Exhibit 10.6
SAUCONY, INC.
13 Centennial Drive
Peabody, MA 01960
September 9, 2004
Dear Roger Deschenes:
On August 2, 2004 Saucony, Inc., a Massachusetts corporation ("Saucony"),
announced publicly that it has retained the services of Chestnut Securities,
Inc. to advise it as to its strategic alternatives. These strategic alternatives
may include a Change in Control (as defined below) of Saucony.
Saucony desires to assure itself as to the continued availability of your
services while it assesses and, in its discretion, negotiates and implements
these strategic alternatives. In addition, should Saucony decide to pursue a
Change in Control, Saucony desires to provide you with additional incentive to
assist with and facilitate such a transaction. Therefore, subject to the terms
of, and as further provided for in, this letter agreement (this "Agreement"),
Saucony desires to offer and pay to you retention bonuses in the event it
completes a Change in Control on or prior to June 30, 2005.
Duties
As part of this Agreement, you agree to (1) perform all of your current
duties, as well as any other duties assigned to you pursuant to your role at
Saucony, in a professional and businesslike manner and (2) assist with and
facilitate in a constructive manner Saucony's assessment, negotiation and
implementation of various strategic alternatives Saucony may, in its discretion,
choose to pursue, including, without limitation, a Change in Control. You agree
that you will not interfere, directly or indirectly, by any act or failure to
act, with any Change in Control or any other strategic alternative.
Change in Control
If Saucony completes a Change in Control on or prior to June 30, 2005 and
you have remained continuously employed full-time by Saucony at all times from
the date of this Agreement through the date of such Change in Control and have
performed your duties as described above, Saucony will pay you a retention bonus
of $73,192.47 in a lump sum (reduced by any applicable withholding taxes) within
30 days after it completes such Change in Control. If, in addition to such
continuous full-time employment through the date of such Change in Control, you
remain continuously employed full-time by Saucony during the period ending six
months after Saucony completes such Change in Control (the "Post-Closing
Period"), or your employment at Saucony is terminated during the Post-Closing
Period by Saucony without Cause (as defined below) or by you for Good Reason (as
defined below), Saucony will pay you an additional retention bonus of $73,192.47
in a lump sum (reduced by any applicable withholding taxes) within 30 days after
the end of the Post-Closing Period (or, if earlier, the date of your
termination).
Nothing in this Agreement imposes any requirement on Saucony to assess,
negotiate, enter into or complete a Change in Control or any other strategic
alternative.
As used herein:
(a) "Cause" means (i) your willful misconduct in connection with your
employment or your material failure to perform your employment
responsibilities, which is not cured after notice and a reasonable
opportunity (not to exceed 20 days) to cure, or (ii) your conviction
of, or your entry of a pleading of guilty or nolo contendere to, any
crime involving moral turpitude or any felony.
(b) "Change in Control" means the acquisition by any person, corporation
or other entity (other than an Exempt Person (as defined below)) of
beneficial ownership of capital stock of Saucony representing a
greater than 66.67% interest in the shares of Saucony's capital stock
entitled to vote generally in the election of directors, by means of
stock purchase, merger or other business combination (other than a
merger or other business combination with the primary purpose of
changing Saucony's jurisdiction of organization or a reorganization or
restructuring with the primary purpose of implementing a holding
company or other structure); provided, that, such an acquisition of
beneficial ownership of capital stock of Saucony by the resulting,
surviving or acquiring person, corporation or other entity in a merger
or other business combination with Saucony (or an affiliate of such a
resulting, surviving or acquiring person, corporation or other entity)
pursuant to which the stockholders of Saucony immediately prior to
such merger or other business combination beneficially own at least a
majority of the capital stock of such resulting, surviving or
acquiring person, corporation or other entity (or an affiliate of such
resulting, surviving or acquiring person, corporation or other entity)
immediately following such merger or business combination shall not be
deemed to be a Change in Control.
(c) "Exempt Person" means John H. Fisher, Charles A. Gottesman or Merrill
F. Gottesman (each, a "Significant Stockholder") or any ancestor,
descendent, spouse, sibling or spouse of a sibling of a Significant
Stockholder or any entity affiliated with any Significant Stockholder.
(d) "Good Reason" means (i) a reduction in your annual base salary as in
effect on the date Saucony completed the relevant Change in Control,
(ii) a change in the location at which you perform your principal
duties for Saucony to a new location more than 30 miles from the
location at which you performed your principal duties for Saucony on
the date Saucony completed the relevant Change in Control or (iii) a
significant diminution of your overall authority or responsibilities
from those customarily assigned to a vice president of Saucony.
Notwithstanding the occurrence of any event described in clauses (i),
(ii) or (iii) of the immediately preceding sentence, such occurrence
shall not be deemed to constitute Good Reason if, within 20 days of
your written notice to Saucony describing in reasonable detail the
occurrence of such event (the "Good Reason Notice"), such event has
been corrected (and any termination of your employment for Good Reason
based upon the occurrence of such event shall not be effective until
the date 21 days after your delivery to Saucony of the Good Reason
Notice).
