EXHIBIT 10.06
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made as of August 28, 1998
(the "Effective Date"), by and between G+G Retail, Inc., a Delaware corporation
(the "Company"), and Jay Galin, an individual resident in 167 East 71st Street,
New York, NY 10021 (the "Executive").
RECITALS
Concurrently with the execution of this Agreement (i) the Company is
purchasing certain assets and assuming certain liabilities pursuant to the Asset
Purchase Agreement, dated as of July 6, 1998 among the Company, G & G Shops,
Inc., the subsidiaries of G & G Shops, Inc. named therein, the subsidiaries of
Petrie Retail, Inc. named therein and PSL, Inc., as amended (the "Asset Purchase
Agreement") and (ii) Pegasus G&G Retail, L.P., Pegasus G&G Retail II, L.P.
(collectively, the "Investors"), the Executive and the other stockholders of G&G
Retail Holdings, Inc., the Company's parent company ("Parent Company") are
entering into a stockholders agreement (the "Stockholders Agreement"), providing
for various rights and obligations of the Parent Company's stockholders. The
Company and the Investors desire the Executive's continued employment with the
Company, and the Executive wishes to accept such continued employment, upon the
terms and subject to the conditions set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.
"Agreement" shall mean this Employment Agreement, including the schedules
and exhibits hereto, as modified, supplemented or amended from time to time.
"Asset Purchase Agreement" shall have the meaning set forth in the
Recitals to this Agreement.
"Basic Compensation" shall have the meaning set forth in Section 3.1(b).
"Benefits" shall have the meaning set forth in Section 3.1(b).
"Board of Directors" shall mean the board of directors of the Company.
"Bonus Compensation" shall have the meaning set forth in Section 3.2(a).
"Cause" shall have the meaning set forth in Section 4.3.
"Company" shall have the meaning set forth in the first paragraph of this
Agreement.
"Confidential Information" shall mean any and all knowledge and
information relating to the business and affairs of the Company or any of its
affiliates, their products, processes and/or services and their customers,
suppliers, landlords, creditors, shareholders, contractors, agents, consultants
and employees ("Related Persons"), that is or is intended by any of them to be
of a confidential nature, including, but not limited to, any and all knowledge
and information relating to products, research, development, inventions,
manufacture, purchasing, accounting, finances, costs, profit margins, marketing,
merchandising, selling, customer lists, customer requirements and personnel,
pricing, pricing methods, computer programs and software, databases and data
processing and any and all other such knowledge, information and materials,
heretofore or hereafter during the term of this Agreement, conceived, designed,
created, used or developed by or relating to the Company, any of its affiliates
or any Related Person; Confidential Information does not include any information
that may be in the public domain or come into the public domain not as a result
of a breach by the Executive of any of the terms or provisions of this
Agreement.
"Designated Beneficiary" shall have the meaning set forth in Section 5.5.
"Disability" shall have the meaning set forth in Section 4.2.
"Effective Date" shall have the meaning set forth in the first paragraph
of this Agreement.
"Employment Period" shall have the meaning set forth in Section 2.2(a).
"Executive" shall have the meaning set forth in the first paragraph of
this Agreement.
"Good Reason" shall have the meaning set forth in Section 4.4.
"Investors" shall have the meaning set forth in the Recitals to this
Agreement.
"Parent Company" shall have the meaning set forth in the first paragraph
of this Agreement.
"Person" shall mean any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, governmental body or other
entity.
"Post-Employment Period" shall have the meaning set forth in Section 6.2.
"Proprietary Items" shall have the meaning set forth in Section 5.2(d).
2
"Salary" shall have the meaning set forth in Section 3.1(a).
"Stockholders Agreement" shall have the meaning set forth in the Recitals
to this Agreement.
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT
Upon consummation of the transactions contemplated in the Asset
Purchase Agreement, the Company employs the Executive, and the Executive accepts
employment by the Company, upon the terms and subject to the conditions set
forth in this Agreement.
2.2 TERM
(a) Subject to the provisions of Section 4 and paragraph (b) below,
the term of the Executive's employment under this Agreement shall be two years,
beginning on the Effective Date and ending on the second anniversary of the
Effective Date (the "Employment Period").
(b) At any time during the Employment Period, the Executive may, by
written notice to the Company in accordance with Section 7.7 (the "Consulting
Notice"), terminate this Agreement and serve as a consultant to the Company (the
"Consulting Option"), substantially upon the terms and conditions set forth in
the consulting agreement attached hereto as Exhibit A (the "Consulting
Agreement"). Following the exercise by the Executive of the Consulting Option,
this Agreement shall terminate and the Consulting Agreement shall take effect in
place of this Agreement in all respects on the later of (i) the date on which
the Company and the Executive enter into the Consulting Agreement and (ii) the
date which is three full months following receipt by the Company of the
Consulting Notice.
2.3 DUTIES
The Executive shall have such duties as are assigned or delegated to
the Executive by the Board of Directors, and shall initially serve as Chairman
and Chief Executive Officer of the Company. The Executive shall (a) devote his
entire business time, attention, skill and energy exclusively to the business of
the Company, (b) serve the Company faithfully, diligently and to the best of his
ability under the direction of the Board of Directors, (c) use his best efforts
to promote the success of the Company's business and (d) cooperate fully with
the Board of Directors in the advancement of the best interests of the Company.
The Executive shall not, without the prior written consent of the Board of
Directors (x) do anything or permit anything to be done at his direction
inconsistent with his duties to the Company or its affiliates or opposed to
their best interests, or (y) become an officer, director, employee or consultant
of, or otherwise become associated with or engaged in, any business other than
that of the Company and the Parent Company, except that the Executive may
continue to serve as a non-employee or "outside" director of Ark Restaurants
Corp.,
3
a publicly-held company. Nothing in this Section 2.3 shall prevent the Executive
from engaging in additional activities in connection with personal investments
and community affairs that are not inconsistent with the Executive's duties
under this Agreement. If the Executive is elected as a director of the Company
or as a director or officer of any of its affiliates, the Executive shall
fulfill his duties as such director or officer without additional compensation.
During the Employment Period, the Executive shall be headquartered in New York
City.
3. COMPENSATION AND BENEFITS
3.1 BASIC COMPENSATION
(a) Salary. The Executive shall be paid an initial annual salary of
$1,050,000 ("Salary"), which shall be payable in equal periodic installments
according to the Company's customary payroll practices, but no less frequently
than monthly. On each anniversary of the commencement of the Employment Period,
the Executive's Salary shall be increased by $25,000.
(b) Benefits. The Company shall maintain for the Executive during
the Employment Period, at no cost to the Executive, hospitalization, medical,
surgical, dental and other employee benefit plans of the Company currently in
effect, as set forth on Schedule 3.1 hereto including, without limitation, so
called Blue Cross-Blue Shield and major medical coverage, (collectively the
"Benefits" and, together with the Salary, "Basic Compensation"), providing for
direct payment or reimbursement to the Executive of substantially all medical
and dental expenses incurred by the Executive, his spouse and dependent members
of his family during the Employment Period.
The Company shall furnish to the Executive, during the Employment
Period, an automobile comparable to that currently being furnished to the
Executive by G&G Shops, Inc. The Company shall pay all expenses relating to the
maintenance and business use of such automobile, including, without limitation,
insurance, repairs and fuel.
(c) Expenses. The Company shall pay on behalf of the Executive (or
reimburse the Executive for) reasonable expenses incurred by the Executive at
the request of, or on behalf of, the Company in the performance of the
Executive's duties pursuant to this Agreement, and in accordance with the
Company's employment policies. The Executive shall file expense reports with
respect to such expenses in accordance with the Company's policies.
