Exhibit 10.1
EMPLOYMENT AGREEMENT
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This
EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as
of
this 30th day of July 2008 (the "Effective Date"), by and between
Hampshire
Group, Limited, a Delaware corporation (the "Company"), and Michael
S. Culang
(the "Executive").
W I T N E S S E T H :
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WHEREAS, Executive is currently employed by the Company as its
President
and Chief Executive Officer; and
WHEREAS, Executive is a party to (i) that certain employment
agreement by
and between Executive and Hampshire Designers, Inc. (a subsidiary
of the
Company), dated July 1, 2005 (the "Prior Employment Agreement"),
(ii) that
certain letter agreement by and between Executive and the Company,
dated March
28, 2007 (the "Change in Control Letter", and together with the
Prior Employment
Agreement, the "Prior Agreements"), and (iii) that certain letter
agreement by
and between Executive and the Company, dated October 8, 2007 (the
"Deferred
Compensation Agreement"); and
WHEREAS, the Company desires to continue to employ Executive and to
enter
into this Agreement embodying the terms of such employment, and
Executive
desires to enter into this Agreement and to accept such continuing
employment,
subject to the terms and provisions of this Agreement.
NOW,
THEREFORE, in consideration of the promises and mutual
covenants
contained herein and for other good and valuable consideration, the
receipt and
sufficiency of which are mutually acknowledged, the Company and
Executive hereby
agree as follows:
Section 1. Definitions.
(a)
"Accrued Obligations" shall mean (i) all accrued but unpaid Base
Salary
through the date of termination of Executive's employment, (ii)
accrued but
unpaid vacation, (iii) any unpaid or unreimbursed expenses incurred
in
accordance with Section 7 below, and (iv) any benefits provided
under the
Company's Executive benefit, incentive, and equity plans upon a
termination of
employment, in accordance with the terms contained therein and
applicable award
agreements.
(b)
"Agreement" shall have the meaning set forth in the preamble
hereto.
(c)
"Annual Bonus" shall have the meaning set forth in Section 4(b)
below.
(d)
"Average Total Compensation" shall mean the average Total
Annual
Compensation paid or payable to Executive over the three (3) fiscal
years
immediately preceding the fiscal year either in which Executive's
employment
with the Company is terminated or during which a Change in Control
occurs, as
applicable.
(e)
"Base Salary" shall mean the salary provided for in Section 4(a)
below
or any increased salary granted to Executive pursuant to Section
4(a).
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(f)
"Board" shall mean the Board of Directors of the Company.
(g)
"Cause" shall mean only (i) Executive's act(s) of gross negligence
or
willful misconduct in the course of Executive's employment
hereunder that is or
could reasonably be expected to be materially injurious to the
Company or any
other member of the Company Group, (ii) willful failure or refusal
by Executive
to perform in any material respect his duties or responsibilities,
(iii)
misappropriation by Executive of any assets or business
opportunities of the
Company or any other member of the Company Group, (iv) embezzlement
or fraud
committed by Executive, or at his direction, (v) Executive's
conviction of, or
pleading "guilty" or " no contest" to, (x) a felony or (y) any
other criminal
charge that has, or could be reasonably expected to have, an
adverse impact on
the performance of Executive's duties to the Company or any other
member of the
Company Group or otherwise result in material injury to the
reputation or
business of the Company or any other member of the Company Group,
(vi) any
material violation of the policies of the Company, including but
not limited to
those relating to sexual harassment or business conduct, and those
otherwise set
forth in the manuals or statements of policy of the Company, or
(vii)
Executive's material breach of this Agreement, including, without
limitation,
Section 9 hereof. No act or failure to act, on the part of
Executive, shall be
considered "willful" or resulting in "gross negligence" if it is
done, or
omitted to be done, by Executive in good faith or with a reasonable
belief that
Executive's action or failure to act was in the best interest of
the Company.
Any act, or failure to act, based on a specific directive given
pursuant to a
resolution adopted by the Board or the Executive Committee shall be
conclusively
presumed to be done, or omitted to be done, by Executive in good
faith and in
the best interest of the Company.
