Sample Business Contracts

Severance Agreement - Liz Claiborne Inc. and Jerome Chazen

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15 May 96  9:54am

Liz Claiborne, Inc.
1441 Broadway
New York City

                                  May 15, 1996

Mr. Jerome A. Chazen

Dear Jerry:

      This letter sets forth our mutual agreements relative to your retirement
from Liz Claiborne, Inc. (the "Company"), which shall be effective as of the
close of the Company's upcoming Annual Meeting (the "Effective Date"), as

      1. Positions. Assuming your reelection by the Company's Shareholders at
the Annual Meeting, you shall serve as a Director of the Company through the
1997 Annual Meeting, during which term you shall have the title "Chairman
Emeritus" and be entitled to such compensation as is generally provided to the
Company's other non-management Directors. By your execution and delivery hereof,
you shall be deemed to have retired from the Company and resigned, effective as
of the Effective Date, from all of your other positions with the Company and all
other entities within the Claiborne Group (as such term is defined and used in
the Consulting Agreement between you and the Company referenced below (the
"Consulting Agreement")), as well as any position held by you at the request of
the Company or any entity within the Claiborne Group, including without
limitation as (i) Chairman of the Board of the Company, (ii) a member of any
Company committees (including without limitation any committee under any Company
Retirement Plan (as such term is hereinafter defined)), and (iii) an employee,
officer, director (except as aforesaid) or board or committee member of any
entity within the Claiborne Group; provided that you shall continue to serve as
a member of the Board of the Liz Claiborne Foundation during the Term of the
Consulting Agreement, and thereafter for such additional period as you and the
Company shall agree.

      2. General Release. Contemporaneously with our mutual execution and
delivery of the Consulting Agreement, you shall deliver a general release in
favor of the Company and the Claiborne Group in the form annexed hereto as
Exhibit A. You hereby confirm (i) that your decision to retire was entirely
voluntary and effected solely at your request, (ii) that you accept the
arrangements contemplated by the Consulting Agreement

<PAGE>   2
referenced below in full and complete satisfaction of any severance obligations
the Company may have to you, and (iii) that you were represented by counsel of
your own choosing in connection with this letter agreement and the transactions
contemplated hereby.

      3.    Retirement Plans.

            (a) You understand that, effective upon the Effective Date, you
shall no longer participate in the Company's profit sharing or savings plans, or
the related SERP (collectively, the "Company Retirement Plans"); you shall be
entitled to receive credit to your respective accounts under such Plans in
accordance with the terms thereof applicable to employees retiring with the
consent of the Company, through the Effective Date.

            (b) With respect to your payout options under the Company Retirement
Plans, you shall in accordance with the applicable provisions of such Plans
deliver to the Company your directions as to your payout elections thereunder,
on such forms as the Company shall provide to you for such purpose.

            (c) In full satisfaction of the Company's obligations to you under
that certain unfunded deferred compensation arrangement established in 1992, the
Company shall pay to you, and you shall accept, the sum of $1,692,541, which
shall be paid to you, net of any applicable withholding, in a lump sum as soon
as is practicable after the Effective Date.

      4. Life Insurance Policy. You may, at your option, take over ownership of
the "portable" life insurance policy held by the Company on your life, in
accordance with standard Company and insurer procedures with respect thereto.

      5. Consulting Agreement.  Concurrently herewith, we have executed and 
delivered the Consulting Agreement, in the form previously agreed.

      6. Company Property. You shall, as soon as is practicable after the
Effective Date, return to the Company or as it may direct, any Company property
in your possession or under your control; provided that you may move the
furniture currently used for your office to your new off site offices. You may,
at your option, take over the Company's lease of the automobile presently
supplied by the Company for your use, such to be at your own cost and expense.

      7. Further Assurances. Each of us shall provide, upon the request of the
other, any documents (signed, if so requested) reasonably deemed necessary or
appropriate by the other to confirm or evidence any of the foregoing matters.

      8. Miscellaneous. This letter agreement may be amended only in a writing
executed by both parties. It shall be governed by the laws of the State of New
York applicable to contracts made

<PAGE>   3
and to be wholly performed within such State, without reference to principles of
conflicts of laws.

      If the foregoing letter correctly sets out our agreement and
understanding, please return an executed copy to us, whereupon it shall
constitute our legally binding agreement.

                                    Very truly yours,

                                    Liz Claiborne, Inc.

                                        /s/ Paul R. Charron
                                    Authorized Signature

Agreed and accepted:

/s/ Jerome A Chazen
Jerome A. Chazen

<PAGE>   4
                               Liz Claiborne, Inc.
                                  1441 Broadway
                                  New York City

                               as of May 17, 1996

Jerome A. Chazen
543 North Broadway
Upper Nyack, New York  10960

Dear Jerry:

            The undersigned Liz Claiborne, Inc. (the "Company") desires to
engage you as a consultant, and you desire to be so engaged by the Company, all
subject to the terms and conditions set forth in this letter agreement ("this
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

            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 May 18, 1996 and (unless sooner terminated as hereinafter
provided) expiring on May 17, 1998 (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 and shall be reasonably acceptable to you.

