Charming Shoppes, Inc. Employment Agreement
EXHIBIT
99.1
Charming
Shoppes, Inc.
This
EMPLOYMENT AGREEMENT is made as of December 31, 2007, by and between CHARMING
SHOPPES, INC., a Pennsylvania corporation having its principal offices in
Bensalem, Pennsylvania (the “Company”), and XXXXXX X. XXXX (the
“Executive”).
WHEREAS,
the Executive is presently employed by the Company in the capacity of President
and Chief Executive Officer, and is a member of the Board of Directors of the
Company where she currently serves as Chairman of the Board;
WHEREAS,
the Executive possesses considerable experience and an intimate knowledge of
the
business and affairs of the Company, its policies, methods, personnel, and
operations; and
WHEREAS,
the Company recognizes that the Executive’s contribution has been substantial
and meritorious and, as such, the Executive has demonstrated unique
qualifications to act in an executive capacity for the Company; and
WHEREAS,
the Company is desirous of assuring the continued employment of the Executive
in
the above stated capacity, and the Executive is desirous of such
assurance.
WHEREAS,
the Company and the Executive are parties to an Employment Agreement dated
as of
January 1, 2005, as amended (the “2005 Employment Agreement”), and the parties
have agreed that this Agreement will supercede and replace the 2005 Employment
Agreement as of the Effective Date (as defined below) of this
Agreement.
NOW
THEREFORE, in consideration of the foregoing and of the mutual covenants and
agreements of the parties set forth in this Agreement, and of other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
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Section
1.
|
Term of Employment |
(a) The
Company hereby agrees to employ the Executive and the Executive hereby agrees
to
continue to be employed by the Company in accordance with the terms and
conditions set forth herein, for an initial term of three (3) years, commencing
as of the Effective Date and ending on January 29, 2011, subject however, to
earlier termination as expressly provided herein.
(b) The
Company may renew this Agreement (as described in Section 2.21(h) below) for
an
additional term of two (2) or more years after the initial term of three (3)
years lapses. In the event the Company notifies the Executive of its
intent not to renew this Agreement for an additional term of two (2) or more
years, this Agreement shall terminate at the end of the initial three (3) year
term, except as otherwise specifically provided herein.
(c) Notwithstanding
the foregoing, if at any time during the Term (as defined in Section 2.38)
a
Change in Control of the Company occurs, then the Term of this Agreement shall
automatically be extended until the later of:
(i) two
(2)
years after the last day of the month in which such Change in Control occurs;
or
(ii) the
end
of the Term established under Sections 1(a) and 1(b) above.
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Section
2.
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Definitions |
2.1 “Agreement”
means this Employment Agreement between the Company and the Executive, including
any amendments hereto.
2.2 “Annual
Bonus” means the annual bonus paid to the Executive pursuant to Section
5.2 herein.
2.3 “Base
Salary” means the salary of record paid to the Executive as annual
salary, pursuant to Section 5.1 herein, excluding amounts received under
incentive or other bonus plans, whether or not deferred.
2.4 “Beneficial
Ownership” shall have the meaning ascribed to such term in Rule 13d-3
of the General Rules and Regulations under the Securities Exchange
Act.
2.5 “Board”
or “Board of Directors” means the Board of Directors of the
Company.
2.6 “Bonus
Agreement” means the Bonus Agreement approved by the Compensation
Committee in December, 2004 with respect to the replacement of the Executive’s
split dollar life insurance with a new life insurance policy in
2004.
2.7 “Cause”
means the Executive’s:
(a) Willful
and continued neglect, refusal or failure to substantially perform her duties
with the Company (other than any such failure resulting from Disability or
occurring after issuance by the Executive of a Notice of Termination for Good
Reason), after a written demand for substantial performance is delivered to
the
Executive that specifically identifies the manner in which the Company believes
that the Executive has willfully failed to substantially perform her duties,
and
after the Executive has failed to resume substantial performance of her duties
on a continuous basis within ten (10) calendar days of receiving such
demand;
(b) Conviction
of a felony involving a crime of moral turpitude; or
(c) Willfully
engaging in illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company.
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For
purposes of determining Cause, no act or omission by the Executive shall be
considered “willful” unless it is done or omitted in bad faith or without
reasonable belief that the Executive’s action or omission was in the best
interests of the Company. Any act or failure to act based upon: (a)
authority given pursuant to a resolution duly adopted by the Board, or (b)
advice of counsel for the Company, shall be conclusively presumed to be done
or
omitted to be done by the Executive in good faith and in the best interests
of
the Company.
2.8 “Change
in Control” or “CIC” of the Company shall be deemed to
have occurred as of the first day any one or more of the following conditions
shall have been satisfied:
(a) Any
Person, other than the Company or a Related Party, acquires directly or
indirectly the Beneficial Ownership of any Voting Security of the Company and
immediately after such acquisition such Person has, directly or indirectly,
the
Beneficial Ownership of Voting Securities representing twenty percent (20%)
or
more of the total voting power of all the then-outstanding Voting Securities;
or
(b) Those
individuals who as of the date of this Agreement constitute the Board or who
thereafter are elected to the Board and whose election, or nomination for
election, to the Board was approved by a vote of at least two-thirds (2/3)
of
the directors then still in office who either were directors as of the date
of
this Agreement or whose election or nomination for election was previously
so
approved, cease for any reason to constitute a majority of the members of the
Board; or
(c) There
is
consummated a merger, consolidation, recapitalization, or
reorganization of the Company, a reverse stock split of outstanding
Voting Securities, or an acquisition of securities or assets by the Company
(a
"Transaction"), other than a Transaction which would result in the holders
of
Voting Securities having at least eighty percent (80%) of the total voting
power
represented by the Voting Securities outstanding immediately prior thereto
continuing to hold Voting Securities or voting securities of the surviving
entity having at least sixty percent (60%) of the total voting power represented
by the Voting Securities or the voting securities of such surviving entity
outstanding immediately after such Transaction and in or as a result of which
the voting rights of each Voting Security relative to the voting rights of
all
other Voting Securities are not altered; or
(d) There
is
implemented or consummated a plan of complete liquidation of the Company or
sale
or disposition by the Company of all or substantially all of the Company's
assets other than any such transaction which would result in Related Parties
owning or acquiring more than fifty percent (50%) of the assets owned by the
Company immediately prior to the transaction.
However,
in no event shall a Change in Control be deemed to have occurred, with respect
to the Executive, if the Executive is part of a purchasing group which
consummates the Change in Control transaction. The Executive shall be
deemed “part of a purchasing group” for purposes of the preceding sentence if
the Executive is an equity participant in the purchasing company or group
(except for: (i) passive ownership, either alone or with any Person,
of less than five (5%) percent of any class of equity securities of the
purchasing company that are registered under Section 12 of the Securities
Exchange Act or (ii) ownership of equity participation in the
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purchasing
company or group which is otherwise not significant, as determined prior to
the
Change in Control by a majority of the nonemployee continuing
Directors).
2.9 “CIC-Severance
Benefits” means the severance compensation payable to the Executive in
connection with a Qualifying Termination as described in Section 8.2
herein.
2.10 “COBRA”
shall refer to continued group health insurance coverage under Sections 601-607
of the federal Employee Retirement Income Security Act of 1974, as
amended.
2.11 “Code”
means the United States Internal Revenue Code of 1986, as amended.
2.12 “Compensation
Committee” means the Compensation Committee of the Board, or any other
committee appointed by the Board to perform the functions of the Compensation
Committee.
2.13 “Company”
means Charming Shoppes, Inc. a Pennsylvania corporation (including any and
all
subsidiaries).
2.14 “Date
of Termination” means the date on which a termination of the
Executive’s employment occurs, including non-renewal by the Company at the end
of the Term.
2.15 “Director”
means any individual who is a member of the Board of Directors of the
Company.
2.16 “Disability”
or “Disabled” means the incapacity of the Executive, due to
injury, illness, disease, or bodily or mental infirmity, to engage in the
performance of substantially all of the usual duties of employment with the
Company.
2.17 “Effective
Date” means February 1, 2008.