(h)
"Change in Control" shall mean (i) individuals who, as of the
Effective
Date, constitute the Board (the "Incumbent Directors") cease for
any reason to
constitute at least a majority of the Board, provided, that any
person becoming
a director subsequent to the Effective Date, whose election or
nomination for
election was approved by a vote of at least two-thirds (2/3rds) of
the Incumbent
Directors then on the Board (either by a specific vote or by
approval of the
proxy statement of the Company in which such person is named as a
nominee for
director, without written objection to such nomination) shall be an
Incumbent
Director; provided, however, that no individual initially elected
or nominated
as a director of the Company as a result of an actual or threatened
election
contest with respect to directors or as a result of any other
actual or
threatened solicitation of proxies or consents by or on behalf of
any person
other than the Board shall be deemed to be an Incumbent Director;
(ii) any
Person is or becomes a "beneficial owner" (as defined in Rule 13d-3
under the
Exchange Act), directly or indirectly, of securities of the Company
representing
50% or more of the combined voting power of the Company's then
outstanding
securities eligible to vote for the election of the Board (the
"Voting
Securities"); provided, however, that the event described in this
subsection
1(h)(ii) shall not be deemed to be a Change in Control by virtue of
any of the
following acquisitions: (A) by the Company or any subsidiary of the
Company in
which the Company owns more than 50% of the combined voting power
of such entity
(a "Subsidiary"), (B) by any employee benefit plan (or related
trust) sponsored
or maintained by the Company or any Subsidiary, (C) by any
underwriter
temporarily holding the Company's Voting Securities pursuant to an
offering of
such Voting Securities, or (D) pursuant to a Non-Qualifying
Transaction (as
defined in subsection 1(h)(iii) below); (iii) the consummation of a
merger,
consolidation, statutory share exchange or similar form of
corporate transaction
involving the
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Company or any Subsidiary that requires the approval of the
Company's
stockholders, whether for such transaction or the issuance of
securities in the
transaction (a "Business Combination"), unless immediately
following such
Business Combination: (A) more than 50% of the total voting power
of (x) the
corporation resulting from such Business Combination (the
"Surviving
Corporation"), or (y) if applicable, the ultimate parent
corporation that
directly or indirectly has beneficial ownership of 100% of the
voting securities
eligible to elect directors of the Surviving Corporation (the
"Parent
Corporation"), is represented by the Company's Voting Securities
that were
outstanding immediately prior to such Business Combination (or, if
applicable,
is represented by shares into which the Company's Voting Securities
were
converted pursuant to such Business Combination), and such voting
power among
the holders thereof is in substantially the same proportion as the
voting power
of the Company's Voting Securities among the holders thereof
immediately prior
to the Business Combination, (B) no Person (other than any employee
benefit plan
(or related trust) sponsored or maintained by the Surviving
Corporation or the
Parent Corporation), is or becomes the beneficial owner, directly
or indirectly,
of 30% or more of the total voting power of the outstanding voting
securities
eligible to elect directors of the Parent Corporation (or, if there
is no Parent
Corporation, the Surviving Corporation) and (C) at least a majority
of the
members of the board of directors of the Parent Corporation (or,
there is no
Parent Corporation, the Surviving Corporation) following the
consummation of the
Business Combination were Incumbent Directors at the time of the
Board's
approval of the execution of the initial agreement providing for
such Business
Combination (any Business Combination which satisfies all of the
criteria
specified in (A), (B) and (C) above shall be deemed to be a
"Non-Qualifying
Transaction"); (iv) a sale of all or substantially all of the
Company's assets;
(v) the stockholders of the Company approve a plan of complete
liquidation or
dissolution of the Company; (vi) the appointment as an executive
officer of the
Company following the Effective Date of any shareholder or member
of any
shareholder group (as such terms are defined under the Exchange
Act) who
beneficially owns, directly or indirectly, in excess of five
percent (5%) of the
Company's outstanding voting securities, or (vii) such other events
as the Board
may designate. Notwithstanding the foregoing, a Change in Control
shall not be
deemed to occur solely because any person acquires beneficial
ownership of more
than 50% of the Company's Voting Securities as a result of the
acquisition of
the Company's Voting Securities by the Company which reduces the
number of the
Company's Voting Securities outstanding; provided, that if after
such
acquisition by the Company such person becomes the beneficial owner
of
additional Company Voting Securities that increases the percentage
of
outstanding Company Voting Securities beneficially owned by such
person, a
Change in Control shall then occur.
