EXECUTIVE AGREEMENT (Michael W. Rayden)
Exhibit 10.2
EXECUTIVE AGREEMENT
(Xxxxxxx X. Xxxxxx)
(Xxxxxxx X. Xxxxxx)
This is an Agreement between Tween Brands, Inc., a Delaware corporation (the
“Corporation”), with its principal office located at 0000 Xxxxxx Xxxxxxx, Xxx Xxxxxx, Xxxx 00000,
and Xxxxxxx X. Xxxxxx (the “Executive”), effective as of December 3, 2008.
Recitals:
The Corporation considers the establishment and maintenance of a sound and vital management to
be part of its overall corporate strategy and essential in protecting and enhancing the interests
of the Corporation and its shareholders. As part of this corporate strategy, the Corporation
wishes to act to retain its well-qualified executive officers notwithstanding any actual or
threatened change in control of the Corporation.
The Executive is a key executive officer of the Corporation and the Executive’s services,
experience and knowledge of the affairs of the Corporation, and reputation and contacts in the
industry are extremely valuable to the Corporation. The Executive’s continued dedication,
availability, advice, and counsel to the Corporation are deemed important to the Corporation, its
Board of Directors (the “Board”), and its shareholders. It is, therefore, in the best interests of
the Corporation to secure the continued services of the Executive notwithstanding any actual or
threatened change in control of the Corporation. Accordingly, the Board has approved this
Agreement with the Executive and authorized its execution and delivery on behalf of the
Corporation.
Agreement:
1. Term of Agreement. This Agreement will begin on the date entered above and will
irrevocably continue in effect for a three-year period from the effective date hereof. On third
anniversary date of the effective date hereof, and on the anniversary date of each year thereafter
(a “Renewal Date”), the term of this Agreement will be extended automatically for a period of one
(1) year unless, not later than thirty (30) days prior to such Renewal Date, the Corporation gives
written notice to the Executive that it has elected not to extend this Agreement, in which
situation this Agreement shall terminate at the end of the three-year term then in progress.
Notwithstanding the above, if a “Change in Control” (as defined herein) of the Corporation occurs
during the term of this Agreement, the term of this Agreement will be for twenty-four (24) months
beyond the end of the month in which any such Change in Control occurs.
2. Definitions. The following defined terms shall have the meanings set forth below, for
purposes of this Agreement:
(a) Annual Award. “Annual Award” means the cash payment paid or payable to the Executive with
respect to a fiscal year under the Corporation’s Incentive Compensation Performance Plan.
(b) Base Annual Salary. “Base Annual Salary” means the greater of (1) the highest annual
rate of base salary in effect for the Executive during the twelve (12) month period immediately
prior to a Change in Control, or (2) the annual rate of base salary in effect at the time a Notice
of Termination is given (or on the date employment is terminated if no Notice of Termination is
required).
(c) Cause. “Cause” means any of the following:
(1) The Executive shall have (a) been convicted of a felony, or (b) committed an
act of intentional gross misconduct, fraud, or gross neglect in connection with the
Executive’s duties or in the course of the Executive’s employment with the Corporation
or any Subsidiary, and the Board shall have determined that such act is materially
harmful to the Corporation; or
(2) The Executive shall have materially breached Section 12 of the Executive’s
Employment Agreement with the Corporation.
For purposes of this Agreement, no act or failure to act on the part of the Executive shall be
deemed “intentional” if it was due primarily to an error in judgment or negligence, but shall be
deemed “intentional” only if done or omitted to be done by the Executive not in good faith and
without reasonable belief that the Executive’s action or omission was in the best interest of the
Corporation. Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for “Cause” under this Agreement unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the Board at a meeting called and held for such purposes, after reasonable
notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel
(if the Executive chooses to have counsel present at such meeting), to be heard before the Board,
finding that, in the good faith opinion of the Board, the Executive had committed an act
constituting “Cause” as defined in this Agreement and specifying the particulars of the act
constituting “Cause” in detail. Nothing in this Agreement will limit the right of the Executive or
the Executive’s beneficiaries to contest the validity or propriety of any such determination.
