VIA FEDERAL EXPRESS & ELECTRONIC DELIVERY (dennis.block@cwt.com, william.mills@cwt.com) Dennis Block, Esq. William Mills, Esq. Cadwalader, Wickersham & Taft LLP One World Financial Center Suite 32-106 New York. NY 10281 Tel: 212 504-5555 Fax: 212...
April
8, 2008
VIA
FEDERAL EXPRESS
&
ELECTRONIC DELIVERY (xxxxxx.xxxxx@xxx.xxx,
xxxxxxx.xxxxx@xxx.xxx)
Xxxxxx
Xxxxx, Esq.
Xxxxxxx
Xxxxx, Esq.
Cadwalader,
Xxxxxxxxxx & Xxxx LLP
One
World Financial Center
Suite
32-106
New
York. NY 10281
Tel:
000 000-0000
Fax:
000 000-0000
E-mail:
xxxxxx.xxxxx@xxx.xxx,xxxxxxx.xxxxx@xxx.xxx
Dear
Xxxxxx:
This
letter agreement sets forth the terms of the severance benefits payable under
Xxxx’s May 12, 2006 employment agreement with The Children’s Place Retail
Stores, Inc. (the “Company”). The terms set forth in this letter agreement are
the same as presented in my letter to you dated December 28, 2007 with
additional changes you requested in our conversation on April 8,
2008.
After
you
have had a chance to review this letter agreement with Xxxx, kindly have Xxxx
execute this letter agreement in the appropriate space provided below for his
signature to evidence his agreement with its terms (along with his election).
Once I have received the fully executed copy of the letter agreement, I will
process the payment of those benefits payable as a lump sum described below
under “Section 6.01(a) Lump Sum Payment.”
The
benefits pertaining to Xxxx’s separation, and terms under which the Company is
prepared to pay these benefits, are described below.
Section
5.01 Notice.
The
Company continued salary payments and benefits through November 23, 2007, the
60th day following September 24, 2007, the day of Xxxx’s separation from the
Company’s employ. We understand Xxxx has raised an issue regarding the nature of
his
separation.
Under his position, it is not clear that these salary continuation payments
(which totaled $173,077) were in fact required to be made. However, the Company
elected to make salary continuation payments for the 60 day period to address
the notice provision set forth in section 5.01 of the employment agreement,
under an interpretation most favorable to Xxxx.
Xxxxxx
Xxxxx, Esq.
April
8,
2008
Page 2
of
7
Section
6.01(a) Lump Sum Payment.
As
noted
in my letter to you dated December 18, 2007, I understand Xxxx has been advised
that regulations issued under Section 409A of the Internal revenue Code of
1986,
as amended (“Section 409A”) provide the basis for a claim that the lump sum
payable under Section 5.01 may be paid prior to June 2, 2008 without adverse
tax
consequences under Section 409A. As agreed, should Xxxx wish to receive this
amount within the 6 month period following his separation (which we now believe
may be anytime prior to June 2, 2008), the Company will require an
indemnification to cover the potential tax penalty exposure for failure to
properly report under Section 409A, in the form set forth in this letter
agreement. In any event, the amount of the payment would be equal to $3 million,
plus interest at the applicable federal short-term rate calculated from November
23, 2007 until the date of payment (less applicable withholdings).
Section
6.01(b) and 4.02 Benefits.
Bonus,
Option Vesting.
No
bonus was payable with respect to the 2007 fiscal year, and none of Xxxx’s
outstanding options were unvested, so the only benefits payable under this
section are with respect to benefits generally provided to senior executives
as
described in Section 4.02.
Medical,
Dental Insurance.
To
address the provision of benefits for the 36-month period commencing November
24, 2007 (the “Coverage Period”), the Company has continued to provide benefits
to Xxxx under its self-insured medical, dental and prescription plans. I have
been advised Xxxx completed his COBRA election forms and is being provided
the
coverage described in this paragraph to him. The Company will continue to
provide such benefits for any period up to the eighteen-month period permitted
under COBRA and, following such period, will purchase from an unaffiliated
insurer commercially available insurance coverage to provide to Ezra such
medical, dental and prescription plan benefits as are reasonably equivalent
to
those medical, dental and prescription plan benefits provided by the Company
to
the Company’s other senior executives (other than those benefits provided under
or pursuant to separately negotiated individual employment agreements or
arrangements) at a reasonable equivalent cost for the remaining period of the
Coverage Period. The Company reserves the option to purchase such commercially
available coverage for such benefits at any time during the Coverage Period
in
full satisfaction of this provision. Under Section 6.03, any medical, dental
or
prescription benefits provided to Xxxx by an unaffiliated person during the
Coverage Period shall be primary to the benefits provided by the Company. I
have
been advised that payment of these benefits is clearly exempt from the
applicability of Section 409A.
Life
Insurance Policy to Replace Xxxx’s current Group Insurance.
The
cost to replace Xxxx’s current group life insurance policy in face amount of
$750,000 is $18,888, which the Company will pay to Xxxx on June 2, 2008, or
per
your request is reflected in Option 2 attached hereto, since the payment would
not be exempt from the applicability of Section 409A.
