EXECUTIVE AGREEMENT (Kenneth T. Stevens)
Exhibit 10.4
(Xxxxxxx X. Xxxxxxx)
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. Xxxxxxx (the “Executive”), effective as of January 29, 2007.
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 through January 28, 2010. On the first
anniversary of the date entered above, 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
negligence 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
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 (dX1) 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;
(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 Too, Inc.
Long-Term Disability Program (effective October 1, 1999), 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 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.
(k) Incentive Compensation Performance Plan. “Incentive Compensation Performance Plan”
means the Corporation’s 1999 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 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 or her 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.
(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.
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;
(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 for any reason at any time within thirty (30) days after the first
anniversary of a Change in Control of the Corporation provided that the Executive shall give
Notice of Termination to the Corporation with respect thereto.
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).
(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).
(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 after 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 may elect to pay such benefits in a lump sum.
(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.
(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 twenty thousand dollars
($20,000).
(h) Code Section 409A Compliance. Notwithstanding any provision of this Agreement to
the contrary, if the Company determines that Executive is a “specified employee” as defined
in Section 409A of the Code or any guidance promulgated thereunder (“Code Section 409A”),
Executive shall not be entitled to any payments under Section 4 of this Agreement that
otherwise would cause Executive to incur any additional tax or interest under Code Section
409A, until the earlier of (i) the date which is six months after the date that Executive’s
employment with the Company is terminated or (ii) the date of Executive’s death. If any
provision of this Agreement (or of any award of compensation, including equity compensation
or benefits) would cause Executive to incur any additional tax or interest under Code
Section 409A, the Company shall, after consulting with Executive and receiving Executive’s
approval (which shall not be unreasonably withheld), reform such provision in such a manner
as shall not cause Executive to incur any such tax or interest.
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 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 withholds such
excise tax from any payments to the Executive. 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 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. 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 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 Employment Agreements and other agreements between the Corporation and
the Executive.
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 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. Xxxxxxx
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxx, XX 00000
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxx, XX 00000
TO THE CORPORATION
Tween Brands, Inc.
0000 Xxxxxx Xxxxxxx
Xxx Xxxxxx, Xxxx 00000
Attention: Senior Vice President-Human Resources
0000 Xxxxxx Xxxxxxx
Xxx Xxxxxx, Xxxx 00000
Attention: 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.
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. Xxxxxx
|
|||||
| Xxxxxxx Xxxxxx | ||||||
| Its: | Chairman and Chief Executive Officer | |||||
| Executive: | ||||||
| /s/ Xxxxxxx X. Xxxxxxx | ||||||
| Xxxxxxx X. Xxxxxxx | ||||||