3.2 BONUS COMPENSATION
The Company shall implement a bonus plan for the benefit of the
senior management of the Company which plan shall provide for annual bonuses to
be paid to eligible members of the Company's management based on the Company
attaining certain annual EBITDA targets to be agreed upon and specified by the
holders of the Parent Company's shares of Class A common stock, par value $.001
per share and Class B common stock, par value $.001 per share.
4
The Executive will be eligible to receive collectively with Scott
Galin up to (and no more than) 50% of the aggregate bonus pool amount, provided,
that in no event shall the Executive receive a bonus amount greater than the
amount of his annual salary. The remainder of the bonus pool shall be
distributed as determined by the Executive and Scott Galin jointly.
The bonus plan shall terminate upon consummation by the Company of
an initial public offering of its common stock, at which time the Company will
consider replacing the bonus plan with a plan more appropriate for public
companies.
4. TERMINATION
4.1 EVENTS OF TERMINATION
The Employment Period, the Executive's Basic Compensation and Bonus
Compensation and any and all other rights of the Executive under this Agreement
or otherwise as an employee of the Company shall terminate (except as otherwise
provided in this Section 4):
(a) upon the death of the Executive;
(b) upon the Disability (as defined in Section 4.2) of the
Executive, immediately upon notice from either party to the other;
(c) upon termination by the Company for Cause (as defined in Section
4.3), on the date specified in Section 4.3; or
(d) upon termination by the Executive for Good Reason (as defined in
Section 4.4), on the date specified in Section 4.4.
4.2 DEFINITION OF "DISABILITY"
(a) For the purposes of this Section 4.2, the Executive shall be
deemed to have a Disability if (i) by reason of physical or mental incapacity,
the Executive shall not be able to perform his duties hereunder for a
consecutive period of six months or more or for a period in the aggregate of six
months in any consecutive period of twelve months; or (ii) when the Executive's
physician shall have determined that he shall not be able, by reason of physical
or mental disability, to devote his time and energy to the business of the
Company for a continuous period of six months or for a period in the aggregate
of six months in a consecutive period of twelve months. In the event that the
Executive or the Company shall dispute any determination of his Disability
hereunder, the matter shall be resolved by the determination of three physicians
qualified to practice medicine in the State of New York, one to be selected by
each of the Company and the Executive and the third to be selected by the
designated physicians. During the period in which the determination of the
Executive's Disability shall be under such review, the Executive shall continue
to be treated for all
5
purposes of this Agreement as an employee of the Company, enjoying the full
status with full pay to which he would otherwise be entitled under this
Agreement.
(b) The Company may, but shall not be obligated to, apply for and
pay the premiums upon disability insurance covering the Executive under policies
providing for the payment thereunder directly to the Executive. If the Executive
shall receive benefits under any of such policies, the Company shall be entitled
to deduct the amount equal to the benefits so received from the Salary which it
otherwise would be required to pay to the Executive as provided in Section
4.5(c).
4.3 DEFINITION OF FOR "CAUSE"
For purposes of Section 4.1, the phrase for "Cause" means: (i) the
failure, neglect or refusal by the Executive to perform his duties hereunder
(including, without limitation, his inability to perform his duties hereunder as
a result of alcohol abuse, chronic alcoholism or drug addiction); (ii) any
willful, intentional or grossly negligent act by the Executive having the effect
of injuring the reputation or business of the Company; (iii) the Executive's
conviction of a felony or a crime involving moral turpitude (including the entry
of a nolo contendere plea); and (iv) any other default, nonperformance or
violation by the Executive of any of the covenants, provisions or terms of this
Agreement. A termination for Cause as defined in clause (i) or (iv) of the
preceding sentence shall become effective only if (A) the Company shall have
given Executive notice thereof describing the basis for such termination for
Cause, and (B) the Executive fails to cure such Cause within 10 business days
after receiving such notice (and the termination for Cause shall be effective
upon the expiration of such 10-business-day period if the Executive fails to
effect such cure); and a termination for Cause as defined in clause (ii) or
(iii) of the preceding sentence shall be effective at the time the Company gives
notice thereof to the Executive.
4.4 DEFINITION OF FOR "GOOD REASON"
For purposes of Section 4.1, the phrase for "Good Reason" means (i)
the Company effects a material reduction in the Executive's position or duties
from those set forth in Section 2.3 hereof, the Company fails to provide the
Executive with any material compensation or benefits to which he is entitled
pursuant to Section 3 hereof, or the Company commits any other material breach
of this Agreement; (ii) the Executive gives the Company notice of the event
described in clause (i) within 20 business days after its occurrence; and (iii)
the Company fails to cure such event within 10 business days after receiving
notice thereof (and the termination for Good Reason shall be effective upon the
expiration of such 10-business-day period if the Company, as applicable, fails
to effect such cure).
4.5 TERMINATION PAY
Effective upon the termination of this Agreement, the Company shall
be obligated to pay the Executive (or, in the event of his death, his Designated
Beneficiary, as defined below)
6
only such compensation as is provided in this Section 4.5, and in lieu of all
other amounts and in settlement and complete release of all claims the Executive
may have against the Company. For purposes of this Section 4.5, the Executive's
"Designated Beneficiary" shall be such individual beneficiary or trust, located
at such address, as the Executive may designate by notice to the Company from
time to time or, if the Executive fails to give notice to the Company of such a
beneficiary, the Executive's estate. Notwithstanding the preceding sentence, the
Company shall have no duty, in any circumstances, to attempt to open an estate
on behalf of the Executive, to determine whether any beneficiary designated by
the Executive is alive or to ascertain the address of any such beneficiary, to
determine the existence of any trust, to determine whether any Person purporting
to act as the Executive's personal representative (or the trustee of a trust
established by the Executive) is duly authorized to act in that capacity or to
locate or attempt to locate any beneficiary, personal representative or trustee.
(a) Termination by the Executive for Good Reason or by the Company
Without Cause. In the event that during the Employment Period, the Executive
terminates his employment with the Company for Good Reason, or the Company
terminates the Executive's employment without Cause, then the Executive shall
receive from the Company (as severance pay and liquidated damages, in lieu of
any other rights or remedies which might otherwise be available to him under
this Agreement, and to the extent permitted by law, without any obligation on
the Executive's part to mitigate damages by seeking other employment or
otherwise and without any offset for any compensation earned as a result of any
such other employment or performance of other services) amounts equal to (and
payable at the same time and in the same manner as) the Salary payable pursuant
to Section 3.1(a) above and the bonus compensation described in Section 3.2(a)
above and all of the Benefits provided for in Section 3.1(b) above, which the
Executive would otherwise have been entitled to receive pursuant to this
Agreement, had he remained employed by the Company throughout the remainder of
the Employment Period as in effect immediately before such termination.
In case of any dispute as to the propriety of the termination of the
Executive's employment by the Company, the Company agrees to continue to provide
to the Executive all of the cash compensation and benefits that would be payable
to the Executive pursuant to the preceding sentence pending final resolution of
such dispute; the Executive shall be entitled to such legal or equitable damages
or relief as may be available to enforce his rights hereunder; and the Executive
shall be obligated to reimburse the Company for all such compensation and
benefits if it is finally determined that he was not entitled thereto. If such
termination is determined to be improper, the Company agrees to pay to the
Executive all of his attorney's fees and expenses arising from such dispute.
