141 Hodge Road
Re: Severance Benefits
Agreement
This is your Severance Benefits Agreement
(this “ Agreement ”) with Liz Claiborne, Inc.
(the “ Company ”). It sets forth certain terms
and conditions of your continued employment with the Company and
its subsidiaries and affiliates from time to time (together, the
“ Group ”) during the term of this Agreement
(the “ Agreement Term ”). This Agreement shall
be deemed to extend and renew your term of employment with the
Company as its Chief Executive Officer under your Amended and
Restated Employment Agreement with the Company dated
December 24, 2008 (the “ Former Employment
Agreement ”). This Agreement supersedes the Former
Employment Agreement, and all prior agreements, understandings or
representations related to your employment and severance
arrangements with the Group, other than the Amended and Restated
Executive Termination Benefits Agreement dated as of the date of
this Agreement (the “ Change in Control Agreement
”). By entering into this Agreement, you acknowledge that the
Former Employment Agreement is hereby terminated, and that you are
due no payments, including but not limited to any non-renewal
payment, under the Former Employment Agreement. Your future
employment and severance rights and entitlements will be governed
by this Agreement and the Change in Control Agreement, which
remains in full force and effect, as modified to reflect the
replacement of your Former Employment Agreement with this Agreement
(it being understood for clarity that any future compensation
grants by the Company or agreements entered into between the
parties hereto after the date of this Agreement shall be governed
by such terms as may be agreed or specified in such grant or
agreement, as the case may be).
(a) Term . The Agreement Term will
begin on the date first written above (the “ Effective
Date ”), and will end at the close of business on the
third anniversary of the Effective Date, subject to the next
sentence. On the first day of each month following the Effective
Date, the Agreement Term will automatically renew and extend for an
additional period of one month, unless written notice of
non-renewal is delivered from the Company to you, or from you to
the Company, at any time. Notwithstanding the foregoing, this
Agreement may be terminated with immediate effect at any time in
accordance with Section 3 hereof. The period from the
Effective Date through the termination date of this Agreement,
regardless of the time or reason for such termination, will
constitute the “ Agreement Term .”
(b) Non-Extension . Either party
providing notice of non-renewal of this Agreement to the other
party shall not result in any payment or benefits, or constitute
Good Reason, under this Agreement or any other agreement you may
have with the Company or the Group.
2.
Continuing Terms of Legacy Equity Awards;
Recoupment.
(a) Legacy Equity Awards .
(1) As an inducement to your agreement to join the Company as
its Chief Executive Officer (“ CEO ”), on
November 6, 2006 (your “ Start Date ”), you
were (A) granted options to purchase 185,200 shares of the
Company’s common stock with an exercise price equal to the
fair market value of the Company’s common stock at the close
of business on the Start Date, (B) granted options to purchase
63,150 shares of the Company’s common stock with an exercise
price equal to 1.2 multiplied by the fair market value of the
Company’s common stock at the close of business on the Start
Date (the options described in (A) and (B), the “
Sign-On Options ”), (C) awarded 76,355 restricted
shares of the Company’s common stock (your “
Make-Whole Restricted Stock ”) and (D) awarded
62,500 restricted shares of the Company’s common stock (your
“ Other Restricted Stock ”).
(2) All shares of Company common stock
acquired pursuant to the exercise of options (including the Sign-On
Options) and the vesting and delivery of stock awards (excluding
the Make-Whole Restricted Stock but including the Other Restricted
Stock) remain subject to the following restrictions on sale and
transferability (except as limited below): With respect to any
exercise of options prior to December 31, 2009 and any stock
that vests and is delivered prior to December 31, 2009, you will be
immediately permitted to sell only 25% of (A) with respect to
options, the net shares acquired pursuant to such exercise, and
(B) with respect to stock, the net shares acquired pursuant to
the vesting and delivery of such restricted stock or restricted
stock units, and you must retain the remainder of the net shares in
accordance with the following: you will be permitted to sell half
of such remaining net shares only on or after December 31,
2009, and you will be permitted to sell the remaining half of such
remaining net shares only on or after December 31, 2010. With
respect to any exercise of options or any stock that vests and is
delivered on or after December 31, 2009 but prior to
December 31, 2010, you will be immediately permitted to sell
62.5% of the net shares, and you will be permitted to sell the
remaining 37.5% of such net shares only on or after
December 31, 2010.
