Severance Agreement for JAMES P. FOGARTY Charming Shoppes, Inc. APRIL 2, 2009
EXHIBIT
10.2
XXXXX
X. XXXXXXX
Charming
Shoppes, Inc.
APRIL 2,
2009
Contents
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Article
1. Establishment, Term, and Purpose
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1
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Article
2. Definitions
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1
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Article
3. Severance Benefits
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5
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Article
4. Tax Compliance
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9
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Article
5. Application of 280G
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10
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Article
6. The Company’s Payment Obligation
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11
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Article
7. Legal Remedies
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11
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Article
8. Outplacement Assistance
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11
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Article
9. Successors and Assignment
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12
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Article
10. Covenants
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12
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Article
11. Miscellaneous
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14
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Charming
Shoppes, Inc.
THIS
AGREEMENT is made and entered into as of April 2, 2009 (the “Effective Date”),
by and between Charming Shoppes, Inc. (hereinafter referred to as the
“Company”) and Xxxxx X. Xxxxxxx (hereinafter referred to as the
“Executive”).
WHEREAS,
the Compensation Committee of the Company (the “Committee”) has determined that
it is appropriate to provide severance compensation to recruit and retain key
executives and to provide incentives to key executives to promote the interests
of the Company;
WHEREAS,
the Committee has approved the Company entering into severance agreements with
certain key executives of the Company; and
WHEREAS,
the Executive is a key executive of the Company.
NOW
THEREFORE, to assure the Company that it will have the continued dedication of
the Executive, and to induce the Executive to remain in the employ of the
Company, and for other good and valuable consideration, the Company and the
Executive agree as follows:
Article
1. Establishment, Term, and Purpose
This
Agreement shall commence on the Effective Date and shall continue in effect for
three (3) full years (i.e., until the day before the third anniversary of the
Effective Date). However, at the end of the first year of such three
(3) year period and at the end of each additional year thereafter, the term of
this Agreement shall be extended automatically for one (1) additional year,
unless the Committee delivers written notice six (6) months prior to the end of
the first year of such term, or extended term, to the Executive, that the
Agreement will not be extended. In such case, the Agreement will
terminate at the end of the term, or extended term, then in
progress. However, in the event a Change in Control occurs during the
original or any extended term, this Agreement will remain in effect for not less
than the longer of: (i) twenty-four (24) months beyond the month in which
such Change in Control occurs; or (ii) until all obligations of the Company
hereunder have been fulfilled, and until all benefits required hereunder have
been paid to the Executive.
Article
2. Definitions
Whenever
used in this Agreement, the following terms shall have the meanings set forth
below and, when the meaning is intended, the initial letter of the word is
capitalized.
2.1 “Base Salary” means the salary
of record paid to the Executive as annual salary, excluding amounts received
under incentive or other bonus plans, whether or not any such salary or other
amounts are deferred.
2.2 “Beneficial Owner” shall have
the meaning ascribed to such term in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act and shall include related terms such as
“Beneficial Ownership.”
1
2.3 “Benefit Period” means the
period as provided in Section 3.3 herein with respect to which the Executive
receives severance compensation.
2.4 “Beneficiary” means the
persons or entities designated or deemed designated by the Executive pursuant to
Section 9.2 herein.
2.5 “Board” means the Board of
Directors of the Company.
2.6 “Cause” means: (a) the
Executive’s willful and continued failure to substantially perform his or 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 his or her
duties, and after the Executive has failed to resume substantial performance of
his or her duties on a continuous basis within thirty (30) calendar days of
receiving such demand; (b) the Executive’s willfully engaging in conduct (other
than conduct covered under (a) above) which is demonstrably and materially
injurious to the Company, monetarily or otherwise; or (c) the Executive’s having
been convicted of a felony. For purposes of this subparagraph, no
act, or failure to act, on the Executive’s part shall be deemed “willful” unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the action or omission was in the best interests of the
Company.
