Contents:
Employment Agreement  Paul R. Charron
Change-in-Control Agreement
Amendment No. 1 to Change-in-Control Agreement
 
 
 
 Liz Claiborne, Inc
 1441 Broadway
 New York, NY 10018
 
 November 3, 2003
 
 
Paul R. Charron
70 Oxridge Lane
Darien, CT. 06820
 
Dear Paul:
 
The undersigned Liz Claiborne, Inc. ("the Company") desires to employ you in the
capacities of Chairman and Chief Executive Officer of the Company, and you
desire to be so employed 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. Employment; Term. The Company hereby employs you, and you hereby accept
 ----------------
such employment and agree to serve the Claiborne Group, upon the terms and
conditions hereinafter set forth, for a term commencing on November 3, 2003 and
(unless sooner terminated as hereinafter provided) expiring on December 31, 2006
(the "Employment Period").
 
2. Position; Conduct.
 -----------------
 
 (a) Position. During the Employment Period, you will hold the titles
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and offices of, and serve in the positions of, Chief Executive Officer of the
Company and (subject to any legal, regulatory (including stock exchange), or
fiduciary requirements) Chairman of the Board of Directors of the Company (the
"Board of Directors"). You shall report to the Board of Directors and shall
perform such specific duties and services as Chairman and Chief Executive
Officer (including services as an officer, director or equivalent position of
any subsidiary, affiliated company or venture of the Claiborne Group, without
additional compensation) as the Board of Directors shall reasonably request
consistent with your position. You will be based at the Company's principal
executive offices, currently in New York, New York. Your performance shall be
reviewed periodically by the Board of Directors.
 
 (b) Responsibilities. During the Employment Period, you agree to (i)
 ----------------
devote your full time and attention and best efforts to the business and affairs
of the Claiborne Group and to faithfully and diligently perform, using your best
efforts, all of your duties and responsibilities; (ii) abide by all applicable
policies of the Claiborne Group from time to time in effect; and (iii) not take
any action or conduct yourself in any manner which would tend to harm
 
 
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the reputation or goodwill of the Claiborne Group. Nothing in this paragraph
shall preclude you from devoting reasonable time and attention to (x) serving,
with the prior approval of the Board of Directors (which shall not be
unreasonably withheld), as director, trustee or member of a committee of any
organization involving no conflict of interest with the interests of the
Claiborne Group; (y) engaging in charitable and community activities; and (z)
managing your personal investments and affairs; provided that such activities do
not, individually or collectively, interfere with the performance of your duties
and responsibilities as contemplated under this Agreement.
 
3. Board of Directors. Subject to the right to elect directors of the Company
 ------------------
by law vested in the stockholders and directors of the Company, you agree to
serve on the Board of Directors at the request of the Company without additional
compensation. By your signature below, you agree that any termination of your
employment with the Company shall also constitute your resignation as a director
of the Company.
 
4. Salary; Additional Compensation; Perquisites and Benefits.
 ---------------------------------------------------------
 
 (a) Base Salary. Effective as of the date hereof, the Company will pay
 -----------
you a base salary (your "Annual Base Salary") at an annual rate of $1,500,000;
provided, however, that the portion of your Annual Base Salary that is in excess
of $1,000,000 in any calendar year during the Employment Period shall be
automatically deferred and credited to your Deferred Salary Account pursuant to
the Liz Claiborne Retirement Income Accumulation Plan (the "RIAP"), and shall
immediately be treated as vested under the RIAP.
 
 (b) Annual Performance-Based Cash Bonus. During the Employment
 -----------------------------------
Period, you will participate, in accordance with and subject to the terms and
conditions thereof and the provisions of this Agreement, in the Company's
Section 162(m) Cash Bonus Plan (as amended and restated, March 12, 2003). Your
target bonus under such Section 162(m) Plan for each fiscal year of the
Employment Period (beginning with fiscal year 2004) shall be 100% of your Annual
Base Salary. For each such year, the Compensation Committee of the Board of
Directors (the "Compensation Committee") shall establish a target performance
threshold (the "Target Threshold"), a minimum performance threshold (the
"Minimum Threshold"), a superior performance threshold (the "Superior
Threshold") and a maximum performance threshold (the "Maximum Threshold"). All
such thresholds shall be determined in good faith by the Compensation Committee.
Your bonus shall be computed in the following manner for each such year:
 
 (i) If the performance results for such year are below the Minimum
 Threshold, you shall receive no bonus for such year.
 
 (ii) If the performance results for such year equal the Minimum
 Threshold, you shall receive a bonus of 50% of your Annual Base Salary
 for such year.
 
 (iii) If the performance results for such year equal the Target
 Threshold, you shall receive a bonus of 100% of your Annual Base
 Salary for such year.
 
 
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 (iv) If the performance results for such year equal the Superior
 Threshold, you shall receive a bonus of 150% of your Annual Base
 Salary for such year.
 
 (v) If the performance results for such year equal or exceed the
 Maximum Threshold, you shall receive an amount (the "Maximum Bonus")
 which shall be established by the Compensation Committee in its
 discretion no later than 90 days after the beginning of such year for
 such year (which amount shall under no circumstances exceed 200% of
 your Annual Base Salary).
 
 (vi) If the performance results for such year fall between the Minimum
 Threshold and the Target Threshold, you shall receive a bonus between
 50% of your Annual Base Salary and 100% of your Annual Base Salary,
 interpolated based on the performance results (for example, if the
 Minimum Threshold is 2x and the Target Threshold is 5x, and the actual
 performance results are 3x, you shall receive a bonus of 2/3 of your
 Annual Base Salary).
 
 (vii) If the performance results for such year fall between the Target
 Threshold and the Superior Threshold, you shall receive a bonus
 between 100% of your Annual Base Salary and 150% of your Base Salary,
 interpolated based on the performance results (for example, if the
 Target Threshold is 5x, the Superior Threshold is 8x, and the actual
 performance results are 7x, you shall receive a bonus of 1 1/3 of your
 Annual Base Salary).
 
 (viii) If the performance results for such year fall between the
 Superior Threshold and the Maximum Threshold, you shall receive a
 bonus between 150% of your Annual Base Salary and the Maximum Bonus,
 interpolated based on the performance results (for example, if the
 Maximum Bonus is 200% of your Annual Base Salary, the Superior
 Threshold is 6x, the Maximum Threshold is 8x, and the actual
 performance results are 7x, you shall receive a bonus of 1 3/4 of your
 Annual Base Salary).
 
 
 (c) Employee Benefits. During the Employment Period, you and your
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family will participate, generally on the same basis as other similarly situated
senior executives of the Claiborne Group, in accordance with and subject to the
respective terms and conditions thereof as to eligibility and otherwise, in the
Company's existing Profit-Sharing Retirement Plan, 401(k) Savings Plan and
Supplemental Executive Retirement Plan relating to the Profit-Sharing and
Savings Plans, as well as the Company's medical, dental, long-term disability
and life insurance programs (subject in the case of life insurance to
insurability at standard rates) and employee discount purchase program. In
addition, if you remain employed by the Company through December 31, 2006 (or if
your employment is terminated earlier by the Company without Cause, by you for
Good Reason, or due to your death or Disability), the Company will arrange for
your continued participation, and the continued participation of your family, in
its medical and dental plans during the period commencing on your termination of
employment and
 
 
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concluding on your 65th birthday (or, at its option, will provide you with
comparable benefits during such period on the same after-tax basis as if
continued participation had been permitted) and, during your lifetime, you shall
be eligible to receive the employee discount on the purchase of products of the
Claiborne Group.
 
