EMPLOYMENT AGREEMENT
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AGREEMENT, made and entered into as of August 11, 2005 (the "Effective
Date") by and between THE WARNACO GROUP, INC., a Delaware corporation (together
with its successors and assigns, the "Company"), and XXX X. XXXXXXXX (the
"Executive").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company desires to continue to employ the Executive and to
enter into an agreement embodying the terms of such continued employment and the
Executive desires to enter into this Agreement and to accept such continued
employment, subject to the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. Certain Definitions.
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(a) "Affiliate" of a specified person or entity shall mean a
person or entity that directly or indirectly controls, is controlled by, or is
under common control with, the person or entity specified.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Cause" shall mean:
(i) willful misconduct by the Executive which causes
material harm to the Company's interests;
(ii) willful and material breach of duty by the Executive in
the course of his employment, which, if curable, is not
cured within 10 days after Executive's receipt of written
notice from the Company;
(iii) willful failure by the Executive, after having been
given written notice from the Company, to perform his duties
other than a failure resulting from Executive's incapacity
due to physical or mental illness; or
(iv) indictment of the Executive for a felony, a crime
involving moral turpitude or any other crime involving the
business of the Company which, in the case of such crime
involving the business of the Company, is injurious to the
business of the Company.
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For purposes of this Cause definition, no act or failure to act, on the
part of the Executive, shall be considered willful unless it is done, or omitted
to be done, by him in bad faith and without reasonable belief that his action
was in the best interests of the Company. The determination to terminate the
Executive's employment for Cause shall be made by the Board and prior to such
determination the Executive shall have the right to appear before the Board or a
committee designated by the Board.
(d) "Change in Control" shall mean any of the following:
(i) any "person" (as such term is used in Sections 3(a)(9)
and 13(d) of the Securities Exchange Act of 1934) or group
of persons acting jointly or in concert, but excluding a
person who owns more than 5% of the outstanding shares of
the Company as of the date of this Agreement, becomes a
"beneficial owner" (as such term is used in Rule 13d-3
promulgated under that Act), of 50% or more of the Voting
Stock of the Company;
(ii) all or substantially all of the assets of the Company
are disposed of pursuant to a merger, consolidation or other
transaction (unless the shareholders of the Company
immediately prior to such merger, consolidation or other
transaction beneficially own, directly or indirectly, in
substantially the same proportion as they owned the Voting
Stock of the Company, all of the Voting Stock or other
ownership interests of the entity or entities, if any, that
succeed to the business of the Company); or
(iii) approval by the shareholders of the Company of a
complete liquidation or dissolution of all or substantially
all of the assets of the Company.
For purposes of this Change in Control definition, "Voting Stock" shall
mean the capital stock of any class or classes having general voting power, in
the absence of specified contingencies, to elect the directors of the Company.
(e) "Date of Termination" shall mean:
(i) if the Executive's employment is terminated by the
Company, the date specified in the notice by the Company to
the Executive that his employment is so terminated; provided
that for a termination for Cause such notice is delivered
after the Board determination as set forth in Section 1(c)
hereof;
(ii) if the Executive voluntarily resigns his employment, 90
days after receipt by the Company of written notice that the
Executive is terminating his employment or if the Company
shortens the required notice period in accordance with
Section 6(c), the date of termination specified in such
notice;
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(iii) if the Executive's employment is terminated by reason
of death, the date of death;
(iv) if the Executive's employment is terminated for
Disability, 30 days after written notice is given as
specified in Section 1(f) below; or
(v) if the Executive resigns his employment for Good Reason,
30 days after receipt by the Company of timely written
notice from the Executive in accordance with Section 1(g)
below unless the Company cures the event or events giving
rise to Good Reason within 30 days after receipt of such
written notice.
(f) "Disability" shall mean the Executive's inability, due to
physical or mental incapacity, to substantially perform his duties and
responsibilities for a period of 180 consecutive days as determined by a medical
doctor selected by the Company and reasonably acceptable to the Executive. In no
event shall any termination of the Executive's employment for Disability occur
until the Party terminating his employment gives written notice to the other
Party in accordance with Section 15 below.
(g) "Good Reason" shall mean the occurrence of any of the
following without the Executive's prior written consent:
(i) a material diminution by the Company in the Executive's
authority, duties or responsibilities as Senior Vice
President, General Counsel and Secretary or the assignment
to the Executive by the Company of any duties materially
inconsistent with such positions;
(ii) a reduction in (A) Base Salary or (B) Target Bonus
opportunity as a percentage of Base Salary;
(iii) in connection with or following a Change in Control, a
change in reporting structure so that the Executive reports
to someone other than the Chief Executive Officer of the
Company;
(iv) the removal by the Company of the Executive as Senior
Vice President, General Counsel and Secretary of the Company
or the failure by the Board to elect or reelect the
Executive as an executive officer of the Company;
(v) requiring the Executive to be principally based at any
office or location more than 50 miles from mid-town
Manhattan; or
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(vi) the failure of a successor to all or substantially all
of the assets of the Company to assume the Company's
obligations under this Agreement either as a matter of law
or in writing within 15 days after a merger, consolidation,
sale or similar transaction.
Anything herein to the contrary notwithstanding, the Executive shall
not be entitled to resign for Good Reason (i) if the occurrence of the event
otherwise constituting Good Reason is the result of Disability, a termination by
the Company for which notification has been given or a voluntary resignation by
the Executive other than for Good Reason and (ii) unless the Executive gives the
Company written notice of the event constituting "Good Reason" within 90 days of
the occurrence of such event and the Company fails to cure such event within 30
days after receipt of such notice.
2. Term of Employment.
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The term of the Executive's employment hereunder shall begin on
the Effective Date and end at the close of business on the third anniversary of
such date; provided, however, that the Term shall thereafter be automatically
extended for additional one-year periods, unless either the Company or the
Executive gives the other written notice at least 180 days prior to the
then-scheduled expiration of the Term that such Party is electing not to so
extend the Term (the initial term plus any extension thereof in accordance
herewith being referred to herein as the "Term"). Notwithstanding the foregoing,
the Term shall end on the date on which the Executive's employment is terminated
by either Party in accordance with the provisions herein.