                  (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
<PAGE>   5
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 15 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

                  (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 reasonably be expected 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 will accept
consulting fees at an annual rate of Four Hundred Thousand Dollars ($400,000).
Such consulting fees will 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 standard 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). In addition, 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. Such expenses shall include an office allowance of up to $25,000
per year of the Term. With respect to any projects requiring that you travel 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 (subject, with respect to subparagraph (i) below, to the cure

<PAGE>   6
provided therein) 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;

                  (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; or

                (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.

                  (b) For purposes of this Section 4, no act, or failure to act,
on your part shall be deemed "willful" or "intentional" if done, or omitted to
be done, by you with 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 resignation,
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 May 17, 1998 your consulting fee provided in
paragraph 3(a) to your estate or personal representative; provided further that
in the event of death, upon request of your estate, all remaining payments shall
be paid to your estate in a lump sum, discounted at 8%, as promptly as
reasonably practicable.

            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

<PAGE>   7
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 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

<PAGE>   8
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 later of (i) the first
anniversary of the Effective Date, and (ii) thirty days after the end of the
Term hereof, you shall not, directly or indirectly, without the express prior
written consent of the Board of Directors,

                   (i) be or become employed or engaged as an employee of or
                       consultant to, or exercise control over, any business
                       which directly competes with any business presently
                       operated by the Company or any member of the Claiborne
                       Group; provided that the written consent of the Board of
                       Directors permitting your activities under this clause 
                       (i) shall not be unreasonably withheld or delayed;

                  (ii) 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;

                 (iii) seek to employ or engage, or assist anyone else to seek
                       to employ or engage, any Protected Person or Entity; or
                  (iv) knowingly interfere in any manner in the relationship of
                       the Claiborne Group with any of its 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, 1995 through the end of the Term hereof
an employee of any entity within the Claiborne Group, other than your personal
assistant, (B) any person or entity who or which, at any time during the period
January 1, 1995 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.

<PAGE>   9
                  (c) You agree that, during the Term, and for a period of 90
days thereafter, you will not willfully or intentionally (such phrase to have
the meaning ascribed to it in Section 4(b) above) take any action which is
intended, or would reasonably be expected, to materially injure the reputation,
business or business relationships of the Claiborne Group or which is intended,
or would reasonably be expected, to lead to unfavorable publicity to the
Claiborne Group.

                  (d) The provisions of this Section 6 shall survive the
termination or expiration of this Agreement and the Term to the extent herein

            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, 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. No Conflict. You covenant that you shall not become party to or
subject to any agreement, contract, understanding or covenant, 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.

            9. 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) You 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 your assistance may be requested
by the Company. Such cooperation shall include, among other things, making
documents in your custody or control available to the Company or its counsel,
making yourself available for interviews by the Company or its counsel, and
making yourself available to appear as a witness, at deposition, trial or

<PAGE>   10
otherwise. Any reasonable and necessary vouchered out-of-pocket expenses
incurred by you in fulfilling your obligations under this paragraph 9(b) shall
be reimbursed by the Company.

                  (c) The provisions of this Section 9 shall survive the
termination or expiration of this Agreement and the Term.

            10. Notices. All notices required or permitted hereunder will be
given in writing by personal delivery; by confirmed facsimile transmission; by
express delivery via 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.

            11.   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. 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.

<PAGE>   11
                  (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 in good faith
against the Company under this Agreement, or the Company makes a claim against
you under this Agreement, (ii) the party charged disputes such claim, and (iii)
you prevail in whole or in part 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 or defending such
disputed claim.

                  (f) This Agreement, together with the letter agreement between
us dated May 15, 1996 (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.

<PAGE>   12
            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/ Paul R. Charron

Accepted and Agreed:

/s/ Jerome A. Chazen
Jerome A. Chazen

<PAGE>   13
                                    EXHIBIT A

                              Addresses for Notice

If to Liz Claiborne, Inc.:

            Liz Claiborne, Inc.
            1441 Broadway
            New York, NY  10018
            Attention:  CEO
            Facsimile:  (212) 626-1803
            Confirm:    (212) 626-3500

              - and -

            Liz Claiborne, Inc.
            One Claiborne Avenue
            North Bergen, NJ  07094
            Attention:  General Counsel
            Facsimile:  (201) 295-7851
            Confirm:    (201) 295-7830

If to You:

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

            Facsimile:  (914)
            Confirm:    (914) 353-3596

      With a copy to:

            Henry P. Baer, Esq.
            Skadden Arps
            919 Third Avenue
            New York, New York  10022
            Facsimile:  (212) 735-3743
            Confirm:    (212) 735-2910

                  - and-

            Sherwin Kamin, Esq.
            Kramer Levin
            919 Third Avenue
            New York, New York  10022
            Fascimile:  (212) 715-8000

<PAGE>   14
            Confirm:      (212) 715-9314