 (d) Stock Options. For each calendar year during which part of the
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Employment Period occurs, you will receive stock options ("Stock Options")
pursuant to the Company's 2002 Stock Incentive Plan (the "Incentive Plan") in
accordance with the following terms and conditions:
 
 (i) The aggregate value on the date of grant (such value to be
 determined by the Compensation Committee in its sole discretion using
 the Black-Scholes method of valuation and accounting for risk of
 forfeiture consistent with the methodology used for other senior
 executive officers, provided, however, that when using the
 Black-Scholes valuation method for your Stock Options, it shall be
 assumed that the Stock Options shall all expire on December 31, 2009)
 of all Stock Options granted you in each calendar year during which
 part of the Employment Period occurs shall equal $1,750,000; provided,
 however, that you will be granted Stock Options for 2003 at a value
 such that the sum of the value of such Stock Options plus the value of
 the stock option granted to you on March 12, 2003 (the "March 12
 Grant") assuming that the options subject to the March 12 Grant shall
 expire on December 31, 2009, will equal $1,750,000 (all such values to
 be determined by the Compensation Committee in its sole discretion
 using the Black-Scholes method of valuation and accounting for risk of
 forfeiture as provided above in this Section 4(d)(i)), and it is
 understood that the March 12 Grant (and all other stock options
 previously granted to you) shall not be considered a "Stock Option"
 for purposes of this Agreement.
 
 (ii) Each Stock Option shall have an exercise price equal to 100% of
 the fair market value of Company common stock on the applicable grant
 date.
 
 (iii) Stock Options shall be granted at the same time stock option
 grants are made to other senior executives of the Company, and subject
 to this Section 4(d), shall be on terms and conditions (including
 vesting schedule) substantially similar to those of stock options
 granted to such other senior executives; provided, however, that for
 2003, in light of the fact that stock options have already been
 granted to senior executives of the Company (and you, pursuant to the
 March 12 Grant), the Company will grant Stock Options at a time other
 than when stock options are granted to other senior executives; and,
 provided, further, that if your employment is terminated due to death
 or Disability, all Stock Options previously granted shall vest in
 full.
 
 
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<PAGE>
 
 (iv) If you remain continuously employed with the Company until
 December 31, 2006, on the termination date of your employment
 (including, without limitation, a termination for any reason after
 December 31, 2006) you shall be considered to have retired and shall
 be given three years thereafter to exercise the Stock Options and the
 March 12 Grant, all of which shall be fully vested and exercisable. In
 addition, if your employment is terminated prior to December 31, 2006
 by the Company without Cause or by you for Good Reason, you shall be
 given one year thereafter to exercise any Stock Options that were
 vested as of the date of such termination.
 
 (v) Any shares of Company stock acquired pursuant to exercise of Stock
 Options or the March 12 Grant shall be subject to the following
 restrictions on sale and transferability (except as limited below):
 With respect to any exercise prior to December 31, 2007, you will be
 immediately permitted to sell only 25% of the net shares acquired
 pursuant to such exercise, and you must retain the remainder of the
 net shares in accordance with the following: you will be permitted to
 sell half of such remaining net shares only on or after December 31,
 2007, and you will be permitted to sell the remaining half of such
 remaining net shares only on or after December 31, 2008. With respect
 to any exercise on or after December 31, 2007 but prior to December
 31, 2008, you will be immediately permitted to sell 62.5% of the net
 shares acquired pursuant to such exercise, and you will be permitted
 to sell the remaining 37.5% of such net shares only on or after
 December 31, 2008. The foregoing restrictions on sale and
 transferability shall be limited by each of the following: (x) you
 shall be permitted at any time to transfer shares to any one or more
 of your spouse, children, or grandchildren, one or more trusts for the
 primary benefit of you or any or all of them, or limited partnerships
 or other entities wholly-owned by you or any one or more of the other
 individuals or entities referred to in this clause (x), provided that
 such transferred shares shall be deemed to be held by you for purposes
 of the restrictions on sale and transfer under this Section 4(d)(v),
 (y) the restrictions on sale and transfer shall not apply to any
 involuntary transfer or a transfer by operation of law, such as upon
 the consummation of a merger or in connection with a bankruptcy
 proceeding, and (z) the restrictions on sale and transfer shall
 automatically terminate upon your death or your Disability.
 Additionally, upon a termination of your employment by the Company
 without Cause or by you for Good Reason, the Company shall determine
 in good faith whether to waive the foregoing restrictions on sale and
 transferability, it being agreed that the Company will, in making such
 determination, operate under a presumption that such restrictions
 shall generally be waived. For purposes of this Section 4(d)(v), the
 "net shares acquired pursuant" to a stock option exercise shall mean
 (A) the number of shares which are purchased pursuant to such exercise
 minus (B) any such shares which are not distributed to you in order to
 satisfy applicable tax withholding or in order to pay the exer-
 
 
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<PAGE>
 
 cise price (or which are sold by you to reimburse yourself for any
 advance of any such withholding or exercise price).
 
 (e) Restricted Stock. For each calendar year during which part of the
 ----------------
Employment Period occurs, you will receive grants of restricted stock (as
defined in the Incentive Plan) from time to time pursuant to the Incentive Plan
or pursuant to the Company's 2000 Stock Incentive Plan (any stock so granted,
"Restricted Stock") in accordance with the following terms and conditions:
 
 (i) The aggregate value of all Restricted Stock granted you in each
 calendar year during which part of the Employment Period occurs shall
 equal $1,750,000. For purposes of this Section 4(e)(i), the value of a
 share of Restricted Stock shall be determined by the Compensation
 Committee by multiplying (x) the fair market value of such share on
 the date of grant times (y) a number less than one (determined in the
 sole discretion of the Compensation Committee consistent with the
 methodology used for other senior executives) designed to reflect the
 risk of forfeiture.
 
 (ii) Your Restricted Stock grants, shall, subject to this Section
 4(e), be granted on terms and conditions substantially similar to, and
 at the same time as, those of restricted stock grants to other senior
 executives of the Company (if any). For the avoidance of doubt, you
 shall receive your Restricted Stock grants regardless of whether
 restricted stock grants are in fact made to other senior executives of
 the Company.
 
 (iii) Each grant of Restricted Stock (other than the grant for
 calendar year 2003 (the "2003 Restricted Stock Grant"), which shall
 fully vest on the first anniversary of grant) shall vest in three
 equal installments on each of the first three anniversaries of the
 date of grant; provided, however, that if you remain continuously
 employed with the Company until December 31, 2006, or if you are
 earlier terminated due to your death or Disability (other than with
 respect to the 2003 Restricted Stock Grant), all Restricted Stock
 previously granted shall vest in full.
 
