EXHIBIT 10.2
EXECUTION COPY
SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT (this “Agreement”) is made on this
2 nd day of March, 2007 by and between
DAN W. MATTHIAS, a resident of Pennsylvania
(“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 Employee
are parties to an Amended and Restated Employment Agreement, dated
April 28, 2005 and as further amended, pursuant to which Employee
serves as the Chief Executive Officer of the Company (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 Employee and Rebecca C. 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 Employee may
amend the Existing Employment Agreement by mutual agreement in
writing; and
WHEREAS, the Company and 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 Chief Executive Officer (his
“Position”) on the terms herein described for the
period beginning on the date hereof and continuing until the
earlier of September 30, 2012 or the date terminated by either
party (such period of Employee’s employment is herein
referred to as the “Term”). For avoidance of
doubt, while the parties may agree to extend the Term by mutual
agreement, in the absence of such agreement, no extension will be
presumed and the failure to extend the Agreement will not trigger
any right to severance or any other entitlement.
2.
Duties
.
2.1.
During his
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 his best
efforts to serve the Company faithfully and shall devote his full
time, attention, skill and efforts to the performance of the duties
required by or appropriate for his 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).
2.2.
Effective on or
after October 1, 2009, Employee may elect (with at least 180
days’ advance written notice to the Company’s Board of
Directors) to reduce his time commitment to 50% part-time. In
that case, (a) Employee’s Base Salary, Cash Bonus and the
range and target number of shares subject to equity incentive
awards described in Section 5.3 will be proportionately reduced,
(b) the reduction in Employee’s hours will not affect his
eligibility to continue to participate in the Company’s group
health plan, as in effect from time to time (or, at the
Company’s election, in a mutually agreed upon and reasonably
comparable individual arrangement) or to receive any other benefits
listed on Schedule A hereto (other than the benefits described in
item 9 thereof, to the extent eligibility for those benefits
requires more than 50% part-time service), and (c) Employee’s
title, authority and duties will be as agreed between Employee and
the Company.
3.
Other Business
Activities . During his 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, (iv)
service as a director for up to three other companies (provided
that advance notice of such other board service is provided to the
Compensation Committee of the Company’s Board of Directors
and provided further that not more than two of such other companies
are publicly traded), or (v) 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 of his employment, the Company shall nominate 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 $531,803 (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
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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 .
(a)
Employee’s
bonus for the fiscal year ending September 30, 2007 will be between
0% and 100% of Employee’s Base Salary, with a target of
50%.
(b)
Employee’s
bonus for any fiscal year of the Term beginning after September 30,
2007 will be between 0% and 200% of Employee’s Base Salary,
with a target of 100%.
(c)
The actual amount
of any bonus payable under this Section 5.2 (each, a “Cash
Bonus”) will be paid in accordance with the Mothers Work,
Inc. Management Incentive Plan, 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.
5.3.
Equity
Incentives .
(a)
For each fiscal
year of the Company ending during the Term, the Company shall issue
to Employee, as additional compensation, restricted stock or
restricted stock units with respect to a number of shares of Common
Stock of the Company, $.01 par value per share (the “Common
Stock”) between zero and 20,000 with a target of 15,000,
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 (the
“Performance Shares”). The actual number of
Performance Shares subject to a given year’s award will be
determined or adjusted, as applicable, based on the Company’s
achievement in the applicable year of corporate and/or individual
performance goals approved by the Company’s Board of
Directors or its Compensation Committee. Such determination
will occur within 30 days following the date on which the Company
releases final earnings for the relevant fiscal year. Any
award issued or to be issued under this paragraph will also be
subject to time vesting in two equal annual installments, on the
first and second anniversaries of the last day of the fiscal year
with respect to which they were granted, based on Employee’s
continued employment with the Company (and subject to accelerated
full vesting in the event of a Change in Control, Employee’s
death, Disability, termination without Cause or resignation with
Good Reason during the two year time vesting period).
(b)
If
Employee’s employment is terminated pursuant to Sections 9.3,
9.4 or 9.6, Employee will be entitled to a pro-rata portion
(determined based on the
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number of full
and partial months of the fiscal year that have transpired prior to
the date of termination) of the Performance Shares that otherwise
would have been earned under this Section 5.3 for the fiscal year
of termination (based on actual corporate and/or individual
performance in that year, determined at the same time and in the
same manner as would have otherwise been applicable in the absence
of the termination). Such shares will be issued or released
from escrow (as applicable, depending on whether awarded in the
form of restricted stock units or restricted stock) at the same
time as would have otherwise been applicable in the absence of the
termination, provided that the time-based vesting
requirement otherwise applicable to such pro-rata Performance Share
award will be waived.
(c)
The
Company’s obligations under this Section 5.3 will be subject
to stockholder approval, in a manner consistent with the
requirements of Section 162(m) of the Code, at the Company’s
2008 annual meeting.
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 (“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 his 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 his 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 . Employee shall not,
during the Term and the two (2) year period following any cessation
of Employee’s 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 a 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
his or 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 manufacture, marketing
and/or sale of maternity clothing, and (ii) any other specialty
apparel retail niche market in which the Company is conducting or
then 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 his Base
Salary, Benefits and Cash Bonus through the end of the month in
which he dies, in addition to that portion of the Severance Pay
described in Section 9.3(c)(i). All outstanding options shall
become immediately vested and exercisable. For purposes of
this Agreement, accrued but unpaid Cash Bonuses means any Cash
Bonus payable with respect to a year ending prior to the date of
termination, as well as a pro-rata portion of any Cash Bonus that
would have been paid for the year of termination, but for that
termination. Except as otherwise provided herein, the amount
of such Cash Bonuses will be determined and paid in the same manner
and as of the same date that Cash 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. 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 him
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
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benefits plan in
which he 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 (or continuation of Base Salary for 45 days in lieu of
such notice). For purposes of this Agreement,
“Cause” shall mean: (i) any material breach by Employee
of any of his 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 his
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 and Benefits. All compensation 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.
