This Executive Employment Agreement involves
Title: EXECUTIVE EMPLOYMENT AGREEMENT
Governing Law: Delaware Date: 8/1/2016
Industry: Retail (Apparel) Sector: Services
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) is made by and between DESTINATION MATERNITY CORPORATION (the “Company”) and DAVID STERN (the “Executive”).
WHEREAS, the parties wish to enter into this Agreement to memorialize the terms of Executive’s employment by the Company.
NOW, THEREFORE, in consideration of the foregoing and intending to be bound hereby, the parties agree as follows:
1. Duration of Agreement . This Agreement is effective on the date it is fully executed and has no specific expiration date. Unless terminated by agreement of the parties, this Agreement will govern Executive’s continued employment by the Company until that employment ceases.
2. Title; Duties . Executive will be employed as the Company’s Executive Vice President & Chief Financial Officer, reporting directly to the Company’s Chief Executive Officer (the “ CEO ”) or as otherwise directed by the Company’s Board of Directors (the “ Board ”). Executive will devote his best efforts and substantially all of his business time and services to the Company and its affiliates to perform such duties as may be customarily incident to his position and as may reasonably be assigned to him from time to time. Executive will not, in any capacity, engage in other business activities or perform services for any other individual, firm or corporation without the prior written consent of the Company; provided, however , that without such consent, Executive may engage in charitable, public service and personal investment activities, and may continue to serve on the boards of Beck Suppliers, Inc. and Camp Ockanickon, so long as in each case such activities do not in any respect interfere with Executive’s performance of his duties and obligations hereunder.
3. Place of Performance . Executive will perform his services hereunder at the principal executive offices of the Company in Moorestown, New Jersey; provided, however, that Executive may be required to travel from time to time for business purposes.
4. Compensation and Indemnification .
4.1. Base Salary . Executive’s annual salary will be $405,000 (the “ Base Salary ”), paid in accordance with the Company’s payroll practices as in effect from time to time. The Base Salary will be reviewed annually by the Compensation Committee of the Board (the “ Committee ”).
4.2. Annual Bonuses .
4.2.1. For each fiscal year ending during his employment, Executive will be eligible to earn an annual performance bonus. The target amount of that bonus will be 60% of Executive’s Base Salary for the applicable fiscal year and will be pro-rated for the fiscal year already in progress at the time of Executive’s commencement of employment (the “ Target Bonus ”). The performance period for this bonus opportunity may be segmented into such shorter periods as the Committee may determine in its reasonable discretion, provided the aggregate bonus opportunities (at target) for the applicable fiscal year are at least equal to the Target Bonus. The actual bonus payable with respect to any performance period will be determined by the Committee, based on the achievement of corporate and individual performance objectives established for the applicable period. Any bonus payable under this paragraph will be paid as soon as administratively practicable following the end of the applicable performance period, but in no event later than 2 1 ⁄ 2 months after the end of the fiscal year that includes the last day of the applicable performance period, and except as otherwise provided in Section 5.1.2 , will only be paid if Executive remains continuously employed by the Company through the actual bonus payment date.
4.2.2. For purposes of determining any bonus payable to Executive, the measurement of corporate and individual performance will be performed by the Committee in good faith. From time to time, to the extent consistent with the requirements for exemption from the deductibility limitation of Section 162(m) of the Internal Revenue Code (the “ Code ”) (if such exemption is intended to be applicable), the Committee may in its sole discretion make adjustments to corporate or individual performance goals, so that required departures from the Company’s operating budget, changes in accounting principles, acquisitions, dispositions, mergers, consolidations and other corporate transactions, and other factors influencing the achievement or calculation of such goals do not affect the operation of this Section 4.2 in a manner inconsistent with its intended purposes.
4.2.3. The Committee may choose to provide Executive’s performance bonus opportunity through the Company’s Management Incentive Program, in which case such bonus opportunity will be subject to the additional terms and conditions therein contained.