2.18 “Executive”
means Xxxxxx X. Xxxx.
2.19 “Fair
Market Value” means the value of a Share as determined by the
Compensation Committee or its designee.
2.20 “Fiscal
Year” means a fiscal year of the Company ending on the last Saturday
nearest January 31.
2.21 “Good
Reason” means, without the Executive’s express written consent, the
occurrence of any one or more of the following:
(a) Assigning
to the Executive duties materially inconsistent or, during the twenty-four
(24)
month period following a Change in Control, inconsistent, in either case with
the Executive’s position (including status, titles, and reporting
relationships), authority or responsibilities in effect on the Effective Date,
or any other action by the Company which results in a diminution of the
Executive’s position, authority, duties, or responsibilities as constituted as
of the Effective Date (excluding an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the Company promptly
after receipt of notice thereof);
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(b) Requiring
the Executive to be based in Pennsylvania or at a location which is at least
fifty (50) miles farther from the Executive’s current primary
residence;
(c) Reducing
the Executive’s Base Salary;
(d) Reducing
the Executive’s targeted Annual Bonus award opportunities in violation of
Section 5.2;
(e) Failing
to maintain the Executive’s amount of benefits under or relative level of
participation in the Company’s employee benefit or retirement plans, policies,
practices, or arrangements in which the Executive participates as of the
Effective Date; provided, however, that any such change that applies
consistently to all executive officers of the Company or is required by
applicable law shall not be deemed to constitute Good Reason;
(f) Purportedly
terminating the Executive’s employment otherwise than as expressly permitted by
this Agreement;
(g) Failing
to require any successor to the Company to assume and agree to perform the
Company’s obligations hereunder; or
(h) Failure
of the Company to renew this Agreement at the end of the initial three (3)
year
Term. The Company shall be considered to renew this Agreement if, at least
ninety (90) days before the end of the Term, the Company offers the Executive
a
continuation of this Agreement on the terms provided herein, and with such
adjustments as may be appropriate to reflect prevailing compensation practices
in the Company’s industry at that time. Comparable compensation under
prevailing compensation practices will be determined by benchmarking against
the
comparable peer group in the Company’s industry that is used for establishing
the compensation of the other members of senior management at the time, and,
for
purposes of the comparability analysis, the Executive’s future compensation will
be determined without regard to equity grants previously made to the Executive
under this Agreement or previous agreements.
2.22 “Notice
of Termination” means a written notice which shall indicate the
specific provision(s) in this Agreement relied upon, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision(s) so
indicated. A Notice of Termination shall include a notice of
non-renewal of the Agreement as described in Section 1(b).
2.23 “Options”
means the non-qualified stock options described in Section 5.3(b), which shall
be exercisable for Shares.
2.24 “Performance
Awards” means the Performance RSUs, Performance SARs
and Performance Options described in Section 5.3(c).
2.25 “Performance
Options” means the non-qualified stock options described in Section
5.3(c), which shall be exercisable for Shares.
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2.26 “Performance
Period” means one or more Fiscal Years, as applicable.
2.27 “Performance
RSUs” mean the restricted Shares described in Section 5.3(c), which
shall be granted in the form of restricted stock units payable in
Shares.
2.28 “Performance
SARs” mean the stock appreciation rights described in Section 5.3(c),
which shall be exercisable for Shares.
2.29 “Person”
shall have the meaning ascribed to such term in Section 3(a)(9) of the
Securities Exchange Act and used in Sections 13(d) and 14(d) thereof, including
a “group” as defined in Section 13(d) thereof.
2.30 “Qualifying
Termination” means any of the events described in Section 8.1 herein,
the occurrence of which triggers the payment of CIC- Severance Benefits
hereunder.
2.31 “Related
Party” means (a) a majority-owned subsidiary of the Company; or (b) a
trustee or other fiduciary holding securities under an employee benefit plan
of
the Company or any majority-owned subsidiary; or (c) a corporation owned
directly or indirectly by the shareholders of the Company in substantially
the
same proportion as their ownership of Voting Securities.
2.32 “SARs”
means the stock appreciation rights described in Section 5.3(b), which shall
be
exercisable for Shares.
2.33 “Securities
Exchange Act” means the United States Securities Exchange Act of 1934,
as amended.
2.34 “SERP”
means the Charming Shoppes, Inc. Supplemental Retirement Plan.
2.35 “Severance
Benefits” means the severance compensation payable to the Executive as
described in Section 7.4 herein, as distinguished from CIC-Severance Benefits
payable to the Executive in connection with a Qualifying
Termination.
2.36 “Shareholder
Return” means shareholder return as defined on Exhibit A.
2.37 “Shares”
mean shares of the Company’s common stock.
2.38 “Term”
means the period of time this Agreement is in effect, including the initial
three (3) year period and any extensions thereof in accordance with this
Agreement.
2.39 “Time
Vested Shares” means the restricted Shares described in Section 5.3(a),
which shall be granted in the form of restricted stock units payable in
Shares.
2.40 “Voting
Securities” or “Voting Security” means any securities
of the Company which carry the right to vote generally in the election of
Directors.
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Section
3.
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Position and Responsibilities |
During
the Term, the Executive agrees to serve as President and Chief Executive Officer
of the Company. In her capacity as President and Chief Executive Officer of
the
Company, the Executive shall report directly to the Board of Directors, and
shall maintain the level of duties and responsibilities in effect as of the
Effective Date, or such higher level of duties and responsibilities as she
may
be assigned during the Term. The Executive shall have the same
status, privileges, and responsibilities normally inherent in such capacities
in
corporate institutions of similar size and character.
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Section
4.
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Standard of Care |
During
the Term, the Executive agrees to devote substantially her full time, attention,
and energies to the Company’s business and shall not be engaged in any other
business activity, whether or not such business activity is pursued for gain,
profit, or other pecuniary advantage. Subject, however, to Section 12
herein, the Executive may serve in charitable and civic positions and as a
director of those companies of which she is a director on the Effective Date
and
of other companies with the prior consent of the Board, which consent shall
not
be unreasonably withheld. The Executive covenants, warrants, and
represents that she shall devote her full and best efforts to the fulfillment
of
her employment obligations, and she shall exercise the highest degree of loyalty
and the highest standards of conduct in the performance of her
duties.
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Section
5.
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Compensation |
As
remuneration for all services to be rendered by the Executive during the Term
of
this Agreement, and as consideration for complying with the covenants herein,
the Company shall pay and provide to the Executive the following:
5.1 Base
Salary. The Company shall pay the Executive a Base Salary of One
Million Five Hundred Fifty Thousand Dollars ($1,550,000) per year, payable
in
equal installments throughout the year, consistent with the normal payroll
practices of the Company. The Base Salary shall be reviewed at least
annually following the Effective Date to ascertain whether, in the judgment
of
the Board or the Compensation Committee, such Base Salary should be
adjusted. If so adjusted, the Base Salary as stated above shall,
likewise, be adjusted for all purposes of this Agreement, but shall not in
any
event be decreased in any year.
5.2 Annual
Bonus. In addition to her Base Salary, the Executive shall be
entitled to an Annual Bonus based on Company performance measured against
targets based on the budget approved by the Board at the beginning of each
Fiscal Year. The specific parameters of the Annual Bonus and the targets shall
be as established by the Board and Compensation Committee, but it is agreed
that
performance that meets the approved target shall entitle the Executive to an
Annual Bonus equal to one hundred percent (100%) of her Base Salary for that
year and the maximum Annual Bonus payable shall be two hundred percent (200%)
of
Base Salary. The Annual Bonus shall be paid to the
Executive promptly after it has been calculated, which shall be no later than
thirty (30) days after receipt by the Company of the audit opinion
of
7
its
independent auditors with respect to the Company’s annual financial statements
for the Fiscal Year, but in any event no later than December 31 of the calendar
year that includes the last day of the relevant Fiscal Year (or by such other
date as may be allowed under the short-term deferral exception under section
409A of the Code).