2.7 “Change in Control” of the
Company shall be deemed to have occurred as of the first day after the Effective
Date that any one or more of the following conditions is satisfied:
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(a)
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Any Person, other
than the Company or a Related Party, acquires directly or indirectly the
Beneficial Ownership of any Voting Security and immediately after such
acquisition such Person has directly or indirectly, the Beneficial
Ownership of Voting Securities representing fifty percent (50%) or more of
the total voting power of all the then-outstanding Voting Securities;
or
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(b)
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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
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(c)
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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 (60%) percent 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
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2
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(d)
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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.
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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 of less than three percent (3%) of the stock of
the purchasing company; or (ii) ownership of equity participation in the
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).
2.8 “COBRA Benefits” shall refer
to continued group health insurance benefits under Sections 601-607 of the
federal Employee Retirement Income Security Act of 1974, as
amended.
2.9 “Code” means the United States
Internal Revenue Code of 1986, as amended.
2.10 “Committee” means the
Compensation Committee of the Board or any other committee appointed by the
Board to perform the functions of the Compensation Committee.
2.11 “Company” means Charming
Shoppes, Inc., a Pennsylvania corporation, or any successor thereto as provided
in Article 9 herein. If the Executive is an officer of Charming
Shoppes of Delaware, Inc. and/or any other subsidiary, direct or indirect, of
Charming Shoppes, Inc. only, or an officer of any or all of Charming
Shoppes of Delaware, Inc., Charming Shoppes, Inc., and/or any other subsidiary,
direct or indirect, of Charming Shoppes, Inc., the word "Company" shall be
deemed to include not only Charming Shoppes, Inc. but also Charming Shoppes of
Delaware, Inc., and/or such other subsidiary, direct or indirect, of Charming
Shoppes, Inc., as applicable, with respect to employment matters, including
termination of employment, where appropriate. References to the
"Company" with respect to a Change in Control and matters incidental to the
determination of a Change in Control relate only to Charming Shoppes,
Inc.
2.12 “Disability” means complete
and permanent inability by reason of illness or accident to perform the duties
of the occupation at which the Executive was employed when such disability
commenced.
2.13 “Effective Date” means the
date of this Agreement set forth above.
2.14 “Effective Date of
Termination” means the date of termination of active employment with the
Company.
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2.15 “Exchange Act” means the
United States Securities Exchange Act of 1934, as amended.
2.16 “Good Reason” shall mean,
without the Executive’s express written consent, the occurrence of any one or
more of the following:
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(a)
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A material
diminution of the Executive’s authorities, duties or responsibilities as
an employee of the Company including the Executive ceasing to have the
title of President and Chief Executive Officer of the
Company.
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(b)
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A material change in
the geographic location at which the Executive must perform services; for
purposes of this Agreement, a material change means the Company requires
the Executive to be based at a location which is at least fifty (50) miles
farther from the Executive’s then current primary residence than is the
Executive’s then current office
location;
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(c)
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A material
diminution by the Company in the Executive's Base Salary as in effect on
the Effective Date or as the same shall be increased from time to time;
or
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(d)
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A material breach by
the Company of this
Agreement.
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Notwithstanding
the foregoing, the Executive shall not have Good Reason for termination if,
within sixty (60) days after the date on which the Executive gives a Notice of
Termination, as provided in Section 3.8, the Company corrects the action or
failure to act that constitutes the grounds for termination for Good Reason as
set forth in the Executive’s Notice of Termination. If the Company
does not correct the action or failure to act, the Executive must terminate his
or her employment within thirty (30) days after the end of the cure period, in
order for the termination to be considered a Good Reason
termination. The existence of Good
Reason shall not be affected by the Executive’s temporary incapacity due to
physical or mental illness not constituting a Disability.
2.17 “Notice of Termination” shall
mean a written notice which shall indicate the specific termination provision 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 so indicated.
2.18 “Qualifying Termination” means
any of the events described in Section 3.2 herein, the occurrence of which
triggers the payment of Severance Benefits hereunder.
2.19 “Related Party” means (a) a
majority-owned subsidiary of the Company; or (b) a trustee or other fiduciary
holding securities under an employment 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.
