NEW YORK – Tommy Hilfiger Corp. has set up a retention bonus plan of up to $12 million for key employees, a maneuver to entice them to stay on with the company after its pending merger with Apax Partners, according to a filing with the Securities and Exchange Commission.
The company last month agreed to be acquired by affiliates of Apax for $1.6 billion, or $16.80 a share. The merger is expected to be completed this spring.
According to the Form 8-K filing, made last Thursday, honorary chairman Tommy Hilfiger and chief executive officer David Dyer are not eligible to receive payments under the retention plan.
Hilfiger, who is also the principal designer for the company, will sign a new employment agreement with Apax. The new agreement is expected to be similar to the one he has now with the company, which paid him between $14 million and $18 million last year. He will also be an equity owner in the new business. Dyer will leave the company after the deal closes. He is to be succeeded by Fred Gehring, ceo of Tommy Hilfiger Europe, who will assume the leadership for the entire company.
According to the SEC filing, executive officers of the company will be eligible to receive a cash retention bonus on the first business day following the 180th day after the merger, provided the executive is still employed by the company.
The filing specified that three key officers – Robert Rosenblatt, chief operating officer; Theo Killion, vice president, human resources, and Joseph Scirocco, chief financial officer – will each be entitled to receive retention bonuses of $300,000. Under the plan, potential retention bonuses in the aggregate amount of $1.2 million may become payable to the company’s executive officers as a group, which also includes Rosenblatt, Killion and Scirocco.
The plan also provides other designated key employees with cash retention bonuses of varying amounts payable at the same time. A spokeswoman noted that the retention plan includes employees at the company’s offices worldwide, and not simply those who work at the corporate parent, Tommy Hilfiger Corp., in New York.
The company also set up a severance plan for employees whose employments are ended by the company without “cause,” or by the employee for “good reason.” In such a scenario, individuals are eligible to receive a lump sum payment equal to 18 months of the person’s base salary during the qualifying 12-month period under the plan.
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Hilfiger and Dyer are not eligible to participate in the severance plan. The filing said that based on current base salaries, Rosenblatt, Killion and Scirocco would be entitled to receive severance payments of $1.2 million, $810,000 and $750,000, respectively. In addition, potential severance payments in the aggregate amount of $3.4 million may become payable to the company’s executive officers as a group, including Rosenblatt, Killion and Scirocco.
The plan also provides employees who are not executive officers with lump sum cash severance payments of varying amounts under certain conditions.
According to the filing, the severance plan has six tiers of classifications.
Per Schedule 1 of the same filing, certain executives were named as Tier 1 participants. They include: Jamie Gallagher, executive vice president, general counsel, Tommy Hilfiger Corp.; Eric Singleton, chief information officer, Tommy Hilfiger USA, and Sharon Waldron, executive vice president, licensing, Tommy Hilfiger USA. Other Tier 1 executives named were Leslie Singer, Beth Kent and Brian Kaminer. Their titles could not be ascertained at press time.
Plan participants in the remaining five tiers were not named.