3. Position; Duties and Responsibilities.
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During the Term, the Executive shall be employed as Senior Vice
President, General Counsel and Secretary of the Company and shall perform such
duties and responsibilities as determined by the Chief Executive Officer. The
Executive shall devote substantially all of his business time and attention to
the satisfactory performance of his duties. Anything herein to the contrary
notwithstanding, nothing shall preclude the Executive from (i) subject to the
reasonable approval of the Board, serving on the boards of directors of trade
associations and/or charitable organizations or other business corporations
(provided such service is not prohibited under Section 8(a)(i) below), (ii)
engaging in charitable activities and community affairs and (iii) managing his
personal investments and affairs, provided that the activities described in the
preceding clauses (i) through (iii) do not materially interfere with the proper
performance of his duties and responsibilities hereunder.
4. Compensation.
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(a) Base Salary. During the Term, the Executive shall be paid an
annualized Base Salary of $310,000 ("Base Salary"), payable in accordance with
the regular payroll practices of the Company, subject to annual review by the
Board (or its designee, including the Compensation Committee of the Board) in
its sole discretion. During the Term the Base Salary may not be decreased
without the Executive's prior written consent. The Executive shall not be
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entitled to any compensation for service as an officer or member of any board of
directors of any Affiliate. After any increase in base salary approved by the
Board or its designee, the term "Base Salary" as used in this Agreement shall
thereafter refer to the increased amount.
(b) Annual Incentive Awards. During the Term, the Executive shall
be eligible to receive an annual incentive award (provided the Executive was
employed continuously during the applicable fiscal year) pursuant to the
Company's Incentive Compensation Plan, as amended (or such other annual
incentive plan as may be approved by the Company's shareholders), in effect for
the applicable fiscal year ("Bonus Plan"). The Executive's annual incentive
award for fiscal year 2005 and thereafter shall have a target of 70% of Base
Salary ("Target Bonus"), with a potential maximum award as set forth in the
Bonus Plan, in all events based on the Executive's achievement of annual
performance and other targets approved by the committee administering the Bonus
Plan. The amount and payment of any annual incentive award shall be determined
in accordance with the Bonus Plan and shall be payable when bonuses for the
applicable performance period are paid to other senior executives of the
Company. After any increase in the Executive's target annual bonus opportunity
as a percentage of Base Salary as approved by the Board (or its designee), the
term "Target Bonus" as used in this Agreement shall thereafter refer to the
increased target opportunity.
(c) Long-Term Incentive Awards. During the Term, the Executive
shall be eligible to participate in the Company's equity incentive plans,
including, without limitation, the 2003 and 2005 Stock Incentive Plans, as
amended from time to time, and such other long-term incentive plan(s) as may be
approved by the Company's shareholders from time to time ("Stock Incentive
Plan"). Except as otherwise provided herein, all equity grants shall be governed
by the applicable equity plan and/or award agreement. The Executive shall be
subject to the equity ownership, retention and other requirements applicable to
senior executives of the Company.
(d) Supplemental Award. During the Term beginning with fiscal
year 2005, provided the Executive is employed by the Company, the Executive
shall be entitled to an annual award with an aggregate grant date value equal to
6% of the sum of Base Salary plus Annual Bonus as defined in this Section 4(d)
if the Executive will be less than age 40 by the end of the applicable fiscal
year, 8% of such amount if the Executive will be age 40 and over and less than
age 50 by the end of the applicable fiscal year, 10% of such amount if the
Executive will be age 50 and over and less than age 60 by the end of the
applicable fiscal year and 13% of such amount if the Executive will be age 60 or
older by the end of the applicable fiscal year ("Supplemental Award"), with the
first such award being made no later than 60 days after the Effective Date. For
this purpose, Base Salary shall be the Base Salary paid to the Executive for the
fiscal year prior to the award year and Annual Bonus shall be the annual bonus
awarded to the Executive by the Board for such prior fiscal year. The
Supplemental Award shall not be awarded to the Executive until after the
determination by the Board of the Executive's annual bonus for the prior fiscal
year (but in no event later than 60 days thereafter for any award made after
fiscal year 2005) and 50% of the value of the Supplemental Award shall be
awarded in the form of restricted shares pursuant to the applicable Stock
Incentive Plan ("Career Shares") and 50% shall be awarded in the form of a
credit to a bookkeeping account maintained by the Company for the Executive's
account (the "Notional Account"). Any Career Shares awarded hereunder shall be
governed by
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the applicable Stock Incentive Plan and, if applicable, any award agreement. For
purposes of this Section 4(d), each Career Share shall be valued at the closing
price of a share of the Company's common stock ("Share") on the date that the
Supplemental Award is made. For the Notional Account, the Company shall select
the investment alternatives available to the Executive under the Company's
401(k) plan. The balance in the Notional Account shall periodically be credited
(or debited) with the deemed positive (or negative) return based on returns of
the permissible investment alternative or alternatives under the Company's
401(k) plan as selected in advance by the Executive (and in accordance with the
applicable rules of such plan or investment alternative) to apply to such
Notional Account, with such deemed returns calculated in the same manner and at
the same times as the return on such investment alternative(s). The Company's
obligation to pay the amount credited to the Notional Account, including any
return thereon provided for in this Section 4(d), shall be an unfunded
obligation to be satisfied from the general funds of the Company. Except as
otherwise provided in Section 6 below or the applicable Stock Incentive Plan and
provided that the Executive is employed by the Company on such vesting date, any
Supplemental Award granted in the form of Career Shares will vest as follows:
50% of the Career Shares will vest on the earlier of the Executive's 62nd
birthday or upon the Executive's obtaining 15 years of "Vesting Service" and
100% of the Career Shares will vest on the earliest of (i) the Executive's 65th
birthday, (ii) upon the Executive's obtaining 20 years of "Vesting Service" or
