EMPLOYMENT AGREEMENT
Exhibit 10.1
This
Employment Agreement (the “Agreement”), dated as of January 1, 2008 (the “Effective
Date”), is made and entered by and between Xxxxxx Xxxxx (the “Executive”) and rue 21, inc., a
Pennsylvania corporation (the “Company”).
RECITALS
A. The Company is engaged primarily in the retail apparel business (the “Business”).
B. The Company desires to be assured of the services of the Executive by employing the
Executive in the capacity and on the terms as set forth below.
C. The Executive desires to commit himself to serve the Company on the terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and
agreements set forth below, the parties hereto agree as follows:
1. Employment. The Company shall employ the Executive and the Executive accepts
employment by the Company for the period commencing on the Effective Date and ending at the close
of business on January 31, 2011, unless sooner terminated in accordance with the provisions of this
Agreement (the “Initial Term”). This Agreement may be renewed upon expiration of the Initial Term
for successive one year periods (each a “Renewal Period”), on terms and conditions substantially
similar hereto or as otherwise agreed to by the Company and the Executive if the Company provides
the Executive with a written notice of its intent to renew by July 31 of the last year of the
Initial Term (or July 31 of any Renewal Period) and the Executive provides to the Company a written
acceptance notice by the following September 30. The Initial Term as so extended by each Renewal
Period is hereinafter referred to as the “Term”. Upon expiration of the Term, except as expressly
set forth herein, this Agreement and all of its provisions shall terminate and shall cease to have
any force or effect. Subject to the Company’s obligation to provide severance benefits as specified
herein, the Executive and the Company acknowledge that this employment relationship may be
terminated at any time, upon written notice to the other party, with or without Cause or Good
Reason and for any or no cause or reason, at the option of either the Company or the Executive.
2. Duties.
(a) During the Term, the Executive shall serve as the President, Chief Executive Officer and
Chairman of the Board of the Company with responsibility for overseeing all aspects of the day to
day operations of the Company and with such other authority and duties as may be assigned to him
from time to time by the Board of Directors of the Company commensurate with such roles of
President and Chief Executive Officer including cooperating with such advisors to the Company as
may be engaged by the Board of Directors from time to time.
(b) During the Term, the Executive shall devote all his working time, attention, skill and
efforts to the business and affairs of the Company, will use his best efforts to promote the
success of the Company’s business, and shall not enter the employ of or serve as a consultant to,
or in any way perform any services, with or without compensation, for, any other person,
enterprise, business, company, corporation, partnership, firm, association or organization where
such conduct would be inconsistent with, in competition with, or prevent, hinder or restrict the
Executive from carrying out, his duties to the Company or which would be otherwise inconsistent
with this Section 2(b) or any other provision of this Agreement, in each case, without the prior
written consent of the Board of Directors of the Company.
(c) Nothing in this Agreement shall preclude Executive from devoting time during business
hours to (i) personal matters and investments, (ii) professional, educational, philanthropic,
public interest, or civic activities, or (iii) serving as a director or member of an advisory
committee of any trade association or other entity not in competition with the Company, provided
that such activities do not interfere with Executive’s regular performance of his duties and
responsibilities hereunder.
(d) The Company shall use its reasonable best efforts to cause the Executive to continue to be
elected as a member of its Board of Directors and Chairman of the Board throughout the Term.
3. Compensation and Related Matters.
(a) Salary. From the Effective Date through January 31,2008 the Executive shall
receive a salary at the rate of $675,000 per annum (the “Base Salary”), payable in accordance with
the Company’s policies in effect from time to time, but in any event no less frequently than
monthly. Effective February 1, 2008 the Executive’s Base Salary shall be increased to $735,000 per
annum; effective February 1, 2009 the Executive’s Base Salary shall be increased to $800,000 per
annum; and effective February 1, 2010 the Executive’s Base Salary shall be increased to $875,000
per annum. For any Renewal Period thereafter, the Executive’s Base Salary shall be reviewed
annually for increases by the Board of Directors of the Company to be effective February 1
commencing February 1, 2011.
(b) Bonus.
(i) In addition to his Base Salary, provided the Executive remains employed by the Company on
the last day of the fiscal year for which such Performance Bonus is payable, the Executive shall be
entitled to receive an annual performance based bonus comprised of two components based on the
Company’s EBITDA performance during the Spring and Fall selling seasons using the same or a
substantially similar methodology as used in the past by the Board of Directors (the “Performance
Bonus”) for each fiscal year during the Term. The Board of Directors will determine the actual
Performance Bonus awarded to the Executive for any fiscal year, provided, however, that such
Performance Bonus for fiscal year 2008 shall be targeted at 50% of the Executive’s Base Salary for
such fiscal year and shall range from 0% to a maximum of 110% of the Executive’s Base Salary in
such fiscal year. The Performance Bonus for fiscal year 2008 will be based on the Company’s actual
EBITDA relative to the Company’s 2008 bonus plan. The bonus plan
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for each fiscal year and season during the Term will be determined by the Executive and the Board
of Directors of the Company. The Performance Bonus will be payable based upon the respective
year’s bonus plan and in accordance with and otherwise conform to the EBITDA Bonus Program for
Corporate Office as currently adopted by the Board of Directors.
(ii) The Executive’s Performance Bonus for fiscal years 2009 and 2010 shall be determined by
the Board of Directors of the Company, provided that the range of Performance Bonus for which the
Executive is eligible in such years, as a percentage of the Executive’s Base Salary, shall not be
less than the range for fiscal year 2008 (i.e., 0% to 110%).