5.3 Long-Term
Incentives. The Executive shall be eligible to participate in the
Company’s long-term incentive plan, by receiving grants of Time Vested Shares,
Options or SARs and Performance Awards, as follows:
(a) On
each
of April 1, 2008, April 1, 2009 and April 1, 2010, the Company shall grant
the
Executive a number of Time Vested Shares having a Fair Market Value of one
million two hundred thousand dollars ($1,200,000) on the grant
date. The number of Shares on each grant date shall be determined by
dividing one million two hundred thousand dollars ($1,200,000) by the Fair
Market Value of a Share on the grant date. Each grant of Time Vested
Shares shall vest as to one-third of the Shares on each of the third, fourth
and
fifth anniversaries of the grant date. Vesting shall be subject to
the Executive’s continued employment with the Company through the applicable
vesting date, provided that vesting shall be accelerated in accordance with
the
terms set forth in Sections 7.1, 7.2, 7.4 and 8.4 below.
(b) On
each
of April 1, 2008, April 1, 2009 and April 1, 2010, the Company shall grant
the
Executive a number of SARs or Options having a Fair Market Value of one million
two hundred thousand dollars ($1,200,000) on the grant date. The
number of Shares subject to the Options or SARs on each grant date shall be
determined by dividing one million two hundred thousand dollars ($1,200,000)
by
the Black-Scholes value of an Option or SAR on the grant date. The
per Share exercise price of the Options or SARs shall be equal to the Fair
Market Value of a Share on the grant date. Each grant of
SARs or Options shall vest as to one-third of the Shares on each of the third,
fourth and fifth anniversaries of the grant date. Vesting shall be
subject to the Executive’s continued employment with the Company through the
applicable vesting date, provided that vesting shall be accelerated in
accordance with the terms set forth in Sections 7.1, 7.2, 7.4 and 8.4
below.
(c) On
each
of April 1, 2008, April 1, 2009 and April 1, 2010, the Company shall grant
the
Executive a number of Performance Awards based on performance during a specified
Performance Period and based on a target Fair Market Value of one million two
hundred thousand dollars ($1,200,000) on the grant date, as
follows:
(i) One-half
of each grant of Performance Awards will be awarded as Performance SARs or
Performance Options. The number of Shares subject to the Performance
SARs or the Performance Options on each grant date shall be determined based
on
the Company’s achievement of performance goals based on relative Shareholder
Return as compared to the Company’s peer group for the three (3) Fiscal Years
preceding the date on which the grant is made (e.g., the April 1, 2008 grant
will be based on relative Shareholder Return for the Fiscal Years beginning
in
2005, 2006 and 2007). The target award for each annual
grant of Performance Options or Performance SARs will be six hundred thousand
dollars ($600,000). The performance goals shall provide for a grant
of Performance Options or Performance SARs at a grant date value of fifty
percent (50%) to two
8
hundred
percent (200%) of target based on achievement of the performance goals described
on Exhibit A; provided that the grant date value of the April 1, 2008
Performance Options or Performance SARs shall be not less than 100% of
target. The Compensation Committee will measure the Company’s
performance against the performance goals for the applicable Performance Period
and will grant the Performance Options or Performance SARs on each of April
1,
2008, April 1, 2009 and April 1, 2010. The number of Shares subject
to the Performance Options or Performance SARs on each grant date shall be
determined by dividing the amount determined based on achievement of the
performance goals by the Black-Scholes value of an Option or SAR on the grant
date. The per Share exercise price of the Performance Options or Performance
SARs shall be equal to the Fair Market Value of a Share on the grant date.
Each
grant of Performance Options or Performance SARs shall vest as to one-half
of
the Shares on each of the first and second anniversaries of the grant
date. Vesting shall be subject to the Executive’s continued
employment with the Company through the applicable vesting date, provided that
vesting shall be accelerated in accordance with the terms set forth in Sections
7.1, 7.2, 7.4 and 8.4 below.
(ii) One-half
of each grant of Performance Awards will be awarded as Performance
RSUs. The number of Shares underlying the Performance RSUs on each
grant date shall be determined based on the Company’s achievement of performance
goals based on relative Shareholder Return as compared to the Company’s peer
group for the Fiscal Year immediately preceding the date on which the grant
is
made (e.g., the April 1, 2008 grant will be based on relative Shareholder Return
for the Fiscal Year beginning in 2007). The target award for each
annual grant of Performance RSUs will be six hundred thousand dollars
($600,000). The performance goals shall provide for a grant at a
grant date value of fifty percent (50%) to two hundred percent (200%) of target
based on achievement of the performance goals described on Exhibit A; provided
that the grant date value of the April 1, 2008 Performance RSUs shall be not
less than one hundred percent (100%) of target. The Compensation
Committee will measure the Company’s performance against the performance goals
for the applicable Performance Period and will grant the Performance RSUs on
each of April 1, 2008, April 1, 2009 and April 1, 2010. The number of
Shares subject to the Performance RSUs on each grant date shall be determined
by
dividing the amount determined based on achievement of the performance goals
by
the Fair Market Value of a Share on the grant date. Each grant of
Performance RSUs shall vest as to one-half of the Shares on each of the first
and second anniversaries of the grant date. Vesting shall be subject
to the Executive’s continued employment with the Company through the applicable
vesting date, provided that vesting shall be accelerated in accordance with
the
terms set forth in Sections 7.1, 7.2, 7.4 and 8.4 below.
(d) Grants
designated for an April 1 may be made on or around that date and shall be made
at the same time as equity grants are made to other executives in accordance
with the Company’s equity grant policy. Each grant of Time Vested
Shares, SARs, Options and Performance Awards shall be evidenced by a Restricted
Stock Agreement, SAR Agreement or Option Agreement pursuant to the Company’s
2004 Stock Award and Incentive Plan, or a
9
successor
plan. If there is a change in the Company’s common stock for any
reason, appropriate adjustments shall be made to the number and type of Shares
to be granted under this Section 5.3 to retain the economic value of the grants
to the Executive, with such adjustments to be consistent with the adjustments
made for purposes of the Company’s 2004 Stock Award and Incentive
Plan.
5.4 Retirement
Benefits.
(a) The
Company shall provide to the Executive participation in all Company qualified
defined benefit and defined contribution retirement plans, subject to the
eligibility and participation requirements of such plans as applicable to
executives of the Company generally. In addition, the Company shall
provide to the Executive participation in all other nonqualified retirement
programs typically offered to executives of the Company generally, including
without limitation the SERP.
(b) Nothing
in this paragraph shall be construed as obligating the Company to refrain from
changing, and/or amending the nonqualified retirement programs, so long as
such
changes are similarly applicable to all executives generally.
5.5 Employee
Benefits.
(a) During
the Term, and as otherwise provided within the provisions of each of the
respective plans, the Company shall provide to the Executive all benefits to
which other executives and employees of the Company are entitled to receive,
as
commensurate with the position of President and Chief Executive Officer, subject
to the eligibility requirements and other provisions of such arrangements as
applicable to executives of the Company generally. Such benefits
shall include, but shall not be limited to, group term life insurance,
comprehensive health and major medical insurance, dental and life insurance,
and
short-term and long-term disability.
(b) The
Executive shall be entitled to paid vacation in accordance with the standard
written policy of the Company with regard to vacations of executive
employees.
(c) The
Executive shall be entitled to participate in any additional benefit plans
and
arrangements that may be established for executive employees during the term
of
this Agreement, including without limitation the Bonus Agreement, and benefits
shall be provided according to the terms of such benefit plans and
arrangements.
5.6 Right
to Change Plans. Section 5.5 herein shall not obligate the
Company to institute, maintain, or refrain from changing, amending, or
discontinuing any benefit plan, program, or perquisite, so long as such changes
are similarly applicable to executive employees generally.
5.7 Perquisites. The
Company shall provide to the Executive a perquisite allowance under which she
may use, at her discretion, an amount up to Seventy Five Thousand Dollars
($75,000) per year on the same terms and for the same purposes as the
perquisites provided to other senior executives of the Company. The
Company shall also provide to the Executive the use of a Company automobile
and
driver for business efficiency and security purposes.