(b) Termination by the Company for Cause or by the Executive Without
Good Reason. If the Company terminates this Agreement for Cause, or if the
Executive terminates his employment other than for Good Reason, the Executive
shall be entitled to receive his Salary only through the date such termination
is effective, and shall not be entitled to any Bonus Compensation for the fiscal
year during which such termination occurs or any subsequent fiscal year.
7
(c) Termination upon Disability. The Company shall continue to pay
the Executive his Salary pursuant to Section 3.1(a) and continue to provide the
Executive with Benefits pursuant to Section 3.1(b) for a period of one year
after he shall be deemed to have a Disability. Thereafter, the Executive shall
be entitled to receive a salary at an annual rate equal to one-half of the
Salary as then in effect and shall continue to receive Benefits, in each case
for a further period of six months. Upon the expiration of such further six-
month period, the Executive shall not be entitled to receive any further Salary
or other compensation or benefits from the Company, until he shall cease to have
a Disability and shall have resumed his duties hereunder. In the event the
Executive dies as the result of a Disability, payments under this Section 4.5(c)
shall cease and payments shall be made to the Executor's estate or otherwise as
provided in Section 4.5(d).
(d) Termination upon Death. In the event that the Executive shall
die during the Employment Period, or as a result of a Disability, the Company
shall pay to the Executive's Designated Beneficiary, the Salary and Bonus
Compensation otherwise payable to the Executive pursuant to Section 3 above for
a period of one year following the date of the Executive's death; provided, that
the foregoing obligation shall be contingent on the Company obtaining key man
life insurance to fund such obligation at a reasonable cost.
(e) Benefits. Upon the termination of this Agreement, the Executive
shall not receive, as part of his termination pay pursuant to this Section 4,
any payment or other compensation for any vacation, holiday, sick leave or other
leave unused on the date the notice of termination is given under this
Agreement. Notwithstanding the foregoing, in the event this Agreement is
terminated other than by the Company for Cause or by the Executive without Good
Reason or by exercise of the Consulting Option, if the Company is able to do so,
the Company shall continue to include the Executive in its hospitalization,
medical, surgical, dental and other health benefit plans and shall pay all
premiums under such plans on behalf of the Executive; provided, however, that
the Executive shall be solely responsible for any expenses or co-payments
incurred by the Executive, his spouse and dependent members of his family,
except as otherwise provided in this Agreement.
Following the Executive's death, unless this Agreement has been terminated
by the Company for Cause or by the Executive without Good Reason or by exercise
of the Consulting Option, until the death of the Executive's spouse, the Company
shall use reasonable efforts to include the Executive's spouse and dependent
children in hospitalization, medical, surgical, dental and other health benefit
plans of the Company currently in effect; provided, however, that the
Executive's spouse and dependent children shall be solely responsible for any
costs incurred by the Company as a result of the inclusion of such people in
such plans.
Notwithstanding anything to the contrary contained herein, the provisions
of this Section 4.5(e) shall survive any termination of this Agreement other
than a termination by the Company for Cause or by the Executive without Good
Reason or by the exercise of the Consulting Option, and shall terminate upon the
death of the Executive's spouse.
8
Notwithstanding anything to the contrary contained in this Section
4.5(e), in the event this Agreement terminates pursuant to exercise of the
Consulting Option, the Executive's benefits following termination shall be
governed by the Consulting Agreement.
5. NON-DISCLOSURE COVENANT
5.1 ACKNOWLEDGMENTS BY THE EXECUTIVE
The Executive acknowledges that (a) during the Employment Period and
as a part of his employment, the Executive shall be afforded access to
Confidential Information; (b) public disclosure of such Confidential Information
could have an adverse effect on the Company and its business; (c) the Company
has required that the Executive make the covenants in this Section 5 as a
condition to its consummation of the transactions contemplated in the Asset
Purchase Agreement and the Investors have required that the Executive make the
covenants in this Section 5 as a condition to their investment in the Parent
Company and their entering into the Stockholders Agreement; and (d) the
provisions of this Section 5 are reasonable and necessary to prevent the
improper use or disclosure of Confidential Information.
5.2 AGREEMENTS OF THE EXECUTIVE
In consideration of the compensation and benefits to be paid or
provided to the Executive by the Company under this Agreement, the Executive
covenants as follows:
(a) During and following the Employment Period, the Executive shall
hold in confidence the Confidential Information and shall not disclose it to any
Person except with the specific prior written consent of the Company or except
as otherwise expressly permitted by the terms of this Agreement or as required
by law or a court of competent jurisdiction; provided, that in the event
disclosure is required by law or a court of competent jurisdiction, the
Executive shall, prior to disclosing any Confidential Information, promptly
notify the Company of such disclosure requirement and provide the Company with
an opportunity to contest such disclosure requirement.
(b) Any trade secrets of the Company shall be entitled to all of the
protections and benefits under applicable law. If any information that the
Company deems to be a trade secret is found by a court of competent jurisdiction
not to be a trade secret for purposes of this Agreement, such information shall,
nevertheless, be considered Confidential Information for purposes of this
Agreement. The Executive hereby waives any requirement that the Company submit
proof of the economic value of any trade secret or post a bond or other
security.
(c) None of the foregoing obligations and restrictions applies to
any part of the Confidential Information that the Executive demonstrates was or
became generally available to the public other than as a result of disclosure by
the Executive.
9
(d) The Executive shall not remove from the Company's premises
(except to the extent such removal is for purposes of the performance of the
Executive's duties at home or while traveling, or except as otherwise
specifically authorized by the Company), any design, document, record, notebook,
plan, model, or computer software, whether embodied in a disk or in any other
form (collectively, the "Proprietary Items"). The Executive recognizes that, as
between the Company and the Executive, all of the Proprietary Items, whether or
not developed by the Executive, are the exclusive property of the Company. Upon
termination of this Agreement by either party, or upon the request of the
Company during the Employment Period, the Executive shall return to the Company
all of the Proprietary Items in the Executive's possession or subject to the
Executive's control, and the Executive shall not retain any copies, abstracts,
sketches or other physical embodiment of any of the Proprietary Items.
5.3 DISPUTES OR CONTROVERSIES
The Executive recognizes that should a dispute or controversy
arising from or relating to this Agreement be submitted for adjudication to any
court, arbitration panel or other third party, the preservation of the secrecy
of Confidential Information may be jeopardized. All pleadings, documents,
testimony and records relating to any such adjudication shall be maintained in
secrecy and shall be available for inspection by the Company, the Executive and
their respective attorneys and experts, who shall agree, in advance and in
writing, to receive and maintain all such information in secrecy, except as may
be limited by them in writing.
6. NON-COMPETITION AND NON-INTERFERENCE
6.1 ACKNOWLEDGMENTS BY THE EXECUTIVE
The Executive acknowledges that: (a) the services to be performed by
him under this Agreement are of a special, unique, unusual, extraordinary and
intellectual character; (b) the Company's business is national in scope and its
products are marketed throughout the United States and in other countries,
territories and possessions; (c) the Company competes with other businesses that
are or could be located in any part of the United States and in other countries,
territories and possessions; (d) the Company has required that the Executive
make the covenants set forth in this Section 6 as a condition to the Company's
consummation of the transactions contemplated by the Asset Purchase Agreement
and the Investors have required that the Executive make the covenants in this
Section 6 as a condition to their investment in the Parent Company and their
entering into the Stockholders Agreement; and (e) the provisions of this Section
6 are reasonable and necessary to protect the Company's business.