(d) Change in Control. “Change in Control” means the occurrence of any of the following:
(1) Any “Person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) is or becomes the
“Beneficial Owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing twenty-five percent (25%) or
more of the combined voting power of the Corporation’s then outstanding securities (a
“25% Shareholder”) provided however, that the term 25% Shareholder shall not include any
Person if such Person would not otherwise be a 25% Shareholder but for a reduction in
the number of outstanding voting shares resulting from a stock repurchase program or
other similar plan of the Corporation or from a
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self-tender offer of the Corporation, which plan or tender offer commenced on or after
the date hereof, provided, however, that the term “25% Shareholder” shall include such
Person from and after the first date upon which (A) such Person, since the date of the
commencement of such plan or tender offer, shall have acquired Beneficial Ownership of,
in the aggregate, a number of voting shares of the Corporation equal to one percent (1%)
or more of the voting shares of the Corporation then outstanding, and (B) such Person,
together with all affiliates and associates of such Person, shall Beneficially Own
twenty-five percent (25%) or more of the voting shares of the Corporation then
outstanding. In calculating the percentage of the outstanding voting shares that are
Beneficially Owned by a Person for purposes of this subsection (d)(1), voting shares
that are Beneficially Owned by such Person shall be deemed outstanding, and voting
shares that are not Beneficially Owned by such Person and that are subject to issuance
upon the exercise or conversion of outstanding conversion rights, exchange rights,
rights, warrants or options shall not be deemed outstanding. Notwithstanding the
foregoing, if the Board of Directors of the Corporation determines in good faith that a
Person that would otherwise be a 25% Shareholder pursuant to the foregoing provisions of
this subsection (d)(1) has become such inadvertently, and such Person (a) promptly
notifies the Board of Directors of such status and (b) as promptly as practicable
thereafter, either divests of a sufficient number of voting shares so that such Person
would no longer be a 25% Shareholder, or causes any other circumstance, such as the
existence of an agreement respecting voting shares, to be eliminated such that such
Person would no longer be a 25% Shareholder as defined pursuant to this subsection
(d)(1), then such Person shall not be deemed to be a 25% Shareholder for any purposes of
this Agreement. Any determination made by the Board of Directors of the Corporation as
to whether any Person is or is not a 25% Shareholder shall be conclusive and binding; or
(2) A change in composition of the Board of Directors of the Corporation occurring
any time during a consecutive two-year period as a result of which fewer than a majority
of the Board of Directors are Continuing Directors (for purposes of this section, the
term “Continuing Director” means a director who was either (A) first elected or
appointed as a Director prior to the date of this Agreement; or (B) subsequently elected
or appointed as a director if such director was nominated or appointed by at least a
majority of the then Continuing Directors); or
(3) Any of the following occurs:
(A) a merger or consolidation of the Corporation, other than a merger or
consolidation in which the voting securities of the Corporation immediately prior
to the merger or consolidation continue to represent (either by remaining
outstanding or being converted into securities of the surviving entity) sixty
percent (60%) or more of the combined voting power of the Corporation or surviving
entity immediately after the merger or consolidation with another entity;
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(B) a sale, exchange, or other disposition (in a single transaction or a
series of related transactions) of all or substantially all of the assets of the
Corporation which shall include, without limitation, the sale of assets
aggregating more than fifty percent (50%) of the assets of the Corporation on a
consolidated basis;
(C) a liquidation or dissolution of the Corporation;
(D) a reorganization, reverse stock split, or recapitalization of the
Corporation which would result in any of the foregoing; or
(E) a transaction or series of related transactions having, directly or
indirectly, the same effect as any of the foregoing.
(e) Change Year. “Change Year” means the fiscal year in which a Change in Control occurs.
(f) Disability. “Disability” means “Total Disability” as defined in the Tween Brands
Long-term Disability Plan (effective August 1, 2007), or any amended or successor plan.
(g) Employee Benefits. “Employee Benefits” means the perquisites, benefits, and service
credit for benefits as provided under any and all employee retirement income and welfare benefit
policies, plans, programs, or arrangements in which the Executive is entitled to participate,
including without limitation any stock option, stock purchase, stock appreciation, savings,
pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred
compensation, incentive compensation, group or other life, health, medical/hospital, or other
insurance (whether funded by actual insurance or self-insured by the Corporation), disability,
salary continuation, expense reimbursement, and other employee benefit policies, plans, programs,
or arrangements that may now exist or any equivalent successor policies, plans, programs, or
arrangements that may be adopted hereafter, providing perquisites, benefits, and service credit for
benefits at least as great in a monetary equivalent as are payable thereunder prior to a Change in
Control.
(h) Employment Agreement. “Employment Agreement” means an executed employment agreement
between the Corporation and the Executive.
