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                             Liz Claiborne, Inc.
                                1441 Broadway
                                New York City



                            as of January 2, 1995

Harvey L. Falk
Buckingham Towers
800 Palisades Avenue
Fort Lee, New Jersey  07024

Dear Harvey:

         The undersigned Liz Claiborne, Inc. (the "Company")  desires to engage
you as a consultant, and you desire to be so engaged by the Company, in each
case subject to the terms and conditions set forth in this letter agreement
("Agreement").  As used in this Agreement, the term the "Claiborne Group" means
and includes the Company and each of its subsidiaries and affiliated companies
and ventures from time to time.

         Accordingly, in consideration of the mutual covenants hereinafter set
forth and intending to be legally bound, the Company and you hereby agree as
follows:

         1.      Engagement; Term.  The Company hereby engages you, and you
hereby accept such engagement and agree to serve as a consultant to the
Claiborne Group, upon the terms and conditions hereinafter set forth, for a
term commencing on January 2, 1995 and (unless sooner terminated as hereinafter
provided) expiring on December 31, 1996 (such term being hereinafter referred
to as the "Term").

         2.      Duties; Conduct.

                 (a)      During the Term, you shall serve in the capacity of a
Senior Advisor to the Company; as such, you shall render consulting services
from time to time as hereinafter provided on such project or projects relating
to the business, affairs and management of the Claiborne Group as may be
reasonably selected and/or delegated to you by the Board of Directors of the
Company ("Board of Directors") and/or the Company's Chief Executive Officer.
The specific consulting services requested of you shall be limited to those of
a senior executive nature.

                 (b)      To the extent practicable, the services to be
provided by you shall be performed at such times as are reasonably convenient
to you.  The Company acknowledges that you may have other activities,
obligations and engagements which may command your time and attention and the
Company will exercise its best efforts, in calling upon your services
hereunder, to respect such other commitments.  Your services may require
travel; domestic travel shall be as reasonably required and foreign travel
shall be as we shall mutually agree.  Your services (including travel time)
shall not require more than 20 days per fiscal quarter of the Company without
your consent, although you shall not be entitled to any greater or lesser
compensation for rendering services for a greater or lesser period of time.


<PAGE>   2

                 (c)      During the Term, you agree to make yourself available
to perform the consulting services referred above in accordance with the
provisions hereof, and to apply your best efforts to perform such services
faithfully and diligently, and to the best of your ability; and not take any
action or conduct yourself in any manner which would tend to harm the
reputation or goodwill of the Claiborne Group.

         3.      Compensation, Benefits and Expenses.

                 (a)      As full compensation for all services to be provided
by you hereunder during the Term, the Company will pay you and you shall accept
the following:  (i) Three Hundred Thousand Dollars ($300,000) on January 2,
1995; and (ii) additional consulting fees, at an annual rate of (A) Three
Hundred Thousand Dollars ($300,000) during the first year of the Term; and (B)
Two Hundred Ninety Thousand Dollars ($290,000) during the second year of the
Term.  Such consulting fees shall be paid in installments in accordance with
the Company's standard practice regarding salary payments to its senior-most
executives from time to time in effect.

                 (b)      During the Term, you will continue to participate, on
the same basis as heretofore, in accordance with and subject to the respective
terms and conditions thereof as to eligibility and otherwise, in the Company's
medical, dental, long-term disability and life insurance programs (subject to
insurability at standard rates, it being understood and agreed that if
insurance becomes unavailable at standard rates, the Company shall maintain the
insurance provided that the difference in premiums between standard and actual
rate is paid by you),   provided that, (i) during the Term, the Company shall
provide you with supplemental life insurance as heretofore in effect in the
face amount of $1.2 million; and (ii) for a period of eighteen months
subsequent to the expiration of the Term, the Company shall provide you with
coverages substantially identical to those provided to its senior-most
executives under its medical and dental insurance programs, such that your
"COBRA" rights, under which you may continue your existing medical coverages
for an additional 18 months at your own expense, shall be deemed to commence
after the expiration of such initial eighteen month period.