(c) Equity Participation. As of the Effective Date, the Company hereby grants the
Executive options (the “Options”) to purchase 75,000 shares of the Company’s common shares,
pursuant to the terms of the rue 21, inc. 2003 Ownership Incentive Plan (the “Option Plan”). The
Options will have an exercise price equal to Eight Dollars ($8.00) per share representing the fair
market value of the Company’s common shares as of January 4, 2008. Thereafter, 25% will be vested,
respectively, on August 1, 2008, August 1, 2009, August 1,2010, and August 1,2011. Each of the
Options will be exercisable for a period of ten years from the date of grant. In the event of the
Executive’s termination prior to the end of the Term, the options will cease to vest on the date of
such termination in accordance with the Option Plan, and the Option Agreement executed by the
Executive. Upon the occurrence of a Change of Control as defined under the Option Plan, the
Executive shall become 100% vested in the unexercised options granted to the Executive and shall be
entitled to exercise said options within 30 days after the occurrence of the Change of Control.
(d) Expenses. The Company shall reimburse the Executive for all reasonable travel and
other reasonable out-of-pocket business expenses incurred by the Executive in the performance of
his duties under this Agreement upon evidence of payment and otherwise in accordance with the
Company’s procedures in effect from time to time.
(e) Employee Benefits. During the Term, the Executive shall be entitled to participate
in or receive benefits under any employee health benefit plan or other arrangement made available
by the Company to its senior executives (“Health Benefit Plan”) on a basis consistent with the
terms, conditions and overall administration of such Health Benefit Plan. The Executive shall also
be entitled to participate in or receive benefits under any other employee benefit plans, on a
basis consistent with the terms, conditions and overall administration of such other employee
benefit plans. The Company shall provide and pay the entire cost of additional term life insurance
coverage for the Executive. The amount of coverage under the additional term life insurance shall
equal at least three times the Executive’s Base Salary.
(f) Vacation; Automobile. The Executive shall be entitled to four weeks paid vacation
for each year during the Term in accordance with the Company’s vacation policies in effect for its
senior management. Vacation days that are not used within any fiscal year during the Term may not
be used in any subsequent fiscal year. The scheduling of such vacation days shall be subject to the
mutual agreement of the Board of Directors and the Executive. During the Term, the Company will
provide to the Executive an automobile mutually agreed upon by the Executive and the Board of
Directors and will pay directly or reimburse the Executive for all insurance and maintenance costs
relating to such automobile.
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(g) Certain Housing/Travel Expenses. The Company will reimburse the Executive for a
mutually agreed upon apartment for a residence in Pittsburgh, Pennsylvania. The Company will
reimburse the Executive for all roundtrip airfare between either Connecticut and Pittsburgh,
Pennsylvania or Miami, Florida and Pittsburgh, Pennsylvania, during the Term of the Agreement. The
Company also shall reimburse the Executive’s spouse for all roundtrip airfare between either
Connecticut and Pittsburgh, Pennsylvania or Miami, Florida and Pittsburgh, Pennsylvania, during
the Term of the Agreement.
(h) Attorney’s Fees. The Company will reimburse the Executive for all reasonable,
documented attorney’s fees incurred by the Executive in connection with the negotiation and
execution by the Executive of this Employment Agreement and the Stock Option Agreement.
(i) Deductions and Withholdings. All amounts payable or which become payable
hereunder shall be subject to all deductions and withholding required by law.
4. Termination. This Agreement may be terminated under the following circumstances:
(a) Death. The Executive’s services hereunder shall terminate upon his death. In the
case of the Executive’s death, the Company shall pay to the Executive’s beneficiaries or estate, as
appropriate, after his death, his then current accrued and unpaid Base Salary, the pro rata portion
of the Executive’s Performance Bonus for the year in which the Executive’s death occurs (based upon
the Performance Bonus for which the Executive is eligible that year, with any discretionary
components deemed satisfied to the fullest extent), the Executive’s Performance Bonus for the year
preceding the year in which the Executive’s death occurs if then due and owing and other benefits
and payments then due (including, without limitation, life insurance payments and reimbursement of
amounts under Sections 3(d) and (e)) to which the Executive is entitled hereunder. The Executive
and his beneficiaries, shall be entitled to no other compensation under this Agreement following,
or as a result of, a termination under these circumstances.
(b) Disability
(i) If a Disability (as defined below) of the Executive occurs during the Term, the Company
may give the Executive written notice of its intention to terminate his employment. In such event,
the Executive’s services with the Company shall terminate on the effective date specified in such
notice. In the case of a termination as a result of a Disability, the Company shall pay to the
Executive after his termination, his then current accrued and unpaid Base Salary, the pro rata
portion of the Executive’s Performance Bonus for the year in which the Executive’s Disability
occurs (based upon the Performance Bonus for which the Executive is eligible that year, with any
discretionary components deemed satisfied to the fullest extent), the Executive’s Performance
Bonus for the year preceding the year in which the Executive’s Disability occurs if then due and
owing and other benefits and payments then due (including, without limitation, long or short term
disability benefits and reimbursement of amounts under Sections 3(d) and (e) to which the
Executive is entitled hereunder. The Executive and his beneficiaries, shall be entitled to no
other compensation under this Agreement following, or as a result of, a termination under these
circumstances.
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(ii) For the purpose of this subsection 4(b), “Disability” shall mean the Executive’s
inability to perform his duties to the Company on a full-time basis, either with or without
reasonable accommodation, as defined in the Americans with Disabilities Act, for 120 consecutive
days or a total of 180 days in any twelve month period as reasonably determined by the Board of
Directors of the Company.
(c) Termination by the Company for Cause. The Company may terminate the Executive’s
services hereunder for Cause (as defined below) at any time upon written notice to the Executive.