(i) Good Reason. “Good Reason” means the occurrence of any one or more of the following:
(1) The assignment to the Executive after a Change in Control of the Corporation of
duties which are a significant reduction in the duties, authority, responsibilities, and
status of the Executive’s position at any time during the twelve (12) month period prior
to such Change in Control;
(2) A reduction by the Corporation in the Executive’s Base Annual Salary in effect
immediately prior to a Change in Control of the Corporation, or the failure to
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grant salary increases and bonus payments on a basis comparable to those granted to
other executives of the Corporation, or a reduction of the Executive’s most recent
highest incentive bonus potential prior to such Change in Control under the
Corporation’s Incentive Compensation Performance Plan, Long-Term Incentive Compensation
Performance Plan, or similar plans;
(3) A demand by the Corporation that the Executive relocate to a location in excess
of fifty (50) miles from the location where the Executive is currently based, or in the
event of any such relocation with the Executive’s express written consent, the failure
of the Corporation or a Subsidiary to pay (or reimburse the Executive for) all
reasonable moving expenses incurred by the Executive relating to a change of principal
residence in connection with such relocation and to indemnify the Executive against any
loss in the sale of the Executive’s principal residence in connection with any such
change of residence, all to the effect that the Executive shall incur no loss on an
after tax basis;
(4) The failure of the Corporation to abide by this Agreement or to obtain a
satisfactory agreement from any successor to the Corporation to assume and agree to
perform this Agreement, as contemplated in Section 14 of this Agreement;
(5) The failure of the Corporation to provide the Executive with substantially the
same Employee Benefits that were provided to him immediately prior to the Change in
Control, or with a package of Employee Benefits that, though one or more of such
benefits may vary from those in effect immediately prior to such Change in Control, is
substantially comparable in all material respects to such Employee Benefits taken as a
whole; or
(6) Any significant reduction in the Executive’s compensation or benefits or
adverse change in the Executive’s location or duties, if such significant reduction or
adverse change occurs at any time after the commencement of any discussion with a third
party relating to a possible Change in Control of the Corporation involving such third
party, if such reduction or adverse change is in contemplation of such possible Change
in Control and such Change in Control is actually consummated within twelve (12) months
after the date of such significant reduction or adverse change.
The existence of Good Reason shall not be affected by the Executive’s incapacity due to
physical or mental illness. The Executive’s continued employment shall not constitute a waiver of
the Executive’s rights with respect to any circumstance constituting Good Reason under this
Agreement. The Executive’s determination of Good Reason shall be conclusive and binding upon the
parties to this Agreement provided such determination has been made in good faith.
(j) Highest Incentive Compensation. “Highest Incentive Compensation” means the greater of the
Executive’s Potential Annual Award for the Executive’s Incentive Group for (a) the Termination Year
or (b) the average of the actual Annual Awards for the three years prior to the Termination Year.
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(k) Incentive Compensation Performance Plan. “Incentive Compensation Performance Plan” means
the Corporation’s 2004 Incentive Compensation Performance Plan in effect as of the effective date
of this Agreement, as well as any amended, successor or similar plan or plans.
(l) Incentive Group. “Incentive Group” means the group or category, if any, into which an
Executive is placed pursuant to the Corporation’s Incentive Compensation Performance Plan.
(m) Long-Term Incentive Compensation Performance Plans “Long-Term Incentive Compensation
Performance Plans” means the Corporation’s 1999 Stock Option and Performance Incentive Plan and
2005 Stock Option and Performance Incentive Plan in effect as of the effective date of this
Agreement, as well as any amended, similar or successor, plan or plans.
(n) Notice of Termination. “Notice of Termination” means a written notice indicating the
specific termination provision in this Agreement relied upon and setting forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the employment under the
provision so indicated.
(o) Potential Annual Award. “Potential Annual Award” means the Annual Award the Executive
could receive according to his Incentive Group pursuant to the Corporation’s Incentive Compensation
Performance Plan assuming that (1) the Corporation met the par target (100%) criteria for the
Corporation’s Incentive Compensation Performance Plan for a particular fiscal period or year
(whether or not such target performance criteria was or could be met); (2) there are no adjustments
for business unit or individual performance; and (3) the Executive’s Base Annual Salary is used to
determine the Potential Annual Award.
(p) Pro-Rated Bonus Amount. “Pro-Rated Bonus Amount” means any accrued but unpaid bonus for a
completed bonus period, plus a pro-rated portion of the greater of (i) the average of the
Executive’s semi-annual bonus for the previous two similar seasons or (ii) the Executive’s par
target (100%) criteria semi-annual bonus for the current semi-annual season calculated as of the
Change in Control date. In the case of a semi-annual bonus, the portion shall be the amount of
semi-annual bonus paid or payable to the Executive with respect to the bonus period in which the
Change in Control occurs, assuming the greater of criteria (i) or (ii) applied, pro-rated by
multiplying such amount by a fraction, the numerator of which is the number of days during the
bonus period in which the Change in Control occurs prior to the occurrence of the Change in
Control, and the denominator of which shall be one hundred eighty-two and one-half (182-1/2).
(q) Performance Criteria. “Performance Criteria” means the performance-based criteria as
referenced in the Corporation’s Incentive Compensation Performance Plan.
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(r) Severance Benefits. “Severance Benefits” means the benefits described in Section 4 of
this Agreement, as adjusted by the applicable provisions of Section 5 of this Agreement.
(s) Subsidiary. “Subsidiary” means any corporation or other entity, a majority of the voting
control of which is directly or indirectly owned or controlled at the time by the Corporation.
(t) Termination Year. “Termination Year” means the year of termination of the Executive.
