EXHIBIT 10.21
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND
RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is
made as of the 28 th day of April, 2005 by and between
Rebecca C. Matthias, a resident of Pennsylvania (the
“Employee”), and Mothers Work, Inc., a corporation
organized and existing under the laws of the State of Delaware (the
“Company”).
W
I T N
E S S E T H
WHEREAS, the
Company and the Employee are parties to an Employment Agreement,
dated July 14, 1994 and an Amendment Agreement, dated
March 14, 2003, pursuant to which the Employee serves as the
President and Chief Operating Officer of the Company (collectively,
the “Existing Employment Agreement”); and
WHEREAS, the
Company has determined it is essential to the business of the
Company to provide for the continued employment of the Employee and
Dan W. Matthias and certain prohibitions against competition
following their termination of that employment under certain
circumstances; and
WHEREAS,
Section 17 of the Existing Employment Agreement provides that
the Company and the Employee may amend the Existing Employment
Agreement by mutual agreement in writing; and
WHEREAS, the
Company and the Employee desire to amend and restate the Existing
Employment Agreement in its entirety.
NOW, THEREFORE, in
consideration of the mutual covenants and obligations contained
herein, and intending to be legally bound, the parties, subject to
the terms and conditions set forth herein, agree as
follows:
1.
Employment and Term . The Company will continue to
employ Employee and Employee hereby accepts continued employment
with the Company, as President and Chief Operating Officer (her
“Position”) on the terms herein described for the
period beginning on the date hereof and continuing until terminated
by either party (such period of Employee’s employment is
herein referred to as the “Term”).
2.
Duties . During her employment by the Company, except
for vacations in accordance with Schedule A hereto, absences
due to temporary illness or as otherwise provided below in
Section 3, Employee shall use her best efforts to serve the
Company faithfully and shall devote her full time, attention, skill
and efforts to the performance of the duties required by or
appropriate for her Position. Employee agrees to assume such
duties and responsibilities as may be customarily incident to the
Position, and as may be reasonably assigned to Employee from time
to time by the Board of Directors of the Company (consistent with
the Company’s Bylaws and with the level of responsibility
appropriate to the Position).
3.
Other Business Activities . During her employment by
the Company, Employee will not, directly or indirectly, engage in
any other business activities or pursuits whatsoever, except
: (i) activities in connection with any charitable or civic
activities, (ii) personal investments, (iii) service as an
executor, trustee or in other similar fiduciary capacity, or (iv)
other activities specifically authorized by the Compensation
Committee of the Company’s Board of Directors;
provided , however , that any of the foregoing
exceptions do not: (x) interfere with Employee’s performance
of responsibilities and obligations pursuant to this Agreement, or
(y) create a conflict of interest with Employee’s
responsibilities to the Company. For avoidance of doubt,
incidental use of Company facilities (such as telephone or email
systems) in furtherance of activities authorized under this
paragraph will not constitute an interference with Employee’s
obligations to the Company.
4.
Director . During the term off her employment, the
Company shall nominate the Employee for election to the
Company’s Board of Directors and shall use its best efforts
to elect Employee to such position.
5.
Compensation . The Company shall pay Employee, and
Employee hereby agrees to accept, as compensation for all services
rendered hereunder and for Employee’s covenant not to compete
as provided for in Section 8 hereof:
5.1.
Base Salary . The Company shall pay Employee an
initial base salary at the annual rate of $491,727 (as the same may
hereafter be increased pursuant to the terms of this section, the
“Base Salary”). The Base Salary shall be
inclusive of all applicable income, social security and other taxes
and charges which are required by law to be withheld by the Company
or which are requested to be withheld by Employee, and which shall
be withheld and paid in accordance with the Company’s normal
payroll practice for its similarly situated employees from time to
time in effect. The Base Salary shall be increased at the
start of each fiscal year of the Company, as determined by the
Compensation Committee of the Company’s Board of Directors,
but in no event shall such increase be less than the corresponding
increase in the Revised Consumer Price Index for All Items for the
1994 Base Year (the “Index”), as published by the
U.S. Department of Labor, Bureau of Labor Statistics.