In such event, the Executive’s services shall terminate on the effective date specified in such
notice. In the case of the Executive’s termination for Cause, the Company shall promptly pay to the
Executive his then current accrued and unpaid Base Salary, reimbursement of amounts under Sections
3(d) and (e) to which the Executive is entitled hereunder and other benefits then due. The
Executive and his beneficiaries shall be entitled to no other compensation under this Agreement
following, or as a result of, a termination under these circumstances. For purposes of this
Agreement, the Company shall have “Cause” to terminate Executive’s services hereunder in the event
of (A) acts or omissions by the Executive which constitute intentional misconduct or a knowing
violation of a material written policy, of the Company (B) the Executive personally receiving a
benefit in money, property or services from the Company or from another person dealing with the
Company, in knowing violation of applicable law or a violation of material written Company policy,
(C) an act of fraud, conversion, misappropriation, or embezzlement by the Executive or his
conviction of, or entering a guilty plea or plea of no contest with respect to, a felony, the
equivalent thereof, or any other crime with respect to which imprisonment is a possible punishment,
(D) an act of moral turpitude adversely affecting the ability of the Executive to perform his
duties hereunder, (E) alcohol or controlled substance abuse, (F) reckless disregard in the
performance of the Executive’s duties, (G) the commission in bad faith by the Executive of any act
which injures or could reasonably be expected to injure the reputation, business or business
relationships of the Company, (H) a material breach by the Executive of any of the provisions of
Section 5 or (I) any other breach by the Executive of this Agreement in any material respect, which
continues uncured for thirty (30) days after receipt by the Executive of written notice of breach
from the Company, provided, however, the Company shall not be permitted to terminate the Executive
for Cause pursuant to subsections (B), (E) or (H) of this Section 4(c) if the Company shall not
have previously provided the Executive with a one-time only written notice from the Company that
the Executive committed any act set forth in subsections (B), (E) or (H) which Executive failed to
cure within thirty (30) days following receipt of such notice.
(d) Termination by the Executive Without Good Reason
(i) The Executive may terminate his employment hereunder for other than Good Reason (as
defined below), provided that Executive first gives the Company a written notice of
termination at least 30 calendar days prior to the effective date of any such termination. In the
event the Executive terminates his employment for other than Good Reason, the Company shall pay to
the Executive his then current accrued and unpaid Base Salary and other benefits and payments then
due (including, without limitation, reimbursement of amounts under Sections 3(d) and (e)) to which
the Executive is entitled hereunder and the Executive shall have 60 days from the date of delivery
of such notice to exercise any vested and exercisable options under the Company’s Stock
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Option
Plan then in effect. The Executive and his beneficiaries, shall be entitled to no other
compensation under this Agreement following, or as a result of, a termination under these
circumstance.
(ii) For purposes of this Agreement, “Good Reason” means, other than with the Executive’s
consent, (A) the removal of the Executive from, or the failure to reappoint Executive to, the
position the Executive held with the Company pursuant to this Agreement, (B) any material decrease
or other material adverse change in the duties and responsibilities of the Executive below his
duties and responsibilities contemplated in Section 2(a), (C) the failure to continue to elect the
Executive to the Board of Directors or removal of the Executive from the Board of Directors at any
time during the Term, (D) any other material breach by the Company of this Agreement, and which,
with respect to clauses (B) and (D) hereof, continues uncured for thirty (30) days after receipt by
the Company of written notice of breach from the Executive or (E) a Change in Control of the
Company, provided, however, that in the event of a Change in Control of the Company, the Executive
shall be required to remain with the Company for a period of six months following the Change in
Control prior to Executive having a right to terminate for Good Reason hereunder solely by reason
of such Change in Control and provided, further, that notwithstanding the occurrence of a Change in
Control, the Executive shall have Good Reason if, following such change in Control, any of the
circumstances set forth in clauses (A), (B), (C) or (D) exists and, which, with respect to clauses
(B) and (D) hereof, continues uncured for thirty (30) days after receipt by the Company of written
notice of breach from the Executive. For purposes of this Agreement, “Change in Control” means,
other than with the Executive’s consent, the occurrence of any
of the following events:
(A) the Company is merged, consolidated or reorganized into or with another Company or other
entity and, as a result of such merger, consolidation or reorganization, less than a majority of
the combined voting power of the then-outstanding securities entitled to vote generally in the
election of members of the Board of Directors (the “Voting Stock”) of such Company or other entity
immediately after such transaction is held in the aggregate by the holders of Voting Stock of the
Company immediately prior to such transaction; or
(B) the Company sells or otherwise transfers all or substantially all of its assets or capital
stock to another company or other entity or person, and, as a result of such sale or transfer, less
than a majority of the combined voting power of the then-outstanding voting stock of such company
or other entity or person is held in the aggregate by the holders of the Voting Stock of the
Company immediately prior to such sale or transfer; or
(C) “any “person” or “persons” (as such term is used in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) other than APAX Partners LP and its
affiliates (“APAX”), becomes the “beneficial owner” (as determined pursuant to Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company’s then outstanding securities
(e) Termination by the Company Without Cause. The Company may terminate the
Executive’s services hereunder without Cause at any time upon written notice to the Executive. In
such event, the Executive’s employment hereunder shall terminate on the effective date specified
in the notice. In the event the Executive’s services hereunder are terminated by the Company
without
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Cause, provided that the Executive enters into a Separation Agreement and Release of the Company
and related parties substantially similar to the form attached hereto as Exhibit A, the Company
shall: (i) pay the Executive an amount equal to two (2) times his Base Salary in effect on the effective
date of termination plus two (2) times his Performance Bonus target for the year in which such
termination occurs, and (ii) to the extent permitted by the Company’s benefit plans, provide the
benefits set forth in Section 3(e) then provided to the Executive for a period of 24 months
following the Executive’s termination pursuant to this Section 4(e), provided that, to the extent
such continuation of one or more benefits is not permitted by the Company’s benefit plans, the
Company shall pay to the Executive, within thirty (30) days after the discontinuation of any such
benefit(s), a lump sum payment of reasonably equivalent value to the discontinued benefit(s). The
entire amount payable under subsection (i) above shall be paid to the Executive in one lump sum
payment within thirty (30) days after the effective date of termination. In addition, the Executive
shall be deemed fully vested, as of the effective date of such termination, in all accrued benefits
under all retirement plans (excluding any stock option plans) for which the Executive is eligible
and has participated, and all such accrued benefits shall be calculated, for all purposes, as if
the Executive were credited, as of the effective date of termination, with two additional years of
age and/or service to the Company. Further, the Company shall reimburse the Executive for any
amounts then due pursuant to Section 3(d) and shall pay the Executive’s Performance Bonus for the
year preceding the year in which the Executive’s termination occurs if then due and owing, and the
Executive shall have 60 days from the date of delivery of such termination notice to exercise any
vested and exercisable options under the Company Stock Option Plan then in effect. The Executive
shall be entitled, at his election and his sole cost and expense, to receive benefits provided
pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following the termination
date Executive’s benefits as set forth in the preceding sentence. The Executive and his
beneficiaries, shall be entitled to no other compensation under this Agreement following, or as a
result of, a termination under these circumstances.