(u) Window Period. “Window Period” means the period of time after a Change in Control in
which Executive can terminate the Executive’s employment with the Corporation with or without Good
Reason and receive Severance Benefits. The Window Period begins on the one year anniversary date
of a Change in Control and lasts for thirty (30) days.
3. Eligibility for Severance Benefits. The Corporation or its successor shall pay or provide
to the Executive the Severance Benefits if the Executive’s employment is terminated during the term
of this Agreement, either:
(a) by the Corporation (1) at any time six (6) months prior to a Change in Control if such
termination was in contemplation of such Change in Control and was done to avoid the effects of
this Agreement or, (2) within twenty-four (24) months after a Change in Control of the Corporation,
unless in either (1) or (2) the termination is on account of the Executive’s death or Disability or
for Cause, provided that, in the case of a termination on account of the Executive’s Disability or
for Cause, the Corporation shall give Notice of Termination to the Executive with respect thereto;
or
(b) by the Executive for Good Reason at any time within twenty-four (24) months after a Change
in Control of the Corporation provided that the Executive shall give Notice of Termination to the
Corporation with respect thereto; or
(c) by the Executive with or without Good Reason at any time during the Window Period.
4. Severance Benefits. The Executive, if eligible under Section 3, shall receive the
following Severance Benefits, adjusted by the applicable provisions of Section 5 (in addition to
accrued compensation, bonuses, and vested benefits and stock options):
(a) Base Annual Salary. A lump sum cash payment equal to the sum of: (1) any accrued base
salary and vacation time payable as of the Executive’s termination of employment (either by reason
of an Employment Agreement or otherwise); and (2) the Executive’s Base Annual Salary multiplied by
three (3). Such amount generally shall be paid to the Executive as soon as administratively
practicable after the date of termination of employment. Additionally, if the Executive is a
“specified employee” as defined in Section 409A of the Internal Revenue
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Code of 1986, as amended, and any guidance promulgated thereunder (“Code Section 409A”), this
amount will be increased by the amount, if any, determined under subsection 4(h).
(b) Annual Incentive Compensation. A lump sum cash payment equal to the sum of: (1) the
Pro-Rated Bonus Amount; and (2) the Executive’s Highest Incentive Compensation multiplied by three
(3). Such amount generally shall be paid to the Executive as soon as administratively practicable
after the date of termination of employment. Additionally, if the Executive is a “specified
employee” as defined in Code Section 409A, this amount will be increased by the amount, if any,
determined under subsection 4(h).]
(c) Long-Term Incentive Compensation. Such compensation as shall be payable according to the
terms of the Corporation’s Long-Term Incentive Compensation Performance Plans.
(d) Insurance Benefits. For a three (3) year period beginning on the date the Executive’s
employment is terminated, the Corporation will arrange to provide to the Executive, at the
Corporation’s expense:
(1) Health Care. Health care coverage comparable to that in effect for
the Executive immediately prior to the termination (or, if more favorable to the
Executive, that furnished generally to salaried employees of the Corporation),
including, but not limited to, hospital, surgical, medical, dental, prescription, and
dependent coverage. Upon the expiration of the health care benefits required to be
provided pursuant to this subsection 4(d), the Executive shall be entitled to the
continuation of such benefits under the provisions of the Consolidated Omnibus Budget
Reconciliation Act. Health care benefits otherwise receivable by the Executive pursuant
to this subsection 4(d) shall be reduced to the extent comparable benefits are actually
received by the Executive from a subsequent employer during the three-year period
following the date the employment is terminated and any such benefits actually received
by the Executive shall be reported by the Executive to the Corporation.
(2) Life Insurance. Life insurance coverage (including any supplemental
coverage, purchase opportunity, and double indemnity for accidental death that was
available to the Executive) equal (including policy terms) to that in effect at the time
Notice of Termination is given (or on the date the employment is terminated if no Notice
of Termination is required) or, if more favorable to the Executive, equal to that in
effect at the date the Change in Control occurs.
In the event the Executive’s participation in any such plan or program is not permitted, or is
taxable to the Executive, the Corporation will directly provide, at no after-tax cost to the
Executive, the benefits to which the Executive would be entitled under such plans and programs.
The Corporation shall pay such benefits in a lump sum. Any benefits or payments to be provided
under this paragraph after completion of the time period described in Treasury Regulation Section
1.409A-1(b)(9)(v)(B) shall be subject to the following conditions: (i) the benefits or payments
provided during any taxable year of the Executive may not affect the
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benefits or payments to be provided to the Executive in any other taxable year; (ii) reimbursement
of any eligible expense must be made on or before the last day of the Executive’s taxable year
following the taxable year in which the expense was incurred; and (iii) the right to such benefits
or payments is not subject to liquidation or exchange for another benefit or payment.