(iii) the 10th anniversary of the date of grant. Except as otherwise provided in
Section 6 below, and provided that the Executive is employed by the Company on
such vesting date, any Supplemental Award granted as a credit to the Notional
Account (as adjusted for any returns thereon) ("Adjusted Notional Account"))
shall vest as follows: 50% on the earlier of the Executive's 62nd birthday or
upon the Executive's obtaining 5 years of "Vesting Service" and 100% on the
earlier of the Executive's 65th birthday and upon the Executive's obtaining 10
years of "Vesting Service". For purposes of this Section 4(d), "Vesting Service"
shall mean the period of time that the Executive is employed by the Company as
an executive officer, provided that for these purposes only the Executive's
service from February 4, 2003 on will be counted. Subject to Section 17(b)
hereof, upon vesting the Career Shares will be delivered in the form of Shares
to the Executive. The vested balance in the Adjusted Notional Account shall not
be distributed to the Executive until he ceases to be an employee of the Company
and, at such time, shall only be distributed at the earliest time that satisfies
the requirements of this Section 4(d). Except as otherwise provided in Section 6
hereof, if the Executive's employment is terminated for any reason, any unvested
Supplemental Awards (whether in the form of Career Shares or the Adjusted
Notional Account) shall be forfeited and any vested balance in the Adjusted
Notional Account, subject to Section 17(b) hereof, shall be paid to the
Executive in a cash lump-sum payment immediately following the Executive's
"separation from service," as defined by Section 409A(a)(2)(A)(i) of the
Internal Revenue Code of 1986, as amended (the "Code"), with the Company;
provided, however, that, except in the case of the Executive's death, if at the
time of such separation from service the Executive is a "specified employee," as
defined in Section 409A(a)(2)(B)(i) of the Code, such distribution shall not be
made until at least six months after the date of such separation from service;
provided, further, that if the Executive's employment is terminated due to
Disability and such Disability satisfies the requirements of Section
409A(a)(2)(C) of the Code, then such distribution may be made upon termination
without regard as to whether Executive was a "specified employee" at such time.
The provisions of this Section 4(d) shall survive expiration or termination of
the Term.
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5. Employee Benefits.
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(a) Employee Benefit Programs. During the Term, subject to the
Company's right to amend, modify or terminate any benefit plan or program, the
Executive shall be entitled to participate in all employee savings and welfare
benefit plans and programs made available to the Company's senior-level
executives on a basis no less favorable than provided to other
similarly-situated executives, as such plans or programs may be in effect from
time to time, including, without limitation, savings and other retirement plans
or programs, medical, dental, hospitalization, short-term and long-term
disability and life insurance plans, accidental death and dismemberment
protection and travel accident insurance. During the Term, the Executive shall
also be entitled to a paid annual physical medical exam as approved by the
Company and Company-paid term life insurance with a benefit equal to $1 million,
provided the Company can obtain such insurance at commercially reasonable
premium levels. The Executive shall be entitled to four weeks paid vacation per
calendar year.
(b) Business Expenses. During the Term, the Executive is
authorized to incur reasonable expenses in carrying out his duties and
responsibilities under this Agreement and the Company shall promptly reimburse
him for all business and entertainment expenses incurred in connection with
carrying out the business of the Company, subject to documentation in accordance
with the Company's policy. The Executive shall be entitled to first class air
travel when traveling on Company business.
(c) Perquisites. The Executive shall be entitled to perquisites
provided to other senior-level executives, including a monthly car allowance of
up to a maximum of $1,000.
6. Termination of Employment. The Term of this Agreement and the
Executive's employment hereunder shall terminate as of the Date
of Termination in the following circumstances:
(a) Termination Without Cause by the Company or Resignation for
Good Reason by the Executive. In the event that during the Term the Executive's
employment is terminated without Cause by the Company (other than due to
Disability) or the Executive resigns for Good Reason and Section 6(d) below does
not apply, the Executive shall be entitled to:
(i) payment of Base Salary as salary continuation for the
remainder of the applicable Term (without regard to its
earlier termination hereunder), but in no event more than 24
months or less than 12 months following the Date of
Termination;
(ii) immediate vesting as of the Date of Termination of 50%
of any restricted stock (other than Career Shares) that
remains unvested as of the Date of Termination;
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(iii) with respect to any stock options granted on or after
the Effective Date which are vested and outstanding as of
the Date of Termination, continued exercisability for 12
months following the Date of Termination or the remainder of
the option term, if shorter; and
(iv) continued participation for the Executive and his
eligible dependents in the Company's welfare benefit plans
in which he and his eligible dependents were participating
immediately prior to the Date of Termination until the
earlier of (a) the end of the applicable Term (without
regard to its earlier termination hereunder), but in no
event more than 24 months or less than 12 months following
the Date of Termination, or (b) the date, or dates, the
Executive receives equivalent coverage under the plans and
programs of a subsequent employer.
(b) Termination upon Death or due to Disability. In the event
that during the Term the Executive's employment is terminated upon death or due
to Disability, the Executive (or his estate or legal representative, as the case
may be) shall be entitled to:
(i) a pro-rata annual bonus determined by multiplying the
amount of the annual bonus the Executive would have received
had his employment continued through the end of the fiscal
year in which the Date of Termination occurs by a fraction,
the numerator of which is the number of days during such
fiscal year that the Executive was employed by the Company
and the denominator of which is 365, payable when bonuses
for such fiscal year are paid to other Company executives;
(ii) immediate vesting as of the Date of Termination of 50%
of any restricted stock (other than Career Shares) that
remains unvested as of the Date of Termination; and
(iii) immediate vesting as of the Date of Termination of 50%
of any previously granted Supplemental Award that remains
unvested as of the Date of Termination, payable in
accordance with Section 4(d) above.