(i)
"Change in Control Retention Payment" shall mean a lump sum
cash
payment in an amount equal to two (2) times the Average Total
Compensation.
(j)
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
(k)
"Company" shall have the meaning set forth in the preamble
hereto.
(l)
"Company Group" shall mean the Company together with any direct
or
indirect subsidiary of the Company or any direct or indirect parent
of the
Company with respect to which Executive maintains operating
control.
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(m)
"Compensation Committee" shall mean the committee of the Board
designated to make compensation decisions relating to senior
executive officers
of the Company Group. Prior to any time that such a committee has
been
designated, the Board shall be deemed the Compensation Committee
for purposes of
this Agreement.
(n)
"Competitive Activities" shall mean any business activities in
which
the Company or any other member of the Company Group engages (or
has committed
plans to engage) during the Term of Employment.
(o)
"Confidential Information" shall mean confidential or proprietary
trade
secrets, client lists, client identities and information,
information regarding
service providers, investment methodologies, marketing data or
plans, sales
plans, management organization information, operating policies or
manuals,
business plans or operations or techniques, financial records or
data, or other
financial, commercial, business or technical information (i)
relating to the
Company or any other member of the Company Group or (ii) that the
Company or any
other member of the Company Group may receive belonging to
suppliers, customers,
or others who do business with the Company or any other member of
the Company
Group, but shall exclude any information that is or becomes
available to the
public, in each case without the breach by Executive of Section
9(a) below, and
any information that became available to Executive on a
non-confidential basis
from a source other than the Company or member of the Company Group
which source
was not under an obligation to the Company or other member of the
Company Group
(whether contractual, legal or fiduciary) to keep such information
confidential.
(p)
"Deferred Compensation Agreement" shall have the meaning set forth
in
the preamble hereto.
(q)
"Developments" shall have the meaning set forth in Section 9(e)
below.
(r)
"Disability" shall mean any physical or mental disability or
infirmity
of Executive that results in his inability to perform his duties
for a period of
(i) ninety (90) consecutive days or (ii) one hundred twenty
(120)
non-consecutive days during any twelve (12) month period. Executive
shall not be
deemed to have a Disability until after such 90-day or 120-day
period, as
applicable, has expired.
(s)
"Effective Date" shall have the meaning set forth in the
preamble
hereto.
(t)
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
the
same may be amended from time to time.
(u)
"Executive" shall have the meaning set forth in the preamble
hereto.
(v)
"Executive Committee" shall mean the executive committee of the
Board.
(w)
"Good Reason" shall mean, without Executive's consent, (i) a
material
diminution in Executive's title, duties or responsibilities, (ii) a
material
reduction in Base Salary (other than pursuant to an
across-the-board reduction
applicable to all similarly situated executives, but in no case
greater than a
10% reduction), (iii) the failure of the Company to pay any
compensation
hereunder when due, (iv) the relocation of Executive's principal
place of
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employment (as provided in Section 3(c) hereof) more than thirty
(30) miles from
its current location, or (v) any other material breach of this
Agreement by the
Company. Notwithstanding the foregoing, during the Term of
Employment, in the
event that the Board and/or the Executive Committee reasonably
believes that
Executive may have engaged in conduct that is reasonably likely to
constitute
Cause hereunder, the Board and/or the Executive Committee may, in
its sole and
absolute discretion, suspend Executive from performing his duties
hereunder, and
any such suspension shall in no event constitute an event pursuant
to which
Executive may terminate employment with Good Reason; provided, that
no such
suspension shall alter the Company's obligations under this
Agreement during
such period of suspension.