(e) Retirement and Nonqualified Plan Benefits. The Executive will be entitled to all
benefits provided under (1) the Corporation’s Alternative Savings Plan and the Corporation’s
Supplemental Retirement and Deferred Compensation Plan, as well as any amended, similar or
successor plans and (2) the Corporation’s tax-qualified plans and nonqualified plans, as well as
any amended, similar, or successor plans. All qualified and nonqualified plan benefits or deferred
compensation agreements or accounts shall become immediately vested with respect to such plan
benefits as of a Change in Control. All payments required under this paragraph shall be made in
accordance with the provisions of each applicable plan.
(f) Stock Options. If upon the date of termination of the Executive’s employment, the
Executive holds any options with respect to stock of Corporation, all such options will immediately
become exercisable upon such date and will be exercisable for one hundred eighty (180) days
thereafter. To the extent such acceleration of exercise of such options is not permissible under
the terms of any plan pursuant to which the options were granted, the Corporation will pay to
Executive, in a lump sum, within one hundred eighty (180) days after termination of employment, an
amount in cash equal to the excess, if any, of the aggregate fair market value of all stock of the
Corporation subject to such options, determined on the date of termination of employment, over the
aggregate option price of such stock, and the Executive will surrender all such options
unexercised.
(g) Outplacement. The Corporation shall pay or reimburse the Executive all fees for
outplacement services and related travel costs up to a maximum of sixty thousand dollars ($60,000).
(h) Code Section 409A Compliance. If the Corporation determines that (1) the Executive is a
“specified employee” as defined in Code Section 409A, and (2) any payments under Section 4 of this
Agreement will cause the Executive to incur additional tax or interest under Code Section 409A,
the Corporation shall pay to the Executive such additional compensation as is necessary (after
taking into account all federal, state, and local income taxes payable by the Executive as a result
of the receipt of such additional compensation) to place the Executive in the same after-tax
position the Executive would have been in had no such excise tax (or any interest or penalties
thereon) been paid or incurred with respect to any of such amounts (the “409A Gross-Up”). The
Corporation shall pay such additional compensation as soon as administratively practicable after
the time when the Corporation makes the applicable payments under Section 4 of this Agreement to
the Executive. In no event, however, shall such payment be made after December 31 of the year
after the year in which the Executive remits such excise tax. The calculation of the 409A Gross-Up
shall be approved by the Corporation’s independent certified public accounting firm engaged by the
Corporation immediately prior to the date of the Executive’s termination of service and the
calculation shall be provided to the Executive in
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writing. The Executive shall then be given fifteen (15) days, or such longer period as the
Executive reasonably requests, to accept or reject the calculation of the 409A Gross-Up. If the
Executive rejects the 409A Gross-Up calculation and the parties are thereafter unable to agree
within an additional forty-five (45) days, the arbitration provisions of Section 10 shall control.
The Corporation shall reimburse the Executive for all reasonable legal and accounting fees incurred
with respect to the calculation of the 409A Gross-Up and any disputes related thereto.
For purposes of determining the amount of the 409A Gross-Up, the Executive shall be deemed to
pay federal income taxes at the highest marginal rate of federal income taxation in the calendar
year in which the 409A Gross-Up is to be made and state and local income taxes at the highest
marginal rates of taxation in the state and locality of the Executive’s residence on the date of
termination.
If the excise tax is subsequently determined to be less than the amount taken into account
hereunder at the time of termination of employment, the Executive shall repay to the Corporation at
the time the reduction in excise tax is finally determined, the portion of the 409A Gross-Up
attributable to such reduction. Notwithstanding the Executive’s acceptance or rejection of the
409A Gross-Up calculation, if the excise tax is determined to exceed the amount taken into account
hereunder at the time of termination of employment, the Corporation shall make an additional Tax
Gross-Up payment to the Executive in respect of such excess at the time the amount of such excess
is finally determined.
In computing and determining Severance Benefits under subsections 4(a), (b), (c), (d), (e),
(f), and (g), above, a decrease in the Executive’s salary, incentive bonus potential, or insurance
benefits shall be disregarded if such decrease occurs within six (6) months before a Change in
Control, is in contemplation of such Change in Control, and is taken to avoid the effect of this
Agreement should such action be taken after such Change in Control. In such event, the salary,
incentive bonus potential, and/or insurance benefits used to determine Severance Benefits shall be
that in effect immediately before the decrease that is disregarded pursuant to this Section 4.
Except as otherwise provided, the Severance Benefits provided in subsections 4(a), (b), (c),
(e), (f), and (g) above shall be paid not later than forty-five (45) business days following the
date the Executive’s employment terminates.