(c) Termination by the Company for Cause or a Voluntary
Resignation by the Executive. In the event that during the Term the Company
terminates the Executive's employment for Cause or the Executive voluntarily
resigns, the Executive shall be entitled to his Base Salary and benefits through
the Date of Termination. A voluntary resignation by the Executive of his
employment shall be effective upon 90 days prior written notice by the Executive
to the Company ("Notice Period"), subject to earlier termination by the Company
in accordance herewith. Failure by the Executive to provide the required notice
shall be deemed to be a breach of this Agreement. During the Notice Period, the
Executive shall continue to be an employee of the Company and his fiduciary
duties and other obligations as an employee of the Company shall continue. The
Executive shall cooperate in the transition of his responsibilities; provided
that the Company shall have the right to direct the Executive to no longer come
to work
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or not to perform any work for the Company during the Notice Period. If the
Company so directs, in addition to his fiduciary duties and other obligations as
an employee and his commitments pursuant to Section 7 and 8 hereof, the
Executive agrees to refrain during the Notice Period from contacting any
customers, clients, advertisers, suppliers, agents, professional advisors or
employees of the Company or any of its Affiliates. The Company shall also have
the right to shorten the Notice Period by providing written notice to the
Executive, in which event the Executive's employment shall terminate on the date
stated in such notice.
(d) Termination without Cause by the Company or Resignation for
Good Reason by the Executive Upon or Following a Change in Control. In the event
that (i) the Executive's employment is terminated without Cause by the Company
(other than due to Disability) or the Executive resigns for Good Reason, in both
cases upon or within one year following a Change in Control (provided the Term
is still in effect or has expired during this one-year period), the Executive
shall be entitled to:
(i) an amount equal to the greater of (x) the sum of Base
Salary plus Target Bonus divided by 12, with such amount
then multiplied by the number of months (including any
partial months) remaining in the Term (without regard to the
earlier termination thereof) or (y) 2 times the sum of (a)
Base Salary plus (b) Target Bonus, payable in a lump sum as
soon as practicable following the Date of Termination (but
in no event later than 60 days following such date);
(ii) a pro-rata Target Bonus for the year of termination,
determined by multiplying the Target Bonus by a fraction,
the numerator of which is the number of days the Executive
was employed by the Company during the year in which the
Date of Termination occurs and the denominator of which is
365, payable in a lump sum as soon as practicable following
the Date of Termination (but in no event later than 60 days
following such date);
(iii) immediate vesting as of the Date of Termination of all
outstanding equity awards (other than Career Shares), with
any stock options granted on or after the Effective Date
remaining exercisable for 24 months following the Date of
Termination or the remainder of the option term, if shorter;
(iv) immediate vesting as of the Date of Termination of any
previously granted Supplemental Award, payable in accordance
with Section 4(d) above; and
(v) continued participation for the Executive and his
eligible dependents in the Company's welfare benefit plans
in which he and his eligible dependents were participating
immediately prior to the Date of Termination until the
earlier of (a) 24 months following the Date of
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Termination, or (b) the date, or dates, the Executive
receives substantially equivalent coverage under the plans
and programs of a subsequent employer.
(e) Termination of the Executive's Employment by the Company Upon
the Expiration of the Term. If the Company provides written notice to the
Executive in accordance with Section 2 above that the Term shall not renew and
upon such expiration of the Term the Company terminates the Executive's
employment under circumstances that during the Term would constitute a
termination of employment without Cause, the Executive shall be entitled to the
same payments, benefits and entitlements as a Termination without Cause under
Section 6(a) hereof. (f) Other Entitlements Upon Termination of Employment. In
the event of any termination of the Executive's employment, the Executive (or
his estate or legal representative, as the case may be) shall be entitled to:
(i) Base Salary through the Date of Termination;
(ii) except for a termination of employment pursuant to
Section 6(c) above, payment of any annual bonus awarded to
the Executive that remains unpaid for the fiscal year
preceding the fiscal year in which the Date of Termination
occurs, payable when bonuses for such performance period are
paid to other Company executives;
(iii) any Supplemental Award that is vested as of the Date
of Termination, payable in accordance with Section 4(d)
above;
(iv) any amounts owing to the Executive but not yet paid
under Section 5(b) and 5(c) above; and
(v) except as otherwise provided in Section 6(g) below,
additional entitlements or treatment, if any, in accordance
with applicable plans and programs of the Company (provided
that in no event shall the Executive be entitled to
duplication of any payments or benefits).
(g) Exclusivity of Benefits; Releases of Claims. Any payments
provided pursuant to Section 6(a), Section 6(d) or Section 6(e) above shall be
in lieu of any salary continuation arrangements under any other severance
program of the Company and in all events, the Executive shall not be entitled to
duplication of any benefit or entitlement. In order to be entitled to any
payments, rights and other entitlements pursuant to this Agreement or otherwise,
the Executive must comply with the covenants and/or acknowledgements contained
in Sections 7, 8, 9 and 10 of this Agreement. In addition, in order to be
entitled to any payments, rights or other entitlements in connection with a
termination covered by Section 6(a), Section 6(d) or Section 6(e) above (except
for those payments or benefits required to be paid or provided by applicable
law), the Executive shall be required to execute and deliver to the Company the
Agreement and Release of Claims attached hereto as Exhibit A (and not revoke
such agreement
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within the applicable revocation period).
(h) Nature of Payments; No Mitigation. Any amounts due under this
Section 6 are in the nature of severance payments considered to be reasonable by
the Company and are not in the nature of a penalty. In the event of termination
of his employment for any reason in compliance with this Agreement, the
Executive shall be under no obligation to seek other employment and, except as
specifically provided for in this Section 6 with respect to continuation of
welfare benefits, there shall be no offset against amounts or entitlements due
to him on account of any remuneration or benefits provided by any subsequent
employment he may obtain.
(i) Resignation. Notwithstanding any other provision of this
Agreement, upon the termination of the Executive's employment for any reason or
the Executive being directed not to come to work or not to perform services for
the Company in accordance with Section 6(c) hereof, unless otherwise requested
by the Board, he shall immediately resign from the Board, if applicable, and all
boards of directors of any Affiliate of the Company of which he may be a member,
and as a trustee of, or fiduciary to, any employee benefit plans of the Company
or any Affiliate. The Executive hereby agrees to execute any and all
documentation of such resignations upon request by the Company, but he shall be
treated for all purposes as having so resigned upon termination of his
employment or upon the date the Company directs him not to come to work or
perform services for the Company, regardless of when or whether he executes any
such documentation.
