EMPLOYMENT AGREEMENT
(▇▇▇▇ ▇. ▇▇▇▇)
AGREEMENT, dated as of January 4, 1998, between The ▇▇▇▇▇▇ ▇▇▇ Company,
Inc., a Delaware corporation, with its principal office at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ (the "Corporation"), and ▇▇▇▇ ▇. ▇▇▇▇, residing at ▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Executive").
RECITALS
A. The Executive has served as the President of the Corporation since
June 2, 1997, and prior thereto as the Chairman, ▇▇▇▇▇▇ ▇▇▇ Sportswear Group of
The ▇▇▇▇▇▇ ▇▇▇ Companies, Inc., predecessor-in-interest to the Corporation.
B. The Corporation desires to secure the continued services of the
Executive, and the Executive desires to continue to furnish services to the
Corporation, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter contained, the parties hereto hereby agree as
follows:
1. Definitions. Unless otherwise defined herein, the following terms
shall have the respective meanings specified below and be equally applicable to
the singular and plural of terms defined:
(a) "Adjusted Incentive EBITDA" shall mean, for any fiscal
year during the Term, the lesser of (i) Incentive EBITDA and (ii) the projected
EBITDA for such fiscal year as set forth in the Corporation's business plan for
such fiscal year approved by the Board.
(b) "Base Salary" shall have the meaning set forth in Section
5 hereof.
(c) "Board" shall mean the Board of Directors of the
Corporation.
(d) "Bonus" shall mean, for any year during the Term, the
Executive's allocable portion of the Cash Bonus Pool for such year, determined
in accordance with Section 6 hereof.
(e) "Cash Bonus Pool" shall have the meaning set forth in
Section 6 hereof.
(f) "Cause" shall mean (i) conviction of the Executive in
respect of a felony, (ii) perpetration by the Executive of (x) an illegal act
which causes significant economic injury to the Corporation or (y) a common law
fraud against the Corporation, or (iii) willful violation by the Executive (a
"Material Insubordination") of a specific written direction from the Board
concerning one or more matters of a material nature for the Corporation or its
business or operations (following a warning in writing in respect thereto from
the Board).
(g) "Change of Control" shall mean the occurrence of any of
the following:
(i) any person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act), other than ▇▇▇▇▇▇▇▇▇ Partners, Inc.
and/or any of its affiliates (as defined in Rule 12b-2 under the
Exchange Act), acquiring "beneficial ownership" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of fifty percent
(50%) or more of the aggregate voting power of the capital stock of the
Corporation; or
(ii) the sale of all or substantially all of the Corporation's
assets in one or more related transactions; or
(iii) any merger, consolidation, reorganization or similar
event of the Corporation or any of its subsidiaries, as a result of
which the holders of the voting stock of the Corporation immediately
prior to such merger, consolidation, reorganization or similar event do
not hold at least fifty-one percent (51%) of the aggregate voting power
of the capital stock of the surviving entity.
(h) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(i) "Compensation Committee" shall mean the compensation
committee of the Board, all of whose members are "outside directors" within the
meaning of Section 162(m) of the Code.
(j) "Corporation Senior Managers" shall mean the Chief
Executive Officer, the President, the Senior Vice President--Manufacturing and
Sourcing, the Senior Vice President-- Administration and Finance (Chief
Financial Officer) and such other employees of the Corporation as determined by
the Compensation Committee in consultation with the Chief Executive Officer.
(k) "Disabled" shall mean, with respect to the Executive,
being physically or mentally disabled, whether totally or partially, so that he
is substantially unable to perform his services hereunder for a consecutive
period of more than six (6) months or for shorter periods aggregating six months
during any twelve-month period.
(l) "EBITDA" shall mean for any fiscal year of the
Corporation, the consolidated earnings before interest, taxes, depreciation and
amortization of the Corporation and its consolidated subsidiaries, and before
any non-cash accruals for stock-based compensation, as determined pursuant to
generally accepted accounting principles in effect in the United States of
America from time to time, provided that for purposes of determining EBITDA
hereunder, EBITDA shall be calculated before determination of the Cash Bonus
Pool.
(m) "Effective Date" shall mean January 4, 1998.
