SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
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SECOND AMENDED AND RESTATED AGREEMENT by and among London Fog
Industries, Inc., a Delaware corporation (the "Company"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇. (the "Executive"), dated as of the 27th day of February, 1998.
W I T N E S S E T H:
WHEREAS, the Executive is Chairman and Chief Executive Officer
of the Company;
WHEREAS, the Board of Directors of the Company (the "Board")
has determined that it is in the best interests of the Company and its
shareholders to continue to employ the Executive as Chairman and Chief Executive
Officer of the Company;
WHEREAS, the Executive desires to continue to serve in such
capacities;
WHEREAS, the Executive has completed his targeted assignment
under his amended and restated employment agreement with the Company (the
"Original Employment Agreement") as to the turnaround of the Company; and
WHEREAS, the Company desires the Executive to continue
employment with the Company pursuant to this Agreement in order to achieve
certain other goals for the Company, but beyond the expiration of his Original
Employment Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment Period. The Company shall continue to employ the
Executive, and the Executive shall continue to serve the Company, on the terms
and conditions set forth in this Agreement, for the period (the "Employment
Period") commencing on the date
hereof, and unless terminated earlier as provided in Section 5, terminating on
February 28, 2002 (the "Employment Period").
2. Position and Duties. (a) During the Employment Period, the
Executive shall serve as Chairman and Chief Executive Officer of the Company and
shall perform such duties as are commensurate with such positions as such duties
may be assigned to him by the Board; it being understood that after the date
hereof, such duties shall be consistent with the duties and responsibilities
performed on and prior to the date hereof.
(b) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive shall
devote his full business activi ties to the business and affairs of the Company.
It shall not be considered a violation of the foregoing for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B) deliver
lectures or fulfill speaking engagements, and (C) make and manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Agreement.
3. Compensation. (a) Annual Base Salary. During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base Salary")
at the rate of $1,389,150 per annum payable in accordance with the Company's
normal payroll practices in effect from time to time. The then Annual Base
Salary shall be increased by 5% (or such greater amount as the Board may
determine) on December 30, 1998 and on each anniversary thereof during the
Employment Period. Once increased, Annual Base Salary shall not be decreased.
The Annual Base Salary, as increased, shall be deemed to be the new Annual Base
Salary.
(b) Bonus. For each fiscal year or portion thereof during the
Employment Period commencing on or after February 28, 1999, the Executive shall
be eligible to receive a cash bonus in an amount to be determined by the Board
(or a sub-committee thereof) based on
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the results of operations of the Company and the Executive's performance during
that fiscal year (the "Bonus").
(c) Equity Enhancement Performance Program. The Executive
shall receive for each full fiscal year or portion of a fiscal year prior to
February 28, 1999 (regardless of whether such date is the end of a fiscal year
of the Company) during the Employment Period, a bonus payment equal to 6% of the
Company's Consolidated EBITA (as defined in the Amended and Restated Credit
Agreement among the Company, the Several Lenders and Chemical Bank dated as of
May 31, 1995, without regard to any amendments thereto after the date hereof)
prorated for any portion of a fiscal year (the "Equity Bonus Payment"). Each
Equity Bonus Payment shall be paid in a single cash lump sum no later than 30
days after the audited financial statements for such fiscal year are complete,
but in no event later than 180 days after the Company's fiscal year end, unless
the Executive elects in writing, before the beginning of the fiscal year for
which the Equity Bonus Payment is to be awarded, to defer receipt of the Equity
Bonus Payment on such terms as agreed by the Executive and the Company.
(d) Other Benefits. During the Employment Period, the
Executive shall be entitled to participate in all welfare benefit, savings and
retirement plans and programs of the Company to the same extent as other
executives of the Company, as well as in the special deferred compensation
arrangement created for senior management.
(e) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in carrying out the Executive's duties under this
Agreement, provided that the Executive complies with the applicable policies,
practices and procedures of the Company.
(f) Vacation. During the Employment Period, the Executive
shall be entitled to four weeks annual paid vacation to be taken in accordance
with Company policies.