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 Cash Bonuses plus the Severance Pay (as
defined herein). Except as specifically set forth herein, all
compensation 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:
(i)
a lump sum in cash to be paid by
the Company to Employee within fifteen (15) days after the
effective date of the event giving rise to such
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payment (the “Severance
Event”) in an amount equal to (A) three times (1)
Employee’s Base Salary as in effect on the date of the
Severance Event (taking into account any reduction occasioned by
Employee’s change to part-time status, as described above in
Section 2.2), plus (2) the target amount of Employee’s Cash
Bonus for the year of the Severance Event (again, taking into
account any reduction occasioned by Employee’s change to
part-time status, as described above in Section 2.2), and (B) any
accrued vacation pay, to the extent not theretofore
paid;
(ii)
continuation, for a period of 36
months, of the Benefits listed as items 1, 3, 7 and 8 on the
attached Schedule A;
(iii)
in lieu of continuation coverage
under COBRA, Employee will be entitled to (A) continued coverage
under the Company’s group health plan, as in effect from time
to time (or, at the election of the Company, under a mutually
agreed upon and reasonably comparable individual arrangement),
until the earlier of (1) Medicare eligibility, or (2) eligibility
for coverage under another employer’s group health plan, and
(B) following Medicare eligibility and until death, payment or
reimbursement of Employee’s Medicare Part B and Part D
premiums and the costs of a Medicare supplement policy reasonably
selected by Employee (or, if a Medicare supplement policy cannot
reasonably be obtained, continued access to coverage under the
Company’s group health plan, as in effect from time to
time).
(d)
Notwithstanding
the foregoing:
(i)
for purposes of any Severance Pay
that becomes payable prior to October 1, 2007, the word
“target” in Section 9.3(c)(i)(A)(2) will be deleted and
replaced with the phrase “maximum
potential.”
(ii)
for purposes of any Severance Pay
that becomes payable on or after October 1, 2009: (x) the phrase
“three times” in Section 9.3(c)(i)(A) will be deleted
and replaced with the phrase “two times,” and (y) the
phrase “36 months” in Section 9.3(c)(ii) will be
deleted and replaced with the phrase “24
months.”
9.4.
Termination
for Good Reason .
(a)
Employee may
terminate Employee’s employment hereunder for “Good
Reason” effective upon the date designated by Employee in a
written notice of the termination of his employment hereunder
pursuant to this Section 9.4(a). “Good Reason”
means any of the following, without Employee’s prior consent:
(i) a material, adverse change in title, authority or duties
(including the assignment of duties materially inconsistent with
Employee’s Position, but excluding (A) any change in title,
authority or duties associated with Employee’s change to
part-time status, as contemplated by Section 2.2, provided Employee
then continues in an executive level role, or (B) the appointment
of another executive to a position held by Employee (and any
resulting transfer of authority or duties associated with that
position), if such appointment was supported by Employee)); (ii) a
reduction in Base Salary or Cash Bonus opportunity (described in
Section 5), other than a proportionate reduction associated with a
change to part-time status, as contemplated by Section 2.2; or
(iii) a requirement that Employee relocate his current place of
residence. However, none of the foregoing events or
conditions will
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constitute Good
Reason unless Employee provides the Company with written objection
to the event or condition within 90 days following the occurrence
thereof, the Company does not reverse or otherwise cure the event
or condition within 15 days of receiving that written objection,
and Employee resigns his employment within 30 days following the
expiration of that cure period.
(b)
In the event of a
termination of Employee’s employment hereunder pursuant to
Section 9.4(a) hereof, Employee shall be entitled to receive all
accrued but unpaid (as of the effective date of such termination)
Base Salary, Benefits and Cash Bonuses. In addition, Employee
shall be entitled to the Severance Pay defined in Section 9.3(c)
herein. Except as specifically set forth in this Section
9.4(b), all compensation 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.
9.5.
Termination
Without Good Reason .
(a)
Employee may
terminate Employee’s employment hereunder at any time, for
any reason, with or without Good Reason, effective upon the date
designated by Employee upon ninety (90) days written notice of the
termination of his employment hereunder.
(b)
In the event of a
termination of Employee’s employment hereunder pursuant to
Section 9.5(a) hereof, Employee will be entitled to receive all
accrued but unpaid (as of the effective date of such termination)
Base Salary, Benefits and Cash Bonuses. In addition and in
lieu of continuation coverage under COBRA, Employee will be
entitled to (A) continued coverage under the Company’s group
health plan, as in effect from time to time (or, at the election of
the Company, under a mutually agreed upon and reasonably comparable
individual arrangement), until the earlier of (1) Medicare
eligibility, or (2) eligibility for coverage under another
employer’s group health plan, and (B) following Medicare
eligibility and until death, payment or reimbursement of
Employee’s Medicare Part B and Part D premiums and the costs
of a Medicare supplement policy reasonably selected by Employee
(or, if a Medicare supplement policy cannot reasonably
be
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