(n) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
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(o) "Good Reason" shall mean the continuation of any of the
following events for more than ten (10) days after the Corporation's receipt
from the Executive of written notice thereof:
(i) the Executive shall fail to be reelected as a
Director of the Corporation or shall be removed from such position or
from the position of President of the Corporation at any time during
the Term (other than for Cause);
(ii) the Executive shall fail to be vested with the
powers and authority of President of the Corporation as described in
Section 4(a) hereof, or the powers and authority of such position or
his responsibilities with respect thereto shall be diminished in any
material respect;
(iii) the Executive shall have assigned to him
without his express written consent any duties, functions, authority or
responsibilities that are inconsistent with the Executive's positions
described in Section 4 hereof;
(iv) the Executive's principal place of employment is
changed to a location more than twenty-five (25) miles from the prior
location without the Executive's prior written consent;
(v) any material failure by the Corporation to
fulfill any of its obligations under this Agreement (other than
pursuant to Section 4(b)), including, without limitation, the failure
to make any material payment required to be made by the Corporation
pursuant to Sections 5 and 6 hereof within five (5) business days after
the date such payment is required to be made;
(vi) any purported termination by the Corporation of
the Executive's employment otherwise than as expressly permitted by,
and in compliance with all conditions and procedures of, this
Agreement; or
(vii) the Corporation shall fail to comply with the
provisions of Section 14 or Section 19(a) hereof.
(p) "Incentive EBITDA" shall mean Eleven Million Five Hundred
Thousand Dollars ($11,500,000).
(q) "Target EBITDA" shall mean Five Million Four Hundred
Forty-Three Thousand Dollars ($5,443,000).
(r) "Term" shall have the meaning set forth in Section 3
hereof.
2. Employment. The Corporation shall employ the Executive, and the
Executive shall serve the Corporation, upon the terms and conditions hereinafter
set forth.
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3. Term.
(a) Term of Employment. Subject to the terms and conditions
hereinafter set forth, the term of the Executive's employment hereunder shall
commence as of the Effective Date and shall continue until the third anniversary
of the Effective Date, unless earlier terminated pursuant to the provisions of
Section 8, 9 or 10 hereof (the "Term").
(b) Renewal. During the third year of the Term, the
Corporation will conduct, in good faith and on a timely basis, negotiations with
the Executive concerning the renewal of the Executive's employment with the
Corporation.
4. Duties and Extent of Services.
(a) President. During the Term, the Executive shall serve as
President of the Corporation faithfully and to the best of his ability, and
shall devote substantially all of his business time, energy and skill to such
employment, it being understood and agreed that the Executive may serve on the
boards of directors or equivalent governing bodies of other business
corporations or other business organizations; provided, however, that (i) such
other corporations or other organizations are not in direct competition with the
Corporation and/or its subsidiaries and (ii) such service does not materially
interfere with the performance by the Executive of his duties hereunder. The
Executive shall be invested with the duties and authority that are customarily
delegated to a president of a corporation, and shall report to and be subject to
the direction of the Board of Directors of the Corporation. The Executive shall
also perform such specific duties and services of a senior executive nature as
the Board of Directors of the Corporation shall request, including, without
limitation, serving as a senior officer and/or director of any of the
Corporation's subsidiaries.
(b) Board Membership. Although it is understood that the right
to elect directors of the Corporation is by law vested in the stockholders of
the Corporation, the Executive shall serve as a member of the Board of Directors
of the Corporation.
5. Base Salary. During the Term, the Corporation shall pay the
Executive a base salary ("Base Salary") of Four Hundred Fifty Thousand Dollars
($450,000), or such higher amount as the Board may from time to time determine,
payable in equal weekly installments.
6. Incentive Compensation.
(a) Amount. If the Corporation's EBITDA for any fiscal year
(except as noted, references in this Section to EBITDA or Incentive EBITDA are
to the corresponding quantity for such fiscal year) during the Term is greater
than or equal to eighty-five percent (85%) (the "Minimum Percentage") of Target
EBITDA, the Corporation shall pay a bonus ("Cash Bonus Pool") to the Corporation
Senior Managers in an amount equal to the sum of:
(x) nine and six-tenths percent (9.6%) of EBITDA, plus
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(y) two-tenths percent (0.2%) of the Corporation's EBITDA for
each percentage point, if any, of Target EBITDA by which EBITDA exceeds
the Minimum Percentage; provided, however, that in no event shall the
combined amount under clause (x) above and this clause (y) exceed
twelve and one-half percent (12.5%) of EBITDA, plus
(z) five percent (5%) of the amount by which EBITDA exceeds
the sum of (I) Incentive EBITDA plus (II) the sum for all prior fiscal
years (excluding the fiscal year for which the amount of the Cash Bonus
Pool is being determined) of the positive difference, if any, for each
such fiscal year between (i) Adjusted Incentive EBITDA for such fiscal
year and (ii) EBITDA for such fiscal year less (III) any amount under
clause (II) applied in any prior year to reduce the amount of the Cash
Bonus Pool that would otherwise have been payable in such year.