Xxxxxx
Xxxxx, Esq.
April
8,
2008
Page 3
of
7
Individual
Life Insurance.
During
the Coverage Period, the Company will continue to pay $20,000 in annual premiums
on the existing individual insurance policy on Xxxx’s life, provided that Xxxx
will pay any premium payment due after November 23, 2007 and prior to June
2,
2008 directly to the insurance carrier, and the Company shall
reimburse
Xxxx
for
such premium payment upon the later of a) the Company’s receipt of documentation
confirming the payment, and b) June 2, 2008, or as otherwise requested by you
as
reflected in Option 2 attached hereto.
Services
of a Personal Driver.
The
Company will also pay Xxxx the sum of $200,000, which has been determined to
be
the reasonable costs of a car service to be available to Ezra for 8 hours a
day
during the Coverage Period, on June 2, 2008, or as otherwise requested by you
as
reflected in Option 2 attached hereto.
Other
Benefits.
The
only retirement plan provided by the Company is the 401(k) Savings Plan. Xxxx
has already exceeded the covered compensation limit for 2007 and will not be
eligible to participate in the future since he is not an active employee.
However, we have agreed that the value of this benefit to Xxxx is $10,012,
which
the Company will pay on June 2, 2008, or as otherwise requested by you as
reflected in Option 2 attached hereto. Xxxx is ineligible to participate in
the
Company’s stock purchase plan due to his level of ownership in the Company.
Finally, the Company’s short-term disability plans provide benefits in the form
of salary continuation and the Company’s long term disability plan is designed
to replace a portion of lost income due to disability. Since Xxxx’s severance
benefit already compensates him for his salary during the Coverage Period,
there
is no income to replace. In addition, the Company has been unable to locate
an
insurer that will provide this coverage to an unemployed
individual.
Stock
Options.
The
1997
Stock Option Plan pursuant to which Xxxx’s options were granted provides that
his options “shall terminate immediately upon the termination for any reason of
the holder’s employment or services,” with the holder having 90 days following
such termination in which to exercise his options. While the language could
be
construed otherwise, the Company, through its Compensation Committee on the
advice of counsel, has taken the position that the options will remain
exercisable until the earlier of their expiration dates and 90 days following
his termination of service as a board member, in accordance with applicable
Company policies. The terms of the January 27, 2006 Transfer Restriction
Agreement between Xxxx and the Company remain in effect.
In
summary, to address all of Xxxx’s benefits remaining payable by the Company, in
addition to the $173,077 it has already paid to Xxxx, the Company proposes
two
options by which Xxxx’s benefits will be delivered. Please have Xxxx execute his
name following the option he selects, in the signature block provided for this
purpose. By executing his name under either option, Xxxx agrees he is
voluntarily and knowingly releasing the Company (including its affiliated
companies), and the officers, directors and agents thereof (collectively, the
“Releasees”) from any and all claims pertaining to benefits under the May 12,
2006 employment agreement between him and all applicable employment laws
identified in Annex 1, and the Company’s reporting of such benefits to
applicable taxing authorities. Xxxx has the right to consider this release
for
21 days and, for seven (7) calendar days following his execution of this letter
agreement, to revoke it. To be effective, his revocation must be in writing
and
delivered by hand or overnight mail and received by the Company within the
seven
day period. This letter agreement will not be effective or enforceable until
the
seven day revocation period has expired. This release does not waive rights
or
claims that may arise when this release is executed. In addition, in the case
of
the second option, Xxxx agrees to indemnify the Releasees for, and hold the
Releasees harmless from and against, any and all claims, liabilities and
exposures arising out of any determination that the payment to Xxxx of benefits
prior to June 2, 2008 does not comply with Section 409A (it being understood
and
agreed that each of Xxxx and the Company will be responsible for the fees and
expenses of its own counsel).
Xxxxxx
Xxxxx, Esq.
April
8,
2008
Page 4
of
7
Option
1
and Option 2 follow on page 5 and 6 respectively.
Any
deliveries to Xxxx will be made by (a) certified mail, return receipt requested,
(b) recognized overnight courier or (c) personal delivery service, in each
case
addressed to Xxxx Xxxxx at 00 Xxxxxxxx Xxxx, Xxxxx Xxxx, Xxx Xxxx 00000 and
will
be deemed delivered, in the case of (a), on the fifth business day following
the
date postmarked, in the case of (b), the next business day, and, in the case
of
(c), the date of delivery to the delivery service as documented by the Company’s
records.
Please
let me know immediately in writing if Xxxx would prefer deliveries to be made
to
an alternate address.
Please
feel free to call me with any questions or comments.
Very
truly yours,
The
Children’s Place Retail Stores, Inc.
| By | /s/ Xxxxxxxx X. Xxxx | |
|
Xxxxxxxx
X. Xxxx
Senior
Vice President, General Counsel and Secretary
Direct:
(000) 000-0000
Facsimile:
(000) 000-0000
|
Xxxxxx
Xxxxx, Esq.