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4. Common Equity. Simultaneous with execution of this
Agreement, the Company shall grant the Executive a stock option to purchase
666,666 shares of common stock of the Company in accordance with the Company's
1998 Stock Option Plan and the draft stock option agreement annexed as Exhibit A
hereto, as well as certain warrants to purchase common stock of the Company.
5. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. The Company shall be entitled to terminate the
Executive's employment because of the Executive's Disability during the
Employment Period. "Disability" means that (i) the Executive has been unable,
for a period of 90 consecutive business days, to perform the Executive's
material duties under this Agreement, as a result of physical or mental illness
or injury, and (ii) a physician selected by the Company or its insurers, and
reasonably acceptable to the Executive or the Executive's legal representative,
has determined that the Executive's incapacity is total and permanent. A
termination of the Executive's employment by the Company for Disability shall be
communicated to the Executive by written notice, and shall be effective on the
tenth day after receipt of such notice by the Executive (the "Disability
Effective Date") , unless the Executive returns to substantially full-time
performance of the Executive's duties before the Disability Effective Date.
(b) By the Company. (i) The Company may terminate the
Executive's employment during the Employment Period for Cause or without Cause.
"Cause" means:
A. the willful refusal of the Executive substantially
to perform the Executive's duties under this Agreement (other
than as a result of physical or mental illness or injury); or
B. illegal conduct or gross misconduct by the
Executive that is willful and results in material and
demonstrable damage to the business or reputation of the
Company.
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(ii) Termination for Cause pursuant to Clause A above shall be
effective upon the fifth business day following delivery to the Executive of a
notice that the Board has determined that the Executive has engaged in conduct
specified by Clause A above (which notice shall describe such conduct in
reasonable detail), unless the Executive has cured the conduct prior to such
time; provided that the Executive shall only have one such cure opportunity in
any twelve month period. Termination for Cause pursuant to Clause B above shall
be effective on the fifth business day following delivery to the Executive of a
notice that the Board has determined that the Executive has engaged in conduct
specified by Clause B (which notice shall describe such conduct in reasonable
detail). In any dispute as to whether the determination of the Board was
correct, the issue shall be a de novo determination of whether Cause existed and
not a deter mination of whether the Board was arbitrary and capricious in
finding that it existed.
(c) Good Reason. (i) The Executive may terminate employment
for Good Reason or without Good Reason. "Good Reason" means:
A. the assignment to the Executive of any duties
inconsistent in any respect with paragraph (a) of Section 2 of
this Agreement, or any other action by the Company that
results in a diminution in the Executive's position,
authority, title, duties or responsibilities, other than an
isolated and insubstantial action that is not taken in bad
faith and that, if such isolated and insubstantial event is
curable, is cured within a reasonable period after notice;
B. any failure by the Company to comply with any
provision of this Agreement, other than an isolated and
insubstantial failure that is not taken in bad faith and that,
if such isolated and insubstantial event is curable, is cured
within a reasonable period after notice;
C. any purported termination of the Executive's
employment by the Company for a reason or in a manner not
expressly permitted by this Agreement; or
D. the occurrence of a Change in Control at the
Company (as defined in Section 5(e) below).
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Any good faith determination of "Good Reason" made by the Executive shall be
conclusive, provided that the Executive gives notice to the Company of such
determination within 45 days (in the case of an event described in Clause D of
the definition of "Good Reason" above) or 90 days (in the case of any other
event described in the definition of "Good Reason" above) of an event which
constitutes Good Reason. Any failure to give such notice on a timely basis as
specified above shall constitute a waiver of the right to treat such event as
Good Reason under this Agreement.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice ("Notice of
Termination for Good Reason") of the termination, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason and the
specific provision(s) of this Agreement on which the Executive relies. A
termination of employment by the Executive for Good Reason shall be effective on
the later of (i) the fifteenth business day following the date on which the
notice is given or (ii) a later date set forth in such notice (which date shall
in no event be later than 30 days after the notice is given).
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company written
notice of the termination specifying a date of effectiveness not later than the
tenth business day after the date such notice is given.