 (iv) Any shares of Company stock acquired pursuant to vesting of
 Restricted Stock other than shares acquired pursuant to vesting of the
 2003 Restricted Stock Grant shall be subject to the following
 restrictions on sale and transferability (except as limited below):
 With respect to any vesting event prior to December 31, 2007, you will
 be immediately permitted to sell or otherwise transfer 25% of the net
 vested shares and you will be required to retain the remaining net
 vested shares in accordance with the following: you will be permitted
 to sell or otherwise transfer half of such remaining net vested shares
 only on or after December 31, 2007, and you will be permitted to sell
 or otherwise transfer the remaining half of such remaining net vested
 shares only on or after December 31, 2008. The foregoing restrictions
 on sale and transferability shall be limited by each of the following:
 (x) you shall be permitted at any time to transfer shares
 
 
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<PAGE>
 
 to any one or more of your spouse, children, or grandchildren, one or
 more trusts for the primary benefit of you or any or all of them, or
 limited partnerships or other entities wholly-owned by you or any one
 or more of the other individuals or entities referred to in this
 clause (x), provided that such transferred shares shall be deemed to
 be held by you for purposes of the restrictions on sale and transfer
 under this Section 4(e)(iv), (y) the restrictions on sale and transfer
 shall not apply to any involuntary transfer or a transfer by operation
 of law, such as upon the consummation of a merger or in connection
 with a bankruptcy proceeding, and (z) the restrictions on sale and
 transfer shall automatically terminate upon your death or your
 Disability. Additionally, upon a termination of your employment by the
 Company without Cause or by you for Good Reason, the Company shall
 determine in good faith whether to waive the foregoing restrictions on
 sale and transferability, it being agreed that the Company will, in
 making such determination, operate under a presumption that such
 restrictions shall generally be waived. For purposes of this Section
 4(e)(iv), the number of net vested shares in respect of any vesting
 event shall equal (A) the number of shares that actually vest in such
 event minus (B) any such shares which are not distributed to you in
 order to satisfy applicable tax withholding (or which are sold by you
 to reimburse yourself for any advance of any such withholding).
 
 (f) Performance Shares. During the Employment Period, you will receive
 ------------------
performance shares (as defined in the Incentive Plan) of the Company's stock
("Performance Shares") pursuant to the Incentive Plan only in accordance with
the following terms and conditions:
 
 (i) You will receive a grant (the "2003 Performance Share Grant") of
 Performance Shares in 2003 in respect of a performance period
 beginning on January 1, 2003 and concluding on December 31, 2005, and
 you will receive a grant (the "2004 Performance Share Grant") of
 Performance Shares in 2004 in respect of a performance period
 beginning on January 1, 2004 and concluding on December 31, 2006. You
 will receive no further grants of Performance Shares. For each of the
 2003 Performance Share Grant and the 2004 Performance Share Grant, you
 will receive a number of Performance Shares having a target value
 equal to (x) (i) $7,000,000 divided by (ii) the value of one share of
 the Company's stock on the date of grant of such Performance Shares
 multiplied by (y) a number less than one (determined in the sole
 discretion of the Compensation Committee consistent with the
 methodology used for other senior executives) designed to reflect the
 risk of forfeiture. For each performance period, the Compensation
 Committee will set target performance levels, the degree of
 achievement of which will determine the number of Performance Shares
 distributed to you at the end of such performance period (or, in the
 case of the 2003 Performance Share Grant, upon your termination of
 employment). The performance criteria for this purpose shall include
 (a) total shareholder return over the period of the performance cycle
 versus peer
 
 
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<PAGE>
 
 group performance, and (b) cumulative earnings per share growth over
 the period of the performance cycle.
 
 (ii) You shall be fully vested in the 2003 Performance Share Grant if
 you remain continuously employed with the Company until December 31,
 2005; provided, however, that you agree to defer distribution of any
 Performance Shares you earn pursuant to the 2003 Performance Share
 Grant until your termination of employment with the Company, and you
 acknowledge that during the period of deferral your right to such
 shares will be in no respect superior to the rights of general
 creditors of the Company. You shall be fully vested in the 2004
 Performance Share Grant if you remain continuously employed with the
 Company until December 31, 2006. If, during any performance period,
 (A) your employment is terminated due to your death or Disability,
 then on the termination date you shall be fully vested in the right to
 receive a percentage of the Performance Shares to which you would have
 been entitled if you had continued your employment through the end of
 the performance period equal to the percentage of the performance
 period that you were employed by the Company, or (B) your employment
 is terminated for any reason other than due to your death or
 Disability, you shall have no right to any Performance Shares with
 respect to such period, but the Committee, in its sole discretion, may
 award you a portion of the Performance Shares for such period if it
 deems such a partial award appropriate.
 
 (iii) Any shares of Company stock acquired pursuant to distribution of
 the Performance Shares subject to the 2004 Performance Share Grant
 shall be subject to the following restrictions on sale and
 transferability (except as limited below): With respect to the net
 amount of Performance Shares distributed to you pursuant to the 2004
 Performance Share Grant, you will be immediately permitted to sell 25%
 of such net amount of Performance Shares, and you will be required to
 retain the remaining net amount of Performance Shares in accordance
 with the following: you will be permitted to sell half of such
 remaining net amount of Performance Shares only on or after December
 31, 2007, and you will be permitted to sell the remaining half of such
 net amount of Performance Shares only on or after December 31, 2008.
 The foregoing restrictions on sale and transferability shall be
 limited by each of the following: (x) you shall be permitted at any
 time to transfer shares to any one or more of your spouse, children,
 or grandchildren, one or more trusts for the primary benefit of you or
 any or all of them, or limited partnerships or other entities
 wholly-owned by you or any one or more of the other individuals or
 entities referred to in this clause (x), provided that such
 transferred shares shall be deemed to be held by you for purposes of
 the restrictions on sale and transfer under this Section 4(f)(iii),
 (y) the restrictions on sale and transfer shall not apply to any
 involuntary transfer or a transfer by operation of law, such as upon
 the consummation of a merger or in connection with a bankruptcy
 proceeding, and (z) the restrictions on sale and transfer shall
 automatically terminate
 
 
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<PAGE>
 
 upon your death or your Disability. Additionally, upon a termination
 of your employment by the Company without Cause or by you for Good
 Reason, the Company shall determine in good faith whether to waive the
 foregoing restrictions on sale and transferability, it being agreed
 that the Company will, in making such determination, operate under a
 presumption that such restrictions shall generally be waived. For
 purposes of this Section 4(f)(iii), the net amount of Performance
 Shares distributed to you in any distribution of Performance Shares
 shall equal (A) the gross number of shares that you earn minus (B) any
 such shares which are not distributed to you in order to satisfy
 applicable tax withholding (or which are sold by you to reimburse
 yourself for any advance of any such withholding).
 
 (g) RIAP. During the Employment Period, you will continue to
 ----
participate in the RIAP. The Company agrees to adopt, and you consent to, an
amendment to the RIAP effective as of the date hereof in substantially the form
set forth as Exhibit A hereto.
 
 (h) Retention Bonus. If you remain employed by the Company on December
 ---------------
31, 2004 (or if your employment is earlier terminated by the Company without
Cause, by you for Good Reason, or due to your death or Disability), you shall
fully vest in the right to receive a retention bonus of $500,000, which bonus
will be paid to you as soon as practicable following the day that follows your
termination of employment.
 