(x)
"Interfering Activities" shall mean (i) encouraging, soliciting,
or
inducing, or in any manner attempting to encourage, solicit, or
induce, any
individual employed by, or individual or entity providing
consulting services
to, the Company or any other member of the Company Group to
terminate such
employment or consulting services; provided, that the foregoing
shall not be
violated by general advertising not targeted at employees or
consultants of the
Company or any other member of the Company Group; (ii) hiring any
individual who
was employed by the Company or any other member of the Company
Group within the
six (6) month period prior to the date of such hiring; or (iii)
encouraging,
soliciting, or inducing, or in any manner attempting to encourage,
solicit, or
induce, any customer, supplier, licensee, or other business
relation of the
Company or any other member of the Company Group to cease doing
business with or
materially reduce the amount of business conducted with the Company
or any other
member of the Company Group, or in any way interfere with the
relationship
between any such customer, supplier, licensee, or business relation
and the
Company or any other member of the Company Group.
(y)
"Person" shall mean any individual, corporation, partnership,
limited
liability company, joint venture, association, joint-stock company,
trust
(charitable or non-charitable), unincorporated organization, or
other form of
business entity.
(z)
"Prior Agreements" shall have the meaning set forth in the
recitals
hereto.
(aa)
"Release Expiration Date" shall mean the date that is twenty-one
(21)
days following the date upon which the Company timely delivers
Executive the
release contemplated in Section 8(g) below, or in the event that
the release is
delivered in connection with a termination of employment that is
"in connection
with an exit incentive or other employment termination program" (as
such phrase
is defined in the Age Discrimination in Employment Act of 1967),
the date that
is forty-five (45) days following such delivery date.
(bb)
"Restricted Area" shall mean any State of the United States of
America
or any other jurisdiction in which the Company or any other member
of the
Company Group engages (or has committed plans to engage) in
business during the
Term of Employment or, following termination of Executive's
employment, was
engaged (or had committed plans to engage) in business at the time
of such
termination of employment.
(cc)
"Restricted Period" shall mean the period commencing on the
Effective
Date and extending to the eighteen (18) month anniversary of
Executive's
termination of employment for any reason.
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(dd)
"Term of Employment" shall mean the period specified in Section
2
below.
(ee)
"Total Annual Compensation" shall mean, with respect to each
fiscal
year of the Company, the sum of (i) the Base Salary paid to
Executive by the
Company (or Hampshire Designers, Inc., as applicable), and (ii)
any
discretionary or performance-based bonus (excluding any retention
bonus or
long-term incentive award granted to Executive by the Company) paid
or payable
to Executive (including any amounts deferred by Executive) for
services
performed entirely within such fiscal year. For the avoidance of
doubt, for
purposes of determining the Annual Bonus to be used in the
calculation of Total
Annual Compensation, the following amounts shall be included: (x)
with respect
to the Annual Bonus paid or payable to Executive for services
performed entirely
within the fiscal year ended December 31, 2005, the $175,000
payable pursuant to
Section 3(A)(ii) of the Prior Employment Agreement, and (y) with
respect to the
Annual Bonus paid or payable to Executive for services performed
entirely within
the fiscal year ended December 31, 2007, the "Special Bonus" (as
defined in the
Deferred Compensation Agreement), and (z) with respect to any
fiscal year, any
discretionary bonus paid or payable to Executive for services
performed entirely
within such fiscal year (but specifically excluding any retention
bonus (other
than as described in clauses (x) or (y) above) or long-term
incentive award
granted to Executive by the Company).
Section 2. Acceptance and Term of Employment.
The
Company agrees to continue to employ Executive, and Executive
agrees to
continue to serve the Company on the terms and conditions set forth
herein. The
Term of Employment shall commence on the Effective Date and shall
continue until
terminated in accordance with Section 8 below.
Section 3. Position, Duties, and Responsibilities; Place of
Performance.
(a)
During the Term of Employment, Executive shall be employed and
serve as
the President and Chief Executive Officer of the Company (together
with such
other position or positions consistent with Executive's title as
the Board
and/or the Executive Committee shall specify from time to time) and
shall have
such duties typically associated with such title. Executive shall
report
directly to the full Board and/or the Executive Committee. In
addition,
Executive shall be nominated for election to the Board for so long
as the
Executive is employed hereunder, so long as such nomination or
election would
not, in the reasonable judgment of the Board, contravene any
prohibitions or
guidelines for good governance under applicable law or the rules of
any stock
exchange or body to those jurisdiction the Company is subject.