(f) Termination by the Executive For Good Reason. The Executive may terminate his
employment hereunder for Good Reason upon written notice to the
Company. In such event, the
Executive’s employment hereunder shall terminate on the date specified in the notice. In the event
the Executive terminates his employment for Good Reason, provided that the Executive enters into a
Separation Agreement and Release of the Company and related parties substantially similar to the
form attached hereto as Exhibit A, the Company shall: (i) pay the Executive an amount equal to two
(2) times his Base Salary in effect on the effective date of termination plus two(2) times his
Performance Bonus target for the year in which such termination occurs, and (ii) to the extent
permitted by the Company’s benefit plans, provide the benefits set forth in Section 3(e) then
provided to the Executive for a period of 24 months following the Executive’s termination pursuant
to this Section 4(f) provided that, to the extent such continuation of one or more benefits is not
permitted by the Company’s benefit plans, the Company shall pay to the Executive, within thirty
(30) days after the discontinuation of any such benefit(s), a lump sum payment of reasonably
equivalent value to the discontinued benefit(s). The amount payable under subsection (i) above,
shall be paid to the Executive in one lump sum payment within thirty (30) days after the effective
date of termination. In addition, the Executive shall be deemed fully vested, as of the effective
date of such termination, in all accrued benefits under all retirement plans (excluding any stock
option plans) for which the Executive is eligible and has participated, and all such accrued
benefits shall be calculated, for all purposes, as if the Executive were credited, as of the
effective date of termination, with two additional years of age and/or service to the Company.
Further, the Company shall reimburse the
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Executive for any amounts then due pursuant to Section 3(d) and shall pay the Executive’s
Performance Bonus payment for the year preceding the year in which the Executive terminates his
employment for Good Reason if then due and owing. The Executive shall be entitled, at his election
and his sole cost and expense, to receive benefits provided pursuant to COBRA following the
termination date Executive’s benefits as set forth in the preceding sentence. The Executive and
his beneficiaries, shall be entitled to no other compensation under this Agreement following, or
as a result of, a termination under these circumstances.
(g) Failure to Renew Agreement. The Executive and his beneficiaries, shall be
entitled to no compensation or benefits under this Agreement, following, or as a result of the
failure by the Executive to renew this Agreement pursuant to Section 1. In the event the: Company
elects not to renew this Agreement pursuant to Section 1, provided that the Executive enters into
a Separation Agreement and Release of the Company and related parties substantially similar to the
form attached hereto as Exhibit A, the Company shall: (i) pay the Executive an amount equal to 24
months of his Base Salary in effect on the date of the end of the Term in which the Company
elected not to renew the Agreement pursuant to this Section 4(g) and (ii) to the extent permitted
by the Company’s benefit plans, continue to provide the benefits set forth in Section 3(e) then
provided to the Executive, for a period of 24 months following the end of the term in which the
Company elected not to renew this Agreement pursuant to this Section 4(g). The amount payable
under subsection (i) above, shall be payable in equal weekly installments commencing on the date
of the end of the Term in which the Company elected not to renew the Agreement pursuant to
Section 4(g) and continuing thereafter until paid in full; provided, however, in the event the Company
fails to timely make any such weekly payment to the Executive, the entire unpaid amount due
Executive under subsection (i) above shall be payable in an immediate lump sum payment upon the
demand of Executive. In addition, the Company shall reimburse the Executive for any amounts then
due pursuant to Section 3(d). The Executive shall be entitled, at his election and his sole cost
and expense, to receive benefits provided pursuant to COBRA following the terms of the Executive’s
benefits as set forth in the preceding sentence. The Executive and his beneficiaries, shall be
entitled to no other compensation under this Agreement following, or as a result of, the Company’s
failure to renew this Agreement.
5. Inclusion of Executive’s Shares in Offering, “Piggy-Back” Registration Rights. If
at any time or times after the Effective Date, the Company proposes for any reason to register any
shares of its capital stock for public sale under the Securities Act of 1933, as amended (whether
in connection with a public offering of securities by the Company, an initial public offering of
securities by stockholders of the Company, or both), the Company will promptly give written notice
thereof to the Executive, such notice to include a brief description of the proposed registration
and offering including the total proposed size, other anticipated selling shareholders, identity of
the underwriter (if any), and anticipated range of offering prices. Within ten days after the
receipt of such notice, the Executive may elect in writing to include some or all of his Company
shares for sale and registration in the proposed offering, in which case the Company xxxx effect
the registration under the Securities Act of all such shares requested by the Executive, up to (but
not exceeding) that number of the Executive’s shares that bears
the same proportion to the total
number of all shares held by the Executive as the number of APAX shares that are included in such
registration bears to the total number of all shares held by APAX. In the case of the registration
of shares of the Company in connection with an underwritten public offering, the Company shall not
be required to include any
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shares of the Executive unless the Executive accepts the standard and customary terms of the
underwriting as reasonably agreed upon by the Company, APAX and the managing underwriter(s) for
such offering. The Company will bear all costs associated with the inclusion of the Executive’s
shares in any such offering with the sole exception of any applicable underwriting commissions or
discounts. The provisions of this Section 5 shall survive any termination of this Agreement and
termination of the Executive’s employment with the Company.