 (i) Reimbursement. The Company will reimburse you, in accordance with
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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 Employment Period in the performance of your duties and
responsibilities under this Agreement.
 
 (j) Vacation. You shall be entitled to a vacation period to be
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credited and taken in accordance with Claiborne Group policy from time to time
in effect for similarly situated senior executives, which in any event shall not
be less than a total of four weeks per annum.
 
 (k) Plans May Be Changed. Your rights under this Agreement with
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respect to the Company's Section 162(m) Cash Bonus Plan, Profit-Sharing
Retirement Plan, 401(k) Savings Plan, Supplemental Executive Retirement Plan,
RIAP, Incentive Plan, medical, dental, long-term disability and life insurance
programs and other programs, perquisites and policies shall not preclude the
Claiborne Group from modifying or terminating any such program, perquisite or
policy, subject to your right, in accordance with the terms of this Agreement,
to participate in or be eligible for such program, perquisite or policy as so
modified or any replacement thereof; provided, however, that if the Company's
Section 162(m) Cash Bonus Plan, Supplemental Executive Retirement Plan, RIAP, or
Incentive Plan are terminated or modified in any material adverse respect with
respect to your compensation opportunities, benefits, or other rights such that
your overall package of compensation and benefits is materially adversely
affected, the Company shall provide you with an alternative or substitute plan
or arrangement such that your overall package of compensation and benefits is
not materially adversely affected.
 
 
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<PAGE>
 
5. Termination.
 -----------
 
 (a) Cause. The Employment Period 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;
 
 (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;
 
 (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 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) Standard. For purposes of this Section 5, 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 that your action or
omission was in the best interests of the Claiborne Group.
 
 (c) Hearing. The Company will endeavor in good faith to 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) Death; Disability. The Employment Period will terminate forthwith
 -----------------
upon your death or, at the Clairborne Group's option, by written notice to you
(or your legal representative) upon your Disability. As used herein the term
"Disability" means your inability to perform your duties and responsibilities as
contemplated under this Agreement for a period (the "Disability Period") of more
than 180 consecutive days due to physical or mental incapacity or impairment. A
determination of Disability will be made by a physician satisfactory to both you
and the Company; provided that if you and the Company cannot agree as to a
physician, then
 
 
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<PAGE>
 
each will select a physician and these two together will select a third
physician, whose determination as to Disability will be binding on you and the
Company. You, your legal representative or any adult member of your immediate
family shall have the right to present to the Company and such physician such
information and arguments on your behalf as you or they deem appropriate,
including the opinion of your personal physician. Should you become
incapacitated, your employment shall continue and all base salary and other
compensation otherwise due to you hereunder shall be continued through the date
on which your employment is terminated for Disability (which date shall under no
circumstances be earlier than the last day of the Disability Period).
 
6. Severance.
 ---------
 
 (a) Termination For Cause; Voluntary Termination Without Good Reason;
 -----------------------------------------------------------------
Termination Due to Death or Disability. In the event that the Employment Period
--------------------------------------
is terminated due to (i) a termination by the Company for Cause, (ii) your
resignation without Good Reason (as hereinafter defined), or (iii) a termination
of your employment on account of your death or Disability, the Company will pay
to you an amount equal to your accrued but unpaid base salary through the date
of such termination, and, in the case of death or Disability, shall continue the
medical and dental insurance coverage for your family called for under Section
6(b) below.
 
 (b) Termination Without Cause; Voluntary Termination For Good Reason.
 ----------------------------------------------------------------
Subject to Section 6(d), in the event that the Employment Period is terminated
(i) by the Company other than for Cause and other than upon your death or
Disability or (ii) by you for Good Reason, then (A) the Company shall pay to you
an amount equal to your accrued but unpaid base salary through the date of such
termination (B) so long as you shall not have breached your obligations to the
Claiborne Group under Sections 7 and 8 hereof (without limitation to any other
remedy available to the Company), the Company shall provide you and your family
with coverage substantially identical to that provided to other senior
executives of the Claiborne Group in its medical, dental, long-term disability
and life insurance programs (subject in the case of life insurance to
insurability at standard rates) for 12 months following the date of such
termination, and, in the case of medical and dental insurance, any longer period
provided for by Section 4(c) (it being understood that, subject to applicable
law, at the Executive's election, such coverage may be provided by the Executive
electing continuation coverage under Section 4980B of the Internal Revenue Code
of 1986, as amended ("COBRA") and the Company reimbursing the cost of such
coverage), and (C) the Company shall pay to you, as and for a severance payment,
two times your Annual Base Salary as soon as practicable (but in no event later
than 20 days after the termination date). For the purposes of this Agreement,
"Good Reason" shall mean the occurrence of one or more of the following events:
(1) your being removed from, or the assignment to you of duties inconsistent
with, your position as described in Section 2(a), in either case without your
consent, which is not cured within 20 days after written notice of such
circumstances by you to the Company, it being understood that your removal as
Chairman due to legal, regulatory (including stock exchange), or fiduciary
requirements shall not constitute Good Reason; (2) a significant adverse change
in the nature or scope of your authority, power, function, duties or
responsibilities as Chief Executive Officer or Chairman, without your consent,
which is not cured within 20 days after written notice of such circumstances by
you to the Company, it being understood that your removal as Chairman due to
legal, regulatory
 
 
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<PAGE>
 
(including stock exchange), or fiduciary requirements shall not constitute Good
Reason; (3) the Company's moving its principal executive offices by more than 20
miles if such move increases your commuting distance by more than 20 miles; or
(4) a material breach by the Company of any of its material obligations under
Section 4 of this Agreement which is not cured within 20 days after written
notice thereof is given by you to the Company. Unless you shall give the Company
notice of any event which, after any applicable notice and the lapse of any
applicable 20-day grace period, would constitute Good Reason within 180 days of
your first knowing of the event, such event shall cease to be an event
constituting Good Reason. Subject to the Company's cure rights described above,
you may terminate your employment by written notice to the Company at any time
that Good Reason for the termination exists. Notwithstanding the foregoing, in
the event that your employment is terminated under circumstances constituting a
Covered Termination (as defined in the Executive Termination Benefits Agreement
between you and the Company dated January 1, 2001 (the "Change in Control
Agreement")) during the Protected Period (as defined in the Change in Control
Agreement), this Section 6(b) shall be of no force.
 
 (c) General. In the event that the Employment Period is terminated for
 -------
any reason, the Company's payment of salary as provided in the previous
paragraphs of this Section 6 (together with reimbursement of your reasonable and
necessary out-of-pocket business expenses incurred through such date in
accordance with the Company's standard policy in effect at such time), the
maintenance of continued participation in the Company's medical, dental,
long-term disability and life insurance programs, if applicable, under this
Section 6, and the vesting, continuation and payment of the other compensation,
perquisites and benefits provided for in Section 4 (including pursuant to the
plans referred to therein) shall constitute complete satisfaction of all
obligations of the Company to you pursuant to this Agreement. Upon any such
termination, you shall cease to be an employee of the Company for all purposes
and except as otherwise expressly set forth in this Section 6, Section 4, or
Section 14 of this Agreement, the Company shall have no obligation under this
Agreement to provide you with any employee benefits or perquisites hereunder.
Nothing in this Section 6(c) shall be deemed to alter or diminish any rights you
may have under plans established by the Company, including the Company's
Supplemental Executive Retirement Plan, Profit-Sharing Retirement Plan, 401(k)
Savings Plan, RIAP or Incentive Plan or under COBRA.
 