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The foregoing restrictions on sale and
transferability will be limited by each of the following:
(x) you will be permitted at any time to transfer shares to
any one or more of your spouse, children, or grandchildren, one or
more trusts for the primary benefit of you or any or all of them,
or limited partnerships or other entities wholly-owned by you or
any one or more of the individuals or entities referred to in this
clause (x), provided that such transferred shares will be deemed to
be held by you for purposes of the restrictions on sale and
transfer under this Section 3(c)(2), (y) the restrictions
on sale and transfer will not apply to any involuntary transfer or
a transfer by operation of law, such as upon the consummation of a
merger or other change in control of the Company or in connection
with a bankruptcy proceeding, and (z) the restrictions on sale
and transfer will automatically terminate upon your death or your
Disability. Additionally, upon a termination of your employment by
the Company without Cause or by you for Good Reason, the Company
will determine in good faith whether to waive the foregoing
restrictions on sale and transferability, it being agreed that the
Company will, in making such determination, operate under a
presumption that such restrictions will generally be
waived.
For purposes of this Section 2(a)(2), the
(1) “net shares acquired pursuant” to a stock option
exercise will mean (A) the number of shares which are
purchased pursuant to such exercise minus (B) any such shares which
are not distributed to you in order to satisfy applicable tax
withholding or in order to pay the exercise price (or which are
sold by you to reimburse yourself or any advance of any such
withholding or exercise price) and (2) “net shares acquired
pursuant to” the vesting and delivery of restricted stock or
restricted stock units will mean (C) the number of shares that
actually vest minus (D) any such shares which are not
distributed to you in order to satisfy applicable tax withholding
(or which are sold by you to reimburse yourself for any advance of
any such withholding).
(b) Recoupment . The Company shall
recover any compensation received by you that is required to be
recovered under law or in equity, including, without limitation,
under the Sarbanes-Oxley Act of 2002. In addition, to the extent
permitted by law, the Board shall seek to recover from you the
after-tax value of any compensation received by you (in whole or in
part) as it deems appropriate if (i) the award was based on
the achievement of certain financial results that were subsequently
the subject of a material restatement of the Company’s
financial statements filed with the SEC, and (ii) the amount
or vesting of the bonus, equity award, equity equivalent or other
incentive compensation would have been less had the financial
statements been correct . In the event that the aforementioned
restatement was caused or substantially caused by your grossly
negligent or intentional misconduct, then the Board shall instead
seek to recover from you the pre-tax value of the such compensation
(in whole or in part) as it deems appropriate.
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3.
Termination of Your Employment.
(a) No Reason Required. You or the
Company may terminate your employment prior to the end of the
Agreement Term at any time for any reason, or for no reason,
subject to the terms and conditions of this Agreement.
(b) Termination by the Company for
Cause.
(1) “
Cause ” means any of the following:
(A) Your willful or intentional failure or
refusal to perform or observe any of your material duties,
responsibilities or obligations as Chief Executive Officer of the
Company, if such breach is not cured, if curable, within
30 days after notice thereof to you by the Company;
(B) Any willful or intentional act or any
willful or intentional failure to act, either of which of a
material nature, involving fraud, misrepresentation, theft,
embezzlement, dishonesty or moral turpitude affecting the Group or
any customer, supplier or employee of the Group;
(C) Your conviction of (or plea of nolo
contendere to) an offense which is a felony in the jurisdiction
involved or a misdemeanor in the jurisdiction involved but which
involves moral turpitude;
(D) Any willful or intentional act which
could reasonably be expected to materially injure the reputation,
business or business relationships of the Group, or your reputation
or business relationships, if such breach is not cured, if curable,
within 30 days after notice thereof to you by the Company;
or
(E) Your willful or intentional failure to
comply with any reasonable and lawful request or direction of the
Board not contrary to the provisions of this Agreement and the
policies of the Company, if such breach is not cured, if curable,
within 30 days after notice thereof to you by the
Company.
For this
definition, no act, or failure to act, on your part will be deemed
“willful” or “intentional” unless done, or
omitted to be done, by you without reasonable belief that your
action or omission was in the best interests of the
Group.
(2) To terminate your employment “for
Cause”, the Board must determine in good faith that Cause has
occurred and must endeavor in good faith to provide you with a
prompt hearing before the Board (at which you may be accompanied by
counsel) prior to such determination.