2.20 “Retirement” means the
Executive’s voluntary termination of employment in a manner which qualifies the
Executive to receive immediately payable retirement benefits under the Company’s
tax-qualified retirement plan or under the successor or replacement of such
retirement plan if it is then no longer in effect. The term
“Retirement” shall not mean a termination of the Executive’s employment under
circumstances that constitute Good Reason or that constitute an involuntary
termination of the Executive’s employment by the Company.
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2.21
“Separation
Pay Limitation” means the lesser
of (i) two (2) times the Executive's then annual compensation or (ii) two (2)
times the limit on compensation then set forth in Section 401(a)(17) of the
Code, as determined for purposes of the “separation pay” exception under Section
409A of the Code.
2.22 “Severance Benefits” means the
payment of severance compensation as provided in Section 3.4
herein.
2.23 “Three-Year Average Bonus”
means the Bonus Percentage (defined below) multiplied by the Executive’s target
annual cash bonus in effect for the fiscal year in which the Effective Date of
Termination occurs. The Bonus Percentage is calculated as the average
of the following percentages for each of the three (3) fiscal years preceding
the Effective Date of Termination: (i) the annual cash bonus paid to
the Executive for the fiscal year, divided by (ii) the Executive’s target annual
cash bonus for the fiscal year. If the Executive has been employed
for less than three (3) fiscal years at the Date of Termination, the average
bonus will be based on the completed fiscal years from the date the Executive
commenced employment with the Company to the Executive’s Date of
Termination.
2.24 “Voting Securities” means any
securities of the Company which carry the right to vote generally in the
election of directors.
Article
3. Severance Benefits
3.1
Right to Severance
Benefits. The Executive shall be entitled to receive from the
Company Severance Benefits, as described in Section 3.4 herein, if there
has been a Qualifying Termination and a Notice of Termination for a Qualifying
Termination has been delivered, provided the Executive executes and does not
revoke a written release and waiver of claims, in form and substance acceptable
to the Company (the “Release”), of any and all claims against the Company and
all related parties with respect to all matters arising out of the Executive’s
employment by the Company, or the termination thereof (other than claims based
upon any severance entitlements under the terms of this Agreement or
entitlements under any plans or programs of the Company under which Executive
has accrued a benefit).
The
Executive shall not be entitled to receive Severance Benefits if the Executive’s
employment is terminated for Cause, or if his or her employment with the Company
ends due to death, Disability, or Retirement or due to a voluntary termination
of employment by the Executive without Good Reason.
3.2 Qualifying
Termination. The occurrence of any one or more of the
following events (as evidenced by a Notice of Termination) shall be considered a
Qualifying Termination under this Agreement:
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(a)
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A
termination of the Executive’s employment by the Company for reasons other
than Cause, as evidenced by a Notice of Termination delivered by the
Company to the Executive; or
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(b)
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A
termination by the Executive for Good Reason, as evidenced by a Notice of
Termination delivered by the Executive to the
Company.
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3.3 Benefit Period. In
the event of a Qualifying Termination, the Executive will receive Severance
Benefits with respect to the Benefit Period. The Benefit Period shall
in all events be twenty-four (24) months.
3.4 Severance
Benefits. In the event the Executive becomes entitled to
receive Severance Benefits as provided in Sections 3.1 and 3.2 herein,
the Executive shall receive the following Severance Benefits:
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(a)
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In
the event of a Qualifying Termination before a Change in Control, or in
the event of a Qualifying Termination after twenty-four (24) months
following a Change in Control, the Company shall pay to the Executive the
following:
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(i)
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An
amount equal to two (2) times the Executive’s annual Base Salary. This
severance amount shall be payable in regular payroll installments over the
Benefit Period, beginning within thirty (30) days after the Effective Date
of Termination, subject to the six-month delay of Section 409A of the
Code, if applicable, as described in subsection (f)
below.
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(ii)
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Reimbursement
of the Executive’s monthly cost of COBRA Benefits under the Company’s
health plan for the Benefit Period, provided, however, that payment of the
COBRA Benefits shall be discontinued prior to the end of the Benefit
Period if the Executive ceases to receive COBRA coverage under the
Company’s health plan or if the Executive has available substantially
similar benefits at a comparable cost to the Executive from a subsequent
employer, as determined by the Committee. The COBRA
reimbursement payments shall be paid monthly on the first payroll date of
each month, beginning within thirty (30) days after the Effective Date of
Termination.