 (d) Release Requirement. The Company expressly conditions its
 -------------------
provision of all payments and benefits due to you pursuant to this Section 6 on
receipt from you of a full release of all claims against the Company, and its
officers, directors, and affiliates, in a form and manner reasonably acceptable
to the Company.
 
 (e) Expiration not Termination. For the avoidance of doubt, expiration
 --------------------------
of the Employment Period on December 31, 2006 shall not constitute a termination
of the Employment Period by the Company without Cause, and shall not otherwise
be deemed to constitute an event with respect to which you may receive any
severance payments pursuant to this Agreement.
 
 (f) Sole Remedy. Your rights set out in this Section 6 (including
 -----------
rights in the other sections of this Agreement and the other Company plans
referred to in Section 6(c)) shall constitute your sole and exclusive rights and
remedies as a result of your actual or constructive termination of employment
without Cause or the failure of the Company to elect
 
 
 12
<PAGE>
 
you to the position of Chief Executive Officer, and you hereby waive any such
other claims against the Claiborne Group in such event.
 
7. Confidentiality.
 ---------------
 
 (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 "Confidential Information"). Confidential
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 employment hereunder, which information you acknowledge is and shall
be the sole and exclusive property of the Claiborne Group. Confidential
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
Confidential Information by the Claiborne Group. By way of example and without
limitation, Confidential 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,
Confidential 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, regulation, or legal
process (provided that, unless prohibited by law, 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 will from time to time disclose to you and entrust
you with Confidential Information. You also acknowledge and agree that the
unauthorized disclosure of Confidential 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
Confidential Information, either during the Employment Period or thereafter.
 
 (c) In the event your employment with the Company ceases for any
reason, you will not remove from the Claiborne Group's premises without its
prior written consent any records, files, drawings, documents, equipment,
materials or writings received from,
 
 
 13
<PAGE>
 
created for or belonging to the Claiborne Group, including those which relate to
or contain Confidential Information, or any copies thereof. Upon request or when
your employment with the Company terminates, you will immediately deliver the
same to the Company.
 
 (d) During the Employment Period, you will disclose to the Company all
designs, inventions and business strategies or plans developed by you during
such period which relate directly or indirectly to the business of the Claiborne
Group, including without limitation any process, operation, product or
improvement. You agree that all of the foregoing are and will be the sole and
exclusive property of the Claiborne Group and that you will at the Company's
request and cost do whatever is necessary to secure the rights thereto, by
patent, copyright or otherwise, to the Claiborne Group.
 
 (e) 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.
 
 (f) The provisions of this Section 7 shall survive the termination of
this Agreement and the Employment Period.
 
8. Restrictive Covenants.
 ---------------------
 
 (a) You acknowledge and agree (i) that the services to be rendered by
you for the Claiborne Group are of a special, unique, extraordinary and personal
character, (ii) 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, which may
constitute the Claiborne Group's primary or only contact with such customers,
employees, suppliers and independent contractors, and (iii) that you will be
uniquely identified by customers, employees, suppliers, independent contractors
and retail consumers with the Claiborne Group's products. 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 8.
 
 (b) You agree that, during the Employment Period and for a period of
18 months thereafter, 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 in the United States; provided however that nothing contained in this
Section 8(b) shall prevent you from owning less than 2% of the voting stock of a
publicly held corporation for investment purposes. For purposes of this Section
8(b), the term "Competing Business" shall mean a business engaged in the design,
manufacture, distribution or marketing of better apparel and related products
which competes with any business then being operated by the Company (except
where such competition is de minimus).
 
 (c) You agree that, during the Employment Period and for a period of
18 months thereafter, you shall not, directly or indirectly,
 
 
 14
<PAGE>
 
 (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 person who at any time during the year preceding the
 termination of your employment hereunder was in the employ of the Claiborne
 Group or was an independent contractor providing material manufacturing,
 marketing, sales, financial or management consulting services in connection
 with the business of the Claiborne Group and with whom you had regular
 contact; or
 
 (iii) 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 supplier or
 independent contractor was originally established in whole or in part by
 your efforts.
 
As used in this Section 8, 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 employment.
 
 (d) You agree that, during the Employment Period and for a period of
18 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 8 shall survive the termination of
this Agreement and the Employment Period.
 
9. Specific Performance. You acknowledge that the Company would sustain
 --------------------
irreparable injury in the event of a violation by you as of any of the
provisions of sections 7 or 8 hereof, and by reason thereof you consent and
agree that if you violate any of the provisions of said Sections 7 or 8, 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.
 
10. Life Insurance. 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 obtaining such
life insurance, to sign any necessary consents, applications and other related
forms or documents and to take any required medical examinations.
 
 
 15
<PAGE>
 
11. 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.
 
12. No Conflict. You represent and warrant that you are not 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.
 
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.
 
14. Miscellaneous.
 -------------
 
 (a) You and the Company hereby agree to enter into an amendment of the
Change in Control Agreement, effective as of the date hereof, in substantially
the form set forth as Exhibit B hereto. You and the Company additionally agree
that with respect to any other agreement between you and the Company containing
a definition of "Change in Control" (or any similar phrase) or any plan in which
you participate that contains such a definition, the definition of Change in
Control contained in the Change in Control Agreement (as amended pursuant to the
amendment set forth on Exhibit B) shall replace the definition of Change in
Control for purposes of such other agreement or for purposes of such plan (as
applied to you) with respect to Stock Options, the March 12 Grant, Restricted
Stock grants, annual bonus participation awards, Performance Share grants or
other grants or awards issued to you under this Agreement or otherwise on or
after January 1, 2003.
 
 (b) 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.
 
 (c) 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 the successors and assigns of the Company
and run in favor of any successor and any assignee of all or substantially all
of the assets of the Company provided that such successor or assignee agrees in
writing to assume all of
 
 
 16
<PAGE>
 
the obligations of the Company under this Agreement. No such assumption shall
relieve the Company of its liability to you under this Agreement.
 
 (d) 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.
 
 (e) 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.
 
 (f) 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 7 or 8 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.
 
 (g) This Agreement supersedes and replaces the letter agreement
between you and the Company dated May 9, 1994, as amended. This Agreement may be
terminated, altered, modified or changed only by a written instrument signed by
both parties hereto.
 
 (h) The Section headings contained herein are for purposes of
convenience only and are not intended to define or list the contents of the
Sections.
 
 (i) The provisions of this Agreement which by their terms call for
performance subsequent to termination of the Employment Period, or of this
Agreement, shall so survive such termination.
 
 (j) You shall not be required to mitigate, by seeking employment or
otherwise, the amount of any payment or benefit provided for in this Agreement,
or under the Incentive Plan, RIAP, Section 162(m) Cash Bonus Plan, or other plan
maintained by the Company, including without limitation any payment or benefit
made or vested upon or as a result
 
 
 17
<PAGE>
 
of the termination of your employment, nor will any compensation, income, or
other benefit from any source whatsoever create any mitigation, offset or
reduction against any such payment or benefit.
 