                 (c)  The Company will reimburse you, in accordance with its
standard policies from time to time in effect, for such reasonable and
necessary vouchered out-of-pocket business expenses as may be incurred by you
during the Term in the performance of the duties and responsibilities assigned
to you under this Agreement.  The Company understands that you will be a
Florida resident during the Term and that with respect to any projects
requiring that you travel (to New York City or otherwise) in accordance with
the terms hereof, you shall be entitled to reimbursement of business class
airfare and first class hotel accommodations.

         4.      Termination.

                 (a)      The Term will terminate at the election of the
Company for Cause immediately upon notice from the Company to you.  As used
herein, the term "Cause" means:

                 (i)      Your willful or intentional failure or refusal to
                          perform or observe any of your material duties,
                          responsibilities or obligations set forth in, or as
                          contemplated under, this Agreement, if such breach is
                          not cured, if curable, within 30 days after notice
                          thereof to you by the Company;


<PAGE>   3

                 (ii)     Any willful or intentional act or failure to act
                          involving fraud, misrepresentation, theft,
                          embezzlement, dishonesty or moral turpitude
                          (collectively, "Fraud") affecting the Claiborne Group
                          or any customer, supplier or employee of the
                          Claiborne Group;

                 (iii)    Conviction of (or a plea of nolo contendere to) an
                          offense which is a felony in the jurisdiction
                          involved or which is a misdemeanor in the
                          jurisdiction involved but which involves Fraud, after
                          exhaustion of all appeals taken therefrom;

                 (iv)     Any willful or intentional act which could reasonably
                          be expected to materially injure  the reputation,
                          business or business relationships of the Claiborne
                          Group, or your reputation or business relationships,
                          if such breach is not cured, if curable, within 30
                          days after notice thereof to you by the Company; or

                 (v)      Your willful or intentional failure to comply with
                          any reasonable request or direction of the Board of
                          Directors or the Chief Executive Officer of the
                          Company not contrary to the provisions of this
                          Agreement, if such breach is not cured, if curable,
                          within 30 days after notice thereof to you by the
                          Company.

                 (b)      For purposes of this Section 6, no act, or failure to
act, on your part shall be deemed "willful" or "intentional" unless done, or
omitted to be done, by you without reasonable belief on your part that your
action or omission was in the best interests of the Claiborne Group.

                 (c)      The Company shall provide you with a prompt hearing
before the Board of Directors (at which you may be accompanied by counsel)
prior to any termination for Cause hereunder.

                 (d)      The Term will terminate forthwith upon your death or,
at the Claiborne Group's option, upon your disability; provided that in the
event that you shall die or become disabled during the Term, the Company shall
continue to pay through the end of the Term your consulting fee provided in
paragraph 3(a) to your estate or personal representative.

         5.      Confidential Information.

                 (a)      The Claiborne Group owns and has developed and
compiled, and will own, develop and compile, certain proprietary techniques and
confidential information which have great value to its business (referred to in
this Agreement, collectively, as "Proprietary Information").  Proprietary
Information includes not only information disclosed by the Claiborne Group to
you, but also information developed or learned by you during the course or as a
result of your prior employment or your engagement hereunder, which information
you acknowledge is and shall be the sole and exclusive property of the
Claiborne Group.  Proprietary Information includes all proprietary information
that has or could have commercial value or other utility in the business in
which the Claiborne Group is engaged or contemplates engaging, and all
proprietary information of which the unauthorized disclosure could be
detrimental to the interests of the Claiborne Group, whether or not such
information is specifically labelled as Proprietary