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(iii)
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A
lump sum amount equal to the Executive’s unpaid annual cash bonus,
calculated based on Company performance, for the year in which the
Executive’s Effective 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 Effective Date of Termination, and
the denominator of which is three hundred and sixty-five (365). This
payment will be paid when the annual cash bonuses for the year are paid to
other executives of the Company (but no later than the end of the “short
term deferral” exception period under Section 409A of the
Code).
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(iv)
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Outplacement
services, as described in Article
8.
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(v)
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A
lump sum amount equal to the Executive’s unpaid Base Salary, accrued
vacation pay, and earned but not taken vacation pay through the Effective
Date of Termination. This payment shall be made within thirty
(30) days after the Effective Date of
Termination.
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(b)
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In
the event of a Qualifying Termination upon or within twenty-four (24)
months after a Change in Control, the Company shall pay to the Executive
the following amounts, all of which shall be paid within thirty (30) days
after the Effective Date of Termination (except as provided in subsection
(b)(iv) or (f) below):
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(i)
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A
lump sum amount equal to two (2) times the sum of (A) the Executive’s
annual Base Salary, plus (B) the Executive’s Three-Year Average
Bonus.
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(ii)
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A
lump sum amount equal to the monthly cost of COBRA Benefits under the
Company’s health plan and the Company’s monthly cost of life insurance and
disability coverage in effect for the Executive at the Effective Date of
Termination, multiplied by the number of full months in the Benefit
Period.
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(iii)
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A
lump sum amount equal to the Executive’s unpaid target annual cash bonus
established for the year in which the Executive’s Effective 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
Effective Date of Termination, and the denominator of which is three
hundred and sixty-five (365). This lump sum amount shall be
payable regardless of whether the Company meets its performance objectives
for the year in which the Executive’s Effective Date of Termination
occurs.
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(iv)
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Outplacement
services, as described in Article
8.
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(v)
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A
lump sum amount equal to the Executive’s unpaid Base Salary, accrued
vacation pay, and earned but not taken vacation pay through the Effective
Date of Termination.
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(c)
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Except
as specifically provided above, incentive awards granted under the
incentive arrangements adopted by the Company shall be paid pursuant to
the terms of the applicable plan. Equity awards shall be paid
pursuant to the terms of the applicable
plan.
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(d)
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The
aggregate benefits accrued by the Executive as of the Effective Date of
Termination under the savings and retirement plans sponsored by the
Company shall be distributed pursuant to the terms of the applicable
plan.
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(e)
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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 or earnings credited with respect to any such
deferred compensation balances, shall be distributed pursuant to the terms
of the applicable plan.
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(f)
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To
the maximum extent permitted under Section 409A of the Code, the severance
benefits payable under this Agreement are intended to comply with the
“short-term deferral exception” under Section 409A and the “separation pay
exception” under Section 409A. Any amount payable to the Executive during
the six (6) month period following the Effective Date of Termination that
does not qualify for either of the foregoing exceptions and that
constitutes deferred compensation subject to the requirements of Section
409A of the Code is referred to as the “Excess Amount.” If at the
time of the Executive’s separation from service, the Executive is a
“specified employee” (as defined in Section 409A of the Code and
determined in accordance with the Company’s “specified employee”
determination policy), the Company shall postpone payment of the Excess
Amount for six (6) months following the Effective Date of Termination as
described in Section 4.1 below.
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(g)
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Notwithstanding
Section 3.4(b), the cash severance payments described in Section 3.4(b)(i)
and (ii) shall be paid in a lump sum payment only if the Change in Control
constitutes a change in control event under Section 409A (a “409A Change
in Control”), if required by Section 409A. If the Change in Control
does not constitute a 409A Change in Control, the cash severance payments
described in Section 3.4(b)(i) and (ii) shall be paid in installments as
described in Section 3.4(a)(i) and (ii), if required by Section
409A.