 
 
 
 
 
 18
<PAGE>
 
 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/ Michael Scarpa
 
 
 
Accepted and Agreed:
 
 
/s/ Paul R. Charron
-----------------------
Paul R. Charron
 
 
 
 
 
 19
<PAGE>
 
 Exhibit A
 ---------
 
 Amendment #2 to the Liz Claiborne Retirement Income Accumulation Plan
 ---------------------------------------------------------------------
 
The Liz Claiborne Retirement Income Accumulation Plan (the "Plan") is hereby
amended effective November 3, 2003 in the following respects:
 
1. Section 1.4(a) of the Plan shall be hereby amended to read as follows:
"Change of Control Termination shall mean a Termination of Employment under
 -----------------------------
circumstances constituting a Covered Termination (as defined in the Executive
Termination Benefits Agreement between the Participant and the Company dated
January 1, 2001, as amended (the "Change in Control Agreement")) during the
Protected Period (as defined in the Change in Control Agreement)."
 
2. Section 1.7 of the Plan shall be amended to read as follows: "Disability
 ----------
shall have the meaning set forth in the Employment Agreement."
 
3. Section 1.8 of the Plan shall be amended to add at the end thereof the
following: "for the period through November 2, 2003 and effective as of November
3, 2003, the employment agreement between the Participant and the Company dated
as of November 3, 2003, as amended and in effect from time to time."
 
4. Section 1.10 of the Plan shall be restated as follows: "Imputed Earnings
 ----------------
Rate means, (a) for any Fiscal Year beginning on or before the first to occur of
----
(x) the first day of the Fiscal Year corresponding to the 2004 calendar year and
(y) the Participant's Termination of Employment, the greater of (i) the Rate of
Return for such Fiscal Year or (ii) the 10-year Treasury rate for the first
business day of such Fiscal Year (as published in the Wall Street Journal)
compounded annually and (b) for any Fiscal Year beginning thereafter the rate
specified in (ii)."
 
5. Section 1.13 of the Plan shall be amended to read as follows: "Termination
 -----------
of Employment means cessation for any reason of the Participant's full-time
-------------
employment by the Company."
 
6. Section 2.1 of the Plan will be amended to replace the reference to "2003"
with a reference to "2005." In addition, the following proviso shall be added at
the end of the first sentence of Section 2.1: "; provided, however, that for the
avoidance of doubt, in the event the employment of the Participant is terminated
in the middle of a Fiscal Year, any credits made pursuant to this section on the
first day of such Fiscal Year in respect of Base Salary relating to the portion
of the year following such termination shall be deemed not to have been so
credited." Further, the last sentence of Section 2.1 of the Plan shall be
amended to read as follows: "For purposes of this Section 2.1 and Section 2.2,
the Participant's Base Salary for each of Fiscal Years 2003, 2004, 2005 and 2006
shall be deemed to be $1,500,000."
 
7. Section 2.2 of the Plan shall be amended by adding the following proviso at
the end of such section: "; provided, however, that for the avoidance of doubt,
in the event the employment of the Participant is terminated in the middle of a
Fiscal Year, any credits made
 
 
 20
<PAGE>
 
pursuant to this section on the first day of such Fiscal Year in respect of Base
Salary relating to the portion of the year following such termination shall be
deemed not to have been so credited."
 
8. Section 3.1.1 of the Plan shall be amended to provide as follows: "The
Participant's right to be paid, pursuant to the terms of the Plan, the amount
standing credited to the Retirement Income Account shall become fully vested and
nonforfeitable on the earliest (such earliest event, the "First Vesting Event")
of (a) the last day of the Fiscal Year corresponding to the 2004 calendar year,
provided that on such date the Participant is employed full-time by the Company
pursuant to the Employment Agreement, (b) the Participant's Termination of
Employment by reason of death, Disability, termination without Cause (as defined
in the Employment Agreement), or termination by the Participant for Good Reason
(as defined in the Employment Agreement) or (c) a Change of Control Termination.
Without limiting any other provision of the Plan, upon the Participant's
Termination of Employment prior to the last day of the Fiscal Year corresponding
to the 2004 calendar year for any reason other than those set forth in Section
3.1.1(b) and 3.1.1(c), his rights to payment from the Retirement Income Account
shall be forfeited in their entirety. The Participant's right to be paid,
pursuant to the terms of the Plan, amounts credited to the Retirement Income
Account subsequent to the First Vesting Event ("Post-2004 Credited Amounts")
shall become fully vested and nonforfeitable on the earliest of (x) December 31,
2006, provided that on such date the Participant is employed full-time by the
Company pursuant to the Employment Agreement, (y) the Participant's Termination
of Employment by reason of death or Disability, or (z) a Change of Control
Termination. Without limiting any other provision of the Plan, upon the
Participant's Termination of Employment subsequent to the First Vesting Event
but prior to December 31, 2006 for any reason other than those set forth in
Section 3.1.1(y) and 3.1.1(z), his rights to Post-2004 Credited Amounts shall be
forfeited in their entirety."
 
9. Section 3.2 of the Plan shall be amended by replacing "January 1, 2005"
with "December 31, 2006." In addition, Section 3.2 of the Plan will be amended
to add the following language after the first sentence of such section:
"Notwithstanding anything else contained therein, the account balance of the
Retirement Income Account on the date of payment pursuant to Section 3.3.1 of
the Plan (or if the Participant has elected installment payments, the date of
the first payment) shall not exceed (x) $13,000,000 minus (y) the sum of (1) the
then-present value of the company-provided component of the Participant's
Supplemental Executive Retirement Plan benefit plus (2) the Enhanced Interest
Amount (as defined in the next sentence). The Enhanced Interest Amount shall
equal the excess of (x) the aggregate amounts credited to the Deferred Salary
Account for all Fiscal Years pursuant to Section 2.3 minus (y) the aggregate
amounts that would have been credited to the Deferred Salary Account for all
Fiscal Years pursuant to Section 2.3 if Section 1.10 provided that the Imputed
Earnings Rate was based solely on the rate set forth in Section 1.10(a)(y)(ii)
of the Plan, as from time to time in effect, rather than on the greater of that
rate or the Rate of Return." Further, the first sentence of Section 3.2 of the
Plan shall be amended by adding prior to the phrase "Retirement Income Account"
the following phrase: "subject to the next sentence,".
 
10. Section 3.3.1 of the Plan shall be amended by inserting the following
proviso at the end of the first sentence thereof: "; provided, however, that for
purposes of this sentence only, the Fiscal Year corresponding to calendar year
2006 shall be deemed to conclude on December 31, 2006 and the payment to be made
following a Termination of Employment by the
 
 
 21
<PAGE>
 
Participant during such Fiscal Year deemed to end on December 31, 2006 shall be
due on January 8, 2007."
 
 
 
 
 22
<PAGE>
 
 
IN WITNESS WHEREOF, Liz Claiborne, Inc. has caused this instrument to be
executed by its duly authorized officer as of the 3rd day of November, 2003.
 
 
 
 LIZ CLAIBORNE, INC.
 