6. Confidential and Proprietary Information
(a) The parties agree and acknowledge that during the course of the Executive’s employment,
the Executive has been given and will have access to and be exposed to trade secrets and
confidential information in written, oral, electronic and other form regarding the Company (which
includes but is not limited to all of its business units, divisions and subsidiaries) and its
business, including, without limitation, the Company’s business methods, practices, strategies,
forecasts, pricing, and marketing techniques; the amounts paid to the Company’s licensors, vendors
and other suppliers; the identities of the Company’s key sales representatives and personnel and
other employees; advertising and sales materials; and other facts and financial and other business
information concerning or relating to the Company and its business, operations, financial
condition, results of operations and prospects. The Executive expressly agrees to use such trade
secrets and confidential information only for purposes of carrying out his duties for the Company,
and not for any other purpose, including, without limitation, not in any way or for any purpose
detrimental to the Company. The Executive shall not at any time, either during the course of his
employment hereunder or during the two years after the termination of such employment, use for
himself or others, directly or indirectly, any such trade secrets and confidential information,
and, except as required by law, the Executive shall not disclose such trade secrets and
confidential information, directly or indirectly, to any other person or entity. Trade secret and
confidential information hereunder shall not include any information which (i) is already in or
subsequently enters the public domain, other than as a result of any direct or indirect action or
inaction by the Executive, (ii) becomes available to the Executive on a non-confidential basis from
a source other than the Company, provided that such source is not subject to a confidentiality
agreement or other obligation of secrecy or confidentiality (whether pursuant to a contract, legal
or fiduciary obligation or duty or otherwise) to the Company or any other person or entity or (iii)
is approved for release by the Company or which the Company makes available to third parties
without an obligation of confidentiality.
(b) All physical property and all notes, memoranda, files, records, writings, documents and
other materials of any and every nature, written or electronic, which the Executive shall prepare
or receive in the course of his employment with the Company and which relate to or are useful in
any manner to the business now or hereafter conducted by the Company are and shall remain the sole
and exclusive property of the Company, provided, however, nothing herein shall prohibit the
Executive from retaining, for his records only, a copy of any information relating to his
compensation and benefits, including copies of any benefit plans
under which he is a participant.
The Executive shall not remove from the Company’s premises any such physical property, the original
or any reproduction of any such materials nor the information contained therein except for the
purposes of carrying out his duties to the Company and all such property (except for any items of
personal property not owned by the Company), materials and information in his possession or under
his
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custody or control upon the termination of his employment shall be immediately turned over to the
Company.
(c) The provisions of this Section 6 shall survive any termination of this Agreement and
termination of the Executive’s employment with the Company.
7. No Solicitation.
(a) The Executive acknowledges and agrees that he has gained and during the time of his
employment with the Company, will gain, valuable information about the identity, qualifications and
on-going performance of the employees of the Company. During the two-year period commencing on the
date of the termination of the Executive’s employment with the Company, the Executive shall not
directly or indirectly (i) hire, employ, offer employment to, or seek to hire, employ or offer
employment to, any of the Company’s (A) current employees or (B) former employees in senior
management or field organization positions who have been employed by the Company within one year
prior to any such hiring or solicitation thereof by the Executive, (ii) solicit or encourage any
such employee to seek or accept employment with any other person or entity or (iii) disclose any
information, except as required by law, about such employee to any prospective employer.
(b) The provisions of this Section 7 shall survive any termination of this Agreement and the
termination of Executive’s employment with the Company.
8. Injunctive Relief. The Executive and the Company (a) intend that the provisions of
Sections 6 and 7 be and become valid and enforceable, (b) acknowledge and agree that the provisions
of Sections 6 and 7 are reasonable and necessary to protect the legitimate interests of the Company
and its business and (c) agree that any violation of Sections 6 or 7 will result in irreparable
injury to the Company, the exact amount of which will be difficult to ascertain and the remedies at
law for which will not be reasonable or adequate compensation to the Company for such a violation.
Accordingly, the Executive agrees that if the Executive violates the provisions of Sections 6 or 7,
in addition to any other remedy which may be available at law or in equity, the Company shall be
entitled to seek specific performance and injunctive relief, without posting bond or other
security, and without the necessity of proving actual damages.
9. Assignment: Successors and Assigns. The Executive agrees that he shall not assign,
sell, transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, any rights
or obligations under this Agreement, nor shall the Executive’s rights hereunder be subject to
encumbrance of the claims of creditors. Any purported assignment, transfer, delegation, disposition
or encumbrance in violation of this Section 9 shall be null and void and of no force or effect.
Nothing in this Agreement shall prevent the consolidation or merger of the Company with or into any
other entity, or the sale by the Company of all or any portion of its properties or assets, or the
assignment by the Company of this Agreement and the performance of its obligations hereunder to any
successor in interest or any affiliated entity and, subject to the Executive’s right to terminate
for Good Reason, the Executive hereby consents to any and all such assignments. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the benefit of the parties and
their respective heirs, legal representatives, successors, and permitted assigns, and, except as
expressly
Page 10 of 18
provided herein, no other person or entity shall have any right, benefit or obligation under this
Agreement as a third party beneficiary or otherwise.