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(3) The Company may place you on paid leave
for up to 30 consecutive days while it is determining whether there
is a basis to terminate your employment for Cause. This leave will
not constitute Good Reason.
(c) Termination by You for Good
Reason.
(1) “
Good Reason ” means any of the following:
(A) A change so that you are no longer
serving as Chief Executive Officer of the Company or a member of
the Board, a change so that you no longer report solely and
directly to the Board, or a material adverse change in your duties,
including the assignment to you of duties materially inconsistent
with your position (including as a director), in any case without
your prior written consent, which is not cured within 30 days
after written notice of such circumstances by you to the
Company;
(B) A material adverse change in the nature
or scope of your authority, power, function, duties or
responsibilities as Chief Executive Officer of the Company, without
your prior written consent, which is not cured within 30 days
after written notice of such circumstances by you to the
Company;
(C) A material diminution in the rate of
your base salary, target annual incentive, or guideline LTI, or any
diminution in your Company-provided long-term disability coverage,
in each case as of immediately prior to the Company’s actions
giving rise to Good Reason hereunder, except as consistent with
broad-based executive reductions only in salary, target annual
incentive, or guideline LTI, as the case may be, by the
Company;
(D) The Company’s moving its
principal executive offices by more than 35 miles if such move
increases your commuting distance by more than 35 miles, without
your prior written consent; or
(E) A material breach by the Company of any
of its material obligations under this Agreement, without your
prior written consent, which is not cured within 30 days after
written notice thereof is given by you to the Company.
(2) To terminate your employment “for
Good Reason”, Good Reason must have occurred. Unless you will
give the Company notice of any event which, after any applicable
notice and the lapse of any applicable 30-day grace period, would
constitute Good Reason within 90 days of the initial existence
of such event, such event will cease to be an event constituting
Good Reason. Subject to the Company’s cure rights described
above, you may terminate your employment by written notice to the
Company at any time that Good Reason for the termination
exists.
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(d) Termination on Disability or
Death.
(1) Your employment will terminate, at the
Group’s option, by written notice to you (or your legal
representative) upon your Disability. “ Disability
” means your inability to perform your duties and
responsibilities as contemplated under this Agreement for a period
of more than 180 consecutive days due to physical or mental
incapacity or impairment. A determination of Disability will be
made by a licensed physician satisfactory to both you and the
Company; provided that if you and the Company cannot agree as to a
licensed physician, then each will select a licensed physician and
these two together will select a third licensed physician, whose
determination as to Disability will be binding on you and the
Company. You, your legal representative or any adult member of your
immediate family will have the right to present to the Company and
such licensed physician such information and arguments on your
behalf as you or they deem appropriate, including the opinion of
your personal physician.
(2) Your employment will terminate
automatically on your death.
4. The
Company’s Obligations in Connection With Your
Termination.
(a) General Effect. On a
termination of your employment in accordance with Section 3
hereof, your employment will end, and the Group will have no
further obligations to you, except as provided in this
Section 4.
(b) For Good Reason or Without
Cause. If, during the Agreement Term, the Company terminates
your employment without Cause or you terminate your employment for
Good Reason:
(1) The Company will pay your accrued but
unpaid annualized base salary through the date of such
termination.
(2) The Company will pay a pro-rated annual
cash bonus for the year of your termination, subject to the terms
of the Company’s Section 162(m) cash bonus plan, based on
actual performance.
(3) The Company will pay, as a severance
payment, an amount equal to the sum of two times your then current
annualized base salary and two times your then current target
annual incentive bonus. In the event that you terminate your
employment for Good Reason pursuant to Section 3(c)(1)(C), the
annualized base salary and/or target annual incentive bonus
amount(s) used to calculate your severance payment under this
Section 4(b)(3) will be the amount(s) in effect immediately prior
to the Company’s actions giving rise to Good Reason under
Section 3(c)(1)(C).
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(4) Your Make-Whole Restricted Stock (but,
for purposes of clarity, not your Sign-On Options) and Other
Restricted Stock will immediately vest in full. As set forth in
Section 2(a)(2), the Company will determine in good faith
whether to waive the restrictions on the sale and transferability
of your Sign-On Options and Other Restricted Stock set forth in
Section 2(a)(2) and will, in making such determination,
operate under a presumption that such restrictions will generally
be waived.