The amount of the Cash Bonus Pool for any fiscal year only a part of which is
within the Term shall be equal to the amount of the Cash Bonus Pool that would
have been payable for such fiscal year had it been entirely within the Term,
times a fraction, the numerator of which is the number of days of such fiscal
year occurring during the Term, and the denominator of which is three hundred
and sixty-five (365).
The Executive and each other Corporation Senior Manager shall
be entitled to receive such portion of the Cash Bonus Pool for any fiscal year
during the Term as determined by the Chief Executive Officer, but only if
approved by the Compensation Committee not later than the end of the first
quarter of such fiscal year. Other than with respect to allocation, all of the
Corporation Senior Managers shall participate in the Cash Bonus Pool on the same
terms and conditions.
(b) Manner of Payment. The Cash Bonus Pool for any fiscal year
during the Term shall be determined after the close of such fiscal year.
However, the Executive shall be permitted to draw during each fiscal year, on a
quarterly basis, against his anticipated allocation of the Cash Bonus Pool for
such year, as follows:
(i) Following each fiscal quarter, the Corporation shall
determine a pro-rated Cash Bonus Pool amount for the period from the
beginning of the fiscal year through the end of such fiscal quarter,
calculated as set forth in clauses (x), (y) and (z) of Section 6(a)
hereof. For purposes of such determination, Target EBITDA, Incentive
EBITDA, Adjusted Incentive EBITDA and the amount described under
subclause (II) of said clause (z), if any, shall be prorated for the
relevant year-to-date period.
(ii) The Executive shall be permitted to draw up to two-thirds
of his allocated amount of the pro-rated Cash Bonus Pool, less the
amount of all prior draws for the same fiscal year.
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(iii) Following the end of the fiscal year, the Corporation
shall determine whether the amount of the Cash Bonus Pool allocable to
the Executive exceeds or is less than the Executive's draws under the
pro-rated Cash Bonus Pool for such fiscal year.
(iv) If the allocated amount of the Cash Bonus Pool to which
the Executive is entitled exceeds the amount of the Executive's draws
for the fiscal year, the Corporation shall pay the difference to the
participant not later than ninety (90) after the end of the fiscal
year. If the allocated amount of the Cash Bonus Pool to which the
Executive is entitled is less than the amount of the Executive's draws
for the fiscal year, the Executive shall repay the difference to the
Corporation within one hundred twenty (120) days after the Corporation
informs the Executive in writing of the deficiency, with a calculation
thereof in reasonable detail. The amount required to be repaid shall
bear interest at the applicable federal rate from the date of the
respective draw(s) until repayment. If the Executive shall dispute the
amount of the deficiency, the Executive shall inform the Corporation in
writing of such dispute on or before the date payment of the deficiency
is otherwise due, shall provide the Corporation with a statement of the
basis for the dispute in reasonable detail and shall pay to the
Corporation any undisputed amount thereof on or prior to the aforesaid
payment date. Thereafter, the Executive and the Corporation shall in
good faith attempt to resolve the dispute, but if the dispute cannot be
resolved prior to the expiration of thirty (30) days from the aforesaid
payment date, the dispute shall be submitted to arbitration in
accordance with the procedures set forth in Section 25.
(v) The Executive's repayment obligations under the preceding
clause (iv) of this Section 6(b) shall be secured by all unexercised
options, vested or unvested, to acquire capital stock of the
Corporation granted by the Corporation to the Executive.
(c) If any payment is required to be made under Section 8, 9
or 10 hereof on the basis of the Cash Bonus Pool for any fiscal year, and the
Cash Bonus Pool for such fiscal year cannot be determined until after the time
that such payment is otherwise required to be made, then the payment of that
amount which is based upon the determination of the Cash Bonus Pool for such
fiscal year shall be deferred until after such time as the determination of the
Cash Bonus Pool for such fiscal year can reasonably be made, and such payment
shall be made as soon thereafter as practicable.
(d) Payment of the Cash Bonus Pool shall be subject to the
approval of the Corporation's stockholders to the extent necessary such that all
payments under the Cash Bonus Pool will be fully deductible under Section 162(m)
of the Code, and the Corporation shall used its reasonable best efforts to
obtain such approval on a timely basis consistent with the provisions of this
Section 6.
7. Employee Benefits.
(a) During the Term, the Executive shall receive coverage
and/or benefits under any and all medical insurance, life insurance, long-term
disability insurance and pension plans and
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other employee benefit plans of the Corporation generally made available to
senior executives of the Corporation from time to time.
(b) During the Term, the Corporation shall provide (x) the
Executive and members of his immediate family with (i) supplemental disability
coverage and (ii) medical insurance for all medical costs and services incurred
by the foregoing, including costs of dental, vision and custodial care, and (y)
the Executive with an automobile allowance equal to $1,140 per month.
