SEPARATION AGREEMENT
EXHIBIT
10.16
This
Separation Agreement (the "Agreement") is made and
entered into this 8th day of
July, 2008, by and between Charming Shoppes, Inc., a Pennsylvania corporation
having its principal place of business in Bensalem, Pennsylvania (the "Company"), and Xxxxxx X.
Xxxx, an individual domiciled in Marco Island, Florida (the "Executive").
Witnesseth
Whereas,
the Company and the Executive entered into an Employment Agreement dated
December 31, 2007, with an effective date of February 1, 2008 (the "Employment Agreement");
and
Whereas, pursuant
to the Employment Agreement, the Executive is employed by the Company as its
President and Chief Executive Officer and is a member of the Board of Directors
of the Company (the “Board”); and
Whereas,
the Executive and the Company desire to sever their employment relationship and
the Executive's membership on the Board on amicable and agreeable terms
effective July 8, 2008 (the "Separation
Date").
Now,
therefore, in consideration of the foregoing and the mutual covenants
herein set forth, and for 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:
1. Separation from
Employment.
The
parties agree that the Executive’s separation from employment shall be deemed to
be “Without Cause,” as
that term is defined in Paragraph 7.4(a) of the Employment Agreement, and
effective as of the Separation Date. The Executive hereby resigns
from the Board and from any committees thereof. The parties waive any
advance notice of such termination that may be required under the terms of the
Employment Agreement.
2. Separation Payments.
The
Executive is entitled to receive the following payments, subject to applicable
withholdings and deductions, on account of her separation (collectively, the
"Separation
Payments"):
(a) Accrued Base
Salary. The Company will pay to the Executive all accrued, but
unpaid, amounts of “Base
Salary” (as that term is defined in Paragraphs 2.3 and 5.1 of the
Employment Agreement) through the Separation Date. The payment will
be made on or prior to July 31, 2008.
(b) Split Dollar Insurance
Replacement Bonus Agreement. Pursuant to that certain Bonus
Agreement, dated January 28, 2005, the Company will pay to the Executive a sum
payment of $365,000.00 on October 27, 2008. The parties agree
that no further payments are due under that certain Bonus
Agreement.
(c) Utilization of Company
Provided Car and Driver. The Company agrees that the Executive
will be permitted to utilize a Company provided car and driver until July 31,
2008, under the same terms as permitted under the Employment
Agreement.
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(d) Utilization of Perquisite
Allowance. The Company agrees that the Executive will be
permitted to utilize the balance (calculated as of the Separation Date) of the
Perquisite Allowance provided under Paragraph 5.7 of the Employment Contract to
pay (1) her reasonable legal fees and expenses incurred in the negotiation of
this Separation Agreement; and (2) the cost of financial planning services
incurred by her in 2008. Upon the presentation of appropriate
documentation, the Company shall pay, or reimburse the Executive, for such fees,
expenses or costs.
(e) Utilization of Company
Provided Secretarial Support. The Company agrees that the
Executive will be permitted to utilize her Company provided secretary until
August 31, 2008, under the same terms as she had under the Employment
Agreement.
(f) Waiver of Notice Provision
under Apartment Lease. The Company agrees to waive any
termination notice required under that certain Apartment Lease, dated March 12,
2008 and effective as of February 1, 2008, between the Company, as lessor, and
the Executive, as lessee. Notwithstanding anything in the Apartment
Lease to the contrary, the Executive may continue to utilize the apartment until
July 31, 2008.
(g) Compensation in Lieu of 90
Days' Notice. In lieu of the notice period required by
Paragraph 7.4(a) of the Employment Agreement, the Company will make a lump sum
payment to the Executive in an amount equal to the Base Salary to which the
Executive would otherwise have been entitled during the 90-day period
immediately following the Separation Date. This payment will be made
on or before July 31, 2008.