5. Tax Gross-Up. If any Severance Benefit or other benefit paid or provided under Section 4,
or the acceleration of stock option vesting, or the payment or distribution of any Employee
Benefits or similar benefits under any plan, program, or agreement which is applicable to the
Executive are subject to excise tax pursuant to Section 4999 of the Internal Revenue Code of 1986,
as amended (or any similar federal or state excise tax), the Corporation shall pay to the Executive
such additional compensation as is necessary (after taking into account all federal, state, and
local income taxes payable by the Executive as a result of the receipt of such additional
compensation) to place the Executive in the same after-tax position the Executive would have been
in had no such excise tax (or any interest or penalties thereon) been paid or incurred with respect
to any of such amounts (the “Tax Gross-Up”). The Corporation shall pay such additional
compensation at the time when the Corporation determines that any payment is subject to the excise
tax under Section 4999 of the Code, but in no event later than December 31 of the year
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after the year in which the Executive remits such excise tax. The calculation of the Tax Gross-Up
shall be approved by the Corporation’s independent certified public accounting firm engaged by the
Corporation immediately prior to the Change in Control and the calculation shall be provided to the
Executive in writing. The Executive shall then be given fifteen (15) days, or such longer period
as the Executive reasonably requests, to accept or reject the calculation of the Tax Gross-Up. If
the Executive rejects the Tax Gross-Up calculation and the parties are thereafter unable to agree
within an additional forty-five (45) days, the arbitration provisions of Section 10 shall control.
The Corporation shall reimburse the Executive for all reasonable legal and accounting fees incurred
with respect to the calculation of the Tax Gross-Up and any disputes related thereto.
For purposes of determining the amount of the Tax Gross-Up, the Executive shall be deemed to
pay federal income taxes at the highest marginal rate of federal income taxation in the calendar
year in which the Tax Gross-Up is to be made and state and local income taxes at the highest
marginal rates of taxation in the state and locality of the Executive’s residence on the date of
termination.
If the excise tax is subsequently determined to be less than the amount taken into account
hereunder at the time of termination of employment, the Executive shall repay to the Corporation at
the time the reduction in excise tax is finally determined, the portion of the Tax Gross-Up
attributable to such reduction. Notwithstanding the Executive’s acceptance or rejection of the Tax
Gross-Up calculation, if the excise tax is determined to exceed the amount taken into account
hereunder at the time of termination of employment, the Corporation shall make an additional Tax
Gross-Up payment to the Executive in respect of such excess at the time the amount of such excess
is finally determined.
6. Withholding of Taxes. The Corporation may withhold from any amounts payable under this
Agreement all federal, state, city, or other taxes as required by law.
7. Acknowledgement; No Duty to Mitigate. The Corporation hereby acknowledges that it will be
difficult and may be impossible for the Executive to find reasonably comparable employment, or to
measure the amount of damages which the Executive may suffer as a result of termination of
employment hereunder. Accordingly, the payment of the Severance Benefits by the Corporation to the
Executive in accordance with the terms of this Agreement is hereby acknowledged by the Corporation
to be reasonable and will be liquidated damages, and the Executive will not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other employment or otherwise,
nor will any profits, income, earnings, or other benefits from any source whatsoever create any
mitigation, offset, reduction, or any other obligation on the part of the Executive hereunder or
otherwise, except for a reduction in health insurance coverage as provided in subsection 4(d)(1).
The Corporation shall not be entitled to set off or counterclaim against amounts payable hereunder
with respect to any claim, debt, or obligation of the Executive.
8. Enforcement Costs; Interest. The Corporation is aware that, upon the occurrence of a
Change in Control, the Board or a stockholder of the Corporation may then cause or attempt to cause
the Corporation to refuse to comply with its obligations under this Agreement, or may
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cause or attempt to cause the Corporation to institute, or may institute, litigation, arbitration,
or other legal action seeking to have this Agreement declared unenforceable, or may take, or
attempt to take, other action to deny the Executive the benefits intended under this Agreement. In
these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the
Corporation that the Executive not be required to incur the expenses associated with the
enforcement of the Executive’s rights under this Agreement by litigation, arbitration, or other
legal action nor be bound to negotiate any settlement of the Executive’s rights hereunder under
threat of incurring such expenses because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Executive under this Agreement. Accordingly, if
following a Change in Control it should appear to the Executive that the Corporation has failed to
comply with any of its obligations under this Agreement, including the proper calculation of the
Tax Gross-Up, or in the event that the Corporation or any other person takes any action to declare
this Agreement void or unenforceable, or institute any litigation or other legal action designed to
deny, diminish, or to recover from the Executive, the benefits intended to be provided to the
Executive hereunder, the Corporation irrevocably authorizes the Executive from time to time to
retain counsel (legal and accounting) of the Executive’s choice at the expense of the Corporation
as provided in this Section 8 to represent the Executive in connection with the calculation of the
Tax Gross-Up, or the initiation or defense of any litigation or other legal action, whether by or
against the Corporation or any director, officer, stockholder, or other person affiliated with the
Corporation. Notwithstanding any existing or prior attorney-client relationship between the
Corporation and such counsel, the Corporation irrevocably consents to the Executive entering into
an attorney-client relationship with such counsel, and in that connection the Corporation and the
Executive agree that a confidential relationship shall exist between the Executive and such
counsel. The reasonable fees and expenses of counsel selected from time to time by the Executive
as provided in this Section shall be paid or reimbursed to the Executive by the Corporation on a
regular, periodic basis upon presentation by the Executive of a statement or statements prepared by
such counsel in accordance with its customary practices. Notwithstanding any provision contained
herein, any reimbursement to be provided under this Section 8 shall be subject to the following
conditions: (i) the reimbursement provided during any taxable year of the Executive may not affect
the reimbursement to be provided to the Executive in any other taxable year; (ii) reimbursement of
any eligible expense must be made on or before the last day of the Executive’s taxable year
following the taxable year in which the expense was incurred; and (iii) the right to such benefits
or payments is not subject to liquidation or exchange for another benefit or payment. In any
action involving this Agreement, the Executive shall be entitled to prejudgment interest on any
amounts found to be due him from the date such amounts would have been payable to the Executive
pursuant to this Agreement at an annual rate of interest equal to the prime commercial rate in
effect at Citibank or its successor in effect from time to time during the prejudgment period plus
4 percent.