(c) The Executive shall be entitled to paid vacations (taken
consecutively or in segments), in accordance with the standard vacation policy
of the Corporation for senior executives, but in no event less than four (4)
weeks each calendar year during the Term. Such vacations shall be taken at times
consistent with the effective discharge of the Executive's duties.
(d) During the Term, the Executive shall be accorded office
facilities and secretarial assistance commensurate with his position as
President of the Corporation and adequate for the performance of his duties
hereunder.
(e) The Executive shall be awarded, as of January 1, 1998, ten
year options to acquire 115,780 shares of the Corporation's common stock, par
value $.01 per share, under the Corporation's 1997 Management Stock Option Plan,
at an exercise price of $6.18 per share, of which options to acquire 70,060
shares will vest in three equal annual installments beginning June 4, 1998 and
options to acquire 45,720 shares will vest in four equal installments beginning
January 4, 1998, subject to acceleration and expiration as provided in the
aforesaid plan.
8. Termination--Death or Disability.
(a) In the event of the termination of the Executive's
employment because of the death of the Executive during the Term, the
Corporation shall pay to any one or more beneficiaries designated by the
Executive pursuant to notice to the Corporation, or, failing such designation,
to the Executive's estate, (i) the unpaid Base Salary owing to the Employee
through the end of the month of his death, in a lump sum within five (5)
business days after his death, and (ii) a Bonus for the year in which such
termination occurs, equal to the Bonus (if any) that would have been paid for
such year if no such termination had occurred, times a fraction, the numerator
of which is the number of months in such year through the end of the month in
which such termination occurs, and the denominator of which is twelve (12).
(b) In the event that the Executive shall become Disabled, the
Corporation shall have the right to terminate the Executive's employment
hereunder by giving him written notice of such termination. Upon receipt of such
notice, the Executive's employment hereunder shall terminate. In the event of
such termination, the Corporation shall pay to the Executive (i) the unpaid Base
Salary owing to the Executive through the end of the month of such termination,
in a lump sum within five (5) business days of such termination, and (ii) a
Bonus for the year in which such termination occurs, equal to the Bonus (if any)
that would have been paid for such year if no such termination had
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occurred, times a fraction, the numerator of which is the number of months in
such year through the end of the month in which such termination occurs, and the
denominator of which is twelve (12).
(c) If the Executive has made interim draws against his Bonus,
in accordance with Section 6(b) hereof, for any fiscal year prior to the date of
his death or termination for disability for which a year-end reconciliation has
not been made in accordance with clause (iv) of such Section, any Bonus payment
required pursuant to Section 8(a) or 8(b) shall be adjusted, and the Corporation
shall make a payment to the Executive or his estate or the Executive or his
estate shall make a payment to the Corporation, as required by Section 6(b)(iv).
9. Termination for Cause by Corporation.
(a) The Executive's employment hereunder may be terminated by
the Corporation for Cause upon compliance with the provisions of Section 9(b)
hereof. In the event that Executive's employment hereunder shall validly be
terminated by the Corporation for Cause pursuant to this Section 9, the
Corporation shall promptly pay accrued but unpaid Base Salary to the date of
termination and reimburse or pay any other accrued but unpaid amounts due under
Sections 6 and 13 hereof as of the date of termination, and thereafter shall
have no further obligations under this Agreement. Upon termination of the
Executive's employment hereunder for Cause, the Executive shall nonetheless
remain bound by the obligations provided for in Sections 11 and 12 hereof. For
purposes of this Section 9(a), the amount accrued to the Executive under Section
6 hereof shall mean a Bonus accrued but unpaid for all fiscal years prior to the
fiscal year in which the termination of the Executive occurs. If the Executive
has made interim draws against his Bonus, in accordance with Section 6(b)
hereof, for the fiscal year during which his termination occurs, the Executive
shall promptly repay the amount of all such draws to the Corporation, and, to
the extent not repaid, such amount may be offset by the Corporation against any
amounts owing to the Executive under this Section 9(a).
(b) Termination for Cause shall be effected only by action of
a majority of the Board then in office (excluding the Executive) at a meeting
duly called and held upon at least ten (10) days' prior written notice to the
Executive specifying the particulars of the action or inaction alleged to
constitute "Cause" (and at which meeting the Executive and his counsel were
entitled to be present and given reasonable opportunity to be heard).
10. Termination for Good Reason by the Executive or Without Cause by
the Corporation; Change of Control; Non-Renewal.