6.2 COVENANTS OF THE EXECUTIVE
In consideration of the acknowledgments by the Executive, and in
consideration of the compensation and benefits to be paid or provided to the
Executive by the Company, the Executive covenants that he shall not, directly or
indirectly:
10
(a) during the Employment Period, except in the course of his
employment hereunder, and during the Post-Employment Period (as defined below),
engage or invest in, own, manage, operate, finance, control or participate in
the ownership, management, operation, financing or control of, be employed by,
associated with or in any manner connected with, lend the Executive's name or
any similar name to, lend the Executive's credit to or render services or advice
to, any Person (other than the Company and the Parent Company) engaged in the
retail apparel business anywhere within the United States or in any other
country, territory or possession in which the Company is then doing business;
provided, however, that the Executive may purchase or otherwise acquire up to
(but not more than) one percent of any class of securities of any enterprise
(but without otherwise participating in the activities of such enterprise) if
such securities are listed on any national or regional securities exchange or
have been registered under Section 12(g) of the Securities Exchange Act of 1934,
as amended;
(b) whether for the Executive's own account or for the account of
any other Person, at any time during the Employment Period and the Post-
Employment Period, solicit business of the same or similar type being carried on
by the Company, from any Person known by the Executive to be a customer of the
Company, whether or not the Executive had personal contact with such Person
during and by reason of the Executive's employment with the Company;
(c) whether for the Executive's own account or the account of any
other Person at any time during the Employment Period and the Post-Employment
Period (i) solicit, employ or otherwise engage as an employee, independent
contractor or otherwise, any person who is or was an employee of the Company at
any time during the Employment Period, or in any manner induce or attempt to
induce any employee of the Company to terminate his employment with the Company;
or (ii) interfere with the Company's relationship with any Person, including any
Person who, at any time during the Employment Period, was an employee,
contractor, supplier or customer of the Company; or
(d) at any time during or after the Employment Period, disparage the
Company or any of its shareholders, directors, officers, employees or agents.
For purposes of this Section 6.2, the term "Post-Employment Period" means
the period from the date of termination of this Agreement until the earlier of
(i) the date on which the Employment Period would have terminated pursuant to
Section 2.2(a) without earlier termination of this Agreement by the Company or
the Executive and (ii) the date which is eighteen months following the date of
termination of the Executive's employment with the Company.
6.3 BINDING NATURE AND DURATION OF COVENANTS; DISCLOSURE
If any covenant in Section 6.2 is held to be unreasonable, arbitrary
or against public policy, such covenant shall be considered to be divisible with
respect to scope, time and geographic area, and such lesser scope, time or
geographic area, or all of them, as a court of competent jurisdiction may
determine to be reasonable, not arbitrary and not against public policy, shall
be
11
effective, binding, and enforceable against the Executive. The period of time
applicable to any covenant in Section 6.2 shall be extended by the duration of
any violation by the Executive of such covenant. The Executive shall, while the
covenant under Section 6.2 is in effect, give notice to the Company, within ten
days after accepting any other employment, of the identity of the Executive's
employer. The Company may notify such employer that the Executive is bound by
this Agreement and, at the Company's election, furnish such employer with a copy
of this Agreement or relevant portions thereof.
7. GENERAL PROVISIONS
7.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY
The Executive acknowledges that the injury that would be suffered by
the Company as a result of a breach of any of the provisions of this Agreement
(including, without limitation, any provision of Section 5 or 6) would be
irreparable and that an award of monetary damages to the Company for such a
breach would be an inadequate remedy. Consequently, the Company shall have the
right, in addition to any other rights it may have, to obtain injunctive relief
to restrain any breach or threatened breach or otherwise to specifically enforce
any provision of this Agreement, and the Company shall not be obligated to post
bond or other security in seeking such relief. Without limiting the Company's
rights under this Section 7 or any other remedies of the Company, if the
Executive breaches any of the provisions of Section 5 or 6, the Company shall
have the right to cease making any payments otherwise due to the Executive under
this Agreement.
7.2 COVENANTS OF SECTIONS 5 AND 6 ARE ESSENTIAL AND INDEPENDENT
COVENANTS
The covenants by the Executive in Sections 5 and 6 are essential
elements of this Agreement, and without the Executive's agreement to comply with
such covenants, the Company would not have consummated the transactions
contemplated by the Asset Purchase Agreement, the Investors would not have
purchased interests in the Parent Company or entered into the Stockholders
Agreement, and the Company would not have entered into this Agreement or
employed or continued the employment of the Executive. The Company and the
Executive have independently consulted their respective counsel and have been
advised in all respects concerning the reasonableness and propriety of such
covenants, with specific regard to the nature of the business conducted by the
Company. The Executive's covenants in Sections 5 and 6 are independent
covenants, and the existence of any claim by the Executive against the Company
under this Agreement or otherwise, or against the Company, the Parent Company or
the Investors, shall not excuse the Executive's breach of any covenant in
Section 5 and 6. If the Executive's employment hereunder expires or is
terminated, this Agreement shall continue in full force and effect as is
necessary or appropriate to enforce the covenants and agreements of the
Executive in Sections 5 and 6.
12
7.3 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE
The Executive represents and warrants to the Company that the
execution and delivery by the Executive of this Agreement do not, and the
performance by the Executive of the Executive's obligations hereunder shall not,
with or without the giving of notice or the passage of time, or both (a) violate
any judgment, writ, injunction or order of any court, arbitrator or governmental
agency applicable to the Executive; or (b) conflict with, result in the breach
of any provisions of or the termination of, or constitute a default under, any
agreement to which the Executive is a party or by which the Executive is or may
be bound.
7.4 OBLIGATIONS CONTINGENT ON PERFORMANCE
The obligations of the Company hereunder, including its obligation
to pay the compensation provided for herein, are contingent upon the Executive's
performance of the Executive's obligations hereunder.
7.5 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power or privilege under this Agreement shall
operate as a waiver of such right, power or privilege, and no single or partial
exercise of any such right, power or privilege shall preclude any other or
further exercise of such right, power or privilege or the exercise of any other
right, power or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement may be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party shall be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party shall be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement.
7.6 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED
This Agreement shall inure to the benefit of, and shall be binding
upon, the parties hereto and their respective successors, assigns, heirs and
legal representatives. This Agreement is personal to the parties hereto and
shall not be assignable by either party without the prior written consent of the
other.
7.7 NOTICES
All notices, consents, waivers and other communications under this
Agreement shall be made in writing and shall be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
facsimile (with written confirmation of receipt) or
13
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and facsimile numbers set forth below (or to such other addresses and facsimile
numbers as a party may designate by notice to the other parties):
If to the Company:
G+G Retail, Inc.
520 Eighth Avenue
New York, NY 10018
Attention: Scott Galin
Facsimile: (212) 695-4952
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, NY 10022-3598
Attention: Mark S. Selinger, Esq.
Facsimile: (212) 836-8689
If to the Executive:
Jay Galin
167 East 71st Street
New York, NY 10021
Facsimile: (212) 772-0474
with a copy to:
Shack & Siegel, P.C.
530 Fifth Avenue, 16th Floor
New York, NY 10036
Attention: Donald Shack, Esq.
Facsimile: (212) 730-1964
7.8 ENTIRE AGREEMENT; AMENDMENTS
This Agreement, the Asset Purchase Agreement, the Stockholders
Agreement and the documents executed in connection with the Asset Purchase
Agreement and the Stockholders Agreement, contain the entire agreement between
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, between the parties hereto
14
with respect to the subject matter hereof. This Agreement may not be amended
orally, but only by an agreement in writing signed by the parties hereto.