(d) Date of Termination. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date on which
the termination of the Executive's employment by the Company for Cause or by the
Executive with or without Good Reason is effective, as the case may be, or the
date specified in a notice advising the Executive that his employment is being
terminated without Cause (which date shall not be later than 30 days after such
notice).
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(e) A "Change in Control" of the Company shall be deemed to
have occurred:
(i) upon any "person" as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") (other
than any holder on the date hereof of the Company's 10% Senior Subordinated
Notes due 2003, any holder of options granted under the Company's 1998 Stock
Option Plan, or the Company, any trustee or other fiduciary holding securities
under any employee benefit plan of the Company, or any company owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of the common stock of the Company), becoming the
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing more than 50% of the combined voting
power of the Company's then outstanding securities;
(ii) upon the merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; provided, however,
that a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person (other than those covered by
the exceptions in (i) above) acquires more than 50% of the combined voting power
of the Company's then outstanding securities shall not constitute a Change in
Control of the Company; or
(iii) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of 80% or more of the Company's assets other than such a sale to
a person or persons who beneficially own, directly or indirectly, at least 50%
or more of the combined voting power of the outstanding voting securities of the
Company at the time of the sale.
6. Obligations of the Company upon Termination. (a) Other than
for Cause, Death or Disability; Good Reason. If, during the Employment Period,
(1) the Company terminates the Executive's employment other than for Cause,
death or Disability, or (2) the Executive terminates his employment for Good
Reason, then the Executive shall receive the amounts described in subparagraphs
(i) and (ii) below at the times specified therein and the Company shall continue
the benefits described in subparagraph (iii) below until the earlier of (A)
February 28, 2002, or (B) two years after the Date of Termination. The payments
provided pursuant to this paragraph (a) of Section 6 are intended as severance
payments for a termination
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of the Executive's employment by the Company other than for Cause or Disability
or for the actions of the Company leading to a termination of the Executive's
employment by the Executive for Good Reason, and shall be the sole and exclusive
remedy therefor.
(i) In the events described in Section 6(a) above, there shall
be paid to the Executive his accrued but unpaid cash compensation (the "Accrued
Obligations"), which shall equal the sum of (1) any portion of the Executive's
Annual Base Salary through the Date of Termination that has not yet been paid;
(2) any unpaid Bonus and/or unpaid (and undeferred) Equity Bonus Payments for
fiscal years completed prior to the Date of Termination; and (3) any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) that has not yet been paid and any expenses not
previously reimbursed by the Company. The amounts due under this subparagraph
(i) shall be paid in a lump sum within 30 days of the Date of Termination.
(ii) In the events described in Section 6(a) above, the
Company shall pay to the Executive (1) a lump sum, within 10 days of the Date of
Termination, equal to two times the sum of his then current Annual Base Salary
and the highest annual Bonus paid to him for either of the prior two completed
fiscal years of the Company; and (2) a Bonus, or if the Date of Termination is
prior to March 1, 1999, an Equity Bonus Payment, for the fiscal year during
which the Date of Termination occurs (paid in a lump sum when such payment would
otherwise be paid) based on actual achievement of performance goals or
Consolidated EBITA, as applicable, for such fiscal year and pro-rated to reflect
the portion of the fiscal year during which the Executive was employed by the
Company. In addition, in such event all outstanding options and equity interests
shall immediately vest and, if options, shall remain exercisable for the
remainder of their stated term.
(iii) The benefits to be continued as described above are
health and welfare benefits to the Executive and/or the Executive's family at
least as favorable (and with the same tax consequences to the Executive) as
those that would have been provided to them under
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paragraph (d) of Section 3 of this Agreement if the Executive's employment had
continued until the second anniversary of the Date of Termination; provided,
however, that during any period when the Executive and/or his family is eligible
to receive such benefits under another employer- provided plan, the benefits
provided by the Company under this subparagraph may be made secondary to those
provided under such other plan.