(a) Termination by Executive for Good Reason. The Executive's
employment hereunder may be terminated by the Executive for Good Reason by
providing written notice to the Corporation to such effect (such termination to
be effective on the date specified in such notice, which date shall not be more
than sixty (60) days nor less than thirty (30) days after the date of such
notice).
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(b) Severance. If at any time (other than following a Change
of Control) the Executive terminates his employment for Good Reason or the
Corporation terminates the Executive's employment without Cause, then, in lieu
of any other amounts that might otherwise have been payable hereunder, the
Corporation shall promptly pay to the Executive:
(i) all accrued but unpaid Base Salary and any other accrued
but unpaid amounts due under Sections 6 and 13 hereof as of the date of
termination; and
(ii) (I) if the termination occurs at any prior to the second
anniversary of the Effective Date, an amount equal to twice the Base
Salary in effect on the date of termination for each year or partial
year remaining during the Term; or (II) if the termination occurs on or
after the second anniversary of the Effective Date, an amount equal to
(x) twice the Base Salary in effect on the date of termination, plus
(y) the amount of the Bonus, if any, payable to the Executive in
respect of the second year of the Term.
If the employment of the Executive is terminated as provided in this Section
9(b) or Section 9(c) below and the Executive has made interim draws against his
Bonus, in accordance with Section 6(b) hereof, for the fiscal year during which
such termination occurs, the Executive shall promptly repay the amount of all
such draws to the Corporation, and, to the extent not repaid, such amount may be
offset by the Corporation against any amounts owing to the Executive under this
Section 9(b) or Section 9(c) below.
(c) Change of Control. If a Change of Control occurs and
thereafter the Executive terminates his employment for Good Reason or the
Corporation terminates the Executive's employment without Cause, the Corporation
shall promptly pay to the Executive an amount equal to the greater of:
(i) the maximum amount that may be paid to the Executive
which, when taken together with all other amounts that would be deemed
to be "parachute payments" under Section 280G of the Code (disregarding
Section 280G(b)(2)(A)(ii) thereof), would not cause the Corporation to
make an "excess parachute payment" to the Executive, within the meaning
of Section 280G of the Code; and
(ii) the sum of (x) the amount payable to the Executive under
Section 10(b) above, and (y) the Gross-Up Payment.
(d) Gross-Up Payment.
(i) For purposes of Section 10(c), "Gross-Up Payment" means an
additional amount such that the net amount retained by the Executive, after
deduction of the Excise Tax (as defined below) on any payments or benefits under
this Agreement and/or under any option plan or agreement of the Corporation
received by the Executive from the Corporation as a result of a Change of
Control (within the meaning of section 280G(b)(2) of the Code) (collectively,
the "Payments") and
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any federal, state and local income tax and the Excise Tax upon the Gross-Up
Payment, and any interest, penalties or additions to tax payable by the
Executive with respect thereto (other than such interest, penalties or additions
to tax payable solely as a result of action or inaction by the Executive), shall
be equal to the total amount of the Payments. "Excise Tax" means the tax imposed
by Section 4999 of the Code. For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amounts of such Excise Tax,
(x) the total amount of the Payments shall be treated as "parachute payments"
within the meaning of section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, except to the extent that, in the opinion of
independent counsel selected by the Corporation and reasonably acceptable to the
Executive ("Independent counsel"), a Payment (in whole or in part) does not
constitute a "parachute payment" within the meaning of section 280G(b)(2) of the
Code, or such "excess parachute payments" (in whole or in part) are not subject
to the Excise Tax; (y) the amount of the Payments that shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the total amount
of the Payments or (B) the amount of "excess parachute payments" within the
meaning of section 280G(b)(1) of the Code (after applying clause (1) hereof);
and (z) the value of any noncash benefits or any deferred payment or benefit
shall be determined by Independent Counsel in accordance with the principles of
sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount
of the Gross-Up Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rates of federal income taxation applicable to the
individuals in the calendar year in which the Gross-Up Payment is to be made and
state and local income taxes at the highest marginal rates of taxation
applicable to individuals as are in effect in the state and locality of the
Executive's residence in the calendar year in which the Gross-Up Payment is to
be made, net of the maximum reduction in federal income taxes that can be
obtained from deduction of such state and local taxes, taking into account any
limitations applicable to individuals subject to federal income tax at the
highest marginal rates.
(ii) The Gross-Up Payments referred to in Section 10(d)(i)
hereof shall be made, subject to applicable withholding requirements, upon the
earlier of (x) the payment to the Executive of any Payment or (y) the imposition
upon the Executive or payment by the Executive of any Excise Tax.