(h) Severance Benefits Pursuant
to the Employment Agreement. The Company will provide to the
Executive the following “Severance Benefits,” as that
term is defined in Paragraphs 2.35 and 7.4 of the Employment
Agreement:
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(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” (as that term
is defined in Paragraph 2.2 of the Employment Agreement) paid to the Executive
for the most recent three (3) completed Fiscal Years. These payments
shall begin within thirty (30) days following the Separation Date.
(ii) The Executive
may continue to participate in the Company’s health plan for twenty seven (27)
months following the Separation Date by electing COBRA coverage and by paying
the applicable premium 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 twenty seven (27) month period;
provided, however, that reimbursement of the COBRA cost shall be discontinued
prior to the end of the first eighteen (18) months of this twenty seven (27)
month period if the Executive ceases to elect COBRA coverage or, if subsequent
to the first eighteen (18) months, she fails to pay the applicable premium cost
of such coverage. In any event, the Executive’s participation in the
Company’s health plan shall terminate if the Executive has available
substantially similar benefits from a subsequent employer, as determined by the
“Compensation
Committee,” as that term is defined in Paragraph 2.12 of the Employment
Agreement. The COBRA reimbursement payments shall be paid monthly on
the first payroll date of each month, beginning
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within
thirty (30) days after the Separation Date, provided the Executive has paid the
applicable monthly COBRA cost. On each date on which a payment is
made under this paragraph, 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 paragraph. This gross
up payment will be made with respect to each payment hereunder and will cease
when COBRA reimbursement payments 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 substantially similar to the coverages she
enjoyed as an employee for 27 months following the Separation
Date. This lump sum reimbursement shall be net of 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 Separation
Date. Such lump sum payment shall be made within thirty (30) days
following the Separation Date.
(iv) The Company
shall pay to the Executive a lump sum amount, payable within thirty (30) days
after the Separation Date, equal to the Executive’s unpaid target Annual Bonus
established for the Company’s 2008-09 “Fiscal Year” (as that term is
defined in Paragraph 2.20 of the Employment Agreement),
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multiplied
by a fraction, the numerator of which is the number of days deemed completed in
the 2008-09 Fiscal Year (i.e., 250 days), and the denominator of which is the
number of days in that Fiscal Year.
(v) The
Executive’s accrued benefit in the “SERP” (as that term is
defined in Paragraph 2.34 of the Employment Agreement) shall become fully vested
as of the Separation Date 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”
(as those terms are defined in Paragraphs 2.23, 5.3(b), 2.32, 5.3(b), 2.24,
5.3(c), 2.39 and 5.3(a), respectively, of the Employment Agreement) 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 the Separation Date shall become vested on such date, 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.
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(i) Business
Expenses The Executive shall, in accordance with the Company's
customary policies and procedures, be reimbursed for all appropriate business
expenses incurred through and including the Separation Date for which the
Executive submits appropriate invoices and similar records. Provided,
however, that such business expenses must be submitted within ninety (90) days
of the Separation Date.
(j) Retirement
Benefits. Except with respect to the SERP, the Executive’s
right to any retirement benefits under any qualified defined benefit and defined
contribution retirement plans maintained by the Company and in which she
participated shall be determined in accordance with the terms of any such
plans.
3. Dispute
Resolution.
(a) Dispute
Resolution. Any dispute or controversy arising under or in
connection with this Agreement, the Employment Agreement, the Executive’s
employment with the Company and/or her separation therefrom 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.
(b) Judgment
may be entered on the award of the arbitrator in any court having proper
jurisdiction. Subject to the limitation set forth in Paragraph 3(c),
related to legal fees incurred by the Executive, all expenses of such
arbitration shall be borne by the Company.
(c) 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
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Executive
as a result of the Company’s refusal to provide the Separation Payments, as
defined in Paragraph 2, above, 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).
4. Confidentiality and
Noncompetition.
(a) Disclosure of
Information. The Executive recognizes that she has had access
to and knowledge of certain confidential and proprietary information of the
Company which was essential to the performance of her duties under
the Employment Agreement. The Executive will not, 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.