4.3. Inducement Awards . Upon commencement of his employment, Executive will receive equity incentive awards with a grant date fair value of approximately $350,000, which fair value will be allocated 50% to a non-qualified stock option, 25% to restricted stock and 25% to a performance-based restricted stock unit. The non-qualified stock option and restrictive stock award will each vest in four equal annual installments, subject to full acceleration upon a “change in control” of the Company (as defined in the Company’s Amended and Restated 2005 Equity Incentive Plan), provided in each case that Executive has remained in continuous service with the Company through the applicable vesting date or event. The other terms of these awards will be substantially similar to the terms of the Company’s standard award agreements for these types of awards, as currently on file with the SEC as exhibits to the Company’s periodic financial disclosures, provided that Executive’s awards may be made as non-plan grants under Nasdaq Listing Rule 5635(c)(4).
4.4. Future Equity Awards . Executive will be eligible to receive additional equity awards in the future when annual grants are issued to other senior executives of the Company generally, and at such other times as may be determined by the Board or Committee.
4.5. Paid Time Off . Executive will be entitled to three weeks of paid time off each year, in addition to sick leave, personal days and holidays in accordance with Company policies in effect from time to time. The accrual, usage, carryover and expiration of such paid time off will be subject to the policies of the Company, as in effect from time to time.
4.6. Indemnification . During his employment and thereafter, the Company agrees to indemnify and hold Executive harmless in connection with actual, potential or threatened actions or investigations related to Executive’s services for, or employment by, the Company and/or its subsidiaries in the same manner as other officers and directors to the fullest extent provided in the Company’s by-laws and to be covered by D&O insurance to the maximum extent and length of coverage of any other officer or director of Company.
4.7. Automobile Reimbursement . During the term of Executive’s employment hereunder, the Company will reimburse the Executive for automobile related expenses not to exceed $1,000 per month.
4.8. Legal Fees . The Company will reimburse Executive for up to $10,000 for the reasonable legal fees incurred in connection with the negotiation of this Agreement and related agreements and obligations. Such reimbursement will be made within 60 days following Executive’s commencement of employment and will be subject to Executive’s delivery of appropriate documentation of these expenses.
5. Termination . Upon any cessation of his employment with the Company, Executive will be entitled only to such compensation and benefits as described in this Section 5 . Upon any cessation of his employment for any reason, unless otherwise requested by the Company, Executive agrees to resign immediately from all officer and director positions he then holds with the Company and its affiliates.
5.1. Termination without Cause or for Good Reason . If Executive’s employment by the Company ceases due to a termination by the Company without Cause (as defined below) or a resignation by Executive for Good Reason (as defined below), Executive will be entitled to:
5.1.1. payment of all accrued and unpaid Base Salary through the date of such cessation;
5.1.2. payment of any performance bonus otherwise payable (but for the cessation of Executive’s employment) with respect to a performance period ended prior to the cessation of Executive’s employment;
5.1.3. payment of a pro-rata performance bonus for the bonus performance period in which termination occurs, determined and paid in the same manner and at the same time as the Executive’s performance bonus would otherwise have been determined and paid for the applicable performance period, but for the termination. Such performance bonus will be pro-rated based on the number of days of the applicable performance period transpired prior to the date of termination relative to the total number of days contained in the applicable performance period;
5.1.4. monthly severance payments equal to one-twelfth of Executive’s Base Salary for a period equal to 12 months; and
5.1.5. waiver of the applicable premium otherwise payable for COBRA continuation coverage for Executive (and, to the extent covered immediately prior to the date of such cessation, his eligible dependents) for a period equal to 12 months.
Except as otherwise provided in this Section 5.1 , all compensation and benefits will cease at the time of such cessation and the Company will have no further liability or obligation by reason of such cessation. The payments and benefits described in this Section 5.1 are in lieu of, and not in addition to, any other severance arrangement maintained by the Company. Notwithstanding any provision of this Agreement, the payments and benefits described in Section 5.1 are conditioned on Executive’s execution and delivery to the Company, within 45 days following his cessation of employment, of a general release of claims against the Company and its affiliates in such form as the Company may reasonably require (the “ Release ”). Subject to Section 5.4 , below, and provided the Release is not revoked, the severance benefits described herein will begin to be paid or provided (x) 15 days after the Release has been delivered, if the 60-day period following the cessation of employment does not straddle two calendar years; or (y) the later of 15 days after the Release has been delivered or the first regularly scheduled payroll date in the calendar year following the cessation of employment, if the 60-day period following such cessation straddles two calendar years.