7. Protection of Confidential Information and Company Property.
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(a) During the Term and thereafter, other than in the ordinary
course of performing his duties for the Company or as required in connection
with providing any cooperation to the Company pursuant to Section 10 below, the
Executive agrees that he shall not disclose to anyone or make use of any trade
secret or proprietary or confidential information of the Company or any
Affiliate of the Company, including such trade secret or proprietary or
confidential information of any customer or other entity to which the Company
owes an obligation not to disclose such information, which he acquires during
the course of his employment ("Confidential Information"), including, but not
limited to, records kept in the ordinary course of business, except when
required to do so by a court of law, by any governmental agency having
supervisory authority over the business of the Company or by any administrative
or legislative body (including a committee thereof) with apparent or actual
jurisdiction to order him to divulge, disclose or make accessible such
information. "Confidential Information" shall not include information that (i)
was known to the public prior to its disclosure by the Executive; or (ii)
becomes known to the public through no wrongful disclosure by or act of the
Executive or any representative of the Executive. In the event the Executive is
requested by subpoena, court order, investigative demand, search warrant or
other legal process to disclose any Confidential Information, the Executive
agrees, unless prohibited by law or Securities and Exchange Commission
regulation, to give the Company's Chief Executive Officer prompt written notice
of any request for disclosure in advance of the Executive's making such
disclosure and the Executive agrees not to disclose such information unless and
until the Company has expressly authorized the Executive to do so in writing or
the Company has had a reasonable
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opportunity to object to such request or to litigate the matter (of which the
Company agrees to keep the Executive reasonably informed) and has failed to do
so.
(b) The Executive hereby sells, assigns and transfers to the
Company all of his right, title and interest in and to all inventions,
discoveries, improvements and copyrightable subject matter (the "Rights") which
during the period of his employment are made or conceived by him, alone or with
others, and which are within or arise out of any general field of the Company's
business or arise out of any work he performs, or information he receives
regarding the business of the Company, while employed by the Company. The
Executive shall fully disclose to the Company as promptly as available all
information known or possessed by him concerning any Rights, and upon request by
the Company and without any further remuneration in any form to him by the
Company, but at the expense of the Company, execute all applications for patents
and for copyright registration, assignments thereof and other instruments and do
all things which the Company may deem necessary to vest and maintain in it the
entire right, title and interest in and to all such Rights.
(c) The Executive agrees upon termination of employment (whether
during or after the expiration of the Term and whether such termination is at
the instance of the Executive or the Company), and regardless of the reasons
therefor, or at any time as the Company may request, he will promptly deliver to
the Company's Chief Executive Officer, and not keep or deliver to anyone else,
any and all of the following which is in his possession or control: (i) Company
property (including, without limitation, credit cards, computers, communication
devices, home office equipment and other Company tangible property) and (ii)
notes, files, memoranda, papers and, in general, any and all physical matter and
computer files containing confidential or proprietary information of the Company
or any of its Affiliates, including any and all documents relating to the
conduct of the business of the Company or any of its Affiliates and any and all
documents containing confidential or proprietary information of the customers of
the Company or any of its Affiliates, except for (x) any documents for which the
Company's Chief Executive Officer has given written consent to removal at the
time of termination of the Executive's employment and (y) any information
necessary for the Executive to retain for his tax purposes (provided the
Executive maintains the confidentiality of such information in accordance with
Section 7(a) above).
8. Additional Covenants.
---------------------
(a) The Executive acknowledges that in his capacity in management
the Executive has had or will have a great deal of exposure and access to the
Company's trade secrets and Confidential Information. Therefore, to protect the
Company's trade secrets and other Confidential Information, the Executive agrees
as follows:
(i) during his employment with the Company or any Affiliate
and for 12 months following termination of such employment
(whether during the Term or thereafter), the Executive shall
not, other than in the ordinary course of performing his
duties hereunder or as agreed by the Company in writing,
engage in a "Competitive Business," directly or indirectly,
as an
12
individual, partner, shareholder, director, officer,
principal, agent, employee, trustee, consultant, or in any
relationship or capacity, in any geographic location in
which the Company or any of its Affiliates is engaged in
business. The Executive shall not be deemed to be in
violation of this Section 8(a) by reason of the fact that he
owns or acquires, solely as an investment, up to two percent
(2%) of the outstanding equity securities (measured by
value) of any entity. "Competitive Business" shall mean a
business engaged in (x) apparel design and/or apparel
wholesaling or (y) retailing in competition with any
business that the Company or its Affiliates is conducting at
the time of the alleged violation; and
(ii) during his employment with the Company or any Affiliate
and for 18 months following termination of such employment
for any reason (whether during the Term or thereafter), the
Executive shall not, other than in the ordinary course of
the Company's business or with the Company's prior written
consent, directly or indirectly, solicit or encourage any
customer of the Company or any of its Affiliates to reduce
or cease its business with the Company or any such Affiliate
or otherwise interfere with the relationship of the Company
or any Affiliate with its customers.
(b) The Executive agrees that during his employment with the
Company or any Affiliate and for 18 months following termination of such
employment for any reason (whether during the Term or thereafter), he shall not,
other than in the ordinary course of the Company's business or with the
Company's prior written consent, directly or indirectly, hire any employee of
the Company or any of its Affiliates, or solicit or encourage any such employee
to leave the employ of the Company or its Affiliates, as the case may be.
(c) During any Notice Period and following the termination of the
Executive's employment for any reason (whether during the Term or thereafter),
the Executive and the Company each agree to refrain from making any statements
or comments, whether oral or written, of a defamatory or disparaging nature to
third parties regarding each other (and, in the case of the Executive's
commitment hereunder, the "Company" shall include an Affiliate of the Company
and the Company's officers, directors, personnel and products). The Executive
and the Company each understand that either party should be entitled to respond
truthfully and accurately to statements about such party made publicly by the
Executive or the Company, as the case may be, provided that such response is
consistent with the responding party's obligations not to make any statements or
comments of a defamatory or disparaging nature as set forth herein.