April
8,
2008
Page 5
of
7
Option
1:
The Company will make the following payments and deliveries to Xxxx Xxxxx,
in
full satisfaction of its obligations under Xxxx’s employment
agreement:
(a)
continued coverage under the Company’s self-insured medical, dental and
hospitalization plans for a period up to the period permitted under COBRA,
and
delivery to Xx. Xxxxx of a commercially available medical, dental and
prescription benefits policy to continue coverage of reasonably equivalent
benefits (as provided by the Company to other senior executives) at a reasonably
equivalent cost to the Company for the remaining portion of the Coverage Period,
(b) deliver, on June 2, 2008, the amount of $18,888 to cover the cost of
replacing the group life insurance policy coverage in face amount of $750,000
with a term of 3 years of coverage,
c)
reimburse Xx. Xxxxx on June 2, 2008 (or such later date as the Company receives
documentation confirming payment by Xx. Xxxxx) for any documented premium
payment due and paid by Xx. Xxxxx after November 23, 2007 and prior to June
2,
2008, and continue to pay the remaining premiums during the Coverage Period
(of
$20,000 per year) on the existing individual insurance policy on Xx. Xxxxx’x
life,
(d)
deliver, on June 2, 2008 a lump sum payment of $200,000, to cover the costs
of
the car service during the Coverage Period,
(e)
deliver, on June 2, 2008 a lump sum of $10,012, reflecting the value of Company
matching contributions under the 401(k) plan, and
(f)
deliver, on June 2, 2008, a lump sum payment equal to $3,000,000 plus interest
calculated at the applicable federal short-term rate from November 23, 2007
until the date of payment (less applicable withholdings).
Accepted
and Agreed, in accordance with the terms set forth in this letter
agreement:
|
Dated:
|
|||
| Xxxx Xxxxx |
Xxxxxx
Xxxxx, Esq.
April
8,
2008
Page 6
of
7
Option
2:
The Company will make the following payments and deliveries to Xxxx Xxxxx,
in
full satisfaction of its obligations under Xxxx’s employment
agreement:
(a)
continued coverage under the Company’s self-insured medical, dental and
hospitalization plans for a period up to the period permitted under COBRA,
and
delivery to Xx. Xxxxx of a commercially available medical, dental and
prescription benefits policy to continue coverage of reasonably equivalent
benefits (as provided by the Company to other senior executives) at a reasonably
equivalent cost to the Company for the remaining portion of the Coverage Period,
(b) deliver, on (i) June 2, 2008, the amount of $6,296 to cover the cost of
replacing the group life insurance policy coverage in face amount of $750,000
during 2008, and (ii) January 5, 2009, the amount of $12,592 to cover the cost
of replacing the group life insurance policy coverage in the face amount of
$750,000 during the remainder of the Coverage Period,
(c)
reimburse Xx. Xxxxx on June 2, 2008 (or such later date during 2008 that the
Company receives documentation confirming payment by Xx. Xxxxx) for any
documented premium payment due and paid by Xx. Xxxxx after November 23, 2007
and
prior to June 2, 2008, and continue to pay the remaining premiums during the
Coverage Period (of $20,000 per year) on the existing individual insurance
policy on Xx. Xxxxx’x life,
(d)
deliver, on (i) June 2, 2008 a lump sum payment of $66,667, to cover the costs
of the car service during 2008, and (ii) January 5, 2009 a lump sum payment
of
$133,333 to cover the cost of the car service during the remainder of the
Coverage Period,
(e)
deliver, on (i) June 2, 2008 a lump sum of $3,337, reflecting the value of
Company matching contributions under the 401(k) plan, that you would have
received during 2008, and (ii) January 5, 2009 a lump sum of $6,675, reflecting
the value of Company matching contributions under the 401(k)
(f)
provided that you have executed on April 8, 2008 and have not rescinded this
agreement on or before April 15, 2008, the Company will deliver at the close
of
business on April 15, 2008 a lump sum payment equal to $3,000,000 plus interest
calculated at the applicable federal short-term rate from November 23, 2007
until the date of payment (less applicable withholdings).
Accepted
and Agreed, in accordance with the terms set forth in this letter
agreement:
| /s/ Xxxx Xxxxx |
Dated:
April 8, 2008
|
|
| Xxxx Xxxxx |
Xxxxxx
Xxxxx, Esq.
April
8,
2008
Page 7
of
7
ANNEX
1
Federal,
state or local employment statutes or civil rights laws, including but not
limited to:
Title
VII
of the Civil Rights Act of 1964, as amended
Age
Discrimination in Employment Act
Old
Workers Benefit Protection Act
Americans
with Disabilities Act
Family
and Medical Disabilities Leave Act
Fair
Labor Standards Act of 1938 as amended by the Equal Pay Act of 1963 and compared
state laws
Employment
Retirement Income Security Act of 1974
New
Jersey Conscientious Employee Protection Act
New
Jersey Law Against Discrimination;
New
Jersey Family Leave Act
New
Jersey Wage Payment Act
New
York
Human Rights Act