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Section
6.
|
Expenses |
Upon
presentation of appropriate documentation, the Company shall pay, or reimburse
the Executive, for all ordinary and necessary expenses, in a reasonable amount,
which the Executive incurs in performing her duties under this Agreement
including, but not limited to, travel, entertainment, professional dues and
subscriptions, and all dues, fees, and expenses associated with membership
in
various professional, business, and civic associations and societies in which
the Executive’s participation is in the best interest of the
Company. The Company shall pay the reasonable legal fees and expenses
of the Executive’s counsel, Xxxxxx, Xxxxx & Xxxxxxx, LLP, in connection with
the preparation of this Agreement.
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Section
7.
|
Employment Termination |
7.1 Termination
Due to Death.
(a) In
the
event the Executive’s employment is terminated during the Term by reason of
death, the Executive’s benefits shall be determined in accordance with the
Company’s retirement, survivor’s benefits, insurance, and other applicable
programs of the Company then in effect. Upon the death of the
Executive, the Company’s obligation to pay the Executive the compensation
described in Sections 5.1, 5.2, and 5.3 herein shall immediately terminate,
except as otherwise provided therein. The Company shall pay to the
Executive’s estate a lump sum amount, payable within ninety (90) days after the
Executive’s death, equal to the Executive’s unpaid target Annual Bonus
established for the Fiscal Year in which the Executive’s Date of Termination
occurs, multiplied by a fraction, the numerator of which is the number of
completed days in the then-existing Fiscal Year through the Date of Termination,
and the denominator of which is the number of days in the Fiscal
Year. Vesting of the Executive’s outstanding equity awards with
respect to stock of the Company or any successor (including outstanding Options,
SARs, Performance Awards and Time Vested Shares) shall be accelerated
in full. The Executive shall be entitled to receive all other rights
and benefits in which she is vested at the date of her death, pursuant to this
Agreement or to other plans and programs of the Company.
7.2 Termination
Due to Disability.
(a) In
the
event that the Executive becomes Disabled during the Term and is, therefore,
unable, or the Board reasonably expects that the Executive will be unable,
to
perform her duties hereunder for more than one hundred eighty (180) total
calendar days during any period of twelve (12) consecutive months, the Company
may deliver written notice to the Executive of the Company’s intent to terminate
her employment for Disability. The Board shall deliver such written
notice to the Executive at least thirty (30) calendar days prior to the intended
Date of Termination.
(b) A
termination for Disability shall become effective upon the end of the thirty
(30) day notice period. Upon such Date of Termination, the Company’s
obligation to pay and provide to the Executive the compensation described in
the
Sections 5.1, 5.2, and 5.3 herein shall immediately terminate, except as
otherwise provided therein. The Company shall pay to the Executive a
lump sum amount, payable within ninety (90) days after the Date of Termination,
equal to the Executive’s unpaid target Annual Bonus established for the Fiscal
Year
11
in
which
the Date of Termination occurs, multiplied by a fraction, the numerator of
which
is the number of completed days in the then-existing Fiscal Year through the
Date of Termination, and the denominator of which is the number of days in
the
Fiscal Year. Vesting of the Executive’s outstanding equity awards
with respect to stock of the Company or any successor (including outstanding
Options, SARs, Performance Awards and Time Vested Shares) shall be accelerated
in full. The Executive shall receive all rights and benefits in which
she is vested at the Date of Termination, pursuant to this Agreement or to
other
plans and programs of the Company.
(c) The
Board’s reasonable determination of Disability must be made in reliance on
competent medical advice from one (1) or more individuals selected by the Board
who are qualified to give such professional medical advice.
(d) If
the
Executive and the Company disagree as to whether the Executive has suffered
a
Disability as described in subsection (a) above, the matter shall be referred
to
a panel of three (3) medical doctors, one of which shall be selected by the
Executive, one of which shall be selected by the Company, and one of which
shall
be selected by the two (2) doctors as so selected, and the decision of a
majority of the panel with respect to the question of whether the Executive
has
suffered a Disability shall be binding upon the Executive and the
Company. The expenses of any such referral shall be borne by the
Company. The Executive may be required by the Company to submit to
medical examination at any time during the period of her employment hereunder,
but not more often than quarterly, to determine whether a Disability exists
for
the purpose of this Agreement.
(e) It
is
expressly understood that the Disability of the Executive for one hundred eighty
(180) total calendar days or less during any period of twelve (12) consecutive
months, in the absence of the Board’s reasonable expectation that her Disability
will continue as described above, shall not constitute a failure by the
Executive to perform her duties hereunder and shall not be deemed a breach
or
default, and the Executive shall receive full compensation for any such period
of Disability or for any other temporary illness or incapacity during the
Term.
7.3 Voluntary
Termination by the Executive.
(a) The
Executive may terminate this Agreement at any time by giving the Board of
Directors written notice of her intent to terminate, delivered at least ninety
(90) calendar days prior to the intended Date of Termination. The
termination automatically shall become effective upon the expiration of the
ninety (90) day notice period.
(b) Upon
the
Date of Termination elected by the Executive as described in subsection (a)
above, if such termination is not for Good Reason, the Company shall pay the
Executive her Base Salary through the Date of Termination, plus all other
benefits to which the Executive has a vested right to receive at that
time. The Executive shall not be entitled to be paid any Annual Bonus
with respect to the Fiscal Year in which she voluntarily terminates this
Agreement (other than for Good Reason). With the exception of the
Executive’s obligations set forth in Section 12 herein (which shall survive such
termination), the Company and the Executive shall thereafter have no further
obligations under this Agreement.
12
7.4 Termination
by the Company Without Cause and Termination by Executive for Good Reason;
Severance Benefits.
(a) At
any
time during the Term, the Board may terminate this Agreement without Cause,
by
providing to the Executive a Notice of Termination at least ninety (90) calendar
days prior to the intended Date of Termination.
(b) At
any
time during the Term, the Executive may terminate this Agreement for Good Reason
by providing to the Board a Notice of Termination, which
notice sets forth in reasonable detail the facts and circumstances claimed
to
provide a basis for such termination. The Executive shall
provide the Notice of Termination for Good Reason at any time at or before
the
end of the Term. The Executive’s right to terminate for Good Reason
shall not be affected by the Executive’s incapacity due to physical or mental
illness unless such incapacity is determined to constitute a Disability as
provided herein. The Executive’s continued employment shall not
constitute consent to, or a waiver of rights with respect to, any circumstance
constituting Good Reason herein.
(c) Upon
the
Date of Termination as contemplated by Section 7.4(a) or 7.4(b), the Company
shall provide to the Executive the following Severance Benefits:
(i) The
Company shall pay to the Executive, in twenty-four (24) equal monthly
installments, an amount equal to two times (2x) the sum of (i) the Executive’s
annual Base Salary plus (ii) the three (3) year average of the actual Annual
Bonus paid to the Executive for the most recent three (3) completed Fiscal
Years. These payments shall begin within thirty (30) days following
the Date of Termination.
(ii) The
Executive may continue to participate in the Company’s health plan for two (2)
years following the Date of Termination by paying the COBRA cost of such
coverage. The Company shall reimburse the Executive an amount equal
to the Executive’s monthly COBRA cost under the Company’s health plan for the
two (2) year period, provided, however, that reimbursement of the COBRA cost
shall be discontinued prior to the end of the two (2) year period if the
Executive ceases to elect COBRA coverage under the Company’s health plan or if
the Executive has available substantially similar benefits from a subsequent
employer, as determined by the Compensation Committee. The COBRA
reimbursement payments shall be paid monthly on the first payroll date of each
month, beginning within thirty (30) days after the Date of
Termination. On each date on which a payment is made under this
Section 7.4(c)(ii), the Company will pay the Executive an additional amount
equal to the federal, state and local income and payroll taxes that the
Executive incurs on all amounts paid under this Section
7.4(c)(ii). This gross up payment will be made with respect to each
payment under Section 7.4(c)(ii) and will cease when payments under this Section
7.4(c)(ii) cease.