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3.5 Termination for
Disability. If the Executive’s employment is terminated by
reason of his or her Disability, the Executive shall receive his or her Base
Salary and accrued vacation through the Effective Date of Termination, at which
point in time the Executive’s benefits shall be determined in accordance with
the Company’s disability, retirement, insurance, and other applicable plans and
programs then in effect. In the event the Executive’s employment is
terminated due to Disability, the Executive shall not be entitled to the
Severance Benefits described in Section 3.4.
3.6 Termination for Retirement or
Death. If the Executive’s employment is terminated by reason
of Retirement or 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. In the event
the Executive’s employment is terminated by reason of his or her Retirement or
death, the Executive shall not be entitled to the Severance Benefits described
in Section 3.4.
3.7 Termination for Cause, or Other Than
for Good Reason or Retirement. If the Executive’s employment is
terminated either: (a) by the Company for Cause; or (b) by
the Executive (other than for Retirement or Good Reason), the Company
shall pay the Executive his or her full Base Salary and accrued vacation through
the Effective Date of Termination, at the rate then in effect, plus all other
amounts to which the Executive is entitled under any compensation plans of the
Company, at the time such payments are due, and the Company shall have no
further obligations to the Executive under this Agreement.
3.8 Notice of
Termination. The Company may terminate the Executive’s
employment by providing not less than sixty (60) days prior written
notice. The Executive shall provide notice of a termination of
employment by the Executive for Good Reason within thirty (30) days
after the event giving rise to Good Reason occurs. Any termination of
employment by the Executive or by the Company for any reason shall be
communicated by a Notice of Termination.
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Article
4. Tax Compliance
4.1Section
409A.
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(a)
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Notwithstanding
the foregoing, if required by Section 409A of the Code, if any amounts
payable upon separation from service are considered “deferred
compensation” under Section 409A, payment of such amounts will be
postponed as required by Section 409A, and the postponed amounts will be
paid, with accrued interest as described below, on the first monthly
payroll date occurring after six (6) months following the Effective Date
of Termination. If the Executive dies during the postponement
period, any amounts postponed on account of Section 409A of the Code, with
accrued interest as described below, shall be paid to the personal
representative of the Executive's estate within sixty (60) days after the
date of the Executive's death. If payment of any amounts under
this Agreement is required to be delayed pursuant to Section 409A, the
Company shall pay interest on the postponed payments from the date on
which the amounts otherwise would have been paid to the date on which such
amounts are paid at a market rate of interest, as determined by the
Committee.
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(b)
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This
Agreement is intended to comply with the requirements of Section 409A of
the Code, and, specifically, the separation pay exceptin and short term
deferral exception of Section 409A, and shall in all respects be
administered and interpreted in accordance with Section
409A. If any payment or benefit cannot be provided or made at
the time specified herein without incurring sanctions on the Executive
under Section 409A of the Code, then such benefit or payment shall be
provided in full at the earliest time thereafter when such sanctions will
not be imposed. Notwithstanding anything in the Agreement to
the contrary, distributions may only be made under the Agreement upon an
event and in a manner permitted by Section 409A of the Code or an
applicable exception. All payments to be made upon a
termination of employment under this Agreement may only be made upon a
“separation from service” under Section 409A. For purposes of
Section 409A of the Code, the right to a series of installment payments
under this Agreement shall be treated as a right to a series of separate
payments, and each payment under this Agreement shall be treated as a
separate payment. In no event may the Executive, directly or
indirectly, designate the calendar year of any payment to be made under
this Agreement.
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(c)
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All
reimbursements and in-kind benefits provided under this Agreement shall be
made or provided in accordance with the requirements of Section 409A of
the Code, including, where applicable, the requirement that (i) any
reimbursement shall be for expenses incurred during the Executive’s
lifetime (or during a shorter period of time specified in this Agreement),
(ii) the amount of expenses eligible for reimbursement, or in-kind
benefits provided, during a calendar year may not affect the expenses
eligible for reimbursement, or in-kind benefits to be provided, in any
other calendar year, (iii) the reimbursement of an eligible expense will
be made on or before the last day of the calendar year following the year
in which the expense is incurred, and (iv) the right to reimbursement or
in-kind benefits is not subject to liquidation or exchange for another
benefit.