If the Index is changed so that a base period other than 1994 is
used, the Index used herein shall be converted in accordance with
the conversion factor published by the Bureau of Labor
Statistics. If the Index is not published, is discontinued or
is otherwise revised during the Term, such other index or
calculation with which it is replaced shall be used in order to
obtain substantially the same result as would be obtained if the
Index had continued to be published in the same form and manner as
it was prior to it being replaced.
5.2.
Cash Bonus . On such date as bonuses are paid to other
senior executives of the Company, the Company shall pay Employee a
bonus for each year throughout the Term (the “Cash
Bonus”) equal to an amount of between 0% and 100% of
Employee’s Base Salary, with a target of 50%. The
actual bonus amount paid, if any, is based upon the Company’s
achievement in the applicable fiscal year of corporate and/or
individual performance goals approved by the Company’s Board
of Directors or its Compensation Committee.
5.3.
Options . Each year throughout the Term, the Company
shall issue to Employee, as additional compensation (the
“Option Compensation”), within thirty (30) days
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following the
date on which the Company releases final earnings for the preceding
fiscal year (such date hereinafter referred to as the
“Earnings Release Date”), an option to purchase that
number of shares of Common Stock of the Company, $.01 par value per
share (the “Common Stock”) equal to an amount of
between zero and 60,000 with a target of 45,000 (the actual number
of shares subject to the option granted, if any, will be based on
the Company’s achievement in the applicable fiscal year of
corporate and/or individual performance goals approved by the
Company’s Board of Directors or its Compensation Committee)
(the “Options”), which amount shall be subject to
equitable adjustment whenever there shall occur a stock split,
combination, reclassification or other similar event involving the
Common Stock. Such Options shall be exercisable at the
closing price of the Common Stock as reported by NASDAQ on the date
of grant and shall vest immediately.
6.
Benefits and Expenses . In addition to those benefits
provided to similarly situated employees of the Company, Employee
shall be entitled to those employee benefits as set forth on
Schedule A hereto, such benefits to include, but not limited
to: an automobile; vacation; health, major medical and
hospitalization insurance; disability insurance; life insurance;
expense reimbursement and participation in the Company’s
401(k) plan (“Benefits”).
7.
Confidentiality . Employee recognizes and acknowledges
that the Proprietary Information (as hereinafter defined) is a
valuable, special and unique asset of the Business of the
Company. As a result, both during the Term and thereafter,
Employee shall not, without prior written consent of the Company,
for any reason either directly or indirectly divulge to any
third-party or use for her own benefit, or for any purpose other
than the exclusive benefit of the Company, any confidential,
proprietary, business and technical information or trade secrets of
the Company or of any subsidiary or affiliate of the Company
(“Proprietary Information”) revealed, obtained or
developed in the course of her employment with the Company.
Failure by the Company to mark any of the Proprietary Information
as confidential or proprietary shall not affect its status as
Proprietary Information under the terms of this Agreement.
8.
Covenant not to Compete . Unless Employee’s
employment with the Company is terminated by Employee for Good
Reason (pursuant to Section 9.4) or upon a Change in Control
(pursuant to Section 9.6), the Employee shall not, during the
Term and for a period ending two (2) years after both Employee and
Dan W. Matthias shall have terminated their employment with the
Company (the “Restricted Period”), do any of the
following directly or indirectly without the prior written consent
of the Company:
8.1.
engage or participate in the Prohibited Business (as defined below)
as determined at the termination of Employee’s employment
hereunder;
8.2.
become interested in (as owner, stockholder, lender, partner,
co-venturer, director, officer, employee, agent, consultant or
otherwise) any person, firm, corporation, association or other
entity engaged in any Prohibited Business as determined at the
termination of Employee’s employment hereunder.
Notwithstanding the foregoing, Employee may hold not more than one
percent (1%) of the outstanding securities of any class of any
publicly-traded securities of a company that is engaged in
activities referenced in Section 8.1 hereof;
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8.3.
solicit or call on, either directly or indirectly, any supplier
with whom the Company shall have dealt at any time during the one
(1) year period immediately preceding the termination of
Employee’s employment hereunder;
8.4.
influence or attempt to influence any supplier or potential
supplier of the Company to terminate or modify any written or oral
agreement or course of dealing with the Company; or
8.5.
influence or attempt to influence any person to either (i)
terminate or modify her employment, consulting, agency,
distributorship or other arrangement with the Company, or (ii)
employ or retain, or arrange to have any other person or entity
employ or retain, any person who has been employed or retained by
the Company as an employee, consultant, agent or distributor of the
Company at any time during the one (1) year period immediately
preceding the termination of Employee’s employment
hereunder.