<PAGE>   4

Information by the Claiborne Group.  By way of example and without limitation,
Proprietary Information includes any and all information developed, obtained or
owned by the Claiborne Group concerning trade secrets, techniques, know-how
(including designs, plans, procedures, merchandising know-how, processes and
research records), software, computer programs, innovations, discoveries,
improvements, research, development, test results, reports, specifications,
data, formats, marketing data and plans, business plans, strategies, forecasts,
unpublished financial information, orders, agreements and other forms of
documents, price and cost information, merchandising opportunities, expansion
plans, designs, store plans, budgets, projections, customer, supplier and
subcontractor identities, characteristics and agreements, and salary, staffing
and employment information.  Notwithstanding the foregoing, Proprietary
Information shall not in any event include information which (i) was generally
known or generally available to the public prior to its disclosure to you; (ii)
becomes generally known or generally available to the public subsequent to
disclosure to you through no wrongful act of any person or (iii) which you are
required to disclose by applicable law or regulation (provided that you provide
the Company with prior notice of the contemplated disclosure and reasonably
cooperate with the Company at the Company's expense in seeking a protective
order or other appropriate protection of such information).

                 (b)      You acknowledge and agree that in the performance of
your duties hereunder the Claiborne Group may from time to time disclose to you
and entrust you with Proprietary Information.  You also acknowledge and agree
that the unauthorized disclosure of Proprietary Information, among other
things, may be prejudicial to the Claiborne Group's interests, an invasion of
privacy and an improper disclosure of trade secrets.  You agree that you shall
not, directly or indirectly, use, make available, sell, disclose or otherwise
communicate to any corporation, partnership, individual or other third party,
other than in the course of your assigned duties and for the benefit of the
Claiborne Group, any Proprietary Information, either during your term of
engagement or thereafter.

                 (c)      You and the Company agree that you shall not disclose
to the Claiborne Group or use for the Claiborne Group's benefit, any
information which may constitute trade secrets or confidential information of
third parties, to the extent you have any such secrets or information.

                 (d)      The provisions of this Section 5 shall survive the
termination or expiration of this Agreement and the Term.

         6.      Restrictive Covenants.

                 (a)      You acknowledge and agree that you have and will
continue to develop a personal acquaintance and relationship with one or more
of the Claiborne Group's customers, employees, suppliers and independent
contractors, and consequently, you agree that it is fair, reasonable and
necessary for the protection of the business, operations, assets and reputation
of the Claiborne Group that you make the covenants contained in this Section 6.

                 (b)      You agree that, until the first anniversary of the
Effective Date, without the prior express written consent of the Board of
Directors, you shall not, directly or indirectly, own, manage, operate, join,
control, participate in, invest in or otherwise be connected or associated
with, in any manner, including as an officer, director, employee, partner,
consultant, advisor, proprietor, trustee or investor, any Competing Business
(as hereinafter defined); provided however that nothing contained in this
Section 6(b) shall prevent you from owning less than 2% of the voting stock of


<PAGE>   5

a publicly held corporation for investment purposes.  For purposes of this
Section 6(b), the term "Competing Business" shall mean a business engaged in
the design, manufacture, distribution or marketing of better apparel or related
products which competes with any business or line of business representing more
than $75 million in sales of the Company and then being operated by the
Company.

                 (c)      You agree that, until the third anniversary of the
Effective Date, you shall not, directly or indirectly,

                          (i)     persuade or seek to persuade any customer of
                 the Claiborne Group to cease to do business or to reduce the
                 amount of business which any customer has customarily done or
                 contemplates doing with the Claiborne Group, whether or not
                 the relationship between the Claiborne Group and such customer
                 was originally established in whole or in part through your
                 efforts;

                          (ii)    seek to employ or engage, or assist anyone
                 else to seek to employ or engage, any Protected Person or
                 Entity; or

                          (iii)   knowingly interfere in any manner in the
                 relationship of the Claiborne Group with any of its customers,
                 suppliers or independent contractors, whether or not the
                 relationship between the Claiborne Group and such customer,
                 supplier or independent contractor was originally established
                 in whole or in part by your efforts.