(iii) If it is established pursuant to a final determination
of a court or an Internal Revenue Service proceeding or the opinion of
Independent Counsel that the Excise Tax exceeds the amount taken into account
hereunder (including by reasons of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Corporation shall
make an additional Gross-Up Payment in respect of such excess within thirty (30)
days of the Corporation's receipt of notice of such final determination or
opinion.
(iv) In the event that the Internal Revenue Service makes any
claim, gives notice of any potential claim or institutes a proceeding against
the Executive asserting that any Excise Tax or additional Excise Tax is due in
respect of the Payments, the Executive shall promptly give the Corporation
notice of any such claim, potential claim or proceeding. The Corporation shall
have the right to conduct all discussions, negotiations, defenses, actions and
proceedings solely to the extent
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relating to any Excise Tax payable in respect of the Payments, and the Executive
shall cooperate with and assist the Corporation, at the Corporation's expense,
in any such discussions, negotiations, defenses, actions and proceedings, to the
extent reasonably requested by the Corporation. The Executive will not settle
any claim or proceeding relating solely to the extent to the Excise Tax payable
in respect of the Payments without the consent of the Corporation, which consent
shall not be unreasonably withheld. The Executive shall file, at the
Corporation's expense, all requests for refunds of the Gross-Up Amount, or any
portion thereof, paid to any taxing authority as shall be reasonably requested
by the Corporation and shall pay over to the Corporation (net of any tax payable
thereon) any such refunds, together with any interest thereon, when and as such
refunds and interest are received by the Executive.
(v) All fees and expenses of Independent Counsel shall be
borne by the Corporation.
(e) Non-Renewal. In the event that the employment of the
Executive is not renewed by the Corporation following the end of the Term on
terms that are no less favorable to the Executive than the terms of this
Agreement, the Corporation shall pay to the Executive, promptly after the end of
the Term, an amount equal to (x) the Base Salary in effect at the end of the
Term, plus (y) the amount of the Bonus, if any, payable to the Executive in
respect of the third year of the Term. If the Corporation is willing to renew
the employment of the Executive at the end of the Term on terms no less
favorable to the Executive than the terms of this Agreement but the Executive is
unwilling to accept such employment, no amount shall be payable to the Executive
under this Section 10(d).
11. Confidential Information. In addition to any other confidentiality
obligation the Executive may have to the date hereof, and until the end of the
original Term, the Executive shall keep secret and retain in strictest
confidence, and shall not use for his benefit or the benefit of others, any and
all confidential information relating to the Corporation and its subsidiaries,
including, without limitation, customer lists, financial plans or projections,
pricing policies, marketing plans or strategies, business acquisition or
divestiture plans, new personnel acquisition plans, designs, and, except in
connection with the performance of his duties hereunder, the Executive shall not
disclose any such information to anyone outside the Corporation and any of its
subsidiaries, except as required by law (provided prior written notice thereof
is given by the Executive to the Corporation) or except with the Corporation's
prior consent, unless such information is known generally to the public or the
trade through sources other than the Executive's unauthorized disclosure.
12. Competitive Activity. The Executive hereby agrees that, during his
employment hereunder, and, following a termination of his employment, for the
balance of the Term (if any), the Executive shall not, without the prior consent
of the Board (i) directly or indirectly, engage or be interested in (as owner,
partner, shareholder, employee, director, officer, agent, consultant or
otherwise), with or without compensation, any business wherever located in the
world engaged in the manufacture, distribution, design marketing or sale of
women's apparel, if such business is a material competitor of the Corporation,
or (ii) induce or attempt to persuade any employee of the Corporation
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or of any subsidiary of the Corporation, or any person who was employed by the
Corporation or any subsidiary of the Corporation within the preceding six
months, to leave the employ of the Corporation or any subsidiary of the
Corporation (but the foregoing shall not be deemed to prevent the Executive in
his capacity as President of the Corporation from hiring or dismissing any
employee of the Corporation or any subsidiary for the benefit of the
Corporation). The provisions of clause (i) of the preceding sentence shall not
apply in the case of a termination by the Executive for Good Reason or by the
Corporation without Cause. Nothing in this Section 12 shall prohibit the
Executive from acquiring or holding not more than five percent (5%) of any class
of publicly traded securities of any business.
13. Expenses. The Corporation shall reimburse the Executive for all
reasonable expenses incurred by the Executive in the performance of the
Executive's duties hereunder; provided, however, that, in connection with such
reimbursement, the Executive shall account to the Corporation for such expenses
in the manner customarily prescribed by the Corporation for its senior
executives.