The term
“Prohibited Business” shall mean both (i) the
manufacturer, marketing and/or sale of maternity clothing, and (ii)
any other specialty apparel retail niche market in which the
Company is conducting or currently implementing plans to conduct
its vertically integrated operating strategy (it being agreed that
the scope of any such niche market will be made by reference to the
relevant characteristics upon which such specific market is defined
(e.g. identifiable target customer base, price point, fashion
point-of-view, styling and retail distribution
locations)).
9.
Termination . Employee’s employment hereunder
may be terminated during the Term upon the occurrence of any one of
the events described in this Section 9. Upon
termination, Employee shall be entitled only to such compensation
and benefits as described in the applicable subsection of this
Section 9.
9.1.
Termination by Death . In the event that Employee dies
during the Term, Employee’s employment hereunder shall be
terminated thereby and the Company shall pay to Employee’s
executors, legal representatives or administrators an amount equal
to the accrued and unpaid portion of her Base Salary, Benefits,
Cash Bonus and Option Compensation (“Cash Bonus” and
“Option Compensation” collectively, the
“Bonuses”) through the end of the month in which she
dies, in addition to the Severance Pay (as defined herein).
All outstanding options shall become immediately vested and
exercisable. For purposes of this Agreement, accrued but
unpaid Cash Bonuses and Option Compensation means any Bonuses
payable with respect to a year ending prior to the date of
termination, as well as a pro-rata portion of any Bonuses that
would have been paid for the year of termination, but for that
termination. Except as otherwise provided herein, the amount
of such Bonuses will be determined and paid in the same manner and
as of the same date that Bonuses would otherwise have been
determined and paid for the applicable year, but for the
termination (the “Customary Payment Date”) and will be
pro-rated, as applicable, based on the number of full and partial
months of the year transpired prior to the date of
termination. However, notwithstanding the foregoing and
except as otherwise provided herein, accrued but unpaid Option
Compensation payable by virtue of a termination of employment will
be paid in the form of a cash lump sum (in lieu of an actual stock
option grant): (i) in the case of Option Compensation payable in
respect of a completed fiscal year, on the Customary Payment Date
in an amount equal to the product of (A) the number
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of shares that
would have been subject to the stock option that otherwise would
have been granted in respect of that Option Compensation, but for
the termination, multiplied by (B) the excess, if any, of (I) the
Fair Market Value (as defined in the Company’ Amended and
Restated Stock Option Plan) as of the date of termination over (II)
the Fair Market Value on the first trading day following the
Earnings Release Date at the beginning of the fiscal year for which
the Option Compensation is being paid; and (ii) in the case of
Option Compensation payable in respect of the year of termination,
within fifteen (15) days following the date of termination in an
amount equal to the product of (A) forty-five thousand (45,000),
pro-rated, based on the number of full and partial months of the
fiscal year transpired prior to the date of termination, multiplied
by (B) the excess, if any, of (I) the Fair Market Value as of the
date of termination over (II) the Fair Market Value on the first
trading day following the Earnings Release Date at the beginning of
the fiscal year for which the Option Compensation is being paid (or
the first trading day following the Earnings Release Date at the
beginning of the prior fiscal year if no Earnings Release Date has
yet occurred in the fiscal year of termination). Except as
specifically set forth in this Section 9.1, the Company shall
have no liability or obligation hereunder to Employee’s
executors, legal representatives, administrators, heirs or assigns
or any other person claiming under or through her by reason of
Employee’s death, except that Employee’s executors,
legal representatives or administrators will be entitled to receive
the payment prescribed under any death or disability benefits plan
in which she is a participant as an employee of the Company, and to
exercise any rights afforded under any compensation or benefit plan
then in effect.
9.2.
Termination for Cause .