7.9 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to conflicts of laws
principles.
7.10 ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in the City of New York on
an expedited basis by a panel of three qualified independent arbitrators
selected on an expedited basis, one by the Executive, the second by the Company
and the third by the first two selected. If no arbitrator can be agreed upon by
the first two arbitrators within three business days of their selection, such
arbitrator shall be selected on an expedited basis in accordance with the rules
for commercial arbitration of the American Arbitration Association. Judgment may
be entered on the arbitrator's award in any court having jurisdiction; provided,
however, that the Company shall be entitled to seek a restraining order or
injunction in any court of competent jurisdiction to prevent, or to prevent any
continuation of, any violation of Sections 5 and 6. The fees and expenses of
such arbitration shall be fixed by the arbitrators and paid in accordance with
their determination.
7.11 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and shall not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement unless otherwise specified. All words used in this
Agreement shall be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
7.12 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Agreement
shall remain in full force and effect. Any provision of this Agreement held
invalid or unenforceable only in part or degree shall remain in full force and
effect to the extent not held invalid or unenforceable.
7.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original copy of this Agreement and all of which,
when taken together, shall be deemed to constitute one and the same agreement.
15
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
G+G RETAIL, INC.
By: /s/ Scott Galin
------------------------------
Name: Scott Galin
Title: President and Chief
Operating Officer
/s/ Jay Galin
---------------------------------
Jay Galin
16
CONSULTING AGREEMENT EXHIBIT A
THIS CONSULTING AGREEMENT (the "Agreement"), is made as of
_____________ ____ ,_____, by and between G+G Retail, Inc., a Delaware
corporation (the "Company"), and Jay Galin, an individual residing at 167 East
71st Street, New York, New York 10021 (the "Consultant").
RECITALS
WHEREAS, the Company purchased certain assets and assumed certain
liabilities pursuant to the Asset Purchase Agreement, dated as of July 6, 1998
among the Company, G & G Shops, Inc., the subsidiaries of G & G Shops, Inc.
named therein, the subsidiaries of Petrie Retail, Inc. named therein and PSL,
Inc., as amended (the "Asset Purchase Agreement").
WHEREAS, concurrently with the closing of the transactions
contemplated by the Asset Purchase Agreement, the Company, desirous of
maintaining Consultant's continued employment, entered into an Employment
Agreement, dated August 28, 1998, with Consultant (the "Employment
Agreement").
WHEREAS, Consultant desires to terminate the Employment Agreement
pursuant to Section 2.2 thereof.
WHEREAS, The Company desires to retain the services of the
Consultant and the Consultant desires to perform certain services for the
Company.
WHEREAS, the Company and the Consultant desire to enter into a
written agreement evidencing the foregoing.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, agree as follows:
8.DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.
"Agreement" shall mean this Consulting Agreement, including the schedules
and exhibits hereto, as modified, supplemented or amended from time to time.
"Asset Purchase Agreement" shall have the meaning set forth in the
Recitals to this Agreement.
A-1
"Basic Compensation" shall have the meaning set forth in Section 3(b).
"Benefits" shall have the meaning set forth in Section 3(b).
"Board of Directors" shall mean the board of directors of the Company.
"Cause" shall have the meaning set forth in Section 4.3.
"Company" shall have the meaning set forth in the first paragraph of this
Agreement.
"Confidential Information" shall mean any and all knowledge and
information relating to the business and affairs of the Company or any of its
affiliates, their products, processes and/or services and their customers,
suppliers, landlords, creditors, shareholders, contractors, agents, consultants
and employees ("Related Persons"), that is or is intended by any of them to be
of a confidential nature, including, but not limited to, any and all knowledge
and information relating to products, research, development, inventions,
manufacture, purchasing, accounting, finances, costs, profit margins, marketing,
merchandising, selling, customer lists, customer requirements and personnel,
pricing, pricing methods, computer programs and software, databases and data
processing and any and all other such knowledge, information and materials,
heretofore or hereafter during the term of this Agreement, conceived, designed,
created, used or developed by or relating to the Company, any of its affiliates
or any Related Person; Confidential Information does not include any information
that may be in the public domain or come into the public domain not as a result
of a breach by the Consultant of any of the terms or provisions of this
Agreement.
"Consultant" shall have the meaning set forth in the first paragraph of
this Agreement.
"Consultation Fees" shall have the meaning set forth in Section 3(a).
"Consultation Period" shall have the meaning set forth in Section 2.2.
"Designated Beneficiary" shall have the meaning set forth in Section 4.5.
"Disability" shall have the meaning set forth in Section 4.2.
"Employment Agreement" shall have the meaning set forth in the Recitals to
this Agreement.
"Good Reason" shall have the meaning set forth in Section 4.4.
"Parent Company" shall mean G&G Retail Holdings, Inc., the Company's
parent company.
"Person" shall mean any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, governmental body or other
entity.
A-2
"Post-Consultation Period" shall have the meaning set forth in Section
6.2.
"Proprietary Items" shall have the meaning set forth in Section 5.2.
2. ENGAGEMENT TERMS AND DUTIES
2.1 ENGAGEMENT
Upon termination of the Employment Agreement, the Company engages
the Consultant, and the Consultant accepts engagement by the Company, upon the
terms and subject to the conditions set forth in this Agreement.
2.2 TERM
Subject to earlier termination pursuant to Section 4, this Agreement
shall commence on the date hereof and shall continue until the third anniversary
hereof (the "Consultation Period").
2.3 DUTIES
The Consultant agrees to perform, during the Consultation Period (as
defined below), such consulting, advisory and related services to and for the
Company as the Company shall reasonably request, for up to half normal working
time. Unless otherwise requested by the Company, (i) the Consultant shall not be
required to report to the Company's offices on a regular basis in order to
perform his duties hereunder, and (ii) if appropriate, may perform certain of
his services from his home or by telephone. If the Consultant is elected as a
director of the Company or as a director or officer of any of its affiliates,
the Consultant shall fulfill his duties as such director or officer without
additional compensation.
2.4 COOPERATION
The Consultant shall use his best efforts in the performance of his
obligations under this Agreement. The Company shall provide such access to its
information and property as may be reasonably required in order to permit the
Consultant to perform his obligations hereunder.
2.5 INDEPENDENT CONTRACTOR STATUS
The Consultant shall perform all services under this Agreement as an
"independent contractor" and not as an employee or agent of the Company. The
Consultant is not authorized to assume or create any obligation or
responsibility, express or implied, on behalf of, or in the name of, the Company
or to bind the Company in any manner.
A-3
3. COMPENSATION AND BENEFITS
(a) Consultation Fees. The Company shall pay to the Consultant
consultation fees in an aggregate amount equal to __________1 (the "Consultation
Fees"). Such Consultation Fees shall be payable in equal periodic installments
according to the Company's customary payroll practices, but not less frequently
than monthly.
(b) Benefits. The Company shall maintain for the Consultant during the
Consultation Period, at no cost to the Consultant, hospitalization, medical,
surgical, dental and other employee benefit plans of the Company currently in
effect, as set forth on Schedule 3.1 hereto, including, without limitation, so
called Blue Cross-Blue Shield and major medical coverage, (collectively the
"Benefits" and, together with the Consultation Fees, "Basic Compensation"),
providing for direct payment or reimbursement to the Consultant of substantially
all medical and dental expenses incurred by the Consultant, his spouse and
dependent members of his family during the Consultation Period.
