LIZ CLAIBORNE, INC.
EXECUTIVE TERMINATION BENEFITS AGREEMENT
This Executive
Termination Benefits Agreement (this “Agreement”),
dated as of the 13th day of October, 2006, (the “Effective
Date”) is by and between Liz Claiborne, Inc., a Delaware
corporation (the “Company”), and William L. McComb (the
“Executive”).
WHEREAS, the
Company’s Board of Directors (the “Board”)
recognizes that the possibility of a change in control of the
Company and the uncertainty and questions which it may raise may
result in the departure or distraction of the Executive to the
detriment of the Company and its stockholders;
WHEREAS, the
Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
the Executive to his/her assigned duties in the face of the
inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by the possibility, threat or
occurrence of a change in control of the Company;
WHEREAS, should
the Company be faced with a possible change in control situation,
in addition to the Executive’s regular duties, he/she may be
called upon to assist in the assessment of proposals, advise
management and the Board as to whether such proposals would be in
the best interests of the Company and its stockholders, and to take
such other actions as the Board might determine to be
appropriate.
NOW, THEREFORE,
to assure the Company that it will have the continued undivided
attention and services of the Executive and the availability of
his/her advice and counsel notwithstanding the possibility, threat
or occurrence of a bid to take over control of the Company, and to
induce the Executive to remain in the employ of the Company in such
a circumstance, for the benefit of the Company and its
shareholders, and for other good and valuable consideration, the
Company and the Executive agree as follows:
(a) Except
as otherwise provided in Section 1(b) below, this Agreement shall
be effective as of the date hereof and shall continue in effect
until the end of the “Term of Employment” as such term
is used in the employment agreement between the Company and the
Executive dated October 13, 2006 (the “Employment
Agreement”).
(b) If a
Change in Control shall have occurred at any time during the period
in which this Agreement is effective, then notwithstanding any
provision hereof to the contrary, this Agreement shall be effective
and continue in effect for (i) the remainder of the month in
which the Change in Control occurred and (ii) a term of
thirty-six (36) months beyond the month in which such Change
in Control occurred; provided that if any obligations of the
Company hereunder shall not have been fully and finally discharged
at the end of such thirty six (36) month period, this
Agreement shall remain in effect until such
obligations
shall have been finally discharged in full. The period commencing
on the earlier of a Potential Change in Control (if applicable) or
Change in Control and ending with the conclusion of such thirty-six
(36) month period shall be referred to hereinafter as the
“Protected Period”.
2. Change in
Control and Potential Change in Control.
(a) For
purposes of this Agreement, a “Change in Control” shall
be deemed to have occurred:
(i) if any
person as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended from time to time (the
“Exchange Act”), and as used in Sections 13(d) and
14(d) thereof, including a “group” as defined in
Section 13(d) of the Exchange Act (a “Person”), but
excluding the Company, any subsidiary of the Company and any
employee benefit plan sponsored or maintained by the Company or any
subsidiary of the Company (including any trustee of such plan
acting as trustee), directly or indirectly, becomes the
“beneficial owner” (as defined in Rule 13(d)-3
under the Exchange Act, as amended from time to time) of Company
securities representing 25% or more of either (i) the then
outstanding shares of the Company’s common stock or
(ii) the combined voting power of the Company’s then
outstanding voting securities entitled to vote generally in the
election of directors; provided, however, that the following
acquisitions shall not constitute a Change in Control: (A) any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), or (B) any
acquisition by any corporation or similar entity pursuant to a
reorganization, merger or consolidation if following such
reorganization, merger or consolidation, the conditions described
in sub-clauses (1), (2), and (3) of Section 2(a)(iii)
below have been satisfied; or
(ii) if
individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least two-thirds (2/3)
of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal
of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board;
or
(iii) upon
consummation of a reorganization, merger or consolidation of the
Company (a “Business Combination”), in each case,
unless, following such Business Combination, (1) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the then outstanding shares
of
common stock of
the Company and the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors immediately prior to such Business
Combination beneficially own, directly or indirectly, more than
fifty percent (50%) of, respectively, the then outstanding shares
of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries),
(2) no Person (excluding (A) any employee benefit plan (or
related trust) of the Company or such corporation resulting from
such Business Combination and (B) any Person beneficially
owning, immediately prior to such reorganization, merger or
consolidation, 25% or more of, respectively, the then outstanding
shares of the common stock of the Company, or the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors)
beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors, and (3) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement relating to, or of the action of
the Incumbent Board providing for, such Business Combination;
or
(iv) upon
consummation of the sale or other disposition of all or
substantially all of the assets of the Company, unless following
such transaction (1) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the then outstanding shares of common stock of the
Company and the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors immediately prior to such transaction
beneficially own, directly or indirectly, more than sixty percent
(60%) of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors,
as the case may be, of the acquiring corporation (including,
without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more
subsidiaries), (2) no Person (excluding (A) any employee
benefit plan (or related trust) of the Company or such acquiring
corporation and (B) any Person beneficially owning,
immediately prior to such transaction, 25% or more of,
respectively, the then outstanding shares of the common stock of
the Company, or the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors) beneficially owns, directly or indirectly,
25% or more of,
respectively,
the then outstanding shares of common stock of the acquiring
corporation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (3) at least a majority of the
members of the board of directors of the acquiring corporation were
members of the Incumbent Board at the time of the execution of the
initial agreement relating to, or of the action of the Incumbent
Board providing for, such sale or disposition; or
(v) approval by the stockholders of the
Company of a complete liquidation or dissolution of the
Company.
