This Employment
Agreement (this “Agreement”) dated and effective on
February 1, 2007 (the “Effective Date”), is
entered into by and between Aeropostale, Inc., a Delaware
corporation (the “Company”), and Michael Cunningham, an
individual residing at 21 Bridge Road, Nanuet, New York 10954(the
“Executive”).
WHEREAS, the
Company is a mall-based specialty retailer of casual and active
apparel for young women and men; and
WHEREAS, the
Executive is presently employed by the Company pursuant to an
Employment Agreement dated February 1, 2004 (the “Prior
Employment Agreement”). The Company and Executive now wish to
further embody and clarify the existing employment relationship in
this Agreement and terminate and replace the Prior Employment
Agreement with this Agreement.
NOW THEREFORE,
for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, it is hereby mutually agreed by and
between the parties hereto as follows:
For purposes of
this Agreement, the terms listed below shall be defined as
indicated.
“
Affiliate ” shall mean a domestic or foreign
business entity controlled by, controlling or under common control
with the Company.
“
Annual Bonus ” shall have the meaning ascribed
to it in Section 3.2.
“ Base
Salary ” shall have the meaning ascribed to it in
Section 4.1.
“
Board ” shall mean the Board of Directors of
the Company.
“
Cause ” shall have the meaning ascribed to it
in Section 8.1.
“Company
Competitors” shall mean those companies listed on
Exhibit A hereto, which includes all subsidiaries, related
companies and affiliates of those companies listed on
Exhibit A.
“
Confidential Information ” shall mean all
secret proprietary information of the Company and its Subsidiaries,
not otherwise publicly disclosed (except if disclosed by the
Executive in violation of this Agreement), whether or not
discovered or developed by Executive, known by Executive as a
consequence of Executive’s employment with the Company at any
time (including prior to the commencement of this Agreement) as an
Executive or agent. Without limiting the generality of the
foregoing, such proprietary information shall include
(a) customer lists; (b) acquisition, expansion,
marketing, financial and other business information and plans;
(c) research and development; (d) computer programs;
(e) sources of supply; (f) identity of specialized
consultants and contractors and confidential information developed
by them for the Company and its Subsidiaries; (g) purchasing,
operating and other cost data; (h) special customer needs,
cost and pricing data; (i) manufacturing methods;
(j) quality control information; (k) inventory
techniques; (l) Executive information; any of which
information is not generally known in the industries in which the
Company and its Subsidiaries are conducting business or shall at
any time during Executive’s Employment conduct business
including (without limitation) the apparel retailing industry.
Confidential Information also includes the overall business,
financial, expansion and acquisition plans of the Company and its
Subsidiaries, and includes information contained in manuals,
memoranda, projections, minutes, plans, drawings, designs, formula
books, specifications, computer programs and records, whether or
not legended or
otherwise
identified by the Company and its Subsidiaries as Confidential
Information, as well as information which is the subject of
meetings and discussions and not so recorded.
“
Disability ” shall mean the absence of the
Executive from the Executive’s duties to the Company on a
full-time basis for a total of 120 days during any 12-month
period as a result of incapacity due to mental or physical illness
which is determined to be permanent by a physician selected by the
Company and acceptable to the Executive or the Executive’s
legal representative (such agreement as to acceptability not to be
withheld unreasonably).
“
Employment Period ” shall mean, unless earlier
terminated as provided in Section 3 hereof.
“EPS” or “Earnings Per Share” in
accordance with Financial Accounting Standard Board Statement
No. 128 “Earnings per Share.” Is defined
as:
Basic –
computed by dividing income available to common shareholders
(numerator) by the weighted average number of common shares
outstanding (denominator).
Diluted –
computed with same numerator as basic, but denominator is increased
to include the number of additional common shares that would have
been outstanding if the dilutive potential common shares had been
issued.
“
Fiscal Year ” shall mean the 52 or 53-week
period ending on the Saturday closest to January 31 of each
calendar year. Fiscal Years shall be referred to herein on the
basis of the calendar year that contains 11 months of such
Fiscal Year.