5.2. Termination Following a Change in Control . For cessations of employment described in Section 5.1 that occur during the two year period following a Change in Control, (i) the reference in Section 5.1.4 to “12 months” will be replaced with a reference to “24 months,” (ii) the reference in Section 5.1.5 to “12 months” will be replaced with a reference to “18 months,” and (iii) Executive will in that case be entitled to an additional severance benefit equal to 60% of his Base
Salary, which amount will be divided into substantially equal monthly installments and paid over the salary continuation period described above in Section 5.1.4 , as modified by Section 5.2(i) . For avoidance of doubt, the payment of these enhanced severance benefits is subject to the release requirements described at the end of Section 5.1 .
5.3. Other Terminations . If Executive’s employment with the Company ceases for any reason other than as described in Section 5.1 , above (including but not limited to termination (a) by the Company for Cause, (b) as a result of Executive’s death, (c) as a result of Executive’s disability or (d) by Executive without Good Reason), then the Company’s obligation to Executive will be limited solely to the payment of accrued and unpaid Base Salary through the date of such cessation. All compensation and benefits will cease at the time of such cessation and, except as otherwise provided by COBRA, the Company will have no further liability or obligation by reason of such termination. The foregoing will not be construed to limit Executive’s right to payment or reimbursement for claims incurred prior to the date of such termination under any insurance contract funding an employee benefit plan, policy or arrangement of the Company in accordance with the terms of such insurance contract.
5.4. Compliance with Section 409A .
5.4.1. If the termination giving rise to the payments described in Section 5.1 is not a “Separation from Service” within the meaning of Treas. Reg. § 1.409A-1(h)(1) (or any successor provision), then the amounts otherwise payable pursuant to that section will instead be deferred without interest and will not be paid until Executive experiences a Separation from Service. In addition, to the extent compliance with the requirements of Treas. Reg. § 1.409A-3(i)(2) (or any successor provision) is necessary to avoid the application of an additional tax under Section 409A of the Code to payments due to Executive upon or following his Separation from Service, then notwithstanding any other provision of this Agreement (or any otherwise applicable plan, policy, agreement or arrangement), any such payments that are otherwise due within six months following Executive’s Separation from Service (taking into account the preceding sentence of this paragraph) will be deferred without interest and paid to Executive in a lump sum immediately following that six-month period. This paragraph should not be construed to prevent the application of Treas. Reg. § 1.409A-1(b)(9)(iii)(or any successor provision) to amounts payable hereunder. For purposes of the application of Treas. Reg. § 1.409A-1(b)(4)(or any successor provision), each payment in a series of payments will be deemed a separate payment.
5.4.2. Notwithstanding anything in this Agreement to the contrary, to the extent an expense, reimbursement or in-kind benefit provided to Executive pursuant to this Agreement or otherwise constitutes a “deferral of compensation” within the meaning of Section 409A of the Code (a) the amount of expenses eligible for reimbursement or in-kind benefits provided to the Executive during any calendar year will not affect the amount of expenses eligible for reimbursement or in-kind benefits provided to the Executive in any other calendar year, (b) the reimbursements for expenses for which the Executive is entitled to be reimbursed shall be made on or before the last day of the calendar year following the calendar year in which the applicable expense is incurred, and (c) the right to payment or reimbursement or in-kind benefits hereunder may not be liquidated or exchanged for any other benefit.
5.5. Compliance with Section 280G. If any payment or benefit due to Executive from the Company or its subsidiaries or affiliates, whether under this Agreement or otherwise, would (if paid or provided) constitute an Parachute Payment (as defined below), then notwithstanding any other provision of this Agreement or any other commitment of the Company, that payment or benefit will be limited to the minimum extent necessary to ensure that no portion thereof will fail to be tax-deductible to the Company by reason of Section 280G of the Code; provided that such reduction shall only apply if the aggregate after-tax value of the Parachute Payments retained by Executive (after giving effect to such reduction) is greater than the aggregate after-tax value (after giving effect to the excise tax imposed by