(b) Death or Disability. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company shall pay the Executive or the Executive's estate
or legal representative, as applicable (1) any Accrued Obligations as provided
in Section 6(a)(i); and (2) a Bonus or, if the Date of Termination is prior to
March 1, 1999, an Equity Bonus Payment, for the fiscal year during which the
Date of Termination occurs (paid in a lump sum when such payment made otherwise
be paid) based on actual achievement of performance goals or Consolidated EBITA,
as applicable, for such fiscal year and pro-rated to reflect the portion of the
fiscal year during which the Executive was employed by the Company. In addition,
in such event all outstanding options and equity interests shall immediately
vest and, if options, shall remain exercisable for the remainder of their stated
term. The Company shall have no further obligations under this Agreement other
than pursuant to Sections 13 and 14 hereof.
(c) Cause; Other than for Good Reason. If the Executive's
employment is terminated by the Company for Cause during the Employment Period,
or if the Executive terminates his employment other than for Good Reason, the
Company shall pay the Executive any Accrued Obligations and unreimbursed
expenses through the Date of Termination, to the extent not yet paid. The
Company shall have no further obligations under this Agreement other than
pursuant to Sections 13 and 14 hereof.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify,
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nor shall anything in this Agreement limit or otherwise affect such rights as
the Executive may have under any contract or agreement with the Company or any
of its affiliated companies. Vested benefits and other amounts that the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of, or any contract or agreement with, the Company or any of its
affiliated companies on or after the Date of Termination shall be payable in
accordance with such plan, policy, practice, program, contract or agreement, as
the case may be, except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the
payments provided for in, and otherwise to perform its obligations under, this
Agreement shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action that the Company may have against the
Executive or others. The Executive shall not be obligated to seek other
employment or to take action by way of mitigation of the amounts payable to the
Executive under the provisions of this Agreement, and no amounts received by the
Executive from sub sequent employment shall offset amounts payable to the
Executive hereunder.
9. Noncompetition; Confidentiality; Work Product.
(a) During the Employment Period and for one year thereafter
the Executive shall not, in any capacity, engage or participate in, or become
employed by or render advisory, consulting or other services to or in connection
with, or make any financial investment (whether in the form of equity or debt)
or own any direct or indirect interest in, any Competitive Business (as defined
below); provided, that nothing in this Section 9(a) shall prevent the Executive
from making any investment in up to one percent of the total outstanding equity
of any company whose stock is listed on an established securities market and
whose annual sales exceed $150 million. "Competitive Business" means a company,
other than Starter, whose outerwear and/or rainwear sales for the fiscal year
ended immediately prior to the Executive's commencing work are more than 37.5%
of that company's total sales for such fiscal year.
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(b) If any restriction set forth with regard to competition is
found by any court of competent jurisdiction, or an arbitrator, to be
unenforceable because it extends for too long a period of time or over too great
a range of activities or in too broad a geographic area, it shall be interpreted
to extend over the maximum period of time, range of activities or geographic
area as to which it may be enforceable.
(c) The Executive shall hold in a fiduciary capacity for the
benefit of the Company all information, knowledge or data relating to the
Company or any of its affiliated companies and their respective businesses that
the Executive obtains during the Executive's employment by the Company or any of
its affiliated companies and that is not public knowledge (other than as a
result of the Executive's violation of this Section 9(c)) or is otherwise
learned from third parties ("Confidential Information"). The Executive shall not
communicate, divulge or disseminate Confidential Information at any time during
or after the Executive's employment with the Company, except (i) as may be
necessary and appropriate in carrying out his duties under this Agreement, (ii)
with the prior written consent of the Company, or (iii) as otherwise required by
law or legal process.
(d) Any intellectual property, including without limitation
trade secrets, know-how, trademarks, trade names, and copyrighted material,
developed by the Executive while employed by the Company shall be the exclusive
property of the Company. Upon termination of the Executive's employment for any
reason, the Executive shall immediately surrender to the Company all letters,
papers, documents, instruments, records, books, products, and any other material
owned by the Company.
(e) In the event of a breach or potential breach of this
Section 9, the Executive acknowledges that the Company and its affiliates will
be caused irreparable injury and that money damages may not be an adequate
remedy and agrees that the Company and its affiliates shall be entitled to
injunctive or other equitable relief (in addition to its other remedies at law)
to have the provisions of this Section 9 enforced.