14. Directors' and Officers' Insurance; Indemnification. The Executive
shall be provided with directors' and officers' insurance in connection with his
employment hereunder and service as a Director as contemplated hereby with such
coverage (including with respect to unpaid wages and taxes not remitted when
done) as shall be reasonably satisfactory to the Executive and with aggregate
limits of liability for all covered officers and directors of not less than
Thirty-Five Million Dollars ($35,000,000), and the Corporation shall maintain
such insurance in effect for the period of the Executive's employment hereunder
and for not less than five (5) years thereafter; provided, however, that, in the
event that the Corporation shall not obtain such insurance, it shall provide or
cause the Executive to be provided with indemnity (or a combination of indemnity
and directors' and officers' insurance) in connection with his employment
hereunder with substantially equivalent coverage and amounts, and the
Corporation shall maintain such indemnity (or combination of indemnity and
directors' and officers' insurance) or cause such indemnity (or such
combination) to be maintained for the period of the Executive's employment
hereunder and for not less than five (5) years thereafter.
15. No Duty to Mitigate. The Executive shall have no duty to mitigate
the severance amounts or any other amounts payable to the Executive hereunder,
and such amounts shall not be subject to reduction for any compensation received
by the Executive from employment in any capacity or other source following the
termination of Executive's employment with the Corporation and its subsidiaries.
16. Entire Agreements; Amendments; No Waiver. This Agreement contains
the entire understanding between the parties hereto with respect to the subject
matter hereof. This Agreement may not be changed orally, but only by an
instrument in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought. No failure on
the part of either party to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof, nor shall any partial exercise of
any right hereunder preclude any further exercise thereof.
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17. Survival of Provisions. The provisions of Sections 10(d), 11, 12,
23 and 25 shall survive the termination or expiration of this Agreement as
provided therein. Such provisions are unique and extraordinary, which give them
a value peculiar to the Corporation, and cannot be reasonably or adequately
compensated in damages for its loss and any breach by the Executive of such
provisions shall cause the Corporation irreparable injury and damage. Therefore,
the Corporation, in addition to all other remedies available to it, shall be
entitled to injunctive and other available equitable relief in any court of
competent jurisdiction to prevent or otherwise restrain a breach of such
provisions for the purposes of enforcing such provisions.
18. Withholding. The Corporation shall be entitled to withhold from any
and all amounts payable to the Executive hereunder such amounts as may from time
to time be required to be withheld pursuant to applicable tax laws and
regulations.
19. Succession, Assignability and Binding Effect. (a) The Corporation
will require any successor or successors (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Corporation expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession had taken
place. Failure of the Corporation to obtain such agreement prior to the
effectiveness of any such succession shall constitute Good Reason for
resignation by the Executive.
(b) This Agreement shall inure to the benefit of and shall be
binding upon the Corporation and its successors and permitted assigns and upon
the Executive and his heirs, executors, legal representatives, successors and
permitted assigns; provided, however, that neither party may assign, transfer,
pledge, encumber, hypothecate or otherwise dispose of this Agreement or any of
its or his rights hereunder without the prior written consent of the other
party, and any such attempted assignment, transfer, pledge, encumbrance,
hypothecation or other disposition without such consent shall be null and void
and without effect.
20. Headings. The paragraph headings contained herein are included
solely for convenience of reference and shall not control or affect the meaning
or interpretation of any of the provisions of this Agreement.
21. Notices. Any notices or other communications hereunder by either
party shall be in writing and shall be deemed to have been duly given if
delivered personally to the other party or, if sent by registered or certified
mail, upon receipt, to the other party at his or its address set forth at the
beginning of this Agreement or at such other address as such other party may
designate in conformity with the foregoing.
22. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York, without
giving effect to the principles thereof relating to the conflict of laws.
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23. Legal Fees and Expenses. In order to induce the Executive to enter
into this Agreement and to provide the Executive with reasonable assurance that
the purposes of this Agreement shall not be frustrated by the cost of its
enforcement, the Corporation shall pay and be solely responsible for any
attorneys' fees and expenses and court costs incurred by the Executive as a
result of the failure by the Corporation to perform this Agreement or any
provision hereof to be performed by it or in connection with any action which
may be brought, by or in the name or for the benefit of the Corporation or any
subsidiary contesting the validity or enforceability of this Agreement or any
provision hereof to be performed by the Corporation, which action shall have
been dismissed by a final, nonappealable court order.
24. Opportunity to Review. The Executive acknowledged that he has been
given the opportunity to discuss this Agreement, including this Section 24, with
his private legal counsel and has availed himself of that opportunity to the
extent he wishes to do so.