10. Governing Law, Jurisdiction and Venue. This Agreement shall be governed,
construed, interpreted and enforced in accordance with the substantive laws of the Commonwealth of
Pennsylvania without regard to the conflicts of law principles thereof. Suit to enforce this
Agreement or any provision or portion thereof may be brought in any court of competent
jurisdiction.
11. Severability of Provisions. In the event that any provision or any portion thereof
should ever be adjudicated by a court of competent jurisdiction to
exceed the time or other
limitations permitted by applicable law, as determined by such court in such action, then such
provisions shall be deemed reformed to the maximum time or other limitations permitted by
applicable law, the parties hereby acknowledging their desire that in such event such action be
taken. In addition to the above, the provisions of this Agreement are severable, and the invalidity
or unenforceability of any provision or provisions of this Agreement or portions thereof shall not
affect the validity or enforceability of any other provision, or portion of this Agreement, which
shall remain in full force and effect as if executed with the unenforceable or invalid provision or
portion thereof eliminated.
Notwithstanding the foregoing, the parties hereto affirmatively represent, acknowledge and agree
that it is their intention that this Agreement and each of its provisions are enforceable in
accordance with their terms and expressly agree not to challenge the validity or enforceability of
this Agreement or any of its provisions, or portions or aspects thereof, in the future.
12. Warranty. As an inducement to the Company to enter into this Agreement, the
Executive represents and warrants that he is not a party to any other agreement or obligation for
personal services, and that there exists no impediment or restraint, contractual or otherwise, on
his power, right or ability to enter into this Agreement and to perform his duties and obligations
hereunder.
13. Notices. All notices, requests, demands and other communications which are required or may
be given under this Agreement shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy, electronic or
digital transmission method upon receipt of telephonic or electronic confirmation; the day after it
is sent, if sent for next day delivery to a domestic address by recognized overnight delivery
service (e.g., Federal Express); and upon receipt, if sent by certified or registered mail, return
receipt requested. In each case notice will be sent to:
(a) if to the Company:
rue 21, inc.
000 Xxxxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxx XxXxxxxxx,
Senior Vice President and Chief Financial Officer
000 Xxxxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxx XxXxxxxxx,
Senior Vice President and Chief Financial Officer
Page 11 of 18
Telecopy:
with a copy to:
APAX Partners LP
000 X 00xx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Telecopy: (000) 000-0000
000 X 00xx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Telecopy: (000) 000-0000
Xxxx Xxxxx LLP
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telecopy: (000) 000-0000
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telecopy: (000) 000-0000
(b) if to the Executive, to:
00 Xxxxxxxxx Xxx
Xxxx Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Xxxx Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
with a copy to:
Xxxxxxxx & Shohl, LLP
000 X Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Ose
Telecopy: (000) 000-0000
000 X Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Ose
Telecopy: (000) 000-0000
or to such other place and with such other copies as either party may designate as to itself or
himself by written notice to the others.
14. Cumulative Remedies. All rights and remedies of either party hereto are
cumulative of each other and of every other right or remedy such party may otherwise have at law
or in equity, and the exercise of one or more rights or remedies shall not prejudice or impair the
concurrent or subsequent exercise of other rights or remedies.
Page 12 of 18
15. Counterparts. This Agreement may be executed in several counterparts, each of
which will be deemed to be an original, but all of which together shall constitute one and the
same Agreement.
16. Entire Agreement. The terms of this Agreement are intended by the parties to be
the final expression of their agreement with respect to the employment of the Executive by the
Company and supersede, and may not be contradicted by, modified or supplemented by, evidence of any
prior or contemporaneous agreement other than the 2003 Incentive Ownership Plan between the Company
and the Executive. The parties further intend that this Agreement shall constitute the complete and
exclusive statements of its terms and that no extrinsic evidence whatsoever may be introduced in
any judicial, administrative or other legal proceeding to vary the terms of this Agreement.
17. Amendments: Waivers. This Agreement may not be modified, amended, or terminated
except by an instrument in writing, approved by the Company and signed by the then existing parties
hereto. As an exception to the foregoing, the parties acknowledge and agree that the Company shall
have the right, in its sole discretion, to reduce the scope of any covenant or obligation of the
Executive set forth in Sections 6 or 7 of this Agreement or any portion thereof, effective
immediately upon receipt by the Executive of written notice thereof from the Company. No waiver of
any of the provisions of this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed or be construed as a further, continuing or subsequent waiver of any
such provision or as a waiver of any other provision of this Agreement. No failure to exercise and
no delay in exercising any right, remedy or power hereunder shall preclude any other or further
exercise of any other right, remedy or power provided herein or by law or in equity.
18. Termination of Credit Agreements. The Company and the Executive
acknowledge that, concurrently with the execution of this Agreement, the Executive has delivered to
the Company for cancellation that certain irrevocable standby letter of credit issued in favor of
the Executive and the Company have terminated the related First Amended and Restated Employee
Security Agreement (the “Credit Arrangements”), which Credit Arrangements were put in place to
support certain contingent severance obligations payable by the Company to the Executive. Further,
the Executive will immediately file all appropriate UCC termination statements with respect to any
liens related to the Credit Arrangements.
19. Representation of Counsel: Mutual Negotiation. Each party has had the opportunity
to be represented by counsel of its choice in negotiating this Agreement. This Agreement shall
therefore be deemed to have been negotiated and prepared at the joint request, direction and
construction of the parties, at arm’s-length, with the advice and participation of counsel, and
shall be interpreted in accordance with its terms without favor to any party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first
above written.
Page 13 of 18
| rue 21, inc. |
||||
| By: | /s/ Xxxxxx Xxxxx | |||
| Name: | Xxxxxx Xxxxx | |||
| Title: | President, CEO | |||
| EXECUTIVE |
||||
| /s/ Authorized Signatory | ||||
Page 14 of 18
EXHIBIT A
SEPARATION AGREEMENT AND GENERAL RELEASE
THIS SEPARATION AGREEMENT AND GENERAL RELEASE (“Release”) is entered into by Xxxxxx Xxxxx
(“Executive”) and rue 21, inc., a Pennsylvania corporation (the “Company”).