The Company shall furnish to the Consultant, during the Consultation
Period, an automobile comparable to that currently being furnished to the
Consultant by the Company under the terms of the Employment Agreement, with a
similar model automobile being furnished to the Consultant every two years
during the Consultation Period. The Company shall pay all expenses relating to
the maintenance and business use of such automobile, including, without
limitation, insurance, repairs and fuel.
(c) Expenses. The Company shall pay on behalf of the Consultant (or
reimburse the Consultant for) reasonable expenses incurred by the Consultant at
the request of, or on behalf of, the Company in the performance of the
Consultant's duties pursuant to this Agreement, and in accordance with the
Company's employment policies. The Consultant shall file expense reports with
respect to such expenses in accordance with the Company's policies.
4. TERMINATION
4.1 EVENTS OF TERMINATION
The Consultation Period, the Consultant's Basic Compensation and any
and all other rights of the Consultant under this Agreement shall terminate
(except as otherwise provided in this Section 4):
(a) upon the death of the Consultant;
(b) upon the Disability (as defined in Section 4.2) of the
Consultant, immediately upon notice from either party to the other;
- --------
1 One-half of his aggregate annual compensation in effect at the time
Consultant delivers written notice to the Company of his intent to
terminate the Employment Agreement.
A-4
(c) upon termination by the Company for Cause (as defined in Section
4.3), on the date specified in Section 4.3; or
(d) upon termination by the Consultant for Good Reason (as defined
in Section 4.4), on the date specified in Section 4.4.
4.2 DEFINITION OF "DISABILITY"
(a) For the purposes of this Section 4.2, the Consultant shall be
deemed to have a Disability if (i) by reason of physical or mental incapacity,
the Consultant shall not be able to perform his duties hereunder for a
consecutive period of six months or more or for a period in the aggregate of six
months in any consecutive period of twelve months; or (ii) when the Consultant's
physician shall have determined that he shall not be able, by reason of physical
or mental disability, to devote his time and energy to the business of the
Company for a continuous period of six months or for a period in the aggregate
of six months in a consecutive period of twelve months. In the event that the
Consultant or the Company shall dispute any determination of his Disability
hereunder, the matter shall be resolved by the determination of three physicians
qualified to practice medicine in the State of New York, one to be selected by
each of the Company and the Consultant and the third to be selected by the
designated physicians. During the period in which the determination of the
Consultant's Disability shall be under such review, the Consultant shall
continue to be treated for all purposes of this Agreement as an employee of the
Company, enjoying the full status with full pay to which he would otherwise be
entitled under this Agreement.
(b) The Company may, but shall not be obligated to, apply for and
pay the premiums upon disability insurance covering the Consultant under
policies providing for the payment thereunder directly to the Consultant. If the
Consultant shall receive benefits under any of such policies, the Company shall
be entitled to deduct the amount equal to the benefits so received from the
Consultation Fees which it otherwise would be required to pay to the Consultant
as provided in Section 4.5(c).
4.3 DEFINITION OF FOR "CAUSE"
For purposes of this Section 4.3, the phrase for "Cause" means: (i)
the failure, neglect or refusal by the Consultant to perform his duties
hereunder (including, without limitation, his inability to perform his duties
hereunder as a result of alcohol abuse, chronic alcoholism or drug addiction);
(ii) any willful, intentional or grossly negligent act by the Consultant having
the effect of injuring the reputation or business of the Company; (iii) the
Consultant's conviction of a felony or a crime involving moral turpitude
(including the entry of a nolo contendere plea); and (iv) any other default,
nonperformance or violation by the Consultant of any of the covenants,
provisions or terms of this Agreement. A termination for Cause as defined in
clause (i) or (iv) of the preceding sentence shall become effective only if (A)
the Company shall have given Consultant notice thereof describing the basis for
such termination for Cause, and (B) the Consultant fails to cure such Cause
within 10 business days after receiving such notice (and the termination for
Cause shall be effective upon the expiration of such 10-business-day period if
the Consultant fails to effect such cure); and
A-5
a termination for Cause as defined in clause (ii) or (iii) of the preceding
sentence shall be effective at the time the Company gives notice thereof to the
Consultant.
4.4 DEFINITION OF FOR "GOOD REASON"
For purposes of Section 4.4, the phrase for "Good Reason" means (i)
the Company effects a material reduction in the Consultant's position or duties
from those set forth in Section 2 hereof, the Company fails to provide the
Consultant with any material compensation or benefits to which he is entitled
pursuant to Section 3 hereof, or the Company commits any other material breach
of this Agreement; (ii) the Consultant gives the Company notice of the event
described in clause (i) within 20 business days after its occurrence; and (iii)
the Company fails to cure such event within 10 business days after receiving
notice thereof (and the termination for Good Reason shall be effective upon the
expiration of such 10-business-day period if the Company, as applicable, fails
to effect such cure).
4.5 TERMINATION PAY
Effective upon the termination of this Agreement, the Company shall
be obligated to pay the Consultant (or, in the event of his death, his
Designated Beneficiary, as defined below) only such compensation as is provided
in this Section 4.5, and in lieu of all other amounts and in settlement and
complete release of all claims the Consultant may have against the Company. For
purposes of this Section 4.5, the Consultant's "Designated Beneficiary" shall be
such individual beneficiary or trust, located at such address, as the Consultant
may designate by notice to the Company from time to time or, if the Consultant
fails to give notice to the Company of such a beneficiary, the Consultant's
estate. Notwithstanding the preceding sentence, the Company shall have no duty,
in any circumstances, to attempt to open an estate on behalf of the Consultant,
to determine whether any beneficiary designated by the Consultant is alive or to
ascertain the address of any such beneficiary, to determine the existence of any
trust, to determine whether any Person purporting to act as the Consultant's
personal representative (or the trustee of a trust established by the
Consultant) is duly authorized to act in that capacity or to locate or attempt
to locate any beneficiary, personal representative or trustee.
(a) Termination by the Consultant for Good Reason or by the Company
Without Cause. In the event that during the Consultation Period, the Consultant
terminates his engagement with the Company for Good Reason, or the Company
terminates the Consultant's engagement without Cause, then the Consultant shall
receive from the Company (as severance pay and liquidated damages, in lieu of
any other rights or remedies which might otherwise be available to him under
this Agreement, and to the extent permitted by law, without any obligation on
the Consultant's part to mitigate damages by seeking other employment or
otherwise and without any offset for any compensation earned as a result of any
such other employment or performance of other services) an amount equal to (and
payable at the same time and in the same manner as) the Consultation Fees
payable pursuant to Section 3(a) above and all of the Benefits provided for in
Section 3(b) above, which the Consultant would otherwise have been entitled to
receive pursuant
A-6
to this Agreement, had he remained engaged by the Company throughout the
remainder of the Consultation Period as in effect immediately before such
termination.
In case of any dispute as to the propriety of the termination of the
Consultant's engagement by the Company, the Company agrees to continue to
provide to the Consultant all of the cash compensation and benefits that would
be payable to the Consultant pursuant to the preceding sentence pending final
resolution of such dispute; the Consultant shall be entitled to such legal or
equitable damages or relief as may be available to enforce his rights hereunder;
and the Consultant shall be obligated to reimburse the Company for all such
compensation and benefits if it is finally determined that he was not entitled
thereto. If such termination is determined to be improper, the Company agrees to
pay to the Consultant all of his attorney's fees and expenses arising from such
dispute.