(5) For two (2) years, the Company
will provide you and your family with coverage substantially
identical to that provided to you immediately prior to termination
in the Group’s medical, dental, vision, long-term disability
and life insurance programs (subject in the case of life insurance
to insurability at standard rates). In regard to such coverage in
the Company’s long-term disability programs, you will
specifically be entitled to a disability benefit equal to 100% of
your annualized base salary then in effect, in accordance with the
terms and conditions of the Company’s short-term and group
long term disability plans, as the same may be supplemented by
individual long-term disability policies. For purposes of providing
continued health benefits, to avoid potential tax issues, the
Company will pay you a monthly amount equal to the applicable COBRA
premium, which payment will be paid in advance on the first payroll
day of each month, commencing with the month immediately following
your termination, and subject to your execution of a release
hereunder, as described in Section 4(e).
(c) For Cause or without Good Reason,
for your Disability or Death. In the event that your employment
is terminated due to (i) a termination by the Company for
Cause, (ii) your resignation without Good Reason, or
(iii) a termination of your employment on account of your
death or Disability, the Company will pay to you an amount equal to
your accrued but unpaid annualized base salary then in effect
through the date of such termination, and, in the case of death or
Disability, (x) the Company will continue to provide you
and/or your family with coverage substantially identical to that
provided to other senior executives of the Group in its medical and
dental programs for 12 months following the date of such
termination and (y) all unvested equity awards (including but
not limited to all equity awards provided for in Section 2(a)
hereof) will immediately vest.
(d) Change in Control.
Notwithstanding the foregoing, in the event that your employment is
terminated under circumstances constituting a Covered Termination
(as defined in Change in Control Agreement) during the Protected
Period (as defined in the Change in Control Agreement), this
Section 4 will be of no force or effect, and the provisions of
the Change in Control Agreement will govern.
(e) Condition. The Company
expressly conditions its provision of all payments and benefits due
to you pursuant to this Section 4 on receipt from you and
non-revocation of a full release of all claims against the Group,
and its officers, directors, and affiliates, in substantially the
form attached as Exhibit A. The Company shall furnish to you
the form of release no later than five (5) days following the
end of the Agreement Term.
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(f) Timing. The benefits provided
in this Section 4 will begin at the end of your employment,
and any cash payments owed to you under this Section 4 will be
paid in one lump sum payment within 55 days of the end of your
employment (but in no event later than 3 business days after the
effective date of the release required by Section 4(e) hereof) or
at any earlier time required by applicable law.
(g) Sole Remedy. Your rights set
out in this Section 4 will constitute your sole and exclusive
rights and remedies as a result of your actual or constructive
termination of employment without Cause or for Good Reason, and you
hereby waive any such other claims against the Group in such
event.
5.
Proprietary Information.
(a) The Group owns and has developed and
compiled, and will own, develop and compile, certain proprietary
techniques and confidential information which have great value to
its business (referred to in this Agreement, collectively, as
“ Confidential Information ”). Confidential
Information includes not only information disclosed by the Group to
you, but also information developed or learned by you during the
course or as a result of employment hereunder, which information
you acknowledge is and will be the sole and exclusive property of
the Group. Confidential Information includes all proprietary
information that has or could have commercial value or other
utility in the business in which the Group is engaged or
contemplates engaging, and all proprietary information the
unauthorized disclosure of which could be detrimental to the
interests of the Group, whether or not such information is
specifically labeled as Confidential Information, and includes any
and all information developed, obtained or owned by the Group
concerning trade secrets, techniques, know-how (including designs,
plans, procedures, merchandising know-how, processes and research
records), software, computer programs, innovations, discoveries,
improvements, research, development, tests results, reports,
specifications, data, formats, marketing data and plans, business
plans, strategies, forecasts, unpublished financial information,
orders, agreements and other forms of documents, price and cost
information, merchandising opportunities, expansion plans, designs,
store plans, budgets, projections, customer, supplier and
subcontractor identities, characteristics and agreements, and
salary, staffing and employment information. Notwithstanding the
foregoing, Confidential Information will not in any event include
information that (i) was generally known or generally
available to the public prior to its disclosure to you;
(ii) becomes generally known or generally available to the
public subsequent to disclosure to you through no wrongful act of
any person or (iii) you are required to disclose by applicable
law, regulation, or legal process (provided, that unless prohibited
by law, you provide the Company with prior notice of the
contemplated disclosure and reasonably cooperate with the Company
at the Company’s expense in seeking a protective order or
other appropriate protection of such information).
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