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9. Injunctive and Other Relief.
----------------------------
(a) The Executive acknowledges that the restrictions and
commitments set forth in Sections 7, 8 and 10 of this Agreement are necessary to
prevent the improper use and disclosure of Confidential Information and to
otherwise protect the legitimate business interests of the Company and any of
its Affiliates. The Executive further acknowledges that the restrictions set
forth in Sections 7, 8 and 10 of this Agreement are reasonable in all respects,
including, without limitation, duration, territory and scope of activity. The
Executive expressly agrees and acknowledges that any breach or threatened breach
by the Executive or any third party of any obligation by the Executive under
this Agreement, including, without limitation, any breach or threatened breach
of Section 7, 8 or 10 of this Agreement will cause the Company immediate,
immeasurable and irreparable harm for which there is no adequate remedy at law,
and as a result of this, in addition to its other remedies, the Company shall be
entitled to the issuance by a court of competent jurisdiction of an injunction,
restraining order, specific performance or other equitable relief in favor of
itself, without the necessity of posting a bond, restraining the Executive or
any third party from committing or continuing to commit any such violation. If
the Company defers or withholds any payment, benefit or entitlement due to the
Executive pursuant to this Agreement or otherwise based on the Executive's
violation of this Agreement and it is subsequently finally determined that the
Executive did not commit such breach, the Company shall promptly pay all such
unpaid amounts, and shall extend such rights or other entitlements, to the
Executive as of the date that it is so determined that the Executive did not
commit such breach.
(b) If any restriction set forth in Section 7, 8 or 10 of this
Agreement is found by any arbitrator or court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too great
a range of activities or in too broad a geographic area, it will be interpreted
to extend over the maximum period of time, range of activities or geographic
area as to which it may be enforceable. If any provision of Section 7, 8 or 10
of this Agreement is declared to be invalid or unenforceable, in whole or in
part, for any reason, such invalidity will not affect the remaining provisions
of such Section which will remain in full force and effect.
10. Cooperation.
------------
Following the Executive's termination of employment for any reason
(whether during or after the expiration of the Term), upon reasonable request by
the Company, the Executive shall cooperate with the Company or any of its
Affiliates with respect to any legal or investigatory proceeding, including any
government or regulatory investigation, or any litigation or other dispute
relating to any matter in which he was involved or had knowledge during his
employment with the Company, subject to his reasonable personal and business
schedules. The Company shall reimburse the Executive for all reasonable
out-of-pocket costs, such as travel, hotel and meal expenses and reasonable
attorneys' fees, incurred by the Executive in providing any cooperation pursuant
to this Section 10, as well as a reasonable per diem amount for the Executive's
time (other than for time spent preparing for or providing testimony) which
shall be based upon the Executive's Base Salary at the Date of Termination.
14
11. Tax Matters.
------------
(a) If any amount, entitlement, or benefit paid or payable to
the Executive or provided for his benefit under this Agreement and under any
other agreement, plan or program of the Company (such payments, entitlements and
benefits referred to as a "Payment") is subject to the excise tax imposed under
Section 4999 of the Code, or any similar federal or state law (an "Excise Tax"),
then notwithstanding anything contained in this Agreement to the contrary, to
the extent that any or all Payments would be subject to the imposition of an
Excise Tax, the Payments shall be reduced (but not below zero) if and to the
extent that such reduction would result in the Executive retaining a larger
amount, on an after-tax basis (taking into account federal, state and local
income taxes and the imposition of the Excise Tax), than if the Executive
received all of the Payments (such reduced amount is hereinafter referred to as
the "Limited Payment Amount"). Unless the Executive shall have given prior
written notice specifying a different order to the Company to effectuate the
limitations described in the preceding sentence, the Company shall reduce or
eliminate the Payments, by first reducing or eliminating those payments or
benefits which are not payable in cash and then by reducing or eliminating cash
payments, in each case in reverse order beginning with payments or benefits
which are to be paid the farthest in time from the Determination (as defined
below). Any notice given by the Executive pursuant to the preceding sentence
shall take precedence over the provisions of any other plan, arrangement or
agreement, including, but not limited to, the other provisions of this
Agreement, governing the Executive's rights and entitlements to any
compensation, entitlement or benefit.
(b) All calculations under this Section 11 shall be made by a
nationally recognized accounting firm designated by the Company and reasonably
acceptable to the Executive (other than the accounting firm that is regularly
engaged by any party who has effectuated a Change in Control) (the "Accounting
Firm"). The Company shall pay all fees and expenses of such Accounting Firm. The
Accounting Firm shall provide its calculations, together with detailed
supporting documentation, both to the Company and the Executive within 45 days
after the Change in Control or the Date of Termination, whichever is later (or
such earlier time as is requested by the Company) and, with respect to the
Limited Payment Amount, shall deliver its opinion to the Executive that he is
not required to report any Excise Tax on his federal income tax return with
respect to the Limited Payment Amount (collectively, the "Determination").
Within 5 days of the Executive's receipt of the Determination, the Executive
shall have the right to dispute the Determination (the "Dispute"). The existence
of the Dispute shall not in any way affect the right of the Executive to receive
the Payments in accordance with the Determination. If there is no Dispute, the
Determination by the Accounting Firm shall be final binding and conclusive upon
the Company and the Executive (except as provided in subsection (c) below).
(c) If, after the Payments have been made to the Executive, it
is established that the Payments made to, or provided for the benefit of, the
Executive exceed the limitations provided in subsection (a) above (an "Excess
Payment") or are less than such limitations (an "Underpayment"), as the case may
be, then the provisions of this subsection (c) shall apply. If it is established
pursuant to a final determination of a court or an Internal Revenue Service (the
15
"IRS") proceeding which has been finally and conclusively resolved, that an
Excess Payment has been made, the Executive shall repay the Excess Payment to
the Company on demand. In the event that it is determined by (i) the Accounting
Firm, the Company (which shall include the position taken by the Company, or
together with its consolidated group, on its federal income tax return) or the
IRS, (ii) pursuant to a determination by a court, or (iii) upon the resolution
to the satisfaction of the Executive of the Dispute, that an Underpayment has
occurred, the Company shall pay an amount equal to the Underpayment to the
Executive within 10 days of such determination or resolution together with
interest on such amount at the applicable federal short-term rate, as defined
under Section 1274(d) of the Code and as in effect on the first date that such
amount should have been paid to the Executive under this Agreement, from such
date until the date that such Underpayment is made to the Executive.