“
Inventions ” shall mean those discoveries,
developments, concepts and ideas, whether or not patentable,
relating to the present, future and prospective activities and
Products and Services of the Company and its Subsidiaries, which
such activities and Products and Services are known to Executive by
virtue of Executive’s employment with the Company and its
Subsidiaries.
“Operating Income” shall mean the
Company’s Operating Income as reported in the Company’s
financial statements filed with Securities and Exchange Commission
in accordance with Generally Accepted Accounting Procedures
consistently applied (“GAAP”).
“
Prior Employment Agreement ” shall mean that
certain Employment Agreement dated February 1, 2004, between
the Company and Executive.
“
Restricted Period ” shall mean the period
beginning on the Effective Date and ending on the last day of the
fifteenth (15 th )
month after termination of Executive’s employment.
“
Subsidiary ” shall mean any entity of which the
Company owns, directly or indirectly, 50% or more of the aggregate
voting power of the voting securities.
2.
Employment, Duties and Compensation .
(a)
Employment by the Company . The Company hereby continues to
engage Executive and Executive hereby agrees to continue to provide
to the Company his full-time services as Executive Vice President,
Chief Financial Officer of the Company, reporting to the
Company’s Chief Executive Officer. The Executive’s
duties shall consist of those duties and responsibilities currently
performed by him plus such other duties consistent with those
generally applicable to a person bearing said title, and as the
Company’s Chief Executive Officer or the Board shall from
time to time direct, provided such directives are consistent with
the duties of an Executive Vice President, Chief Financial Officer.
Except during any vacation period and reasonable periods of absence
due to sickness, personal injury or other disability throughout the
Employment Period, Executive shall devote his full working time and
attention during normal business hours to performing his services
and duties hereunder to the best of his abilities and utilizing all
of his skills, experience and knowledge to advance the business and
interests of the Company in a manner consistent with the
professional duties and responsibilities of his position.
Accordingly, during the
Employment
Period and any Restricted Period, Executive shall not, directly or
indirectly, engage in or participate in the operation or management
of, or render any services to, any Company Competitors.
Notwithstanding the foregoing to the contrary, Executive shall not
be prevented from investing and managing his assets in such form or
manner as will not unreasonably interfere with the services to be
rendered by Executive hereunder, or from acting as a director,
trustee, officer of, or on a committee of, or a consultant to, any
other firm, trust or corporation or deliver lectures, fulfill
speaking engagements or teach or coach at educational institutions
whether or not for compensation where such positions do not
interfere in any way with the services to be rendered by Executive
hereunder and where the business of such firm, trust or corporation
is not in competition with the Company’s (or any of the
Company’s affiliates) business. Executive further agrees that
he will not, directly or indirectly, engage or participate in any
activities at any time during such employment which conflict with
or could reasonably be considered to conflict with the interests of
the Company in any way. Furthermore, Executive will not, nor will
any family member of Executive, related to Executive by blood,
marriage or adoption, maintain any ownership interest whatsoever in
any supplier, agent, vendor, independent contractor, professional
organization or consultant working for or on behalf of the Company,
nor will any of the aforementioned parties maintain any employment
relationship with any supplier, agent, vendor, independent
contractor, professional organization or consultant working for or
on the behalf of the Company.
(b)
Location of Employment. During the Employment Period,
Executive’s principal place of employment shall be located at
one of the Company’s principal places of business or
principal executive offices, wherever located as designated from
time to time by the Chief Executive Officer or the
Board.
(c)
Acceptance of Employment . Executive hereby accepts
employment with the Company on the terms and in the manner set
forth in this Agreement.
4.
Employment Period . Executive’s employment
hereunder shall be for a period commencing on February 1, 2007
and shall continue, through and including January 31, 2010
(the “Employment Period”). Unless this Agreement is
terminated in accordance with the terms and conditions contained in
Section 8, or amended by written agreement signed by the
parties hereto prior to the end of the Employment Period, or any
anniversary of the end of the Employment Period, as the case may
be, the Employment Period shall automatically be extended from year
to year under the same terms and conditions as shall be in effect
on the last termination date. Executive agrees that the covenants
set forth in Section 6 and all other provisions of this
Agreement related to the enforcement thereof, shall continue
throughout the Employment Period, surviving any termination of
Executive’s employment hereunder for any reason.
