Business Context and Reporting Period
This Form 8-K Current Report was filed by Tapestry, Inc. on August 29, 2019, reporting events occurring on September 4, 2019. The filing addresses significant changes in executive leadership, specifically the departure of the Chief Executive Officer (CEO) and the appointment of a new CEO.
Key Financial Metrics
This filing does not contain standard financial performance metrics such as revenue, profit, cash flow, margins, debt, or liquidity. The document focuses exclusively on executive compensation arrangements and employment terms.
Material Changes
Departure of Chief Executive Officer
Victor Luis resigned as CEO and from the Board of Directors, effective September 3, 2019. The Board size was reduced to eight directors.
Appointment of Chief Executive Officer
Jide Zeitlin, previously the Chairman of the Board, was appointed CEO effective September 4, 2019. He will continue to serve as Chairman.
Compensation, Outlook, and Risks
Victor Luis Separation Agreement
Mr. Luis entered into a separation and mutual release agreement providing the following compensation:
- Pay in lieu of notice: Six months' base salary ($700,000) plus 50% of the average bonus percentage applied to the 2020 maximum bonus ($1,155,583).
- Deferred Salary: Continued base salary for 21 months starting six months post-separation ($2,450,000).
- Deferred Bonus: Payment of 21 months of annual bonus (1.75x average bonus percentage) starting six months post-separation ($4,044,542).
- 2020 Annual Bonus: Pro-rated payment based on actual performance for the portion of fiscal year 2020 employed.
- Benefits: Company pays excess COBRA premiums for 27 months; continues universal life insurance premiums for up to 27 months.
- Equity: Continued vesting of unvested stock options and RSUs over 27 months; performance RSUs vest on original dates based on performance.
- Covenants: Subject to 27-month non-competition and non-solicitation restrictions.
Jide Zeitlin Employment Agreement
Mr. Zeitlin's new employment terms include:
- Base Salary: $1,300,000 per year.
- Annual Bonus: Target of 150% of base salary (prorated), with a range of 0% to 200% based on performance.
- Equity Grant: Appointment grant with an aggregate value of $3,500,000 consisting of:
- 40% Performance Restricted Stock Units (vesting on 3rd anniversary).
- 40% Stock Options (vesting 25% annually over 4 years).
- 20% Restricted Stock Units (vesting 25% annually over 4 years).
- Retention Requirement: Must retain 50% of net shares from the grant for one year following termination (except for death, disability, or change in control).
- Severance: Not eligible for the Company's Severance Pay Plan or Special Severance Plan.
- Covenants: Subject to 12-month post-employment non-competition and non-solicitation restrictions.
Investor Verification Checklist
- Verify the total cash and equity value of the separation package for Victor Luis against the company's cash reserves and stock-based compensation expense.
- Review the specific performance metrics attached to Jide Zeitlin's $3.5 million equity grant and annual bonus targets.
- Confirm the impact of the leadership transition on the company's strategic direction as outlined in the accompanying press release (Exhibit 99.1).
- Assess the implications of the 27-month non-compete clause for Mr. Luis on potential future competition.