(iii) The
Company shall pay Executive a lump sum cash reimbursement equal to the cost
to
the Executive to secure life insurance, accidental death and dismemberment
insurance and disability insurance coverage for two (2) years
13
following
the Date of Termination, less the amount that the Executive would have paid
to
the Company for these benefits had the Executive continued participation in
the
Company’s life insurance, accidental death and dismemberment insurance and
disability insurance programs, on the same terms and conditions as in effect
immediately preceding the Executive’s Date of Termination. Such lump
sum payment shall be made within thirty (30) days following the Date of
Termination.
(iv) The
Company shall pay to the Executive a lump sum amount, payable within thirty
(30)
days after the Date of Termination, equal to the Executive’s unpaid target
Annual Bonus established for the Fiscal Year in which the Date of Termination
occurs, multiplied by a fraction, the numerator of which is the number of
completed days in the then-existing Fiscal Year through the Date of Termination,
and the denominator of which is the number of days in the Fiscal
Year.
(v) The
Executive’s accrued benefit in the SERP shall become fully vested as of the Date
of Termination and such accrued benefit shall be paid in accordance with the
terms of the SERP.
(vi) The
vesting schedule of the Executive’s outstanding equity awards with respect to
stock of the Company or any successor (including outstanding Options, SARs,
Performance Awards and Time Vested Shares) shall be accelerated by two (2)
years
and the outstanding equity awards that would have vested if the Executive had
continued employment for an additional two (2) years following such Date of
Termination shall become vested on the Date of Termination, and the outstanding
equity awards otherwise shall be treated pursuant to the terms of the applicable
plan or agreement.
(vii) The
Company shall pay the Executive all other benefits to which the Executive has
a
vested right at the time, according to the provisions of this Agreement or
the
governing plan or program.
(d) Notwithstanding
the foregoing, if and to the extent required by Section 409A of the Code,
payments described in this Section 7.4 shall be subject to the six-month delay
described in Section 13.10(b) below.
(e) Upon
termination of this Agreement pursuant to this Section 7.4, with the exception
of the Executive’s obligations set forth in Section 12 herein and the Company’s
obligation to make payments under this Section 7.4 (which shall survive such
termination), the Company and the Executive shall thereafter have no further
obligations under this Agreement.
(f) If
a
Qualifying Termination occurs, the Executive shall receive CIC-Severance
Benefits as set forth in Section 8.2 rather than the Severance Benefits set
forth in this Section 7.4.
14
7.5 Termination
for Cause.
(a) Nothing
in this Agreement shall be construed to prevent the Board from terminating
the
Executive’s employment under this Agreement for “Cause,” effective as of a date
determined by the Board.
(b) Executive
shall not be deemed to be terminated for Cause 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 entire membership
of the Board at a meeting called and held for such purpose (after reasonable
notice is provided to the Executive and Executive is given an opportunity,
together with counsel, to be heard before the Board) finding that, in the good
faith opinion of the Board, Executive has engaged in conduct which constitutes
Cause as defined herein, and specifying the particulars thereof in detail.
(c) In
the
event this Agreement is terminated by the Board for Cause, the Company shall
pay
the Executive her Base Salary through the effective date of the termination
and
the Executive shall immediately thereafter forfeit all rights and benefits
(other than vested benefits) she would otherwise have been entitled to receive
under this Agreement. The Company and the Executive thereafter shall
have no further obligations under this Agreement, except for the Executive’s
obligations set forth in Section 12, which shall survive such
termination.
|
Section
8.
|
Change in Control |
8.1 Qualifying
Termination. The Executive shall be entitled to receive from the
Company CIC-Severance Benefits if there is a Change in Control of the Company
and a Qualifying Termination occurs. CIC-Severance Benefits shall be
paid in lieu of all other Severance Benefits provided to the Executive under
the
terms of this Agreement. “Qualifying Termination” means a termination
of the Executive’s employment based upon the occurrence of any one or more of
the following events:
(i) termination
of the Executive’s employment by the Company without Cause within twenty-four
(24) calendar months following the end of the month in which a Change in Control
of the Company occurs, as evidenced by a Notice of Termination delivered by
the
Company to the Executive,
(ii) termination
of the Executive’s employment by the Company without Cause if, within three (3)
months after the Date of Termination, a Change in Control occurs or a binding
agreement is entered into that results in transaction described in Section
2.8(c) or Section 2.8(d);
(iii) a
voluntary termination by the Executive for Good Reason within twenty-four (24)
calendar months following the end of the month in which a Change in Control
of
the Company occurs, as evidenced by a Notice of Termination delivered to the
Company by the Executive; or
(iv) termination
by the Executive based on the Company or any successor company materially
breaching any of the provisions of Sections 5 or 6
15
herein
or
failing to comply with the provisions of the second paragraph of Section 9.1
herein.
8.2 CIC
-Severance Benefits Paid upon a Qualifying Termination.
(a) Upon
a
Qualifying Termination, the Executive shall be entitled to receive the following
CIC-Severance Benefits, which, in the case of lump sum payments, shall be paid
within thirty (30) days after the Date of Termination:
(i) A
lump
sum amount equal to three times (3x) the highest rate of the Executive’s
annualized Base Salary in effect at any time from her initial date of employment
with the Company up to and including the Date of Termination.
(ii) A
lump
sum amount equal to three times (3x) the three (3) year average of the actual
Annual Bonus paid to the Executive for the most recent three (3) completed
Fiscal Years.
(iii) A
lump
sum amount equal to the Executive’s unpaid targeted Annual Bonus established for
the Fiscal Year in which the Date of Termination occurs, multiplied by a
fraction, the numerator of which is the number of completed days in the
then-existing Fiscal Year through the Date of Termination, and the denominator
of which is the number of days in the Fiscal Year.
(iv) A
lump
sum amount equal to the Executive’s unpaid Base Salary, accrued vacation pay and
earned but not taken vacation pay through the Date of Termination.
(v) The
Executive may continue to participate in the Company’s health plan for two (2)
years following the Date of Termination by paying the COBRA cost of such
coverage. The Company shall reimburse the Executive an amount equal
to the Executive’s monthly COBRA cost under the Company’s health plan for the
two (2) year period, provided, however, that reimbursement of the COBRA cost
shall be discontinued prior to the end of the two (2) year period if the
Executive ceases to elect COBRA coverage under the Company’s health plan or if
the Executive has available substantially similar benefits from a subsequent
employer, as determined by the Compensation Committee. The COBRA
reimbursement payments shall be paid monthly on the first payroll date of each
month, beginning within thirty (30) days after the Date of
Termination. On each date on which a payment is made under this
Section 8.2(a)(v), the Company will pay the Executive an additional amount
equal
to the federal, state and local income and payroll taxes that the Executive
incurs on all amounts paid under this Section 8.2(a)(v). This gross
up payment will be made with respect to each payment under Section 8.2(a)(v)
and
will cease when payments under this Section 8.2(a)(v) cease.
(vi) The
Company shall pay Executive a lump sum cash reimbursement equal to the cost
to
the Executive to secure life insurance, accidental death and dismemberment
insurance and disability insurance coverage for two (2) years following the
Date
of Termination, less the amount that the Executive would have
16
paid
to
the Company for these benefits had the Executive continued participation in
the
Company’s life insurance, accidental death and dismemberment insurance and
disability insurance programs, on the same terms and conditions as in effect
immediately preceding the Executive’s Date of Termination. Such lump
sum payment shall be made within thirty (30) days following the Date of
Termination.
(vii) The
Executive’s outstanding equity with respect to stock of the Company or a
successor (including outstanding Options, SARs, Performance Awards and Time
Vested Shares) shall become vested in accordance with Section 8.4 below and
otherwise shall be treated pursuant to the terms of the applicable plan or
agreement.
(viii) The
Executive’s accrued benefit in the SERP shall become fully vested as of the Date
of Termination and such accrued benefit shall be paid in accordance with the
terms of the SERP.
(ix) The
aggregate benefits accrued by the Executive as of the Effective Date of
Termination under any savings and retirement plan sponsored by the Company
shall
be distributed pursuant to the terms of the applicable
plan. Compensation which has been deferred under the Charming Shoppes
Variable Deferred Compensation Plan or other plans sponsored by the Company,
as
applicable, together with all interest that has been credited with respect
to
any such deferred compensation balances, shall be distributed pursuant to the
terms of the applicable plan.