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10. Arbitration; Attorneys' Fees. Except with regard to
injunctive and equitable relief provided in Section 9, all claims by the Company
or the Executive under this Agreement shall be subject to arbitration in New
York City under the rules of the American Arbitration Association. The decision
of the arbitrators shall be final and binding as between the parties and may be
entered in any court having jurisdiction over the parties. The Company shall
reimburse the Executive for all costs and expenses, including without limitation
attorneys' fees, that the Executive may reasonably incur in connection with any
contest between the Company and the Executive of the validity or enforceability
of, or liability under, any provision of this Agreement, provided that the
Executive obtains more than a de minimis portion of the relief he sought in such
contest. The Company shall reimburse the Executive for the reasonable fees of
one law firm retained by the Executive to assist in the negotiation of this
Agreement.
11. Successors. (a) This Agreement is personal to the
Executive and, without the prior written consent of the Company, shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and permitted assigns. This
Agreement may not be assigned by the Company except by operation of law through
a merger or consolidation or in connection with a sale of assets constituting
90% or more of the assets of the Company.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean both
the Company as defined above and any such successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
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12. Miscellaneous. (a) This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified except by a written agreement executed
by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
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▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to the Company:
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London Fog Industries, Inc.
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 12. Notices and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be held
invalid or unenforceable in part, the remaining portion of such
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provision, together with all other provisions of this Agreement, shall remain
valid and enforceable and continue in full force and effect to the fullest
extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
(e) Neither the Executive's nor the Company's failure to
insist upon strict compliance with any provision of, or to assert any right
under, this Agreement (including, without limitation, the right of the Executive
to terminate employment for Good Reason pursuant to paragraph (c) of Section 5
of this Agreement shall be deemed to be a waiver of such provision or right or
of any other provision of or right under this Agreement), except as specified in
the last sentence of Section 5(c)(i).
(f) The Executive and the Company acknowledge that this
Agreement supersedes: (i) the amended and restated employment agreement dated as
of May 31, 1995 by and among the Executive, the Company and London Fog
Corporation, and (ii) any other agreement between them concerning the subject
matter hereof.
13. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Executive
payable or distributed or distributable pursuant to the terms of this Agreement,
but determined without regard to any additional payments required under this
Section 13 (a "Payment"), would be subject to the excise tax (the "Excise Tax")
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), then the Executive shall be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by the Executive of
all income taxes and Excise Tax imposed
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upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 13(c), all
determinations required to be made under this Section 13, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or such other certified public accounting firm as may be
designated by the Executive (the "Accounting Firm") and which shall be
reasonably acceptable to the Company, which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 13, shall be paid by the Company to the
Executive within ten days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon the Company and
the Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 13(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred, together with the
amount of any interest and penalties imposed as a result thereof, and any such
amounts shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the
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Company of the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such repre sentation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 13(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and ▇▇▇ for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the
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Company directs the Executive to pay such claim and ▇▇▇ for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount; and
further provided that at any time when the Company fails to pay any material
amount that it is obligated to pay under this Section 13(c) within 30 days after
such amount becomes due (except to the extent the Company is contesting its
obligation to pay such amount in good faith), the Executive rather than the
Company shall thereafter have control over such proceeding and may make all
determinations (provided that the foregoing shall not relieve the Company of its
liability under this Section 13.) Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 13(c), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 13(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 13(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
-17-
14. Insurance and Indemnity. During the Employment Period, the
Company shall maintain in effect (i) directors' and officers' liability
insurance in an amount no less than in effect as of the date hereof, and (ii) to
the maximum extent permitted by law, indemnification provisions in favor of the
Executive no less favorable than those contained in the Company's certificate of
incorporation and bylaws as in effect as of December 30, 1994.
-18-
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization of its Board of Directors,
the Company has caused this Agreement to be executed in its name on its behalf,
all as of the day and year first above written.
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
LONDON FOG INDUSTRIES, INC.
By
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Name:
Title:
-19-
Exhibit A
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[Stock Option Agreement]