4.
Compensation and Benefits .
4.1. Base
Salary . The Company shall pay to Executive, during the
Employment Period, an annual base salary (the “Base
Salary”) of $425,000 per annum. The Base Salary shall be
reviewed annually by the Company and may be increased if the
Company, in its sole and absolute discretion, determines that such
an increase is advisable based on such factors as the Company shall
consider appropriate from time to time (it is understood that under
no circumstances shall such review cause a decrease in
Executive’s Base Salary). Executive’s Base Salary shall
be payable in accordance with the Company’s customary
Executive payroll policy as in effect from time to time (but in no
event less frequently than monthly). Such Base Salary, together
with any other compensation which may be payable to Executive
hereunder, shall be less such deductions as shall be required to be
withheld by applicable law and regulations and shall be pro-rated
for any period that does not constitute a full twelve
(12) month period.
4.2. Annual
Incentive and Bonus Plan .
|
|
(a)
|
|
Executive shall, during each of the
Company’s fiscal years in which Employee is employed
hereunder, be eligible to participate in the Company’s Annual
Incentive and Bonus Plan (the “AIP”). Based upon the
successful completion of stated goals as set forth by the Company
in the AIP for the fiscal year in question, employee shall be
eligible to receive as a cash bonus up to, but not greater than,
150% of his Salary (it being understood that the calculation of the
amount of such bonus shall be as set forth in the AIP for such
fiscal year) as well as equity compensation from the Company which
may include, among other things, options, restricted stock awards,
long-term cash plans, performance shares or such other equity
compensation
|
|
|
|
|
determined to be included in the AIP
by the Company and the Company’s Compensation Committee.
Company reserves the right to amend, modify or cancel the AIP;
provided that if Company does modify the financial goals of the AIP
for any Fiscal Year which were set by Company at the commencement
of such Fiscal Year, such modification will not affect the
calculation of Employee’s AIP Bonus for such Fiscal Year, if
any (in other words Employee’s AIP bonus, if any, shall be
calculated pursuant to the financial goals set at the commencement
of the applicable Fiscal Year).
|
|
|
|
|
|
|
|
(b)
|
|
In
addition to any incentive compensation the Executive may receive in
accordance with Section 4(a), upon execution of this
Agreement, Executive will receive a grant from the Company of such
number of shares of the Company’s restricted stock equating
to, on the date of grant, $400,000, which restricted stock shall
vest three (3) years from the date of grant.
|
4.3.
Benefits . In addition to the payments required by
Paragraph 4.1 to be paid to the Executive during the
Employment Period, the Executive shall also continue to:
|
|
(a)
|
|
be
eligible to participate, on the same basis and to the same extent
as other key executive executives of the Company, in all executive
fringe benefits plans presently in effect and/or hereafter
maintained or created by the Company;
|
|
|
|
|
|
|
|
(b)
|
|
be
eligible to participate in medical, dental, short and/or long-term
disability, life and accidental death and dismemberment insurance
plans that may be provided by the Company for its key executive
Executives in accordance with the provisions of any such
plans;
|
|
|
|
|
|
|
|
(c)
|
|
be
entitled to sick leave and sick pay in accordance with any Company
policy and practice that may be applicable, from time to time, to
key executive Executives; and
|
|
|
|
|
|
|
|
(d)
|
|
be
eligible to any pension and 401(k) plan and other retirement income
benefit plans presently in effect and/or hereafter maintained or
created by the Company.
|
Service with the
Company, any Subsidiary, or Federated Department Stores, Inc.
(“Federated”) or any affiliate of Federated shall be
recognized for vesting purposes under any benefit, retirement or
other plans of the Company.
4.4. Automobile
Allowance . Company shall provide Executive with an automobile
allowance of $8,500 per year, payable monthly. The Company, in its
discretion, may increase such automobi
|