(x) The
Company shall pay the Executive all other benefits to which the Executive has
a
vested right on the Date of Termination of a Qualifying Termination, according
to the provisions of this Agreement or the governing plan or
program.
(b) Notwithstanding
the foregoing, the amounts described in clauses (i) and (ii) of Section 8.2(a)
will be paid in a lump sum payment only if the transaction constituting a Change
of Control under this Agreement is also a “change in control event” within the
meaning of Section 409A of the Code and the regulations thereunder, and if
the
Executive’s employment is terminated under this Section 8.2 upon or within two
(2) years following such Change in Control. If the transaction
constituting the Change in Control is not a “change in control event” within the
meaning of Section 409A of the Code and the regulations thereunder or the
Executive’s employment is terminated under this Section 8.2 after the two (2)
year period following such Change in Control, and if required by Section 409A,
the severance amount described in clauses (i) and (ii) of this Section 8.2
shall
be paid as follows: (i) the portion of the severance amount that equals the
amount calculated under Section 7.4(c)(i) shall be paid in twenty four (24)
monthly installments, beginning within thirty (30) days after the Date of
Termination, and (ii) the portion of the severance amount in excess of the
amount calculated under Section 7.4(c)(i) shall be paid in a lump sum payment
within thirty (30) days after the Date of Termination, in both cases subject
to
subsection (c) below.
17
(c) Notwithstanding
the foregoing, if and to the extent required by Section 409A of the Code,
payments described in this Section 8.2 shall be subject to the six-month delay
described in Section 13.10(b) below.
8.3 Excise
Tax Equalization Payment. In the event a Change in Control occurs
and the Executive becomes entitled to any benefits or payments under this
Agreement, or any other plan, arrangement, or agreement with the Company (the
“Total Payments”), and such benefits or payments will be subject to the tax (the
“Excise Tax”) imposed by Section 4999 of the Code (or any similar tax that may
hereafter be imposed), the Company shall pay to the Executive in cash an
additional amount (the “Gross-Up Payment”) such that the net amount to be
retained by the Executive after deduction of any Excise Tax upon the Total
Payments and any Federal, state and local income tax and Excise Tax upon the
Gross-Up Payment provided for by this Section 8.3 (including FICA) shall be
equal to the Total Payments. Such payment shall be made by the
Company to the Executive on or before the date on which the taxes are remitted
by the Company to the taxing authorities, and all such payments shall be made
in
accordance with Section 409A of the Code. Notwithstanding the
foregoing provisions of this Section 8.3, if it shall be determined that the
Parachute Value of the Total Payments is more than one hundred percent (100%)
but less than one hundred five percent (105%) of the Safe Harbor Amount, then
no
Gross-Up Payment shall be paid to the Executive. The term “Parachute
Value” means the present value, as of the date of the change of control for
purposes of Section 280G of the Code, of those Total Payments that
are “parachute payments” under Section 280G of the
Code. The term “Safe Harbor Amount” means 2.99 times the Executive’s
“base amount,” within the meaning of Section 280G(b)(3) of the
Code.
(a) Tax
Computation. In determining the potential impact of the Excise
Tax, the Company may rely on any advice it deems appropriate, including, but
not
limited to, the counsel of its independent auditors. For purposes of
determining whether any of the Total Payments will be subject to the Excise
Tax
and the amounts of such Excise Tax:
(i) any
other
payments or benefits received or to be received by the Executive in connection
with a Change in Control of the Company or the Executive’s termination of
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement, or agreement with the Company, or with any Person whose actions
result in a Change in Control of the Company or any Person affiliated with
the
Company or such Persons) shall be treated as “parachute payments” within the
meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments”
within the meaning of Section 280G(b)(1) shall be treated as subject to the
Excise Tax, unless in the opinion of the Company’s advisors, including, but not
limited to, its independent auditors, any portion of the Total Payments do
not
constitute parachute payments by reason of Section 280G(b)(4)(A)-(B) of the
Code
or are otherwise not subject to the Excise Tax;
(ii) the
amount of the Total Payments which shall be treated as subject to the Excise
Tax
shall be equal to the amount of excess parachute payments within the meaning
of
Section 280G(b)(1) of the Code (after applying clause (i) above);
and
18
(iii) the
value
of any noncash benefits or any deferred or accumulated payment or benefit shall
be determined by the Company’s independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
For
purposes of determining the amount
of the Gross-Up Payment, 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 Gross-Up Payment is to be made, and state and local income
taxes at the highest marginal rate of taxation in the state and locality of
the
Executive’s residence on the Date of Termination, net of the maximum reduction
in Federal income taxes which could be obtained from deduction of such state
and
local taxes.
(b) Subsequent
Recalculation. In the event the Internal Revenue Service proposes
to increase the amount of Excise Tax payable by the Executive in excess of
the
computation of the Company under Section 8.3 herein so that the Executive did
not receive the greatest net benefit, the Company shall reimburse the Executive
for the full amount necessary to make the Executive whole, plus a market rate
of
interest, as determined by the Committee; provided, however, that the Executive
follows the procedures set forth in this Section 8.3. All
reimbursements shall be made on or before the date on which the taxes are
remitted by the Company to the taxing authorities and in accordance with Section
409A of the Code.
The
Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company
of
the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after the later of either:
(i) the date the Executive has actual knowledge of such claim, or (ii) ten
(10)
days after the Internal Revenue Service issues to the Executive either a written
report proposing imposition of the Excise Tax or a statutory notice of
deficiency with respect thereto, and shall apprise the Company of the nature
of
such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration
of the thirty (30) day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment
of
taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires
to
contest such claim, the Executive shall:
(i) give
the
Company any information reasonably requested by the Company relating to such
claim;
(ii) take
such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Company;
(iii) cooperate
with the Company in good faith in order effectively to contest such claim;
and
(iv) permit
the Company to participate in any proceedings relating to such
claims.
19
Provided,
however, that the Company shall directly bear and pay all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax (including FICA), including interest
and
penalties with respect thereto, imposed and payment of costs and
expenses. Without limitation of the foregoing provisions of this
Section 8.3, the Company shall control all proceedings taken in connection
with
such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings, and conferences with the taxing
authority in respect of such claim.
If
the
Company does not notify the Executive in writing prior to the expiration of
such
thirty (30) day period that it desires to contest such claim, the Company shall
reimburse the Executive for the full amount necessary to make the Executive
whole, plus a market rate of interest, as determined by the Committee, all
as
contemplated by this Section 8.3.
If,
after
the receipt by the Executive of an amount advanced by the Company pursuant
to
this Section 8.3, the Executive receives a refund with respect to such claim
due
to an overpayment of Excise Tax, including interest and penalties with respect
thereto, the Executive shall (subject to the Company’s complying with the
requirements of this Section 8.3) promptly pay to the Company the amount of
such
refund (together with any interest paid or credited thereon after taxes
applicable thereto).
8.4 Equity
Acceleration upon a Change in Control. Notwithstanding anything
in this Agreement to the contrary, upon a Change in Control, the Executive’s
outstanding equity awards with respect to stock of the Company or a successor
(including outstanding Options, SARs, Performance Awards and Time Vested Shares)
shall become fully vested if the acquiring company does not convert the
Executive’s outstanding equity awards to equity awards of the acquiring company
(or the parent of the acquiring company, if the acquirer is a subsidiary) that
have the same economic value, vesting provisions and other terms as the
Executive’s outstanding equity awards. If, upon a Change
in Control, the acquiring company does convert the Executive’s outstanding
equity awards to equity awards of the acquiring company (or the parent of the
acquiring company, if the acquirer is a subsidiary) that have the same economic
value, vesting provisions and other terms as the Executive’s outstanding equity
awards, the vesting schedule of the Executive’s outstanding equity awards with
respect to stock of the Company or a successor (including outstanding Options,
SARs, Performance Awards and Time Vested Shares) shall be accelerated by two
(2)
years and the outstanding equity awards that would have vested over the two
(2)
year period following such Change in Control shall become vested on the date
of
the Change in Control, unless the terms of the grant agreements provide for
greater vesting. If the Executive’s employment terminates upon a
Qualifying Termination, the Executive’s outstanding equity awards with respect
to stock of the Company or a successor (including any acquiring company or
any
parent of an acquirer) shall become fully vested. Nothing
in this Section 8.4 shall limit the provisions of any of the Executive’s
existing equity grant agreements.
|
Section
9.
|
Assignment |
9.1 Assignment
by Company. This Agreement may and shall be assigned or transferred to, and
shall be binding upon and shall inure to the benefit of, any successor of the
Company, and any such successor shall be deemed substituted for all purposes
of
the
20
“Company”
under the terms of this Agreement. As used in this Agreement, the
term “successor” shall mean any person, firm, corporation, or business entity
which at any time, whether by merger, purchase, or otherwise, acquires all
or
substantially all of the assets or the business of the
Company. Notwithstanding such assignment, the Company shall remain,
with such successor, jointly and severally liable for all its obligations
hereunder.