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9
4.2 Withholding of
Taxes. The Company shall be entitled to withhold from any
amounts payable under this Agreement all taxes as legally shall be required to
be withheld (including, without limitation, any United States federal taxes and
any other state, city, or local taxes).
Article
5. Application of 280G
5.1 Effect of Section 280G on
Payments. In the event a Change in Control occurs and the
Executive becomes entitled to any benefits or payments in the nature of
compensation (within the meaning of Section 280G(b)(2) of the Code) under this
Agreement, or any other plan, arrangement, or agreement with the Company (the
“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 aggregate present value of the Payments under this
Agreement shall be reduced (but not below zero) to the Reduced Amount (as
defined below), if reducing the Payments under this Agreement will provide the
Executive with a greater net after-tax amount than would be the case if no
reduction was made. The “Reduced Amount” shall be an amount expressed
in present value which maximizes the aggregate present value of Payments without
causing any Payment under this Agreement to be subject to the Excise Tax,
determined in accordance with Section 280G(d)(4) of the Code. The
Company shall reduce the Payments under this Agreement by first reducing
Payments that are not payable in cash and then by reducing cash
Payments. Only amounts payable under this Agreement shall be reduced
pursuant to this Section 5.1.
5.2 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 accounting firm. For purposes of determining whether any
of the Payments will be subject to the Excise Tax and the amount of such Excise
Tax, the Company may take into account any relevant guidance under the Code and
the regulations promugalted thereunder, including, but not limited to, the
following:
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(a)
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The
amount of the 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, as determined by the Company’s
independent accounting firm;
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(b)
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The
value of any non-cash benefits or any deferred or accumulated payment or
benefit shall be determined by the Company's independent accounting firm
in accordance with the principles of Sections 280G(d)(3) and (4) of the
Code; and
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(c)
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The
value of the non-competition covenants contained in this Agreement shall
be taken into account to reduce “parachute payments” to the maximum extent
allowable under Section 280G of the
Code.
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For
purposes of the determinations under this Article 5, 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 applicable 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, net of the maximum
reduction in federal income taxes which could be
obtained from deduction of such state and local
taxes.”
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Article
6. The Company’s Payment Obligation
The
Company’s obligation to make the payments and the arrangements 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 anyone else. All amounts payable by the Company
hereunder shall be paid without notice or demand. 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.
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.
Article
7. Legal Remedies
7.1 Payment of Legal Fees. To the
extent permitted by law, the Company shall pay all legal fees, costs of
litigation, prejudgment interest, and other expenses incurred in good faith by
the Executive as a result of the Company’s refusal to provide the 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 of thirty-five thousand dollars ($35,000). The Company
will provide such payment or reimbursement, as applicable, in accordance with
Section 4.1(c) herein.
7.2 Arbitration. Any
dispute or controversy arising under or in connection with this Agreement (other
than as described in Section 10.4 below) 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 his or her
employment with the Company, in accordance with the rules 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 limitations set forth in Section 7.1
above relating to legal fees incurred by the Executive, all expenses of such
arbitration, including the fees and expenses of the counsel for the Executive,
shall be borne by the Company.
Article
8. Outplacement Assistance
Following
a Qualifying Termination (as described in Section 3.2 herein),
the Executive shall be reimbursed by the Company for the costs of all
outplacement services obtained by the Executive within the two (2) year period
after the Effective Date of Termination, provided, however, that the total
reimbursement shall be limited to an amount equal to thirty thousand dollars
($30,000). 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 by the
end of the third taxable year following the Effective Date of Termination, in
accordance with Section 409A of the Code.
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Article
9. Successors and Assignment
9.1 Successors to the
Company. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation, or otherwise) of all or
substantially all of the business and/or assets of the Company or of any
division or subsidiary thereof to expressly assume and agree to perform the
Company’s obligations under this Agreement in the same manner and to the same
extent that the Company would be required to perform them if no such succession
had taken place.