Executive and the Company desire to settle fully any and all matters between them, including,
but not limited to, any matters relating to Executive’s employment with the Company, Executive’s
Employment Agreement with the Company, dated as of January 1, 2008, a copy of which is attached
hereto and is hereby incorporated by reference herein (“Employment Agreement”), and the
termination of Executive’s employment. Therefore, in consideration of the mutual promises set
forth herein and other good and valuable consideration, the receipt and sufficiency of which is
acknowledged, Executive and the Company agree as follows:
1. Termination of Employment. Executive’s employment with the Company is
terminated effective (“Termination Date”). Executive waives and releases any claim
that he has or may have to reemployment with the Company, or any of its parent companies,
subsidiary companies, affiliates, successors or assigns.
2. Employment Agreement. The Company will provide termination payments and benefits as of the
Termination Date as provided in Section 4 of Executive’s Employment Agreement. The Company will
provide any payments provided in Section 3 of Executive’s Employment Agreement owed to the
Executive as of the Termination Date. Executive agrees to comply with all of his or her continuing
obligations under the Employment Agreement, including without limitation Sections 6 and 7 of the
Employment Agreement, Executive will not seek any further compensation or benefits from the
Company, or any of its parent companies, subsidiary companies, affiliates, successors or assigns,
except as expressly provided in the Employment Agreement. Any rights Executive may have to equity
compensation and/or stock options are governed by the terms of 2003 Incentive Ownership Plan of the
Company, and other Company documents relating to stock options.
3. No Authority. Executive understands and agrees that effective on the Termination Date,
Executive is no longer authorized to incur any expenses, obligations, or liabilities on behalf of
the Company.
4. Release. As a material inducement to the Company to enter into the Employment Agreement and
to receive the termination payments provided in Section 4 thereof, Executive hereby forever
releases and discharges the Company, its parent, subsidiaries, owners, affiliates, divisions,
shareholders, directors, officers, members, partners, business associations, agents, current and
former employees, attorneys, related companies, predecessors, successors and assigns (collectively
“Released Parties”), and each of them, of and from any and
all charges, complaints, claims, or
liabilities (including attorneys’ fees and costs actually incurred) of any nature whatsoever, known
or unknown, suspected or unsuspected, including, but not limited to, rights arising out of alleged
violations of any contracts, express or implied, or any state law tort claim, or any federal,
state, or other governmental statute, regulation, or ordinance, including, but not limited to,
claims under Title
Page 15 of 18
VII of the Civil Rights Act of 1964 or the Age Discrimination in Employment Act, 29 U.S.C. §§62
1-634, which Executive now has or claims to have, or which Executive at any time heretofore had or
claimed to have, against each or any of the Released Parties; provided, however, Executive
specifically does not release (a) any rights under the Age Discrimination in Employment Act arising
after the Effective Date of this Release, (b) any claims to enforce this Release or any claims
which Executive is precluded from waiving by operation of law, (c) any claims Executive may have
against the Company pursuant to the terms of the Stockholders Agreement, by and among the Company
and the Stockholders signatory thereto, if the Executive is a party to such agreement, (d) any
entitlement executive may have to indemnification from the Company for actions taken in his
capacity as an employee, officer or director of the Company for which indemnification is provided
pursuant to the Company’s Third Amended and Restated Articles of Incorporation, the Bylaws of the
Company currently in effect any applicable insurance policy of the Company or otherwise provided by
law, and (e) [Describe reasonable any non-employment related claim against the Company alleged by
the Executive in good faith to be outstanding on the date of this Release]. Notwithstanding the
foregoing, the parties acknowledge that any continuing obligations under the Employment Agreement
remain in full force and effect, including, without limitation, the Company’s and the Executive’s
obligations described in Section 2 of this Release and the Executive’s obligations set forth in
Sections 6 and 7 of the Employment Agreement.
5. No Claims. Executive represents that Executive has not filed any complaints, charges, or
lawsuits with any local, state, or federal agency or court against the Company or any of the
Released Parties, that Executive will not do so at any time based upon any matter that he or she
released in Paragraph 4 that arose on or before the execution of this Release, and that if any such
agency or court assumes jurisdiction of any such charge, complaint, or lawsuit against the Company
or any of the Released Parties on behalf of Executive, Executive will request such agency or court
to withdraw from the matter.
6. Consultation with Counsel. Executive agrees that Executive fully understands Executive’s
right to discuss all aspects of this Release with Executive’s attorney, that the Company encourages
Executive to consult with legal counsel, that Executive has carefully read and fully understands
all the provisions of this Release, and that Executive is knowingly and voluntarily entering into
this Release.
7. No Representations. Executive represents and acknowledges that, in signing this Release,
Executive does not rely, and has not relied, upon any representation or statement made by any of
the Released Parties or by any of the Released Parties’ agents, representatives, or attorneys with
regard to the subject matter, basis, or effect of this Release or otherwise.
8. Acceptance and Revocation. Executive agrees that this Release was presented to Executive
for review and consideration on (“Review Date”). Executive understands that
Executive has twenty-one (21) days from the Review Date within which to decide whether to execute
this Release and return it to the Company. If Executive does not return this Release to the
Company fully executed within twenty-one (21) days of the Review Date, any offer implied by the
representation of this Release for Executive’s review and consideration is withdrawn in its
entirety at that time. Executive further understands that Executive has seven (7) days after
execution of this Release within which to provide the Company with written notice of revocation of
this Release
Page 16 of 18
(“Revocation Period”). If said written notice of revocation is not received by the Company by the
close of business on the seventh day following Executive’s signing of this Release, Executive
agrees that this Release shall be final, binding, and irrevocable. If Executive does exercise his
or her right to revoke this Release, all of the terms and conditions of the Release shall be of no
force and effect and the Company shall not have any obligation to make payments to Executive as
set forth in this Release.