As used in this Section 6, (i) the terms "customer" and "supplier" shall mean
and include any individual, proprietorship, partnership, corporation, joint
venture, trust or any other form of business entity which is then a customer or
supplier, as the case may be, of the Claiborne Group or which was such a
customer or supplier at any time during the one-year period immediately
preceding the date of termination of your engagement hereunder; and (ii) the
term "Protected Person or Entity" shall mean and include (A) any person who was
at any time during the period January 1, 1994 through the end of the Term
hereof an employee of any entity within the Claiborne Group, (B) any person or
entity who or which, at any time during the period January 1, 1994 through the
date hereof was a contractor or supplier to the Company (1) who or which (x)
provided material manufacturing marketing, sales, financial or management
consulting services to any entity within the Claiborne Group, or (y) was a
supplier of apparel or related goods or components thereof to the Claiborne
Group, and (2) with whom you had regular or significant contact as an employee
of the Company, and (C) any person or entity with whom you had substantive
meetings or discussions at the direction of the Company hereunder during the
Term hereof.

                 (d)      You agree that, during the Term, and for a period of
12 months thereafter, you will take no action which is intended, or would
reasonably be expected, to harm the Claiborne Group or its reputation or which
would reasonably be expected to lead to unwanted or unfavorable publicity to
the Claiborne Group.

                 (e)      The provisions of this Section 6 shall survive the
termination or expiration of this Agreement and the Term.

         7.      Specific Performance.  You acknowledge that the Company would
sustain irreparable injury in the event of a violation by you of any of the
provisions of Sections 5 or 6 hereof, and by reason thereof you consent and
agree that if you violate any of the provisions of said Sections 5 or 6,


<PAGE>   6

in addition to any other remedies available, the Company shall be entitled to a
decree specifically enforcing such provisions, and shall be entitled to a
temporary and permanent injunction restraining you from committing or
continuing any such violation, from any arbitrator duly appointed in accordance
with the terms of this Agreement or any court of competent jurisdiction,
without the necessity of proving actual damages, posting any bond, or seeking
arbitration in any forum.  The provisions of this Section 7 shall survive the
termination or expiration of this Agreement and the Term.

         8.      Stock Options.

                 By all necessary corporate action, which the Company
represents has been taken, your existing option agreements dated December 13,
1993; December 14, 1992; December 17, 1991; and December 14, 1990
(collectively, the "Option Agreements") are hereby amended, with effect as of
the day following the Effective Date, to provide as follows:

                 (a)      that your "termination of employment" for all purposes
under such Option Agreements shall be deemed to be the last day of your
engagement as a consultant pursuant to this Agreement;

                 (b)      Provided that you shall not have materially breached
any provision of this Agreement entitling the Company to terminate the same in
accordance with its terms, all options granted pursuant to the Option
Agreements that shall not have theretofore vested in accordance with the terms
of such Option Agreements shall vest in full on the date immediately preceding
the last day of the Term; and

                 (c)      Your use of so-called "cashless exercise" procedures
permitted within the terms of the stock option plan of the Company under which
your Option Agreements were issued, including your being deemed to tender "in
the money" options as payment for your exercise price and/or tax withholding
obligations in connection with your option exercises, are hereby approved with
respect to any future exercises of your options granted under the Option
Agreements.

                 (d)      In the event that the Company shall amend the
relevant option plan, or adopt any policy thereunder, to generally provide,
with effect prior to the end of the Term, that Company stock options issued
prior to the date hereof to senior executive officers and vested prior to
termination of employment may be exercised by the holder thereof during a
period longer than three months after termination of employment, or to
otherwise unconditionally provide an acceleration or other benefit under the
Terms of such options to the holder thereof, then such amendment or policy
shall apply to your options covered by the Option Agreements with equal force
and effect.

         9.      Life Insurance.

                 (a)      You agree that the Claiborne Group will have the 
right to obtain and maintain life insurance on your life, at its expense, and 
for its benefit.  You agree to cooperate fully with the Claiborne Group in


<PAGE>   7

obtaining such life insurance, to sign any necessary consents, applications and
other related forms or documents and to take any required medical examinations.

