DEFERRED COMPENSATION PLAN
The following are the terms of the deferred compensation plan
(the "Plan") of London Fog Industries, Inc. (the "Company").
1. PARTICIPATION.
The participants (the "Participants") in the Plan shall be
each person who receives options pursuant to the Company's 1998 Stock Option
Plan (the "Stock Option Plan").
2. AMOUNT OF BENEFIT.
On the date of any grant of options to a Participant pursuant
to the Stock Option Plan, the Company shall credit (via a non-cash bookkeeping
entry) to an account in the name of the Participant (through a bookkeeping
entry) an amount (the "Initial Amount") equal to the aggregate exercise price of
the options granted to that Participant under the Stock Option Plan. The Initial
Amount shall accrue interest at the rate of interest on 10-year Treasury Notes
as reported in The Wall Street Journal, compounded annually. The initial rate of
interest shall be determined on the date that the options are granted and the
rate shall be reset on each anniversary thereof.
3. PAYMENT OF BENEFIT UPON EXERCISE.
Upon any exercise of options granted to a Participant under
the Stock Option Plan which exercise occurs while the Participant is employed by
or providing services to the Company or its subsidiaries, unless the Participant
elects not to then receive payment hereunder and to pay the exercise price for
the options with a promissory note, the Participant shall be paid, within three
business days thereafter, by certified or bank check, an amount equal to the
Initial Amount with respect to the exercise price of those options, and any
interest accrued thereon shall be forfeited.
4. PAYMENT OF BENEFIT WITH RESPECT TO UNEXERCISED OPTIONS IN TEN YEARS.
If on the tenth anniversary of the date of grant of any
options to a Participant under the Stock Option Plan, the Participant has not
exercised all of the options granted to him and has been continuously employed
by or continuously providing services to the Company or its subsidiaries during
the ten-year period, then the Company shall pay to the Participant an amount
equal to the portion of the Initial Amount that is equal to the aggregate
exercise price of the unexercised options plus all accrued interest thereon. If,
pursuant to section 3, a Participant elects not to then receive payment
hereunder and to pay the exercise price for any options with a promissory note,
then, on the tenth anniversary of the date of grant of those options to the
Participant, the Company shall pay to the Participant an amount equal to the
portion of the Initial Amount that is equal to the aggregate exercise price of
those options plus accrued interest
thereon, provided, however, that the amount of such accrued interest shall not
exceed the amount of interest on the promissory note delivered upon exercise of
the options.
5. PAYMENT OF BENEFIT WITH RESPECT TO EXERCISED OPTIONS IN TEN YEARS.
Subject to section 6, if a Participant's employment by or
services to the Company or its subsidiaries terminates prior to the exercise of
all of the options granted to the Participant under the Stock Option Plan, and
if the Participant subsequently exercises any options (the "Former Management
Options") and pursuant to the terms of the Stock Option Plan is required to pay
the exercise price for those Former Management Options by delivery of a
Promissory Note (the "Option Note"), then, except as provided in section 6, on
the tenth anniversary of the date of grant of the exercised options the Company
shall pay to the Participant an amount equal to the portion of the Initial
Amount that is equal to the aggregate exercise price of the Former Management
Options plus accrued interest thereon, provided, however, that the amount of
such accrued interest shall not exceed the amount of interest on the Option
Note, and any additional accrued interest on the Initial Amount shall be
forfeited. A Participant shall have no right of offset or right of recoupment
under applicable bankruptcy law with respect to such payment if the Participant
is required to make payment on the Option Note at a time when the Company is in
bankruptcy.
6. PAYMENT ON SPECIFIED DATE FOR PARTICIPANTS NO LONGER EMPLOYED BY OR
PROVIDING SERVICES TO THE COMPANY.
Notwithstanding anything to the contrary in section 5, at the
time a person becomes a Participant in this Plan, the Participant may elect, by
notice to the Company, to receive the portion of the Initial Amount that is
equal to the aggregate exercise price of any options that remain unexercised at
the time his employment by or services to the Company and its subsidiaries
terminates, plus accrued interest thereon to the extent required to repay the
Option Note as provided in section 5, on a date specified in the election (the
"Specified Date"), provided that the Participant will only receive such payment
if (a) his employment by or services to the Company or its subsidiaries
terminates prior to the Specified Date, and (b) he has exercised the options no
later than 75 days prior to the Specified Date. If such a Participant's options
are not exercised within the time period specified in clause (b) above, the
Participant will forfeit the right to receive any payments under this Plan. Any
designation of a Specified Date may be changed at any time thereafter, provided
that no change will be effective if made within 12 months of the date of
termination of employment or services.