(b) Covenants Regarding Other
Employees. For a period of twenty-four (24) months following
the Separation Date, the Executive agrees not to attempt to induce, directly or
indirectly, any merchant, buyer, or manager or higher level employee (a
“restricted employee”) of the Company to terminate his or her employment with
the Company. In addition and for the same time period, the Executive
agrees that she will not hire, employ, engage as a consultant or otherwise
utilize the services of any restricted employee and that she will not authorize,
permit or
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suffer
any entity for which she is engaged to provide services (whether as an employee,
director, consultant or otherwise) to hire, employ, engage as a consultant or
otherwise utilize the services of any restricted employee.
(c) Covenants Not To
Compete. For a period of twenty-four (24) months following the
Separation Date, the Executive will not: (i) 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 as of the Separation Date, and the Executive will not assist in, manage,
or supervise any of the foregone activities, or (ii) undertake any action
to induce or cause any supplier to discontinue any part of its business with the
Company. For purposes of this Paragraph of this Agreement,
“Competitor” shall have the following meaning:
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(1)
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Except
as provided in subsection (2), 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.
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(2)
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During
any period in which Executive is receiving Separation Payments under
Paragraph 2 hereof, the term “Competitor” shall mean, in addition to a
Competitor as described in subsection (1), above, a chain of retail stores
with one hundred (100) or more store locations (without regard
to
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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 Separation
Payments hereunder, or otherwise does not receive such Separation
Payments, the term “Competitor” shall have the meaning given that term in
subsection (1), above.
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5. Indemnification
Matters. Except as provided in Paragraph 6(a), below, 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. The Company agrees
to maintain for a period of six (6) years directors and officers liability
insurance coverage for the Executive, on the same terms as such coverage is
provided for other directors and officers of the Company.
6. Releases.
(a) The Company’s Release of
Claims. In further consideration for the Executive’s entering
into this Agreement, the Company, individually and on behalf of its successors
and assigns, directors, officers, agents, and employees, hereby irrevocably and
unconditionally RELEASES, WAIVES, and DISCHARGES the Executive, her successors,
assigns, and heirs, from any and all claims, demands, actions and liabilities
whatsoever, whether known or unknown, suspected or unsuspected, that the Company
may have or claim to have in any way relating to or arising out of any event or
act of omission or commission occurring on or
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before
the date of the Executive’s execution of this Agreement, except that this
paragraph shall not apply to the following: (i) claims or actions to
enforce the terms and provisions of this Agreement; and (ii) matters
involving fraud or intentional, reckless, or gross misconduct, arising out of
the Executive’s employment with the Company.
(b) The Executive’s Release of
Claims.
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(i)
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The
Executive agrees that she will not file (or ask or let anyone file for
her) any charge, complaint, claim or lawsuit of any kind in connection
with any claim released by this Agreement against any Released
Person. However, the preceding sentence does not apply to any
claim the Executive might file alleging that her waiver of claims under
the Age Discrimination in Employment Act of 1967 (“ADEA”) was not knowing
and voluntary. The Executive agrees that she has not already
filed a charge, complaint, claim or lawsuit arising out of any claim
released by this Agreement against any Released Person. The
Executive acknowledges full and complete satisfaction of, and releases and
discharges all Released Persons from, any Claims. The Executive
is giving this release for herself, as well as for her executors,
administrators, heirs and assigns.
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(ii)
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“Released
Persons” are the Company, its predecessors, successors, parents,
subsidiaries and affiliates, successors, and assigns and each of their
past, present and future managers, members, members, directors, officers,
partners, agents, employees, attorneys, representatives, and
fiduciaries.