12. Representations.
----------------
(a) The Executive represents and warrants that he has the free
and 0 unfettered right to enter into this Agreement and to perform his
obligations under it and that he knows of no agreement between him and any other
person, firm or organization, or any law or regulation, that would be violated
by the performance of his obligations under this Agreement. The Executive agrees
that he will not use or disclose any confidential or proprietary information of
any prior employer in the course of performing his duties for the Company or any
of its Affiliates.
(b) The Company represents that (i) the execution of this
Agreement and the granting of the benefits and awards hereunder have been
authorized by the Company, including, where necessary, by the Board, (ii) the
execution, delivery and performance of this Agreement does not violate any law,
regulation, order, decree, agreement, plan or corporate governance document of
the Company and (iii) upon the execution and delivery of this Agreement by the
Parties, it shall be the valid and binding obligation of the Company enforceable
against it in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally.
13. Indemnification and Liability Insurance.
----------------------------------------
The Company hereby agrees during, and after termination of, his
employment to indemnify the Executive and hold him harmless, both during the
Term and thereafter, to the fullest extent permitted by law and under the
certificate of incorporation and by-laws of the Company against and in respect
of any and all actions, suits, proceedings, claims, demands, judgments, costs,
expenses (including reasonable attorneys' fees), losses, amounts paid in
settlement to the extent approved by the Company, and damages resulting from the
Executive's good faith performance of his duties as an officer or director of
the Company or any Affiliate of the Company. The Company shall reimburse the
Executive for expenses incurred by him in connection with any proceeding
hereunder upon written request from the Executive for such reimbursement and the
submission by the Executive of the appropriate documentation associated with
these expenses. Such request shall include an undertaking by the Executive to
repay the amount of such advance or reimbursement if it shall ultimately be
determined that he is not entitled to be indemnified hereunder against such
costs and expenses. The Company shall use
16
commercially reasonable efforts to obtain and maintain directors' and officers'
liability insurance covering the Executive to the same extent as the Company
covers its other officers and directors.
14. Resolution of Disputes.
-----------------------
Except as otherwise provided in Section 9 above, any controversy,
dispute or claim arising under or relating to this Agreement, the Executive's
employment with the Company or any Affiliate or the termination thereof shall,
at the election of the Executive or the Company (unless otherwise provided in an
applicable Company plan, program or agreement), be resolved by confidential,
binding and final arbitration, to be held in the borough of Manhattan in New
York City in accordance with the rules and procedures of the Commercial
Arbitration Rules of the American Arbitration Association. Judgment upon the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof and shall be binding upon the Parties. The Executive consents to the
personal and exclusive jurisdiction of the Courts of the State of New York
(including the United States District Court for the Southern District of New
York) in any proceedings for equitable relief. The Executive further agrees not
to interpose any objection for improper venue in any such proceeding. Each Party
shall be responsible for its own costs and expenses, including attorneys' fees,
and neither Party shall be liable for punitive or exemplary damages, provided
that if the Executive substantially prevails with respect to all claims that are
the subject matter of the dispute, his costs, including reasonable attorneys'
fees, shall be borne by the Company.
15. Notices.
--------
Any notice given to a Party shall be in writing and shall be deemed to
have been given (i) when delivered personally (provided that a written
acknowledgement of receipt is obtained), (ii) three days after being sent by
certified or registered mail, postage prepaid, return receipt requested or (iii)
two days after being sent by overnight courier (provided that a written
acknowledgement of receipt is obtained by the overnight courier), with any such
notice duly addressed to the Party concerned at the address indicated below or
to such other address as such Party may subsequently designate by written notice
in accordance with this Section 15:
If to the Company: The Warnaco Group, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
If to the Executive: The most recent address in the Company's records.
16. Governing Law.
--------------
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New York without reference to principles of
conflicts of law, provided, however, that Federal law shall apply to the
interpretation or enforcement of the arbitration provisions of
17
Section 14 hereof.
17. Miscellaneous Provisions.
-------------------------
(a) This Agreement contains the entire understanding and
agreement between the Parties concerning the subject matter hereof and, as of
the Effective Date, shall supersede all prior agreements, understandings,
discussions, negotiations and undertakings, whether written or oral, between the
Parties with respect thereto (but not including any indemnification agreements
and/or equity agreements which remain outstanding as of the Effective Date). No
provision of this Agreement may be amended unless such amendment is agreed to in
writing and signed by the Executive and an authorized officer of the Company.
Notwithstanding the foregoing, in 2005, the Company shall have the right to
modify any provision of this Agreement (or, if requested by the Executive, shall
make such modification), including, without limitation, Section 4(d) and/or
Section 6 hereof, if, and only to the extent that, such modification shall be
required, in the reasonable opinion of the Company's and/or the Executive's
counsel, to comply with Section 409A of the Code or any regulations or similar
guidance issued by the Treasury or the Internal Revenue Service with respect to
Code Section 409A. No waiver by either Party of any breach by the other Party of
any condition or provision contained in this Agreement to be performed by such
other Party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same or any prior or subsequent time. Any waiver must be in
writing and signed by the Party against whom it is being enforced (either the
Executive or an authorized officer of the Company, as the case may be). The
respective rights and obligations of the Parties hereunder, including, without
limitation, Section 4(d) (Supplemental Award), Section 7 (protection of
confidential information and company property), Section 8 (additional
covenants), Section 9 (injunctive and other relief), Section 10 (cooperation),
Section 13 (indemnification and liability insurance) and Section 14 (resolution
of disputes), shall survive any expiration of the Term, including expiration
thereof upon the Executive's termination of employment for whatever reason, to
the extent necessary to the intended preservation of such rights and
obligations.