                 (b)      At the conclusion of the Term, you shall be entitled
to take over ownership of any "portable" life insurance policies held by
Company on your life, in accordance with the standard Company procedures with
respect thereto.

         10.     Withholding.  The parties understand and agree that all
payments to be made by the Company pursuant to this Agreement shall be subject
to all applicable tax withholding obligations of the Company.

         11.     No Conflict.  You covenant that you shall not become party to
or subject to any agreement, contract, understanding, covenant, judgment or
decree or under any obligation, contractual or otherwise, in any way
restricting or adversely affecting your ability to act for the Claiborne Group
in all of the respects contemplated hereby.

         12.     Indemnification; Cooperation.  (a)  The Company hereby
confirms to and agrees with you with respect to any and all matters arising out
of or in connection with your prior employment by the Company or your
engagement as a consultant hereunder, that you shall continue to be entitled to
receive the benefits of all indemnification provisions contained in the
Certificate of Incorporation and By-Laws of the Company, as in effect on the
date hereof, notwithstanding any changes therein made after the date hereof, to
the fullest extent permitted by applicable law at the time of the assertion of
any liability against you.  Without limiting the generality of the foregoing,
the Company hereby covenants and agrees that you shall be entitled to receive
any and all indemnification to which you would have been entitled had you
remained an officer or director of the Company after the date hereof,
including, without limitation, such indemnification benefits as may hereafter
be extended or otherwise made available by the Company to its senior executive
officers.

                 (b)      Consultant shall cooperate fully with the Company in
the prosecution or defense, as the case may be, of any and all actions,
governmental inquiries or other legal proceedings in which his assistance may
be requested by the Company.  Such cooperation shall include, among other
things, making documents in his custody or control available to the Company or
its counsel, making himself available for interviews by the Company or its
counsel, and making himself available to appear as a witness, at deposition,
trial or otherwise.  Any reasonable and necessary vouchered out-of-pocket
expenses incurred by Consultant in fulfilling his obligations under this
paragraph 12(b) shall be the sole responsibility of the Company.

                 (c)      The provisions of this Section 12 shall survive the
termination or expiration of this Agreement and the Term.

         13.     Notices.  All notices required or permitted hereunder will be
given in writing by personal delivery; by confirmed facsimile transmission; by
express delivery via any reputable express courier service; or by registered or
certified mail, return receipt requested, postage prepaid, in each case
addressed to the parties at the respective addresses set forth in Exhibit A or
at such other address as may be designated in writing by either party to the
other in the manner set forth herein.  Notices which are delivered personally,
by confirmed facsimile transmission, or by courier as aforesaid, will be
effective on the date of delivery.  Notices delivered by mail will be deemed
effectively given upon the fifth calendar day subsequent to the postmark date
thereof.


<PAGE>   8


         14.     Miscellaneous.

                 (a)      The failure of either party at any time to require
performance by the other party of any provision hereunder will in no way affect
the right of that party thereafter to enforce the same, nor will it affect any
other party's right to enforce the same, or to enforce any of the other
provisions in this Agreement; nor will the waiver by either party of the breach
of any provision hereof be taken or held to be a waiver of any prior or
subsequent breach of such provision or as a waiver of the provision itself.

                 (b)      This Agreement is a personal contract calling for the
provision of unique services by you, and your rights and obligations hereunder
may not be sold, transferred, assigned, pledged or hypothecated by you.  In the
event of any attempted assignment or transfer of rights hereunder by you
contrary to the provisions hereof (other than as may be required by law), the
Company will have no further liability for payments hereunder.  The rights and
obligations of the Company hereunder will be binding upon and run in favor of
the successors and assigns of the Company, but no assignment by the Company
shall release the Company from its obligations hereunder, and the Company shall
not assign this Agreement to any entity outside of the Claiborne Group except
in connection with a sale of all or substantially all of the assets of the
Company.