9. Notices. The executed copy of this Release and/or any written notices should be provided
to:
rue 21, inc.
000 Xxxxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Secretary
000 Xxxxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Secretary
10. Effective Date. This Release shall not become effective in any respect until the
Revocation Period has expired without notice of revocation. In the absence of Executive’s
revocation of this Release, the eighth day after Executive’s signing of this Release shall be the
“Effective Date” of this Release.
11. No Admissions. This Release shall not in any way be construed as an admission by the
Company that it has acted wrongfully or breached any Release with respect to Executive or any other
person, or an admission of any acts of discrimination whatsoever against Executive, and the Company
specifically disclaims any liability to or discrimination against Executive, on the part of itself,
its employees, its agents or its affiliates.
12. Executive Breach. Executive agrees that, in the event Executive breaches any provision of
this Release, Executive agrees to indemnify the Company and the Released Parties against all
liability, costs and expenses, including reasonable attorney’s fees, and will reimburse the Company
for all benefits paid to-Executive pursuant to-this Release.
13. Sole and Entire Agreement. The Release, including the Employment Agreement, constitutes
the entire agreement of the parties, and fully supersedes any and all prior and contemporaneous
agreements or understandings between the parties. This Release may be amended or modified only by
an agreement in writing and signed by both parties.
14. Governing Law. The validity, interpretation, construction and performance of this
Agreement will be governed by and construed in accordance with the substantive laws of the
Commonwealth of Pennsylvania, without giving effect to its principles of conflict of laws.
15. Severability. If any provision of this Release or the application of any provision hereof
to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder
of this Release and the application of such provision to any other person or circumstances will not
be affected, and the provision so held to be invalid, unenforceable or otherwise illegal will be
reformed to the extent (and only to the extent) necessary to make it valid, enforceable and legal.
Page 17 of 18
16. Survival of Provisions. Notwithstanding any other provision of this Release, the parties’
respective rights and obligations under Sections 4, 6 and 7 of the Employment Agreement will
survive any termination or expiration of this Release or the termination of Executive’s employment
for any reason whatsoever.
17. Counterparts. This Release may be executed in one or more counterparts, each of which will
be deemed to be an original but all of which together will constitute one and the same agreement.
PLEASE READ AND CONSIDER THIS RELEASE CAREFULLY BEFORE SIGNING IT. THIS SEPARATION AGREEMENT
AND GENERAL RELEASE INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
| Signature: | ||||
| Xxxxxx Xxxxx | ||||
| Date: | ||||
| Witnessed: | ||||
| Name: | ||||
| Date: | ||||
| rue 21, inc. |
||||
| By | ||||
| Title | ||||
| Date: | ||||
Page 18 of 18
Pursuant to the authority granted by 15 Pennsylvania Consolidated Statutes Section 1727(b),
the Board of Directors of rue21, inc. (the “Company”) adopted the following resolution by
unanimous written consent of all of the Directors of the Company:
RESOLVED, that the form, terms and provisions of the Employment Agreement between Xxxxxx Xxxxx
and the Company dated as of January 1, 2008 in the form attached hereto as Exhibit A (the
“Employment Agreement”) are hereby approved and that each of the officers of the Company are
authorized and directed, on behalf of the Company, to execute and deliver the Employment Agreement
and such documents, instruments and agreements contemplated thereby and to take such actions as the
officers deem necessary or appropriate to perform the obligations of the Company thereunder.
Signed this day of January, 2008.
| /s/ Xxxx Xxxxxx | ||||
| Xxxx Xxxxxx | ||||
| Xxxxxxx Xxxxxxx | ||||
| Xxxxxx Xxxxx | ||||
Pursuant to the authority granted by 15 Pennsylvania Consolidated Statutes Section 1727(b),
the Board of Directors of rue21, inc. (the “Company”) adopted the following resolution by
unanimous written consent of all of the Directors of the Company:
RESOLVED, that the form, terms and provisions of the Employment Agreement between Xxxxxx Xxxxx
and the Company dated as of January 1, 2008 in the form attached hereto as Exhibit A (the
“Employment Agreement”) are hereby approved and that each of the officers of the Company are
authorized and directed, on behalf of the Company, to execute and deliver the Employment Agreement
and such documents, instruments and agreements contemplated thereby and to take such actions as the
officers deem necessary or appropriate to perform the obligations of the Company thereunder.
Signed this 18th day of January, 2008.
| Xxxx Xxxxxx | ||||
| Xxxxxxx Xxxxxxx | ||||
| /s/ Xxxxxx Xxxxx | ||||
| Xxxxxx Xxxxx | ||||
Pursuant to the authority granted by 15 Pennsylvania Consolidated Statutes Section 1727(b),
the Board of Directors of rue21, inc. (the “Company”) adopted the following resolution by
unanimous written consent of all of the Directors of the Company:
RESOLVED, that the form, terms and provisions of the Employment Agreement between Xxxxxx Xxxxx
and the Company dated as of January 1, 2008 in the form attached hereto as Exhibit A (the
“Employment Agreement”) are hereby approved and that each
of the officers of the Company are
authorized and directed, on behalf of the Company, to execute and deliver the Employment Agreement
and such documents, instruments and agreements contemplated thereby and to take such actions as the
officers deem necessary or appropriate to perform the obligations of the Company thereunder.
Signed this 21 day of January, 2008.
| Xxxx Xxxxxx | ||||
| /s/ Xxxxxxx Xxxxxxx | ||||
| Xxxxxxx Xxxxxxx | ||||
| Xxxxxx Xxxxx | ||||