Executive also
agrees to serve as an officer and/or director of any subsidiary of
the Company
to the extent such service is consistent with his position with the
Company, in
each case without additional compensation.
(b)
Executive shall devote his full business time, attention, skill,
and
best efforts to the performance of his duties under this Agreement
and shall not
engage in any other business or occupation during the Term of
Employment,
including, without limitation, any activity that (x) conflicts with
the
interests of the Company or any other member of the Company Group,
(y)
interferes with the proper and efficient performance of his duties
for the
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Company, or (z) interferes with the exercise of his judgment in the
Company's
best interests. Notwithstanding the foregoing, nothing herein shall
preclude
Executive from (i) serving, with the prior written consent of the
Board and/or
the Executive Committee, as a member of the board of directors or
advisory
boards (or their equivalents in the case of a non-corporate entity)
of
non-competing businesses and charitable organizations, (ii)
engaging in
charitable activities and community affairs, and (iii) managing his
personal
investments and affairs; provided, however, that the activities set
out in
clauses (i), (ii), and (iii) shall be limited by Executive so as
not to
materially interfere, individually or in the aggregate, with the
performance of
his duties and responsibilities hereunder.
(c)
Executive's principal place of employment shall be in Manhattan,
New
York, although Executive understands and agrees that he may be
required to
travel from time to time for business reasons.
Section 4. Compensation. During the Term of Employment, Executive
shall be
entitled to the following compensation:
(a)
Base Salary. Executive shall be paid an annualized Base Salary,
payable
in accordance with the regular payroll practices of the Company
(but no less
frequently than monthly), of not less than $800,000, with
increases, if any, as
may be approved in writing by the Board or the Compensation
Committee.
(b)
Annual Bonus. Executive shall be eligible for an annual incentive
bonus
award determined by the Board or the Compensation Committee in
respect of each
fiscal year (including the 2008 fiscal year) during the Term of
Employment (the
"Annual Bonus"), with the actual Annual Bonus payable being based
upon the level
of achievement of annual Company and/or individual performance
objectives for
such fiscal year, as determined by the Board or the Compensation
Committee after
consultation with Executive. Notwithstanding the immediately
preceding sentence,
to the extent that the Company adopts a bonus plan for its senior
executive
officers, Executive shall participate in such plan and the actual
Annual Bonus
payable to Executive shall be determined in a manner consistent
with such bonus
plan.
(c)
Long-Term Incentive and Equity-Based Plans. Executive shall be
eligible
to participate in any long-term incentive and equity-based
arrangements
generally available to the other senior executives of the Company
and shall
receive such awards as the Board or the Compensation Committee, in
its
discretion, shall grant Executive.
(d)
Change in Control Payment. Upon any Change in Control that
occurs
during the Term of Employment, within thirty (30) days following
the Change in
Control, the Company (or its successor) shall pay Executive or
Executive's
estate, as the case may be, the Change in Control Retention Payment
(less any
applicable withholding).
Section 5. Executive Benefits.
During the Term of Employment, Executive shall be entitled to
participate
in health, insurance, retirement and other benefits provided to
other senior
executives of the Company. Executive shall also be entitled to the
same number
of holidays, vacation, sick days
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and other benefits as are generally allowed to senior executives of
the Company
in accordance with the Company policy in effect from time to
time.
Section 6. Key-Man Insurance.
At
any time during the Term of Employment, the Company shall have the
right
to insure the life of Executive for the sole benefit of the
Company, in such
amounts, and with such terms, as it may determine. All premiums
payable thereon
shall be the obligation of the Company. Executive shall have no
interest in any
such policy, but agrees to cooperate with the Company in taking out
such
insurance by submitting to physical examinations, supplying all
information
required by the insurance company, and executing all necessary
documents,
provided that no financial obligation is imposed on Executive by
any such
documents.
Section 7. Reimbursement of Business Expenses.
Executive is authorized to incur reasonable business expenses in
carrying
out his duties and resp