                 (c)      Each of the covenants and agreements set forth in
this Agreement are separate and independent covenants, each of which has been
separately bargained for and the parties hereto intend that the provisions of
each such covenant shall be enforced to the fullest extent permissible.  Should
the whole or any part or provision of any such separate covenant be held or
declared invalid, such invalidity shall not in any way affect the validity of
any other such covenant or of any part or provision of the same covenant not
also held or declared invalid.  If any covenant shall be found to be invalid
but would be valid if some part thereof were deleted or the period or area of
application reduced, then such covenant shall apply with such minimum
modification as may be necessary to make it valid and effective.

                 (d)      This Agreement has been made and will be governed in
all respects by the laws of the State of New York applicable to contracts made
and to be wholly performed within such state and the parties hereby irrevocably
consent to the jurisdiction of the courts of the State of New York and federal
courts located therein for the purpose of enforcing this Agreement.

                 (e)      Any controversy arising out of or relating to this
Agreement or the breach hereof shall be settled by arbitration in the City of
New York in accordance with the rules then obtaining of the American
Arbitration Association and judgment upon the award rendered may be entered in
any court having jurisdiction thereof, except that in the event of any
controversy relating to any violation or alleged violation of any provision of
Section 5 or 6 hereof, the Company in its sole discretion shall be entitled to
seek injunctive relief from a court of competent jurisdiction without any
requirement to seek arbitration.  The parties hereto agree that any arbitral
award may be enforced against the parties to an arbitration proceeding or their
assets wherever they may be found.  In the event that (i) you make a claim
against the Company under this Agreement, (ii) the Company disputes such claim,
and (iii) you prevail with respect to such disputed claim, then the Company
shall reimburse you for your reasonable costs and expenses (including
reasonable attorney's fees) incurred by you in pursuing such disputed claim.


<PAGE>   9

                 (f)      This Agreement, together with the letter agreement
between us dated December 8, 1994 (which include any Exhibits and Annexes
hereto or thereto), sets forth the entire understanding between the parties as
to the subject matter of this Agreement and merges and supersedes all prior
agreements, commitments, representations, writings and discussions between the
parties with respect to that subject matter.  This Agreement may be terminated,
altered, modified or changed only by a written instrument signed by both
parties hereto.

                 (g)      The Section headings contained herein are for
purposes of convenience only and are not intended to define or list the
contents of the Sections.

                 (h)      The provisions of this Agreement which by their terms
call for performance subsequent to termination of the Term, or of this
Agreement, shall so survive such termination.

                 (i)      In rendering the services to be rendered by you
hereunder, you shall be an independent contractor, and you shall not, without
the prior express direction of the Company, be authorized to bind the Company
in any manner whatsoever.

         Please confirm your agreement with the foregoing by signing and
returning the enclosed copy of this letter, following which this will be a
legally binding agreement between us as of the date first written above.


                                           Very truly yours,

                                           Liz Claiborne, Inc.


                                           By: /s/ Jerome A. Chazen        
                                               -----------------------------
                                               Name:  Jerome A. Chazen
                                               Title: Chairman


Accepted and Agreed:


/s/ Harvey L. Falk
------------------
Harvey L. Falk
              


<PAGE>   10

                                  EXHIBIT A


                              Addresses for Notice

If to Liz Claiborne, Inc.:

            Liz Claiborne, Inc.
            1441 Broadway
            New York, NY  10018
            Attention:  Chairman
            Facsimile:  (212) 626-1888
            Confirm:  (212) 626-3300

             - and -

            Liz Claiborne, Inc.
            300 Lighting Way
            Secaucus, NJ  07094
            Attention:  General Counsel
            Facsimile:  (201) 601-8650
            Confirm:    (201) 601-8501

If to You:

            To your address set forth on the first page of this Agreement

            Facsimile:
            Confirm:

With a copy to:

            Donald D. Shack, Esq.
            Shack & Siegel, P.C.
            530 Fifth Avenue
            New York, New York
            Facsimile:  (212) 730-1964
            Confirm:    (212) 782-0700

  


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