(b) For
purposes of this Agreement, a “Potential Change in
Control” shall be deemed to have occurred if (i) the
Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control; (ii) any
Person (including the Company) publicly announces an intention to
take or to consider taking actions which if consummated would
constitute a Change in Control; or (iii) the Board adopts a
resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred; provided that the Board
shall not be precluded from adopting a resolution to the effect
that for purposes of this Agreement, it is the good faith opinion
of the Board that a Potential Change in Control has been abandoned
and that a Potential Change in Control no longer exists.
(c) For
purposes of Sections 3 through 9 of this Agreement, the term
“Company” shall include Liz Caliborne, Inc. and any
successor thereto, whether by merger, reorganization,
consolidation, acquisition of substantially all of its assets or
any other means.
(a) In the
event that the Executive’s employment is terminated during
the Protected Period either (i) by the Company without Cause
(as defined in Section 3(c) below) or (ii) by the Executive
for Good Reason (as defined in Section 3(b) below) (each, a
“Covered Termination”), the Company will provide the
Executive with the payments and benefits set forth in
Section 4 below.
(b) For
purposes of this Agreement, “Good Reason” shall mean
the occurrence of one or more of the following events (regardless
of whether any other reason, other than Cause as provided below,
for such termination exists or has occurred, including without
limitation other employment):
(i) failure to elect or reelect or
otherwise maintain the Executive in the offices or positions, or
substantially equivalent offices or positions, of or with the
Company, which the Executive held immediately prior to the Change
of Control;
(ii) a
significant adverse change in the nature or scope of the
authorities, powers, functions, duties or responsibilities attached
to the position with the Company which the Executive held
immediately prior to the Change in Control;
(iii) a
reduction by the Company, without the Executive’s prior
consent, in either (1) the Executive’s annual base
salary immediately prior to the Change in Control or (2) the
Executive’s target bonus opportunity (expressed as a
percentage of the Executive’s annual base salary) immediately
prior to the Change in Control;
(iv) the
Company’s requiring the Executive, without the
Executive’s prior consent, to be based more than fifty
(50) miles from the Company’s offices at which the
Executive is based immediately prior to the Change in Control
(excluding for this purpose required travel on the Company’s
business to an extent substantially consistent with the
Executive’s business travel obligations immediately prior to
the Change in Control), or, in the event the Executive consents to
any such relocation of his/her offices, the failure by the Company
to provide the Executive with all of the benefits of the
Company’s relocation policy as in effect immediately prior to
the Change in Control;
(v) the
failure by the Company, without the Executive’s prior
consent, to pay to the Executive any portion of the
Executive’s current compensation (for purposes of this clause
(v), “current compensation” shall mean the
Executive’s annual base salary as in effect on the date
hereof or as the same may be increased from time to time, plus the
bonuses awarded to the Executive pursuant to the Company’s
cash incentive bonus plan), or to pay to the Executive any portion
of any installment or deferred compensation under any deferred
compensation program of the Company within twenty (20) days
after request for payment by the Executive after such deferred
compensation is due;
(vi) the
failure by the Company to continue in effect any then ongoing
compensation or benefit plan in which the Executive participates
immediately prior to the Change in Control and which is significant
to the Executive’s total compensation opportunity on either
an annual or long-term basis, including, but not limited to, the
Company’s 2005 Stock Incentive Plan, any other long-term
incentive plan of the Company, or any substitute plan for any of
the foregoing adopted prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the
failure by the Company to continue the Executive’s
participation therein on a basis not significantly less favorable
to the Executive, in terms of the amount of the compensation
opportunities so provided, to those provided to the Executive
immediately prior to the Change in Control, it being agreed,
without limiting the foregoing, for the avoidance of doubt, that
the Company shall be deemed to have failed to continue the
Executive’s participation in such plans on a basis not
significantly less favorable to the Executive in the event that the
Executive’s target long-term incentive compensation
opportunity
(expressed as a
percentage of the Executive’s base salary) subsequent to the
Change of Control shall not equal or exceed his/her long-term
incentive compensation opportunity (expressed as a percentage of
the Executive’s base salary) as in effect immediately prior