9. Indemnification. From and after the earliest to occur of a Change in Control or
termination of employment, the Corporation shall (a) for a period of five (5) years after such
occurrence, provide the Executive (including the Executive’s heirs, executors, and administrators)
with coverage under a standard directors’ and officers’ liability insurance policy at the
Corporation’s expense, and (b) indemnify and hold harmless the Executive, to the fullest extent
permitted or authorized by the law of the State of Delaware as it may from time to time
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be amended, if the Executive is (whether before or after the Change in Control) made or threatened
to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, by reason of the fact that the Executive is or
was a director, officer, or employee of the Corporation or any Subsidiary, or is or was serving at
the request of the Corporation or any Subsidiary as a director, trustee, officer, or employee of a
corporation, partnership, joint venture, trust, or other enterprise. The indemnification provided
by this Section 9 shall not be deemed exclusive of any other rights to which the Executive may be
entitled under the charter or bylaws of the Corporation or of any Subsidiary, or any agreement,
vote of shareholders or disinterested directors, or otherwise, both as to action in the Executive’s
official capacity and as to action in another capacity while holding such office, and shall
continue as to the Executive after the Executive has ceased to be a director, trustee, officer, or
employee and shall inure to the benefit of the heirs, executors, and administrators of the
Executive.
10. Arbitration. As the method for resolving any dispute arising out of this Agreement, the
Executive, in the Executive’s sole discretion, may select binding arbitration in accordance with
this Section. Except as provided otherwise in this Section, arbitration pursuant to this Section
shall be governed by the Commercial Arbitration Rules of the American Arbitration Association. The
Executive shall deliver written notice to the Corporation, including a description of the issue to
be arbitrated. Within fifteen (15) days after the Executive demands arbitration, the Corporation
and the Executive shall each appoint an arbitrator. Within fifteen (15) additional days, these two
arbitrators shall appoint the third arbitrator by mutual agreement; if they fail to agree within
this fifteen (15) day period, then the third arbitrator shall be selected promptly pursuant to the
rules of the American Arbitration Association for Commercial Arbitration. The arbitration panel
shall hold a hearing in Columbus, Ohio, within ninety (90) days after the appointment of the third
arbitrator. The fees and expenses of the arbitrators, and any American Arbitration Association
fees, shall be paid by the Corporation. Both the Corporation and the Executive may be represented
by counsel and may present testimony and other evidence at the hearing. Within ninety (90) days
after commencement of the hearing, the arbitration panel will issue a written decision; the
majority vote of two of the three arbitrators shall control. The majority decision of the
arbitrators shall be binding on the parties, and the parties may not pursue other available legal
remedies if the parties are not satisfied with the majority decision of the arbitrator. The
Executive shall be entitled to seek specific performance of the Executive’s rights under this
Agreement during the pendency of any dispute or controversy arising under or in connection with
this Agreement.
11. Employment Rights. This Agreement sets forth the Severance Benefits payable to the
Executive in the event the Executive’s employment with the Corporation is terminated under certain
conditions specified in Section 3. This Agreement is not an employment contract nor shall it
confer upon the Executive any right to continue in the employ of the Corporation or its
Subsidiaries and shall not in any way affect the right of the Corporation or its Subsidiaries to
dismiss or otherwise terminate the Executive’s employment at any time with or without cause subject
to provisions contained in the Employment Agreement and other agreements between the Corporation
and the Executive.