9.2 Assignment by the
Executive. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and
legatees. If the Executive dies while any amount would still be
payable to the Executive hereunder had he or she continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive’s Beneficiary. If the
Executive has not named a Beneficiary, then such amounts shall be paid to the
Executive’s devisee, legatee, or other designee, or if there is no such
designee, to the Executive’s estate.
Article
10. Covenants
10.1 Disclosure of
Information. The Executive recognizes that he or she has
access to and knowledge of certain confidential and proprietary information of
the Company which is essential to the performance of his or her duties under
this Agreement. The Executive will not, during or after the term of
his or her employment by the Company, 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 he or she make use of any such
information for his or 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 legal process.
10.2 Covenants Regarding Other
Employees.
(a)
During the term of this Agreement and after the Executive’s termination of
employment for any reason for the period of time equal to the Benefit Period
that would be applicable if there was a Qualifying Termination (regardless of
whether the Executive receives Severance Benefits), the Executive will not
attempt to induce any employee of the Company to terminate his or her employment
with the Company.
(b) After
the Executive’s termination of employment for any reason for the period of time
equal to the Benefit Period that would be applicable if there was a Qualifying
Termination (regardless of whether the Executive receives Severance Benefits),
the Executive will not employ or hire, directly or indirectly, any employee of
the Company and/or its subsidiaries.
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10.3 Non-Competition
Covenants.
(a)
During the term of this Agreement and after the Executive’s termination of
employment for any reason for the period of time equal to the Benefit Period
that would be applicable if there was a Qualifying Termination (regardless of
whether the Executive receives Severance Benefits), the Executive shall not,
within the United States: (1) directly or indirectly own any equity
or proprietary interest (except for ownership of shares in a publicly traded
company not exceeding three percent (3%) of any class of outstanding securities)
in, or be an employee, agent, director, advisor, consultant, or independent
contractor of, any Competitor of the Company, whether on the Executive’s own
behalf or on behalf of any person, or (2) undertake any action to induce or
cause any supplier or vendor to discontinue all or any part of its business with
the Company.
(b) For
purposes of this Agreement, “Competitor” shall mean a chain of retail stores
with fifty (50) or more store locations that sells or distributes primarily
women’s apparel; provided, however, that the average square footage of the
chain’s stores is less than ten thousand (10,000) square feet.
10.4 Non-Disparagement. During
or after the term of his or her employment by the Company, (a) the Executive
will not make any negative or disparaging statements about the professional or
personal reputation of the Company, its officers, directors, or employees,
except if testifying truthfully under oath pursuant to subpoena or other legal
process, and (b) the Company will not make any negative or disparaging
statements about the professional or personal reputation of the Executive except
if testifying truthfully under oath pursuant to subpoena or other legal
process.
10.5 Enforcement.
(a) The
Executive acknowledges and agrees that the restrictions contained in this
Article 10 are reasonable and necessary to protect and preserve the legitimate
interests, properties, goodwill and business of the Company, that the Company
would not have entered into this Agreement in the absence of such restrictions
and that irreparable injury will be suffered by the Company should the Executive
breach any of the provisions of those Sections. The Executive
represents and acknowledges that (i) the Executive has been advised by the
Company to consult the Executive’s own legal counsel in respect of this
Agreement, and (ii) the Executive has had full opportunity, prior to execution
of this Agreement, to review thoroughly this Agreement with the Executive’s
counsel.
(b) The
Executive further acknowledges and agrees that a breach of any of the
restrictions in this Article 10 cannot be adequately compensated by monetary
damages. The Executive agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of Section 10.1, 10.2, 10.3 or 10.4
hereof, which rights shall be cumulative and in addition to any other rights or
remedies to which the Company may be entitled. In the event that any
of the provisions of Section 10.1, 10.2, 10.3 or 10.4 hereof should ever be
adjudicated to exceed the time, geographic, service, or other limitations
permitted by applicable law in any jurisdiction, it is the intention of the
parties that the provision shall be amended to the extent of the maximum time,
geographic, service, or other limitations permitted by applicable law, that such
amendment shall apply only within the jurisdiction of the court that made such
adjudication and that the provision otherwise be enforced to the maximum extent
permitted by law.