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(iii)
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“Claims”
are any and all claims, demands and causes of action of whatever kind,
including any claims for attorney’s fees, that the Executive now has, or
at any time had, against any Released Persons, including, without
limitation, those that arise out of or relate in any way to her
employment, termination of employment with the Company or the Employment
Agreement. “Claims” includes, without limitation, except as
provided in Paragraph 6(b)(4), claims that may arise under the ADEA,
Americans with Disabilities Act, Title VII of the Civil Rights Act, the
Civil Rights Act of 1991, the Fair Labor Standards Act, the Pennsylvania
Human Relations Act, and/or any other statute, regulation or principle or
theory of law which the Executive may have now or in the future, except
those that arise after the execution of this
Agreement. “Claims” includes claims the Executive may not even
know about or suspect, as well as any claims she may have under the
ADEA.
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(iv)
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“Claims”
does not include (and Executive is not releasing): (1) Any claims against
the Company for promises it is making to the Executive in this Agreement;
(2) Any claims for benefits under any retirement, savings, or other
employee benefit programs (but this Release does cover any claims she may
make for benefits or compensation beyond those described or referred to in
this Agreement); (3) Any claims covered by workers compensation
and
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(v)
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The
Executive retains the right to file a claim or a charge of employment
discrimination with the Equal Employment Opportunity Commission (“EEOC”)
because of race, color, sex, religion, national origin, age, disability
and/or equal pay under the statutes enforced by the EEOC with respect to
matters preceding the date of this Agreement and to assist or cooperate
with such agency in its investigation or prosecution of a claim or
charge. The Executive understands and agrees, however, that as
part of this Agreement and Release, she is waiving any and all right to
recover damages and other relief in any lawsuit, regardless of whether it
is initiated by the Executive or on her behalf by a government
agency. This waiver specifically covers all forms of relief
including, without limitation, reinstatement, front pay, back pay,
compensatory damages, mental and emotional distress damages, punitive
damages and attorneys’ fees.
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7. Company’s
Remedies. In the event that the Executive breaches, or the
Company reasonably believes that she is about to breach, any of the covenants of
Paragraph 4, the Executive agrees that the Company will be entitled to
injunctive relief. The Executive recognizes that the Company will
suffer immediate and irreparable harm and that money damages will not be
adequate to compensate the Company or to protect and preserve the status
quo. Therefore, THE EXECUTIVE HEREBY CONSENTS TO THE ISSUANCE OF A
TEMPORARY RESTRAINING ORDER, WITH OR WITHOUT NOTICE, AND A PRELIMINARY OR
PERMANENT INJUNCTION to enforce the terms of this Agreement. This
injunctive remedy shall be in addition to any other remedies to which the
Company may be entitled at law or in equity. Further, any claim for
such injunctive relief by the Company shall not be subject to Paragraph 3,
hereof.
8. Compliance with Section 409A
of the Code. 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, any
payments or distributions hereunder may only be made 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.
Further,
given that the Executive is a “specified employee” (as defined in Section 409A
of the Code), notwithstanding any provision of this Agreement to the contrary,
the payment of
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any
amounts payable hereunder that the Company determines are subject to Section
409A of the Code shall be postponed in compliance with Section 409A (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). Any such postponed
payments 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.
9. No Admissions. This
Agreement results from a mutual decision and does not constitute an admission by
the Executive, or the Company, of any violation of any federal, state or local
law, regulation, ordinance or statute or of any employment contract (including
the Employment Agreement) whether written or oral.
10. Entire
Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof. Except
as set forth herein, this Agreement supersedes any and all other agreements
(including, but not without limit, the Employment Agreement), either oral or
written, between the parties hereto with respect to the subject matter
hereof.
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11. Binding Effect and Assign
ability. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors, assigns, affiliated entities, and any
party-in-interest. The Executive agrees and understands that, should
the Company or the relevant portion of its business or assets be acquired by,
merge with, or otherwise combine with another corporation or business entity,
the surviving or acquiring entity will have all rights to enforce the terms of
this Agreement against the Executive without the need for any formal assignment
of the Agreement. This Agreement shall be deemed assigned upon any
such acquisition, purchase, merger or other manner of corporate
combination.