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12. Arrangements Not Exclusive. The specific benefit arrangements referred to in this
Agreement are not intended to exclude the Executive from participation in or from other benefits
available to executive personnel generally or to preclude the Executive’s right to other
compensation or benefits as may be authorized by the Board at any time. The provisions of this
Agreement and any payments provided for hereunder shall not reduce any amounts otherwise payable,
or in any way diminish the Executive’s existing rights, or rights which would accrue solely as the
result of the passage of time under any compensation plan, benefit plan, incentive plan, stock
option plan, employment agreement, or other contract, plan, or arrangement except as may be
specified in such contract, plan, or arrangement. Notwithstanding anything to the contrary in this
Section 12, the Severance Benefits provided in Section 4 are in lieu of any benefits to which the
Executive would be entitled following the termination of the Executive’s employment pursuant to any
employment agreement or other plan or agreement pursuant to the Corporation’s transition pay or any
successor to such plan.
13. Termination. Except for termination of employment described in Section 3(a), this
Agreement shall terminate if the employment of the Executive with the Corporation shall terminate
prior to a Change in Control.
14. Successors; Binding Agreements. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. The Executive’s rights and benefits under
this Agreement may not be assigned, except that if the Executive dies while any amount would still
be payable to the Executive hereunder if the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement, to
the beneficiaries designated by the Executive to receive benefits under this Agreement in a writing
on file with the Corporation at the time of the Executive’s death or, if there is no such
beneficiary, to the Executive’s estate. The Corporation will require any successor (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the
business and/or assets of the Corporation (or of any division or Subsidiary thereof employing the
Executive) to expressly assume and agree to perform this Agreement in the same manner and to the
same extent that the Corporation would be required to perform it if no such succession had taken
place. Failure of the Corporation to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Corporation in the same amount and on the same terms to which
the Executive would be entitled hereunder if the Executive terminated employment for Good Reason
following a Change in Control.
15. No Vested Interest. Neither the Executive nor the Executive’s beneficiaries shall have
any right, title, or interest in any benefit under this Agreement prior to the occurrence of the
right to the payment of such benefit.
16. Notice. For the purpose of this Agreement, notices and all other communications provided
for in this Agreement shall be in writing and shall be deemed to have been duly given when
delivered personally or mailed by United States registered mail, return receipt requested, postage
prepaid, addressed to the such addresses as each party may designate from time to time
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to the other party in writing in the manner provided herein. Unless designated otherwise notices
should be addressed as follows:
TO THE EXECUTIVE
Xxxxxxx X. Xxxxxx
0000 Xxxxxxxxxx Xxxx
Xxx Xxxxxx, XX 00000
Xxxxxxx X. Xxxxxx
0000 Xxxxxxxxxx Xxxx
Xxx Xxxxxx, XX 00000
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TO THE CORPORATION
Tween Brands, Inc.
0000 Xxxxxx Xxxxxxx
Xxx Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Senior Vice President — Human Resources
Tween Brands, Inc.
0000 Xxxxxx Xxxxxxx
Xxx Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Senior Vice President — Human Resources
If the parties by mutual agreement supply each other with telecopier numbers for the purposes
of providing notice by facsimile, such notice shall also be proper notice under this Agreement.
Notice sent by certified or registered mail shall be effective two (2) days after deposit by
delivery to the U.S. Post Office.
17. Savings Clause. If any payments otherwise payable to the Executive under this Agreement
are prohibited or limited by any statute or regulation in effect at the time the payments would
otherwise be payable:
(a) Corporation will use its best efforts to obtain the consent of the appropriate
governmental agency to the payment by Corporation to the Executive of the maximum amount that is
permitted; and
(b) the Executive will be entitled to elect to have apply, and therefore to receive benefits
directly under, either (i) this Agreement or (ii) any generally applicable Corporation severance,
separation pay, and/or salary continuation plan that may be in effect at the time of the
Executive’s termination.
Following any such election, the Executive will be entitled to receive benefits under this
agreement or plan elected only if and to the extent the agreement or plan is applicable and subject
to its specific terms.
18. Amendment; Waiver. This Agreement may not be amended or modified and no provision may be
waived unless such amendment, modification, or waiver is agreed to in writing and signed by the
Executive and the Corporation.
19. Validity. The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
20. Prior Executive Agreements. This Agreement supersedes any and all prior executive
agreements or similar agreements between the Corporation (or any predecessor of the Corporation)
and the Executive and no payments or benefits of any kind shall be made under, on account of, or by
reference to the prior executive agreements.
21. Counterparts. This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original but all of which together shall constitute one and the same instrument.
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22. Governing Law; Jurisdiction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Ohio, without giving effect to conflict of law
principles thereof. The parties hereby consent to the exclusive jurisdiction of the state courts
of the State of Ohio and venue in Franklin County, Ohio.
In witness whereof, the parties have signed this Agreement as of the day and year
written above.
| Corporation: | ||||||
| TWEEN BRANDS, INC. | ||||||
| By: | /s/ Xxxxxxx X. Xxxxx
|
|||||
| Its: Senior Vice President — Human Resources | ||||||
| Executive: | ||||||
| /s/ Xxxxxxx X. Xxxxxx | ||||||
| Xxxxxxx X. Xxxxxx | ||||||
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