 
 
 -----------------
 
 By:
 
 
 
I hereby consent to this Amendment #2 to the Liz Claiborne Retirement Income
Accumulation Plan.
 
 
 
 ---------------
 Paul Charron
 
 
 
 
 23
<PAGE>
 
 Exhibit B
 ---------
 
 FIRST AMENDMENT TO
 ------------------
 EXECUTIVE TERMINATION BENEFITS AGREEMENT
 ----------------------------------------
 
 THIS FIRST AMENDMENT TO THE EXECUTIVE TERMINATION BENEFITS AGREEMENT (this
"Amendment") is made as of November 3, 2003 by and among Liz Claiborne, Inc.
(the "Company") and Paul R. Charron (the "Executive) (the Company and the
Executive together, the "Parties"). Unless otherwise specified, capitalized
terms herein shall have the meaning ascribed to them in the Change in Control
Agreement (as defined herein).
 
 WITNESSETH:
 ----------
 
 WHEREAS, the Parties are the parties to that certain Executive Termination
Benefits Agreement, dated as of January 1, 2001 (the "Change in Control
Agreement").
 
 WHEREAS, the Parties desire to amend the Change in Control Agreement as set
forth in this Amendment.
 
 NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained in this Amendment, and intending to be legally bound
hereby, the parties hereto agree as follows:
 
 1. Amendment of Section 1(a). Section 1(a) of the Change in Control
 -------------------------
Agreement is amended by replacing the phrase "December 31, 2003" in Section
1(a)(i) with "December 31, 2006," and by eliminating the portion of such Section
1(a) that follows such reference to December 31, 2003.
 
 2. Amendment of Section 2(a)(iii). Section 2(a)(iii) of the Change in
 ------------------------------
Control Agreement is amended by replacing the phrase "sixty percent (60%)"
agreement with the phrase "fifty percent (50%)."
 3. Counterparts; Effectiveness. This Amendment may be executed by facsimile
 ---------------------------
and in one or more counterparts, all of which shall be considered one and the
same agreement. Except as expressly amended hereby, the terms and conditions of
the Change in Control Agreement shall remain in full force and effect.
 4. Controlling Law. This Amendment shall be construed in accordance with
 ---------------
the laws of the State of Delaware with respect to contracts to be performed
exclusively therein without regard to its conflict of laws rules.
 
 
 
 
 24
<PAGE>
 
 IN WITNESS WHEREOF, the undersigned have hereunto set their hands to this
Amendment to the Change in Control Agreement and consented to the amendments to
the Change in Control Agreement contemplated hereby as of the date set forth
above.
 
LIZ CLAIBORNE INC.
 
 
By:
 ---------------------------------
 Name:
 Title:
 
 
 
----------------------
 
Paul Charron
 
 
 
 
Back to Top
 
 
 
 LIZ CLAIBORNE, INC.
 EXECUTIVE TERMINATION BENEFITS AGREEMENT
 
 
 This Executive Termination Benefits Agreement (this "Agreement"), dated as
of the 1st day of January, 2001, is by and between LIZ CLAIBORNE, INC., a
Delaware corporation (the "Company"), and PAUL R. CHARRON (the "Executive").
 WHEREAS, the Company's Board of Directors (the "Board") recognizes that the
possibility of a change in control of the Company and the uncertainty and
questions which it may raise may result in the departure or distraction of the
Executive to the detriment of the Company and its stockholders;
 WHEREAS, the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of the Executive
to his/her assigned duties in the face of the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created by the
possibility, threat or occurrence of a change in control of the Company;
 WHEREAS, should the Company be faced with a possible change in control
situation, in addition to the Executive's regular duties, he/she may be called
upon to assist in the assessment of proposals, advise management and the Board
as to whether such proposals would be in the best interests of the Company and
its stockholders, and to take such other actions as the Board might determine to
be appropriate.
 NOW, THEREFORE, to assure the Company that it will have the continued
undivided attention and services of the Executive and the availability of
his/her advice and counsel notwithstanding the possibility, threat or occurrence
of a bid to take over control of the Company, and to induce the Executive to
remain in the employ of the Company in such a circumstance, for the benefit of
the Company and its shareholders, and for other good and valuable consideration,
the Company and the Executive agree as follows:
 
<PAGE> 2
 
1. Term of Agreement.
 
 (a) Except as otherwise provided in Section 1(b) below, (i) this Agreement
shall be effective as of the date hereof and shall continue in effect through
December 31, 2003 and (ii) commencing on January 1, 2004 and each January 1
thereafter, this Agreement shall be automatically extended for one additional
year unless, not later than June 30th of the preceding year, either party to
this Agreement gives notice to the other that this Agreement shall not be
extended under this Section 1(a); provided, however, that no such notice by the
Company shall be effective, and this Agreement shall be extended for an
additional year, if a Change in Control or Potential Change in Control (both as
defined in Section 2 below) shall have occurred or occurs at any time prior to
the date of such notice or within the 12-month period beginning on the date of
such notice.
 
 (b) If a Change in Control shall have occurred at any time during the
period in which this Agreement is effective, then notwithstanding any provision
hereof to the contrary, this Agreement shall be effective and continue in effect
for (i) the remainder of the month in which the Change in Control occurred and
(ii) a term of thirty-six (36) months beyond the month in which such Change in
Control occurred; provided that if any obligations of the Company hereunder
shall not have been fully and finally discharged at the end of such thirty six
(36) month period, this Agreement shall remain in effect until such obligations
shall have been finally discharged in full. The period commencing on the earlier
of a Potential Change in Control (if applicable) or Change in Control and ending
with the conclusion of such thirty-sixth month period shall be referred to
hereinafter as the "Protected Period."
 
2. Change in Control and Potential Change in Control.
 
 (a) For purposes of this Agreement, a "Change in Control" shall be deemed
to have occurred:
 
 (i) if any person as defined in Section 3(a)(9) of the Securities
 Exchange Act of 1934, as amended from time to time (the "Exchange
 Act"), and as used in Sections 13(d) and 14(d) thereof, including a
 "group" as defined in Section 13(d) of the Exchange Act (a "Person"),
 but excluding the Company, any subsidiary of the Company and any
 employee benefit plan sponsored or maintained by the Company or any
 subsidiary of the Company (including any trustee of such plan acting
 as trustee), directly or indirectly, becomes the "beneficial owner"
 (as defined in Rule 13(d)-3 under the Exchange Act, as amended from
 time to time) of Company securities representing 25% or more of either
 (i) the then outstanding shares of the Company's common stock or (ii)
 the combined voting power of the Company's then
 
 
 2
<PAGE> 3
 
 outstanding voting securities entitled to vote generally in the
 election of directors; provided, however, that the following
 acquisitions shall not constitute a Change in Control: (A) any
 acquisition directly from the Company (excluding an acquisition by
 virtue of the exercise of a conversion privilege), or (B) any
 acquisition by any corporation or similar entity pursuant to a
 reorganization, merger or consolidation if following such
 reorganization, merger or consolidation, the conditions described in
 sub-clauses (1), (2), and (3) of Section 2(a)(iii) below have been
 satisfied; or
 