25. Arbitration.
(a) Disputes Subject to Arbitration. In the event that the
Corporation terminates the Executive's employment on the grounds set forth in
clause (iii) of the definition of "Cause", the Corporation and the Executive
mutually consent to the resolution by arbitration of any dispute between the
Corporation and the Executive as to whether such Cause has occurred. Unless the
Corporation and the Executive otherwise agree, no other disputes, issues, claims
or controversies arising out of the Executive's employment (or its termination),
or any other matter whatsoever, shall be submitted to or resolved by
arbitration.
(b) Arbitration Procedures.
(i) The Corporation and the Executive agree that, except as
provided in this Agreement, any arbitration shall be in accordance with
the then current Model Employment Arbitration Procedures of the
American Arbitration Association ("AAA") before an arbitrator who is
licensed to practice law in the state in which the arbitration is
convened (the "Arbitrator"). The arbitration shall take place in or
near the city in which the Executive is or was last employed by the
Corporation.
(ii) Upon designation as a Dispute, the AAA shall give each
party a list of eleven (11) arbitrators drawn from its panel of labor
and employment arbitrators. The Corporation and the Executive may
strike all names on the list which it deems unacceptable. If only one
common name remains on the lists of all parties, said individual shall
be designated as the Arbitrator. If more than one common name remains
on the lists of all parties, the parties shall strike names
alternatively until only one remains. If no common name remains on the
lists of all parties, the AAA shall furnish an additional list and the
parties shall alternate striking names on such second list until an
arbitrator is selected.
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(iii) The Arbitrator shall apply the law of the State of New
York applicable to contracts made and to be performed wholly in that
state (without giving effect to the principles thereof relating to
conflicts of law). The Federal Rules of Evidence shall apply. The
Arbitrator, and not any federal, state, or local court or agency, shall
have exclusive authority to resolve any dispute relating to the
interpretation, applicability or formation of the term "Cause". The
Arbitrator shall render a decision within thirty (30) days of the date
upon which the Arbitrator is selected pursuant to Section 25(b)(ii),
which decision shall be final and binding upon the parties. In the
event that the Arbitrator decides that Material Insubordination has (x)
occurred, then the Executive's employment shall be deemed to have been
terminated for cause pursuant to Section 9(a) hereof or (y) not
occurred, then the Executive's employment shall be deemed to have been
terminated without Cause pursuant to Section 10(b) hereof.
(iv) The Arbitrator shall have jurisdiction to hear and rule
on pre-hearing disputes and is authorized to hold prehearing
conferences by telephone or in person as the Arbitrator deems
necessary. The Arbitrator shall have the authority to entertain a
motion to dismiss and/or a motion for summary judgment by any party and
shall apply the standards governing such motions under the Federal
Rules of Civil Procedure.
(v) Either party, at its expense, may arrange for and pay the
costs of a court reporter to provide a stenographic report of
proceedings.
(vi) Either party, upon request at the close of hearing, shall
be given leave to file a post-hearing brief. The time for filing such a
brief shall be set by the Arbitrator.
(vii) Either party may bring an action in any court of
competent jurisdiction to compel arbitration under this Section 25.
Except as otherwise provided in this Section 25, both the Corporation
and the Executive agree that neither such party shall initiate or
prosecute any lawsuit or administrative action in any way related to
any Dispute covered by this Section 25.
(viii) The arbitrator shall render an opinion in the form
typically rendered in labor arbitrations.
(c) Arbitration Fees and Costs. The Corporation and the
Executive shall equally share the fees and costs of the Arbitrator. Each party
shall deposit funds or post other appropriate security for its share of the
Arbitrator's fee, in an amount and manner determined by the Arbitrator, ten (10)
days before the first day of hearing. Each party shall pay for its own costs and
attorneys' fees, if any. However, if any party prevails on a statutory claim
that affords the prevailing party attorneys' fees, the Arbitrator may award
reasonable fees to the prevailing party.
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(d) Opportunity to Review. The Executive acknowledged that he
has been given the opportunity to discuss this Agreement, including this Section
25, with his private legal counsel and has availed himself of that opportunity
to the extent he wishes to do so.
(e) Law Governing. The parties agree that the arbitration
provisions set forth in this Section 25 shall be governed by the Federal
Arbitration Act, 9 ▇.▇.▇.▇▇.▇▇. 1-16, ("FAA"). The parties further agree that
all Disputes, whether arising under state or federal law, shall be subject to
the FAA, notwithstanding any state or local laws to the contrary.
26. Prior Employment Agreement. The employment agreement, dated as of
June 2, 1997 between the Executive and the Corporation is hereby terminated as
of the Effective Date.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the day and year first above written.
THE ▇▇▇▇▇▇ ▇▇▇ COMPANY, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
/s/ ▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇
Executive
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