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(c)
Notwithstanding anything in this Agreement to the contrary, if the Executive
breaches any of the Executive’s obligations under Section 10.1, 10.2, 10.3 or
10.4 hereof, the Company shall thereafter be obligated only for the compensation
and other benefits provided in any Company benefit plans, policies or practices
then applicable to the Executive in accordance with the terms thereof, and all
payments under this Agreement shall cease.
(d) The
covenants described in this Article shall continue to apply during the period
specified herein after the Executive’s termination of employment for any reason,
without regard to whether the Executive executes a Release or receives any
Severance Benefits as a result of such termination. If the Executive
breaches any of the covenants described in Sections 10.1, 10.2, 10.3 and 10.4,
the applicable period during which the covenant applies shall be tolled during
the period of the breach. Without limiting the foregoing, the
Severance Benefits provided under this Agreement are specifically designated as
additional consideration for the covenants described in Sections 10.1, 10.2,
10.3 and 10.4.
(e) All
references to the Company in this Article 10 shall include Charming Shoppes,
Inc. and its subsidiaries, direct or indirect, and each of their
successors.
Article
11. Miscellaneous
11.1 Notices. All
notices and other communications required or permitted under this Agreement or
necessary or convenient in connection herewith shall be in writing and shall be
deemed to have been given when hand delivered or mailed by registered or
certified mail, as follows (provided that notice of change of address shall be
deemed given only when received):
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If
to the Company, to:
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Charming
Shoppes, Inc.
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0000
Xxxxx Xxxx
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Xxxxxxxx,
XX 00000
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Attention: General
Counsel
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|
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If
to the Executive, to:
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|
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Xxxxx
X. Xxxxxxx
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|
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00
Xxx Xxxxxxx Xxxxx Xxxx
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|
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Xx.
Xxxxx, XX 00000
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or to
such other names or addresses as the Company or the Executive, as the case may
be, shall designate by notice to each other person entitled to receive notices
in the manner specified in this Section.
14
11.2 Employment
Status. Except as may be provided under any other agreement
between the Executive and the Company, the employment of the Executive by the
Company is “at will,” and may be terminated by either the Executive or the
Company at any time, subject to applicable law.
11.3 Beneficiaries. The
Executive may designate one or more persons or entities as the primary and/or
contingent Beneficiaries of any Severance Benefits owing to the Executive under
this Agreement. Such designation must be in the form of a signed
writing acceptable to the Committee. The Executive may make or change
such designations at any time.
11.4 Severability. In
the event any provision of this Agreement shall be held illegal or invalid for
any reason, the illegality or invalidity shall not affect the remaining parts of
the Agreement, and the Agreement shall be construed and enforced as if the
illegal or invalid provision had not been included. Further, the
captions of this Agreement are not part of the provisions hereof and shall have
no force and effect.
11.5 Modification. No
provision of this Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is approved by the Committee and agreed to in
writing and signed by the Executive and by an authorized officer of the Company,
or by the respective parties’ legal representatives and successors.
11.6 Other Severance Plans and
Agreements. The benefits under this Agreement will be provided
in lieu of benefits under any other severance plan or agreement of the Company,
except as otherwise provided herein. Except as otherwise provided
herein, this Agreement replaces any other severance agreements between the
Executive and the Company or a subsidiary and any non-competition or
non-solicitation agreements between the Executive and the Company or a
subsidiary.
11.7 Counterparts. This
Agreement may be executed in any number of counterparts, each of which when so
executed and delivered shall be an original hereof, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one counterpart hereof.
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11.8. Applicable Law. To
the extent not preempted by the laws of the United States, the laws of the state
of Pennsylvania shall be the controlling law in all matters relating to this
Agreement.
IN
WITNESS WHEREOF, the parties have executed this Agreement on this ___ day of
April, 2009.
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CHARMING
SHOPPES, INC.
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EXECUTIVE
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_______________________________
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___________________________________
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Xxxx
Xxxxxxxx
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Its: Chairman
of the Board and
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Interim
Chief Executive Officer
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ATTEST:________________________
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Xxxxx
X. Xxxxx
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Secretary
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