(a)
The Company may terminate Employee’s employment hereunder at
any time for “cause” upon forty-five (45) days prior
written notice to Employee. For purposes of this Agreement,
“cause” shall mean: (i) any material breach by Employee
of any of her material obligations under Sections 7 or 8 of this
Agreement or (ii) other conduct of Employee involving any type of
material disloyalty to the Company or willful misconduct with
respect to the Company, including without limitation fraud,
embezzlement, theft or proven dishonesty in the course of her
employment or conviction of a felony.
(b)
In the event of a termination of Employee’s employment
hereunder pursuant to Section 9.2(a), Employee shall be
entitled to receive all accrued but unpaid (as of the effective
date of such termination) Base Salary, Benefits and Bonuses.
All Base Salary, Benefits and Bonuses shall cease at the time of
such termination, subject to the terms of any benefit or
compensation plan then in force and applicable to Employee.
All outstanding options which remain unvested shall be
automatically canceled and declared null and void. Except as
specifically set forth in this Section 9.2, the Company shall
have no liability or obligation hereunder by reason of such
termination.
(c)
At least thirty (30) days prior to the termination of
Employee’s employment hereunder pursuant to any clause of
Section 9.2(a), the Board of Directors of the Company shall
hold a meeting at which Employee shall be given the opportunity to
be heard with respect to such termination and, to the extent
remediable, a reasonable opportunity to remedy the objectionable
behavior.
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9.3.
Termination Without Cause .
(a)
The Company may terminate Employee’s employment hereunder at
any time, for any reason, without cause, effective upon the date
designated by the Company upon ninety (90) days written notice to
Employee.
(b)
In the event of a termination of Employee’s employment
hereunder pursuant to Section 9.3(a), Employee shall be
entitled to receive all accrued but unpaid (as of the effective
date of such termination) Base Salary, Benefits and Bonuses plus
the Severance Pay (as defined herein); provided , that the
amount of any Option Compensation will be determined in accordance
with this Section 9.3(b). Subject to Section 9.6,
any accrued but unpaid Option Compensation payable by virtue of a
termination pursuant to this Section 9.3 or Section 9.4
will be paid in the form of a cash lump sum (in lieu of an actual
stock option grant) in an amount equal to the estimated fair value
(pro-rated, as applicable) of the stock option that otherwise would
have been granted in respect of that Option Compensation, but for
the termination. Such estimated fair value will be determined
by the Company’s independent auditor: (i) in the case of
Option Compensation payable in respect of a completed fiscal year,
as of the applicable Customary Payment Date using the Black-Scholes
model and the following assumptions: (A) option exercise price
equal to the Fair Market Value as of the Customary Payment Date,
(B) remaining option duration equal to eight years, (C) risk-free
rate of return equal to the yield to maturity as of the Customary
Payment Date of non-callable ten year U.S. Treasury Notes with a
remaining term of eight years, (D) volatility equal to the standard
deviation of the daily change in the Fair Market Value for the
eight year period immediately preceding the Customary Payment Date,
and (E) a dividend yield equal to the sum of the dividends per
share paid on Common Stock in the twelve month period immediately
preceding the Customary Payment Date, divided by the Fair Market
Value as of the Customary Payment Date; and (ii) in the case of
Option Compensation payable in respect of the year of termination,
as of the date of termination using the Black-Scholes model and the
same assumptions as those set forth above except that: (A) the
option exercise price is equal to the Fair Market Value as of the
date of termination, and (B) the number of shares subject to the
option is forty-five thousand (45,000) pro-rated, based on the
number of full and partial months of the fiscal year transpired
prior to the date of termination. Except as specifically set
forth herein, all Base Salary, Benefits and Bonuses shall cease at
the time of such termination, subject to the terms of any benefit
or compensation plan then in force and applicable to
Employee. All outstanding options shall become immediately
vested and exercisable.
(c)
For the purposes of this Agreement, the term “Severance
Pay” shall mean a lump sum in cash to be paid by the
Corporation to the Employee within fifteen (15) days after the
effective date of the event giving rise to such payment (the
“Severance Event”) in an amount equal to (i) the
Employee’s Base Salary, computed based on the Base Salary in
effect on the date of the Severance Event, which would have been
payable for the thirty-six (36) month
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