(b) Termination by the Company for Cause or by the Consultant
Without Good Reason. If the Company terminates this Agreement for Cause, or if
the Consultant terminates his engagement other than for Good Reason, the
Consultant shall be entitled to receive his Consultation Fee only through the
date such termination is effective, and shall not be entitled to any other
compensation for the fiscal year during which such termination occurs or any
subsequent fiscal year.
(c) Termination upon Disability. The Company shall continue to pay
the Consultant Consultation Fees pursuant to Section 3(a) and continue to
provide the Executive with Benefits pursuant to Section 3(b) for a period of one
year after he shall be deemed to have a Disability. Thereafter, the Consultant
shall be entitled to receive consultation fees at an annual rate equal to
one-half of the Consultation Fees as then in effect and shall continue to
receive Benefits, in each case for a further period of six months. Upon the
expiration of such further six-month period, the Consultant shall not be
entitled to receive any further Consultation Fees or other compensation or
benefits from the Company, until he shall cease to have a Disability and shall
have resumed his duties hereunder. In the event the Consultant dies as the
result of a Disability, payments under this Section 4.5(c) shall cease and
payments shall be made to the Executor's estate or otherwise as provided in
Section 4.5(d).
(d) Termination upon Death. In the event that the Consultant shall
die during the Consultation Period, or as a result of a Disability, the Company
shall pay to the Consultant's Designated Beneficiary, the Consultation Fees
otherwise payable to the Consultant pursuant to Section 3 above for a period of
one year following the date of the Consultant's death; provided, that the
foregoing obligation shall be contingent on the Company obtaining key man life
insurance to fund such obligation at a reasonable cost.
(e) Benefits. Upon the termination of this Agreement, the Consultant
shall not receive, as part of his termination pay pursuant to this Section 4,
any payment or other compensation for any vacation, holiday, sick leave or other
leave unused on the date the notice of termination is given under this
Agreement. Notwithstanding the foregoing, in the event this Agreement is
terminated other than by the Company for Cause or by the Consultant without Good
Reason, if the
A-7
Company is able to do so, the Company shall continue to include the Consultant
in its hospitalization, medical, surgical, dental and other health benefit plans
and shall pay all premiums under such plans on behalf of the Consultant;
provided, however, that the Consultant shall be solely responsible for any
expenses or co-payments incurred by the Consultant, his spouse and dependent
members of his family, except as otherwise provided in this Agreement.
Following the Consultant's death, unless this Agreement has been
terminated by the Company for Cause or by the Consultant without Good Reason,
until the death of Consultant's spouse, the Company shall use reasonable efforts
to include the Consultant's spouse and dependent children in hospitalization,
medical, surgical, dental and other health benefit plans of the Company
currently in effect; provided, however, that the Consultant's spouse and
dependent children shall be solely responsible for any costs incurred by the
Company as a result of the inclusion of such people in such plans.
Notwithstanding anything to the contrary contained herein, the provisions
of this Section 4.5(e) shall survive any termination of this Agreement other
than a termination by the Company for Cause or by the Consultant without Good
Reason, and shall terminate upon the death of the Consultant's spouse.
5. NON-DISCLOSURE COVENANT
5.1 ACKNOWLEDGMENTS BY THE CONSULTANT
The Consultant acknowledges that (a) during the Consultation Period
and as a part of his engagement, the Consultant shall be afforded access to
Confidential Information (as defined below); (b) public disclosure of such
Confidential Information could have an adverse effect on the Company and its
business; (c) the Company has required that the Consultant make the covenants in
this Section 5 as a condition to entering into this Agreement; and (d) the
provisions of this Section 5 are reasonable and necessary to prevent the
improper use or disclosure of Confidential Information.
5.2 AGREEMENTS OF THE CONSULTANT
In consideration of the compensation to be paid or provided to the
Consultant by the Company under this Agreement, the Consultant covenants as
follows:
(a) During and following the Consultation Period, the Consultant
shall hold in confidence the Confidential Information and shall not disclose it
to any Person except with the specific prior written consent of the Board of
Directors or except as otherwise expressly permitted by the terms of this
Agreement or as required by law or a court of competent jurisdiction; provided,
that in the event disclosure is required by law or a court of competent
jurisdiction, the Executive shall, prior to disclosing any Confidential
Information, promptly notify the Company of such disclosure requirement and
provide the Company with an opportunity to contest such disclosure requirement.
A-8
(b) Any trade secrets of the Company shall be entitled to all of the
protections and benefits under applicable law. If any information that the
Company deems to be a trade secret is found by a court of competent jurisdiction
not to be a trade secret for purposes of this Agreement, such information shall,
nevertheless, be considered Confidential Information for purposes of this
Agreement. The Consultant hereby waives any requirement that the Company submit
proof of the economic value of any trade secret or post a bond or other
security.
(c) None of the foregoing obligations and restrictions applies to
any part of the Confidential Information that the Consultant demonstrates was or
became generally available to the public other than as a result of disclosure by
the Consultant.
(d) The Consultant shall not remove from the Company's premises
(except to the extent such removal is for purposes of the performance of the
Consultant's duties at home or while traveling, or except as otherwise
specifically authorized by the Company), any design, document, record, notebook,
plan, model, or computer software, whether embodied in a disk or in any other
form (collectively, the "Proprietary Items"). The Consultant recognizes that, as
between the Company and the Consultant, all of the Proprietary Items, whether or
not developed by the Consultant, are the exclusive property of the Company. Upon
termination of this Agreement by either party, or upon the request of the
Company during the Consultation Period, the Consultant shall return to the
Company all of the Proprietary Items in the Consultant's possession or subject
to the Consultant's control, and the Consultant shall not retain any copies,
abstracts, sketches or other physical embodiment of any of the Proprietary
Items.
5.3 DISPUTES OR CONTROVERSIES
The Consultant recognizes that should a dispute or controversy
arising from or relating to this Agreement be submitted for adjudication to any
court, arbitration panel or other third party, the preservation of the secrecy
of Confidential Information may be jeopardized. All pleadings, documents,
testimony and records relating to any such adjudication shall be maintained in
secrecy and shall be available for inspection by the Company, the Consultant and
their respective attorneys and experts, who shall agree, in advance and in
writing, to receive and maintain all such information in secrecy, except as may
be limited by them in writing.
6. NON-COMPETITION AND NON-INTERFERENCE
6.1 ACKNOWLEDGMENTS BY THE CONSULTANT
The Consultant acknowledges that: (a) the services to be performed
by him under this Agreement are of a special, unique, unusual, extraordinary and
intellectual character; (b) the Company's business is national in scope and its
products are marketed throughout the United States and in other countries,
territories and possessions; (c) the Company competes with other businesses that
are or could be located in any part of the United States and in other countries,
territories and possessions; (d) the Company has required that the Consultant
make the covenants in this Section 6
A-9
as a condition to entering into this Agreement; and (e) the provisions of this
Section 6 are reasonable and necessary to protect the Company's business.