Failure
of the Company to obtain the agreement of any successor to be bound by the
terms
of this Agreement prior to the effectiveness of any such succession shall be
a
breach of this Agreement, and shall immediately entitle the Executive to benefit
from the Company in the same amount and on the same terms as the Executive
would
be entitled to receive in the event of a termination of employment for Good
Reason as provided in Section 7.4 or 8.2, if the failure of assignment follows
or is in connection with a Change in Control. Except as herein
provided, this Agreement may not otherwise be assigned by the
Company.
9.2 Assignment
by Executive. The services to be provided by the Executive to the
Company hereunder are personal to the Executive, and the Executive’s duties may
not be assigned by the Executive; provided, however that this Agreement shall
inure to the benefit of and be enforceable by the Executive’s personal or legal
representatives, executors, and administrators, successors, heirs, distributes,
devices, and legatees. If the Executive dies while any amounts
payable to the Executive hereunder remain outstanding, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive’s devisee, legatee, or other designee or, in the
absence of such designee, to the Executive’s estate.
|
Section
10.
|
Dispute Resolution and Notice |
10.1 Dispute
Resolution. Any dispute or controversy arising under or in
connection with this Agreement shall be settled by arbitration, conducted before
a panel of three (3) arbitrators sitting in a location selected by the Executive
within fifty (50) miles from the location of her employment with the Company,
in
accordance with the National Rules for the Resolution of Employment Disputes
of
the American Arbitration Association then in effect.
Judgment
may be entered on the award of the arbitrator in any court having proper
jurisdiction. Subject to the limitation set forth in Section 10.2 related to
legal fees incurred by the Executive, all expenses of such arbitration shall
be
borne by the Company.
10.2 Payment
of Legal Fees. To the extent permitted by law, the Company shall
pay (or advance, upon the written request of the Executive) legal fees, costs
of
arbitration, prejudgment interest, and other expenses incurred (or to be
incurred) in good faith by the Executive as a result of the Company’s refusal to
provide the Severance Benefits or CIC-Severance Benefits to which the Executive
becomes entitled under this Agreement, or as a result of the Company’s
contesting the validity, enforceability, or interpretation of this Agreement,
or
as a result of any conflict (including conflicts related to the calculation
of
parachute payments) between the parties pertaining to this Agreement, subject
to
an overall limit on the payment of legal fees incurred by the Executive of
fifty
thousand dollars ($50,000).
21
10.3 Notice. Any
notices, requests, demands, or other communications provided for by this
Agreement shall be sufficient if in writing and if sent by registered or
certified mail to the Executive at the last address she has filed in writing
with the Company or, in the case of the Company, at its principal
offices.
|
Section
11.
|
Outplacement Assistance |
The
Company shall pay directly or reimburse the Executive up to a maximum of Fifty
Thousand Dollars ($50,000) for the costs of outplacement services utilized
by
the Executive within the two (2) year period after termination of this Agreement
as a result of a termination for Good Reason or a termination without
Cause. The Company will provide reimbursement for the costs of
outplacement services, provided that such reimbursements are available only
for
expenses incurred by the Executive, and the reimbursements shall be made within
thirty (30) days after the Executive submits her reimbursement request and
in no
event by the end of the third taxable year following the Date of
Termination.
|
Section
12.
|
Confidentiality and Noncompetition |
12.1 Disclosure
of Information. The Executive recognizes that she has access to
and knowledge of certain confidential and proprietary information of the Company
which is essential to the performance of her duties under this
Agreement. The Executive will not, during or after the Term hereof,
in whole or in part, disclose such information to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever, nor shall
she
make use of any such information for her own purposes, so long as such
information has not otherwise been disclosed to the public or is not otherwise
in the public domain except as required by law or pursuant to administrative
or
legal process.
12.2 Covenants
Regarding Other Employees. During the Term and for a period of
twenty-four (24) months following the termination of Executive’s employment
hereunder for any reason, the Executive agrees not to attempt to induce any
merchant, buyer, or manager or higher level employee of the Company to terminate
his or her employment with the Company.
12.3 Non-compete
Following a Termination of Employment. During the Term and for a
period of twenty-four (24) months following the termination of Executive’s
employment hereunder for any reason, the Executive will not: (a) directly or
indirectly own any equity or proprietary interest in (except for ownership
of
shares in a publicly traded company not exceeding five percent (5%) of any
class
of outstanding securities), or be an employee, agent, director, advisor, or
consultant to or for, any Competitor (as defined below) of the Company in the
United States, whether on her own behalf or on behalf of any person, and
involved in the procuring, sale, marketing, promotion, or distribution of any
product or product lines competitive with any product or product lines of the
Company at the end of the Term or on the Date of Termination, if earlier, and
the Executive will not assist in, manage, or supervise any of the foregone
activities, or (b) undertake any action to induce or cause any supplier to
discontinue any part of its business with the Company. For purposes
of this Section of this Agreement, “Competitor” shall have the following
meaning:
22
(a) Except
as
provided in subsection (b) below, “Competitor” shall mean at any time only a
chain of retail stores with fifty (50) or more store locations; provided,
however, that the average square footage of the chain’s stores is less than
fifteen thousand (15,000) square feet.
(b) During
any period in which Executive is receiving severance payments under Section
7.4(c)(i) above, the term “Competitor” shall mean, in addition to a Competitor
as described in subsection (a), a chain of retail stores with one hundred (100)
or more store locations (without regard to square footage) whose gross revenues
in plus size women’s apparel (sizes 14-34) exceeds five percent (5%) of its
total gross revenues. If Executive waives her right to receive
severance payments under Section 7.4(c)(i) above, or otherwise does not receive
severance payments under Section 7.4(c)(i), the term “Competitor” shall have the
meaning given that term in subsection (a) above.
|
Section
13.
|
Miscellaneous |
13.1 Entire
Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto or between the
Executive and the Company, with respect to the subject matter hereof, and
constitutes the entire agreement of the parties with respect
thereto.
13.2 Modification. This
Agreement shall not be varied, altered, modified, canceled, changed, or in
any
way amended except by mutual agreement of the parties in a written instrument
executed by the parties hereto or their legal representatives.
13.3 Severability. In
the event that any provision or portion of this Agreement shall be determined
to
be invalid or unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full force and
effect.
13.4 Counterparts. This
Agreement may be executed in one (1) or more counterparts, each of which shall
be deemed to be an original, but all of which together will constitute one
and
the same Agreement.
13.5 Tax
Withholding. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes as may be required
pursuant to any law or governmental regulation or ruling.
13.6 Beneficiaries. Any
payment or benefits hereunder due the Executive at the time of her death shall
nonetheless be paid or provided and the Executive may designate one or more
persons or entities as the primary and/or contingent beneficiaries of any
amounts to be received under this Agreement. Such designation must be
in the form of a signed writing acceptable to the Board or the Board’s
designee. The Executive may make or change such designation at any
time.