to the Change in Control;
(vii) the
failure by the Company to continue to provide the Executive with
benefits comparable in the aggregate to those enjoyed by the
Executive under the Company’s retirement, life insurance,
medical, dental, health, accident and disability plans in which the
Executive was participating immediately prior to the Change in
Control;
(viii) the
failure of the Company to obtain an agreement from any successor to
assume and agree to perform this Agreement as contemplated by
Section 9 below prior to the effective date of any such
succession, or, if such an agreement is not so obtained, the
failure of the Company, within three (3) business days after
receiving a written request from the Executive for such agreement,
to so provide such agreement;
(ix) any
failure of the Company to timely renew the Term of Employment (as
such term is used in the Employment Agreement) at the end of the
Initial Term (as such term is used in the Employment Agreement) or
at the end of any extension period of the Term of Employment after
the Initial Term, in accordance with Section 2 of the
Employment Agreement; or
(x) any
purported termination of the Executive’s employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Section 5(a) below.
The
Executive’s continued employment shall not constitute consent
to, or a waiver of rights with respect to, any act or failure to
act constituting Good Reason hereunder. Notwithstanding the
foregoing, the occurrence of an event that would otherwise
constitute Good Reason hereunder shall cease to be an event
constituting Good Reason if the Executive does not provide a Notice
of Termination to the Company within one hundred eighty
(180) days of the date that the Executive first becomes aware
of the occurrence of such event.
(c) For
purposes of this Agreement, “Cause” shall mean and be
limited to
(i) the
Executive’s willful and intentional repeated failure or
refusal, continuing after notice that specifically identifies the
breach(es) complained of, to perform substantially his/her material
duties, responsibilities and obligations (other than a failure
resulting from the Executive’s incapacity due to physical or
mental illness or other reasons beyond the control of the
Executive), and which
failure or
refusal results in demonstrable direct and material injury to the
Company;
(ii) any
willful and intentional act or failure to act involving fraud,
misrepresentation, theft, embezzlement, dishonesty or moral
turpitude (collectively, “Fraud”) which results in
demonstrable direct and material injury to the Company;
(iii) conviction of (or a plea of nolo
contendere to) an offense which is a felony in the jurisdiction
involved or which is a misdemeanor in the jurisdiction involved but
which involves Fraud; or
(iv) the
Executive’s complete inability to perform his/her material
duties, responsibilities and obligations on account of a physical
or mental incapacity or impairment for a period of more than 180
consecutive days or for an aggregate of 240 days within a
360-day period, which incapacity or impairment continues for more
than thirty (30) days after the Executive’s receipt of
written notice from the Company given after such 180 or
240 day period has run without the Executive’s return,
on a substantially full-time basis, to employment. For purposes of
determining whether Cause exists, no act, or failure to act, on the
Executive’s part shall be deemed “willful” or
“intentional” unless done, or omitted to be done, by
the Executive in bad faith, and without reasonable belief that
his/her action or omission was in the best interests of the
Company.
For purposes of
clause (iv) above, a determination of the Executive’s
complete inability to perform his/her material duties,
responsibilities and obligations will be made by a single physician
satisfactory to both the Executive and the Company; provided that
if the Executive and the Company cannot agree as to a single
physician, then each will select a physician and these two together
will select a third physician, whose determination will be binding
on the Executive and the Company. The Executive shall have the
right to present to the Company and such physician such information
and arguments on the Executive’s behalf as the Executive
deems appropriate, including the opinion of the Executive’s
personal physician.
Notwithstanding
the foregoing, the Executive shall not be deemed to have been
terminated for “Cause” hereunder unless and until there
shall have been delivered to the Executive a copy of a resolution
(a “Cause Resolution”) duly adopted by the affirmative
vote of not less than two thirds (2/3) of the Board then in office
at a meeting of the Board called upon reasonable notice to all
Directors and held for such purpose, after reasonable notice to the
Executive and an opportunity for the Executive, together with his
counsel (if the Executive chooses to have counsel present at such
meeting), to be heard before the Board at such meeting, finding
that, in the good faith opinion of the Board, the Executive had
commi
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