6.2 COVENANTS OF THE CONSULTANT
In consideration of the acknowledgments by the Consultant, and in
consideration of the compensation to be paid or provided to the Consultant by
the Company, the Consultant covenants that he shall not, directly or indirectly:
(a) during the Consultation Period, except in the course of his
engagement hereunder, and during the Post-Consultation Period (as defined
below), engage or invest in, own, manage, operate, finance, control or
participate in the ownership, management, operation, financing or control of, be
employed by, associated with or in any manner connected with, lend the
Consultant's name or any similar name to, lend the Consultant's credit to or
render services or advice to any Person (other than the Company and the Parent
Company) engaged in the retail apparel business anywhere within the United
States or in any other country, territory or possession in which the Company is
then doing business; provided, however, that the Consultant may purchase or
otherwise acquire up to (but not more than) one percent of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended;
(b) whether for the Consultant's own account or for the account of
any other Person, at any time during the Consultation Period and during the
Post-Consultation Period, solicit business of the same or similar type being
carried on by the Company, from any Person known by the Consultant to be a
customer of the Company, whether or not the Consultant had personal contact with
such Person during and by reason of the Consultant's employment with the
Company;
(c) whether for the Consultant's own account or the account of any
other Person at any time during the Consultation Period and during the
Post-Consultation Period (i) solicit, employ or otherwise engage as an employee,
independent contractor or otherwise, any person who is or was an employee of the
Company at any time during the Consultation Period, or in any manner induce or
attempt to induce any employee of the Company to terminate his employment with
the Company; or (ii) interfere with the Company's relationship with any Person,
including any Person who, at any time during the Consultation Period, was an
employee, contractor, supplier or customer of the Company; or
(d) at any time during or after the Consultation Period, disparage
the Company or any of its shareholders, directors, officers, employees or
agents.
For purposes of this Section 6.2, the term "Post-Consultation Period"
means the period from the date of termination of this Agreement until the
earlier of (i) the date on which the Consultation Period would have terminated
pursuant to Section 2.2 without earlier termination of this Agreement
A-10
by the Company or the Consultant and (ii) the date which is eighteen months
following the date of termination of the Consultant's consultation with the
Company.
6.3 BINDING NATURE AND DURATION OF COVENANTS; DISCLOSURE
If any covenant in Section 6.2 is held to be unreasonable, arbitrary
or against public policy, such covenant shall be considered to be divisible with
respect to scope, time and geographic area, and such lesser scope, time or
geographic area, or all of them, as a court of competent jurisdiction may
determine to be reasonable, not arbitrary and not against public policy, shall
be effective, binding, and enforceable against the Consultant. The period of
time applicable to any covenant in Section 6.2 shall be extended by the duration
of any violation by the Consultant of such covenant. The Consultant shall, while
the covenant under Section 6.2 is in effect, give notice to the Company, within
ten days after accepting any other employment, of the identity of the
Consultant's employer. The Company may notify such employer that the Consultant
is bound by this Agreement and, at the Company's election, furnish such employer
with a copy of this Agreement or relevant portions thereof.
7. GENERAL PROVISIONS
7.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY
The Consultant acknowledges that the injury that would be suffered
by the Company as a result of a breach of any of the provisions of this
Agreement (including, without limitation, any provision of Section 5 or 6) would
be irreparable and that an award of monetary damages to the Company for such a
breach would be an inadequate remedy. Consequently, the Company shall have the
right, in addition to any other rights it may have, to obtain injunctive relief
to restrain any breach or threatened breach or otherwise to specifically enforce
any provision of this Agreement, and the Company shall not be obligated to post
bond or other security in seeking such relief. Without limiting the Company's
rights under this Section 7 or any other remedies of the Company, if the
Consultant breaches any of the provisions of Section 5 or 6, the Company shall
have the right to cease making any payments otherwise due to the Consultant
under this Agreement.
7.2 COVENANTS OF SECTIONS 5 AND 6 ARE ESSENTIAL AND INDEPENDENT
COVENANTS
The Company and the Consultant have independently consulted their
respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenants, with specific regard to the
nature of the business conducted by the Company. The Consultant's covenants in
Sections 5 and 6 are independent covenants, and the existence of any claim by
the Consultant against the Company under this Agreement or otherwise shall not
excuse the Consultant's breach of any covenant in Section 5 and 6. If the
Consultant's engagement hereunder expires or is terminated, this Agreement shall
continue in full force and effect as is necessary or appropriate to enforce the
covenants and agreements of the Consultant in Sections 5 and 6.
A-11
7.3 REPRESENTATIONS AND WARRANTIES BY THE CONSULTANT
The Consultant represents and warrants to the Company that the
execution and delivery by the Consultant of this Agreement do not, and the
performance by the Consultant of the Consultant's obligations hereunder shall
not, with or without the giving of notice or the passage of time, or both (a)
violate any judgment, writ, injunction or order of any court, arbitrator or
governmental agency applicable to the Consultant; or (b) conflict with, result
in the breach of any provisions of or the termination of, or constitute a
default under, any agreement to which the Consultant is a party or by which the
Consultant is or may be bound.
7.4 OBLIGATIONS CONTINGENT ON PERFORMANCE
The obligations of the Company hereunder, including its obligation
to pay the compensation provided for herein, are contingent upon the
Consultant's performance of the Consultant's obligations hereunder.
7.5 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power or privilege under this Agreement shall
operate as a waiver of such right, power or privilege, and no single or partial
exercise of any such right, power or privilege shall preclude any other or
further exercise of such right, power or privilege or the exercise of any other
right, power or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement may be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party shall be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party shall be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement.
7.6 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED
This Agreement shall inure to the benefit of, and shall be binding
upon, the parties hereto and their respective successors, assigns, heirs and
legal representatives. This Agreement is personal to the parties hereto and
shall not be assignable by either party without the prior written consent of the
other.
7.7 NOTICES
All notices, consents, waivers and other communications under this
Agreement shall be made in writing and shall be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
facsimile (with written confirmation of receipt) or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
A-12
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
If to the Company:
G+G Retail, Inc.
520 Eighth Avenue
New York, NY 10018
Attention: Scott Galin
Facsimile: (212) 695-4952
with a copy to:
Attention:
Facsimile:
If to the Consultant:
Jay Galin
167 East 71st Street
New York, NY 10021
Facsimile: (212) 772-0474
with a copy to:
Shack & Siegel, P.C.
530 Fifth Avenue, 16th Floor
New York, NY 10036
Attention: Donald Shack, Esq.
Facsimile: (212) 730-1964
7.8 ENTIRE AGREEMENT; AMENDMENTS
This Agreement, the Asset Purchase Agreement, the Employment
Agreement and the documents executed in connection with the Asset Purchase
Agreement and the Employment Agreement, contain the entire agreement between the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, between the parties hereto with
respect to the subject matter hereof. This Agreement may not be amended orally,
but only by an agreement in writing signed by the parties hereto.
A-13
7.9 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to conflicts of laws
principles.
7.10 ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in the City of New York on
an expedited basis by a panel of three qualified independent arbitrators
selected on an expedited basis, one by the Consultant, the second by the Company
and the third by the first two selected. If no arbitrator can be agreed upon by
the first two arbitrators within three business days of their selection, such
arbitrator shall be selected on an expedited basis in accordance with the rules
for commercial arbitration of the American Arbitration Association. Judgment may
be entered on the arbitrator's award in any court having jurisdiction; provided,
however, that the Company shall be entitled to seek a restraining order or
injunction in any court of competent jurisdiction to prevent, or to prevent any
continuation of, any violation of Sections 5 and 6. The fees and expenses of
such arbitration shall be fixed by the arbitrators and paid in accordance with
their determination.
7.11 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and shall not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement unless otherwise specified. All words used in this
Agreement shall be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
7.12 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Agreement
shall remain in full force and effect. Any provision of this Agreement held
invalid or unenforceable only in part or degree shall remain in full force and
effect to the extent not held invalid or unenforceable.
7.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original copy of this Agreement and all of which,
when taken together, shall be deemed to constitute one and the same agreement.
A-14
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
G+G RETAIL, INC.
By:_______________________________
Name:
Title:
__________________________________
Jay Galin
A-15