Taxes
Any payments under this Agreement shall be made without regard to whether
the deductibility of such payments (or any other payments contingent upon a
change in control as such terms are defined for purposes of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") to or for your benefit
(collectively, "Change in Control Payments")) would be limited or precluded by
Section 280G and without regard to whether such payments (or any other Change in
Control Payments) would subject you to the federal excise tax levied on certain
"excess parachute payments" under Section 4999 of the Code; provided that if the
total of all Change in Control Payments to or for your benefit, after reduction
for all federal, state and local taxes (including the tax described in Section
4999 of the Code, if applicable) with respect to such payments (the "Total
After-Tax Payments"), would be increased by the limitation or elimination of any
payments under this Agreement or any Change in Control Payments under other
agreements or arrangements between you and Saucony, then the amounts payable
under this Agreement (or the Change in Control Payments under such other
agreements or arrangements as Saucony and you shall mutually determine) shall be
reduced to the extent, and only to the extent, necessary to maximize the Total
After-Tax Payments. The determination as to whether and to what extent the
payments under this Agreement (or the Change in Control Payments under such
other agreements or arrangements) are required to be reduced in accordance with
the preceding sentence shall be made at Saucony's expense by a certified public
accounting firm designated by Saucony's Board of Directors prior to a Change in
Control. In the event of any underpayment or overpayment under this Agreement
(or such other agreements or arrangements) as determined by the firm designated
in accordance with the preceding sentence, the amount of such underpayment or
overpayment shall promptly be paid to you or refunded to Saucony, as the case
may be, with interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code.
Assignment
This Agreement binds Saucony, its successors or assigns, and your heirs and
the personal representatives of your estate. Without Saucony's prior written
consent, you may not assign or delegate this Agreement or any or all rights,
duties, obligations, or interests under it. References in this Agreement to
Saucony applicable to any time following a Change in Control include, if
applicable in the context, Saucony's successor, assign or acquirer in connection
with such Change in Control.
At-Will Employment
Nothing in this Agreement changes the at-will nature of your employment by
Saucony. Without limiting the foregoing, if your employment by Saucony
terminates prior to the completion of a Change in Control for which Saucony
would otherwise be obligated to pay you a retention bonus pursuant to this
Agreement, Saucony will not be required to pay you any retention bonus,
regardless of the circumstances of the termination of your employment, whether
the termination was with Cause (including, without limitation, your failure to
perform your obligations set forth in this Agreement under the heading "Duties"
or otherwise) or without Cause or whether the termination was at your or
Saucony's election. In addition, if your employment by Saucony terminates
following a Change in Control and prior to the end of any Post Closing Period
for which Saucony would otherwise be obligated to pay you a retention bonus
pursuant to this Agreement, Saucony will not be required to pay you such
retention bonus if your employment at Saucony is terminated during the
Post-Closing Period by Saucony for Cause or by you without Good Reason.
Release and Non-Disparagement
In partial consideration of Saucony's agreement to pay to you retention
bonuses subject to and on the terms and conditions set forth in this Agreement:
(i) You hereby fully, forever, irrevocably and unconditionally release and
discharge Saucony, its directors, officers, stockholders, affiliated
entities, agents, employees and representatives (the "Released
Parties"), from any and all claims, causes of action, agreements,
promises, liabilities, obligations and expenses ("Claims"), of every
kind and nature, whether arising from any act, omission,
misrepresentation or otherwise, and whether based on any federal,
state or other law or right of action at law or in equity, and whether
foreseen or unforeseen, matured or unmatured, known or unknown, that
you ever had or now have against any and all of the Released Parties,
including, without limitation, any and all Claims arising out of or
relating to your employment with Saucony; provided, that, nothing in
this paragraph (i) shall release or discharge any Claim for (y)
salary, personal, sick or vacation time or other benefits accrued and
unpaid through the date of this Agreement or (z) stock options granted
to you with the specific approval of Saucony's Board of Directors.
(ii) You understand and agree that you will not make any false, disparaging
or derogatory statements to any person or entity regarding Saucony or
any of its directors, officers, stockholders, affiliated entities,
agents, employees or representatives or about Saucony's business
affairs or financial condition.
General
All notices under this Agreement must be in writing and delivered, if to
Saucony, to its Chief Executive Officer at its principal place of business, and
if to you, at the most recent address for you set forth in Saucony's personnel
records. The laws of the Commonwealth of Massachusetts (other than its conflict
of laws provisions) govern this Agreement. Each of Saucony and you hereby waives
any right to trial by jury in any proceeding arising out of or relating to this
Agreement.
If you accept the terms of this Agreement, please sign below and return a
copy to Hal J. Leibowitz, Esq., Wilmer Cutler Pickering Hale and Dorr LLP, 60
State Street, Boston, MA 02109, by no later than 5:00 p.m. (Eastern time) on
September 10, 2004. We encourage you to consult with any advisors you choose.
Very truly yours,
SAUCONY, INC.
By: /s/ John H. Fisher
Name: John H. Fisher
Title: CEO
I accept and agree to the terms set forth in this Agreement:
/s/ Roger P. Deschenes Dated: September 10, 2004
Roger Deschenes