This Severance
Agreement (the “Agreement”) is made as of
April 30, 2009, between The Talbots, Inc., a Delaware
corporation (together with its subsidiaries, the
“Company”) and Richard T. O’Connell, Jr. (the
“Executive”). This Agreement sets forth the agreement
of the parties relating to the severance arrangements for the
Executive under certain circumstances. Capitalized terms used in
this Agreement are defined in Section 7 hereof.
1.
Severance Pay and Associated Benefits Upon a Qualified
Termination .
(a)
Severance Benefits . In the event of a Qualified
Termination, and subject to the terms of this Agreement, the
Company will provide to the Executive the payments and benefits
described in this Section 1 (collectively, the
“Severance Benefits”).
(b)
Severance Pay . Subject to the terms of this Agreement, in
the event of a Qualified Termination, the Company will pay to the
Executive severance pay in the gross amount equal to 1.5 times the
Executive’s annual base salary in effect immediately prior to
such termination (the “Severance Payment”), payable in
equal installments in accordance with normal Company payroll
practices over a 18 month period beginning immediately
following the Termination Date (the “Severance
Period”).
(c)
Benefits Continuation . Subject to the terms of this
Agreement, upon any such Qualified Termination, the Company will
also arrange for the Executive to continue to participate (through
COBRA or otherwise), on substantially the same terms and conditions
as in effect for the Executive (including any required employee
contribution) on the date hereof, in the medical and dental
programs provided to the Executive on the date hereof until the
earlier of (i) the end of the Severance Period, or
(ii) such time as the Executive is eligible to be covered by
comparable benefits of a subsequent employer. The Executive agrees
to notify the Company promptly if and when the Executive begins
employment with another employer and if and when the Executive
becomes eligible to participate in any benefit or other welfare
plans, programs or arrangements of another employer. Executive
agrees that any automobile/housing allowance or other personal
benefits provided by the Company to the Executive immediately prior
to such termination will cease as of the Termination Date. The
Company, however, may choose to make any separate arrangements with
the Executive to assist with the transfer of any such benefits.
Nothing herein is intended to reduce or affect the benefits set
forth in Section 1(d) below.
(d)
Retirement and Certain Other Benefits . Nothing in this
Agreement will modify or otherwise limit any of the
Executive’s rights and benefits as may exist under the terms
of any qualified, nonqualified or supplemental retirement, 401(k),
savings or deferred compensation plans of the Company, excluding
any severance or severance compensation plans (“Retirement
Plans”) and no benefits or amounts payable under any such
Retirement Plans shall reduce or offset any Severance Benefits
afforded to the Executive under this Agreement. Further, nothing in
this Agreement is intended to modify or otherwise limit the
Executive’s existing vested material right and entitlement to
benefits for himself and his eligible dependents during his
employment under the Executive’s separate Talbots Executive
Medical/Dental Plan and, following the Executive’s separation
from employment for any reason, Executive’s existing vested
material right and entitlement to benefits for himself and his
spouse under the Executive’s separate Retiree Executive
Medical/Dental Plan, each as currently in effect for Executive, and
which are hereby confirmed by the Company.
(i) If
in the event of a Qualified Termination the Executive still holds
one or more options to purchase shares of Company stock which have
not expired and have not been fully exercised, the Executive (or
his or her heirs or estate), at any time within 3 years after
the Termination Date (but in no event after the option has
expired), may exercise any such options with respect to any shares
as to which the Executive could have exercised the options on the
Termination Date.
(ii) The
Executive agrees that until the expiration of 6 months from
the Termination Date, the Executive will not engage in the purchase
or sale of the Company’s common stock (including without
limitation any “cashless exercise” of any stock options
involving the sale of any Company common stock as part of such
option exercise) during any trading window “blackout”
or “quiet period” applicable to management level
employees (“Quiet Period”); provided that in no event
shall the Executive be prohibited from making a purchase or sale of
the Company’s stock or exercising stock options for the
Company’s stock if such sale, purchase or exercise is made
pursuant to a written plan for trading securities within the
meaning of Rule 10b5-1 under the Securities Exchange Act of
1934, as amended (a “10b5-1 Trading Plan”), and such
10b5-1 Trading Plan is consistent with the Company’s insider
trading policy and has been approved by the Company. The Executive
acknowledges that the Company reserves the right to modify the
Quiet Period from time to time in its sole and absolute discretion.
The Company will provide the Executive with notice of Quiet Periods
and changes thereto at the time it provides such notice to the
Company’s management level employees. In addition, the
Executive agrees to notify the Company’s Chief Financial
Officer prior to exercising any options or trading in the
Company’s common stock within such 6 month period
following the Termination Date to ascertain whether such
transaction would violate any Quiet Period covered by this
subsection (e)(ii).
(f)
Withholdings . The Company may deduct from the
Executive’s Severance Payment and any other payments
otherwise due to the Executive, such withholding taxes and similar
governmental payments and charges as may be required.
(g)
Timing for Payment; Section 409A Restrictions .
Notwithstanding anything in this Agreement to the contrary, it is
the intention of the parties that this Agreement comply with
Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”), and any regulations or other guidance
issued thereunder, and this Agreement and the payments of any
benefits hereunder will be operated and administered accordingly.
Specifically, but not by limitation, the Executive agrees that if,
at the time of termination of employment, the Company is considered
to be publicly traded and the Executive is considered to be a
specified employee, as defined in Section 409A of the Code
(and as determined as of December 31 preceding the
Executive’s termination of employment, unless the
Executive’s termination of employment occurs prior to
April 30, in which case the determination will be made as of
the second preceding December 31), then some or all of such
payments to be made under this Agreement as a result of the
Executive’s termination of employment will be deferred for no
more than 6 months following such termination of employment,
if and to the extent the delay in such payments is necessary in
order to comply with the requirements of Section 409A of the Code
after utilizing the short-term deferral and involuntary separation
pay plan regulations. Upon expiration of such 6 month period
(or, if earlier, the Executive’s death), any payments so
withheld hereunder from the Executive hereunder will be distributed
to the Executive, with a payment of interest thereon credited at a
rate of prime plus 1% (with such prime rate to be determined as of
the actual payment date). Notwithstanding anything contained in
this Agreement to the contrary, the Company acknowledges that, for
purposes of Section 409A of the Code, each and every payment
made under this Agreement shall be deemed a separate payment and
not a series of payments.
The
Company’s obligation to make the payments and provide the
benefits to the Executive as set forth in Section 1 above will
be conditioned
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