7. FORFEITURE OF BENEFITS WITH RESPECT TO UNEXERCISED OPTIONS.
If a Participant's employment by or services to the Company or
its subsidiary terminates prior to the tenth anniversary of the date any options
were granted to the Participant under the Stock Option Plan and if on such tenth
anniversary the Participant has not exercised all of his options, the
Participant shall forfeit the portion of the Initial Amount that is equal to the
aggregate exercise price of the unexercised options and all accrued interest
thereon.
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8. CONSTRUCTION OF PLAN.
(a) The Plan is "unfunded" and benefits payable hereunder shall be paid
by the Company out of its general assets. The Participant shall not have any
interest in any specific asset of the Company as a result of this Plan. Nothing
contained in this Plan and no action taken pursuant to the provisions of this
Plan shall create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and the Participant or any other person. Any
funds which may be invested under the provisions of this Plan shall continue for
all purposes to be part of the general funds of the Company and no person other
than the Company shall by virtue of the provisions of this Plan have any
interest in such funds. To the extent that any person acquires a right to
receive payments from the Company under this Plan, such right shall be no
greater than the right of any unsecured general creditor of the Company. The
obligations to the Participant hereunder shall be that of the Company and no
other entity shall have any obligations to him.
(b) All expenses incurred by the Company in administering the Plan
shall be paid by the Company.
9. LIMITATION OF RIGHTS.
Nothing contained herein shall be construed as conferring upon
the Participant the right to continue in the employ of the Company as an
executive or in any other capacity or to interfere with the Company's right to
discharge him at any time for any reason whatsoever.
10. PAYMENT NOT SALARY.
No amount payable under this Plan shall be deemed salary or
other compensation to the Participant for the purposes of computing benefits to
which he may be entitled under any pension plan or other arrangement of the
Company for the benefit of its employees.
11. SEVERABILITY.
In case any provision of this Plan shall be illegal or invalid
for any reason, said illegality or invalidity shall not affect the remaining
parts hereof, but this Plan shall be construed and enforced as if such illegal
or invalid provision never existed.
12. WITHHOLDING.
All payments under this Plan shall be subject to the
withholding of such amounts relating to federal, state or local taxes,
including, without limitation, taxes imposed pursuant to the Federal Insurance
Contribution Act (FICA) and the Federal Unemployment Tax Act (FUTA), as the
Company may reasonably determine it should withhold based on applicable law or
regulations. If a Participant elects and if the Company consents in its sole
discretion to such election, any such taxes may be paid by delivering shares of
the Company's Common Stock acquired upon exercise of options under the Stock
Option Plan (valued at fair market value as defined in the Plan).
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13. ASSIGNMENT.
This Plan shall be binding upon and inure to the benefit of
the Company, its successors and assigns, and the Participant and his heirs,
executors, administrators and legal representatives. The Participant may not
assign any of his rights under this Plan to any person other than by will or by
the laws of descent and distribution.
14. NON-ALIENATION OF BENEFITS.
The benefits payable under this Plan shall not be subject to
alienation, transfer, assignment, garnishment, execution or levy of any kind,
and any attempt to cause any benefits to be so subjected shall not be
recognized.
15. GOVERNING LAW.
This Plan shall be governed by the laws of the State of New
York.
16. AMENDMENT OR TERMINATION OF PLAN.
This Plan may be amended or withdrawn by the Stock Option
Committee with respect to any amounts not yet credited under this Plan, and the
Committee with the consent of each adversely affected Participant may at any
time amend this Plan as it relates to the terms and conditions of any amounts
previously credited under this Plan.
17. NON-EXCLUSIVITY.
The adoption of the Plan by the Company shall not be construed
as creating any limitations on the power of the Company to adopt such other
supplemental retirement income arrangements as it deems desirable, and such
arrangements may be either generally applicable or limited in application.
18. GENDER AND NUMBER.
Wherever used in this Plan, the masculine shall be deemed to
include the feminine and the singular shall be deemed to include the plural,
unless the context clearly indicates otherwise.
19. HEADINGS AND CAPTIONS.
The headings and captions herein are provided for reference
and convenience only. They shall not be considered part of the Plan and shall
not be employed in the construction of the Plan.
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IN WITNESS WHEREOF, the Company has caused this Plan to be
executed this 27th day of February, 1998.
LONDON FOG INDUSTRIES, INC.
By:
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