(b) The Company may withhold from any amounts or payments under
this Agreement such Federal, state, local or other taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(c) This Agreement shall be binding upon and inure to the benefit
of the Parties and their respective successors, heirs (in the case of the
Executive) and assigns. For purposes of this Section 17(c), a successor to the
Company shall be limited to an entity which shall have acquired all or
substantially all of the business and/or assets of the Company and shall have
assumed (whether by agreement or operation of law) the Company's rights and
obligations under this Agreement. No rights or obligations of the Executive
under this Agreement may be assigned or transferred by the Executive other than
his rights to compensation and benefits, which may be transferred only by will,
operation of law or in accordance with this clause (c). The Executive shall be
entitled, to the extent permitted under applicable plans, agreements or law, to
select and change a beneficiary or beneficiaries to receive any compensation or
benefit payable hereunder following the Executive's death by giving the Company
written notice thereof. In the event of the Executive's death or a judicial
determination of his incompetence, reference
18
in this Agreement to the Executive shall be deemed, where appropriate, to refer
to his beneficiary, estate or other legal representative.
(d) In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable by an arbitrator or court of
competent jurisdiction for any reason, in whole or in part, the remaining
provisions of this Agreement shall be unaffected thereby and shall remain in
full force and effect to the fullest extent permitted by law.
(e) The headings and subheadings of the sections contained in
this Agreement are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.
(f) This Agreement may be executed in two or more counterparts.
[Signatures on next
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
THE WARNACO GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
THE EXECUTIVE
/s/ Xxx X. Xxxxxxxx
-------------------------------------
Xxx X. Xxxxxxxx
20
EXHIBIT A
AGREEMENT AND RELEASE OF CLAIMS
THIS AGREEMENT AND RELEASE is executed by XXX X. XXXXXXXX (the
"Executive") as of the date hereof.
WHEREAS, the Executive and The Warnaco Group, Inc. (the "Company")
entered into an employment agreement dated August 11, 2005 (the "Employment
Agreement");
WHEREAS, the Executive has certain entitlements pursuant to the
Employment Agreement subject to the Executive's executing this Agreement and
Release and complying with its terms.
NOW, THEREFORE, in consideration of the payments set forth in Section 6
of the Employment Agreement and other good and valuable consideration, the
Executive agrees as follows:
The Executive, on behalf of himself and his dependents, heirs,
administrators, agents, executors, successors and assigns (the "Executive
Releasors"), hereby releases and forever discharges the Company and its
affiliated companies and their past and present parents, subsidiaries,
successors and assigns and all of the aforesaid companies' past and present
officers, directors, employees, trustees, shareholders, representatives and
agents (the "Company Releasees"), from any and all claims, demands, obligations,
liabilities and causes of action of any kind or description whatsoever, in law,
equity or otherwise, whether known or unknown, that any Executive Releasor had,
may have had or now has against the Company or any other Company Releasee as of
the date of execution of this Agreement and Release arising out of or relating
to the Executive's employment relationship, or the termination of that
relationship, with the Company (or any affiliate), including, but not limited
to, any claim, demand, obligation, liability or cause of action arising under
any Federal, state, or local employment law or ordinance (including, but not
limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of
1991, the Equal Pay Act, the Americans With Disabilities Act of 1991, the
Workers Adjustment and Retraining Notification Act, the Employee Retirement
Income Security Act (other than any claim for vested benefits), the Family and
Medical Leave Act, and the Age Discrimination in Employment Act, as amended by
the Older Workers' Benefit Protection Act ("ADEA")), tort, contract, or alleged
violation of any other legal obligation (collectively "Released Executive
Claims"). In addition, in consideration of the promises and covenants of the
Company, the Executive, on behalf of himself and the other Executive Releasors,
further agrees to waive any and all rights under the laws of any jurisdiction in
the United States, or any other country, that limit a general release to any of
the foregoing actions, causes of action, claims or charges that are known or
suspected to exist in the Executive's favor as of the date of this Agreement and
Release. Anything to the contrary notwithstanding in this Agreement and Release
or the Employment Agreement, nothing herein shall release any Company Releasee
from any claims or damages based on (i) any right or claim that arises after the
date of this Agreement and Release pertaining to a matter that arises after such
date, (ii) any right the Executive may have to enforce
21
Sections 6, 11 and 13 of the Employment Agreement, (iii) any right or claim the
Executive may have to benefits or equity awards that have accrued or vested as
of the Date of Termination or any right pursuant to any qualified retirement
plan or (iv) any right the Executive may have to be indemnified by the Company
to the extent such indemnification by the Company or any Affiliate is permitted
by applicable law or the Company's by-laws.
The Executive agrees that he shall continue to be bound by, and will
comply with, the provisions of Sections 7, 8, 10 and 14 of the Employment
Agreement and the provisions of such sections, along with Section 9 of the
Employment Agreement, shall be incorporated fully into this Agreement and
Release.
The Executive acknowledges that he has been provided a period of at
least 21 calendar days (45 calendar days in the case of any termination covered
by Section 7(f)(1)(F)(ii) of ADEA) in which to consider and execute this
Agreement and Release. The Executive further acknowledges and understands that
he has seven calendar days from the date on which he executes this Agreement and
Release to revoke his acceptance by delivering to the Company written
notification of his intention to revoke this Agreement and Release in accordance
with Section 15 of the Employment Agreement. This Agreement and Release becomes
effective when signed unless revoked in writing and in accordance with this
seven-day provision. To the extent that the Executive has not otherwise done so,
the Executive is advised to consult with an attorney prior to executing this
Agreement and Release.
This Agreement and Release shall be governed by and construed and
interpreted in accordance with the laws of New York without reference to
principles of conflicts of law. Capitalized terms, unless defined herein, shall
have the meaning ascribed to such terms in the Employment Agreement.
IN WITNESS WHEREOF, the Executive has executed this Agreement and
Release as of the date hereof.
----------------------------
Xxx X. Xxxxxxxx
Date:
-----------------------
22