13.7 Payment
Obligation Absolute. The Company’s obligation to make the
payments and the arrangement provided for herein shall be absolute and
unconditional, and shall not be affected by any circumstances, including,
without limitation, any offset, counterclaim, recoupment, defense, or other
right which the Company may have against the Executive or
23
anyone
else. All amounts payable by the Company hereunder shall be paid
without notice or demand. Subject to the provisions set forth in
Section 8.3, each and every payment made hereunder by the Company shall be
final, and the Company shall not seek to recover all or any part of such payment
from the Executive or from whomsoever may be entitled thereto, for any reasons
whatsoever other than Executive’s breach of Section 12 herein.
The
Executive shall not be obligated to seek other employment in mitigation of
the
amounts payable or arrangements made under any provision of this Agreement,
and
the obtaining of any such other employment shall in no event effect any
reduction of the Company’s obligations to make the payments and arrangements
required to be made under this Agreement; provided, however, that continued
health plan participation pursuant to Section 7.4(c)(ii) or 8.2(v) shall be
discontinued in the event the Executive becomes eligible to receive
substantially similar benefits from a successor employer.
13.8 Contractual
Rights to Benefits. This Agreement establishes and vests in the
Executive a contractual right to the benefits to which she is entitled
hereunder. However, nothing herein contained shall require or be
deemed to require, or prohibit or be deemed to prohibit, the Company to
segregate, earmark, or otherwise set aside any funds or other assets, in trust
or otherwise, to provide for any payments to be made or required
hereunder.
13.9 Specific
Performance. The Executive acknowledges that the obligations
undertaken by her pursuant to Section 12 of this Agreement are unique and that
the Company will likely have no adequate remedy at law if the Executive shall
fail to perform any of her obligations hereunder. The Executive
therefore confirms that the Company’s right to specific performance of the terms
of this Agreement is essential to protect the rights and interests of the
Company. Accordingly, in addition to any other remedies that the Company may
have at law or in equity, the Company shall have the right to have all
obligations, covenants, agreements, and other provisions of this Agreement
specifically performed by the Executive and the Company shall have the right
to
obtain preliminary injunctive relief to secure specific performance and to
prevent a breach or contemplated breach of this Agreement by the
Executive.
13.10 Compliance
with Section 409A of the Code.
(a) The
Agreement is intended to comply with the requirements of Section 409A of the
Code or an exemption, and shall in all respects be administered in accordance
with Section 409A. Notwithstanding anything in the Agreement to the
contrary, distributions upon termination of employment may only be made under
the Agreement upon a “separation from service” as determined under Section
409A. Each payment under this Agreement shall be treated as a
separate payment for purposes of Section 409A. In no event may the
Executive, directly or indirectly, designate the calendar year of any payment
to
be made under this Agreement. All reimbursements provided under the
Agreement shall be made in accordance with the requirements of Section 409A
of
the Code.
(b) Notwithstanding
anything in this Agreement to the contrary, if at the time of the Executive’s
termination of employment with the Company, the Executive is a “specified
employee” (as defined in Section 409A of the Code) and it is necessary to
postpone the commencement of any payments under this Agreement in order to
prevent taxation under
24
Section
409A, then the Company shall postpone commencement of such payments hereunder
(without any reduction in such payments ultimately paid or provided to the
Executive) until the first payroll date that occurs after the date that is
six
(6) months following the Executive’s “separation from service” with the Company
(within the meaning of such term under Section 409A). If any payments
are postponed, the postponed amounts will be paid in a lump sum to the Executive
on the first payroll date that occurs after the date that is six (6) months
following the Executive’s “separation from service” with the
Company. If the Executive dies during the postponement period prior
to the payment of the postponed amount, the amounts withheld on account of
Section 409A shall be paid to the personal representative of the Executive’s
estate within sixty (60) days after the date of the Executive’s
death.
13.11 Governing
Law.
To
the
extent not preempted by federal law, the provisions of this Agreement shall
be
construed and enforced in accordance with the substantive laws (and not the
choice of law rules) of the Commonwealth of Pennsylvania.
|
Section
14.
|
Indemnification |
The
Company hereby covenants and agrees to indemnify and hold harmless the Executive
fully, completely, and absolutely against and in respect to any and all actions,
suits, proceedings, claims, demands, judgments, costs, expenses (including
attorney’s fees), losses, and damages resulting from the Executive’s good faith
performance of her duties and obligations under the terms of this Agreement
and
her service as a member of the Board of Directors.
IN
WITNESS WHEREOF, the undersigned, intending to be legally bound, have duly
executed this Agreement as of the date first above written.
|
Executive:
|
|
|
_____________________________________
|
|
|
XXXXXX
X. XXXX
|
|
ATTEST:
|
CHARMING
SHOPPES, INC.
|
|
By:_________________________________
|
By:
__________________________________
|
|
Corporate
Secretary
|
Name:
|
|
Title:
|
25
EXHIBIT
A
Shareholder
Return
For
purposes of this Agreement, “Shareholder Return” means the return on common
shares to a shareholder during the applicable Performance Period, assuming
reinvestment of cash dividends declared on such common shares during the
Performance Period. Shareholder Return shall be calculated as the
increase (or decrease) in the value of a share of stock during the Performance
Period, based on the average value of a share of stock over the twenty (20)
trading day period at the end of the Performance Period (as described below)
as
compared to the average value of a share of stock over the twenty (20) trading
days at the beginning of the Performance Period (as described below), and
assuming reinvestment of cash dividends declared on such stock during the
Performance Period. The share price shall be adjusted to take into
account stock splits, stock dividends and spinoffs, but not extraordinary
dividends (i.e. other one-time non-recurring cash dividends declared on such
shares) as determined by the Compensation Committee, during the Performance
Period.
The
twenty (20) trading day period at the end of the Performance Period shall be
the
twenty (20) trading day period beginning ten (10) trading days before the end
of
the Performance Period and ending ten (10) trading days after the end of the
Performance Period. The twenty (20) trading day period at the
beginning of the Performance Period shall be the twenty (20) trading day period
beginning ten (10) trading days before the first day of the Performance Period
and ending ten (10) trading days after the first day of the Performance
Period.
The
Company’s Shareholder Return shall be compared to the average Shareholder Return
of the corporations in the Company’s peer group, as set forth in the Company’s
annual proxy for the Fiscal Year prior to the commencement of the Performance
Period. For Performance Periods beginning before 2007, the peer group
set forth in the Company’s 2007 proxy shall be used. The results
shall be certified by the Compensation Committee for each Performance
Period.
The
peer
group shall be established at the beginning of the Performance
Period. Any corporation that announces any of the following events
during the Performance Period shall be removed from the peer group for the
Performance Period as of the date of the public announcement and will be
excluded from the peer group for the entire Performance Period: (a)
an acquisition of the corporation (by merger, stock acquisition or acquisition
of more than 50% of the corporation’s assets), (b) delisting of a corporation’s
stock from a stock exchange for any reason, (c) any outside person or group
acquires 20% or more of the market value of the corporation, or (d) the
corporation’s filing for bankruptcy under the federal or applicable state
bankruptcy laws.
Performance
Awards Granted as Options or SARs
Each
grant of Performance Options or Performance SARs shall be granted based on
a
target value of $600,000. Performance will be based on the Company’s
historical three-year relative Shareholder Return compared to the peer group,
as
follows:
|
·
|
Less
than 30th
percentile positioning = 0% of target
($0)
|
|
·
|
30th
percentile positioning = Threshold 50% of target
($300,000)
|
|
·
|
60th percentile
positioning = Target 100% of target
($600,000)
|
|
·
|
90th–
100th
percentile
positioning = Maximum 200% of target
($1,200,000)
|
Performance
between levels shall result in an award determined by linear
interpolation.
Performance
Awards Granted as RSUs
Each
grant of Performance RSUs shall be granted based on a target value of
$600,000. Performance will be based on the Company’s historical
one-year relative Shareholder Return compared to the peer group, as
follows:
|
·
|
Less
than 30th
percentile positioning = 0% of target
($0)
|
|
·
|
30th
percentile positioning = Threshold 50% of target
($300,000)
|
|
·
|
60th percentile
positioning = Target 100% of target
($600,000)
|
|
·
|
90th–
100th
percentile
positioning = Maximum 200% of target
($1,200,000)
|
Performance
between levels shall result in an award determined by linear
interpolation.