12. Notices. Any
notice required or permitted to be given under this Agreement will be sufficient
if in writing and if delivered in person or sent by any national overnight
delivery service or by certified mail to the following addresses (or to any
other address that any party may designate by notice to the other parties
hereto):
Xxxxxx X.
Xxxx
0000 Xxxx
Xxxxx Xxxxx #000
Xxxxx
Xxxxxx, XX 00000
with a
copy to:
Xxxxxx X.
Xxxxxxxxxxxx, Esquire
Xxxxxx
Xxxxx
0000
Xxxxxx Xx.
Xxxxxxxxxxxx,
XX 00000-0000
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(b) if to the
Company:
Xxxxx
Xxxxx, Esquire
General
Counsel
Charming
Shoppes, Inc.
000 Xxxxx
Xxxx
Xxxxxxxx,
XX 00000
with a
copy to:
Xxxxxxx
X. Xxxxxxxx, Esquire
Xxxx
Xxxxx, LLP
0000
Xxxxxx Xxxxxx
00xx
Xxxxx
Xxxxxxxxxxxx,
XX 00000
13. Governing Law. To
the extent not preempted by Federal Law, the provisions of this Agreement shall
be continued and enforced in accordance with the substantive laws (and not the
choice of law rules) of the Commonwealth of Pennsylvania.
14. Severability. If
any provision of this Agreement is held to be unenforceable, then this Agreement
will be deemed amended to the extent necessary to render the otherwise
unenforceable provision, and the rest of the Agreement, valid and
enforceable. If a court declines to amend this Agreement
as provided therein, the invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the remaining
provisions, which shall be enforced as if the offending provision had not been
included in this Agreement.
15. No
Waiver. No failure or delay by the Company or the Executive in
enforcing or exercising any right or remedy hereunder shall operate as a waiver
hereof. No modification, amendment or waiver of this Agreement nor
consent to any departure by either party from any of
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the terms
or conditions thereof, shall be effective unless in writing and signed by an
authorized officer representative of the respective party. Any such
waiver or consent shall be effective only in the specific instance
and for the purpose for which given.
16. Counterparts. The
parties may execute this Agreement in one or more counterparts, all of which
together shall constitute but one Agreement. The Parties agree that
facsimile signatures of this Agreement shall be deemed a valid and binding
execution of this Agreement.
17. The Executive’s
Understanding. By signing this Agreement, the Executive admits
and agrees that:
(a) She has
read the Agreement;
(b) She
understands it is legally binding, and she was advised to review it with a
lawyer of her choice prior to executing this Agreement;
(c) She has
had (or has had the opportunity to take) 21 calendar days to review it and
discuss it with a lawyer of her choice before signing it, and, if she signs
before the end of that period, she does so of her own free will and with the
full knowledge that she could have taken the full period;
(d) She
realizes and understands the Release set forth in Paragraph 6 covers all claims,
demands, and causes of action against the Company and any Released Persons (but
does not apply to claims described in Paragraph 6(b)(iv)), including claims
under the ADEA, whether or not she knows or suspects them to exist at the
present time; and
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(e) She
understands the terms of the Agreement, she is signing voluntarily and with the
full understanding of its consequences, and she has not been forced or coerced
in any way.
18. Revoking the
Agreement. The Executive has seven days from the date she
signs the Agreement to revoke and cancel it. To do that, a clear,
written revocation notice, signed by the Executive must be received by the
Company, consistent with the notice provisions hereof, before the close of
business on the seventh (7th)
calendar day following the date she signs this Agreement. Upon the
expiration of that seven-day-period, this Agreement shall become effective for
all purposes.
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IN WITNESS WHEREOF, the undersigned,
intending to be legally bound, have duly executed this Agreement as of the date
first above written.
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Executive:
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______________________________
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XXXXXX
X. XXXX
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ATTEST:
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CHARMING
SHOPPES, INC.
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By:_______________________________
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By:___________________________
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Corporate
Secretary
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Name:
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Title:
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