 (ii) if individuals who, as of the date hereof, constitute the Board
 (the "Incumbent Board") cease for any reason to constitute at least a
 majority of the Board; provided, however, that any individual becoming
 a director subsequent to the date hereof whose election, or nomination
 for election by the Company's stockholders, was approved by a vote of
 at least two-thirds (2/3) of the directors then comprising the
 Incumbent Board shall be considered as though such individual were a
 member of the Incumbent Board, but excluding, for this purpose, any
 such individual whose initial assumption of office occurs as a result
 of an actual or threatened election contest with respect to the
 election or removal of directors or other actual or threatened
 solicitation of proxies or consents by or on behalf of a Person other
 than the Board; or
 
 (iii) upon consummation of a reorganization, merger or consolidation
 of the Company (a "Business Combination"), in each case, unless,
 following such Business Combination, (1) all or substantially all of
 the individuals and entities who were the beneficial owners,
 respectively, of the then outstanding shares of common stock of the
 Company and the combined voting power of the then outstanding voting
 securities of the Company entitled to vote generally in the election
 of directors immediately prior to such Business Combination
 beneficially own, directly or indirectly, more than sixty percent
 (60%) of, respectively, the then outstanding shares of common stock
 and the combined voting power of the then outstanding voting
 securities entitled to vote generally in the election of directors, as
 the case may be, of the corporation resulting from such Business
 Combination (including, without limitation, a corporation which as a
 result of such transaction owns the Company or all or substantially
 all of the Company's assets either directly or through one or more
 subsidiaries), (2) no Person (excluding (A) any employee benefit plan
 (or related trust) of the Company or such corporation resulting from
 such Business Combination and (B) any Person beneficially owning,
 immediately prior to such reorganization, merger or consolidation, 25%
 or more of, respectively, the then outstanding shares of the common
 stock of the Company, or the combined voting power of the then
 outstanding voting securities of the Company entitled to vote
 generally in the election of directors) beneficially owns, directly or
 indirectly, 25% or more of, respectively, the then outstanding shares
 of common stock of the corporation resulting from such Business
 Combination or the combined voting power of the then outstanding
 voting securities of such corporation entitled to vote generally in
 the election of directors, and (3) at least a majority of the members
 of the board of directors of the corporation resulting from such
 Business Combination were members of the Incumbent Board at the time
 of the execution of the initial agreement relating to, or of the
 action of the Incumbent Board providing for, such Business
 Combination; or
 
 (iv) upon consummation of the sale or other disposition of all or
 substantially all of the assets of the Company, unless following such
 transaction (1) all or substantially all of the individuals and
 entities who were the beneficial owners, respectively, of the then
 outstanding shares of common stock of the Company and the combined
 voting power of the then outstanding voting securities of the Company
 entitled to vote generally in the election
 
3
<PAGE> 4
 
 of directors immediately prior to such transaction beneficially own,
 directly or indirectly, more than sixty percent (60%) of,
 respectively, the then outstanding shares of common stock and the
 combined voting power of the then outstanding voting securities
 entitled to vote generally in the election of directors, as the case
 may be, of the acquiring corporation (including, without limitation, a
 corporation which as a result of such transaction owns the Company or
 all or substantially all of the Company's assets either directly or
 through one or more subsidiaries), (2) no Person (excluding (A) any
 employee benefit plan (or related trust) of the Company or such
 acquiring corporation and (B) any Person beneficially owning,
 immediately prior to such transaction, 25% or more of, respectively,
 the then outstanding shares of the common stock of the Company, or the
 combined voting power of the then outstanding voting securities of the
 Company entitled to vote generally in the election of directors)
 beneficially owns, directly or indirectly, 25% or more of,
 respectively, the then outstanding shares of common stock of the
 acquiring corporation or the combined voting power of the then
 outstanding voting securities of such corporation entitled to vote
 generally in the election of directors, and (3) at least a majority of
 the members of the board of directors of the acquiring corporation
 were members of the Incumbent Board at the time of the execution of
 the initial agreement relating to, or of the action of the Incumbent
 Board providing for, such sale or disposition; or
 
 (v) approval by the stockholders of the Company of a complete
 liquidation or dissolution of the Company.
 
 (b) For purposes of this Agreement, a "Potential Change in Control" shall
be deemed to have occurred if (i) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in Control;
(ii) any Person (including the Company) publicly announces an intention to take
or to consider taking actions which if consummated would constitute a Change in
Control; or (iii) the Board adopts a resolution to the effect that, for purposes
of this Agreement, a Potential Change in Control has occurred; provided that the
Board shall not be precluded from adopting a resolution to the effect that for
purposes of this Agreement, it is the good faith opinion of the Board that a
Potential Change in Control has been abandoned and that a Potential Change in
Control no longer exists.
 
 (c) For purposes of Sections 3 through 9 of this Agreement, the term
"Company" shall include Liz Claiborne, Inc. and any successor thereto, whether
by merger, reorganization, consolidation, acquisition of substantially all of
its assets or any other means.
 
3. Covered Termination.
 
 (a) In the event that Executive's employment is terminated during the
Protected Period either (i) by the Company without Cause (as defined in Section
3(c) below) or (ii) by the Executive for Good
 
 
 4
<PAGE> 5
 
Reason (as defined in Section 3(b) below) (each, a "Covered Termination"), the
Company will provide the Executive with the payments and benefits set forth in
Section 4 below.
 
 (b) For purposes of this Agreement, "Good Reason" shall mean the occurrence
of one or more of the following events (regardless of whether any other reason,
other than Cause as provided below, for such termination exists or has occurred,
including without limitation other employment):
 
 (i) failure to elect or reelect or otherwise maintain Executive in the
 offices or positions, or substantially equivalent offices or
 positions, of or with the Company, which Executive held immediately
 prior to the Change of Control;
 
 (ii) a significant adverse change in the nature or scope of the
 authorities, powers, functions, duties or responsibilities attached to
 the position with the Company which the Executive held immediately
 prior to the Change in Control;
 
 (iii) a reduction by the Company, without the Executive's prior
 consent, in either (1) the Executive's annual base salary immediately
 prior to the Change in Control or (2) the Executive's target bonus
 opportunity (expressed as a percentage of Executive's annual base
 salary) immediately prior to the Change in Control;
 
 (iv) the Company's requiring the Executive, without the Executive's
 prior consent, to be based more than fifty (50) miles from the
 Company's offices at which the Executive is based immediately prior to
 the Change in Control (excluding for this purpose required travel on
 the Company's business to an extent substantially consistent with the
 Executive's business travel obligations immediately prior to the
 Change in Control), or, in the event the Executive consents to any
 such relocation of his/her offices, the failure by the Company to
 provide the Executive with all of the benefits of the Company's
 relocation policy as in effect immediately prior to the Change in
 Control;
 
 (v) the failure by the Company, without the Executive's prior consent,
 to pay to the Executive any portion of the Executive's current
 compensation (for purposes of this clause (v), "current compensation"
 shall mean the Executive's annual base salary as in effect on the date
 hereof or as the same may be increased from time to time, plus the
 bonuses awarded to Executive pursuant to the Company's cash incentive
 bonus plan), or to pay to the Executive any portion of any installment
 of deferred compensation under any deferred compensation program of
 the Company within twenty (20) days after request for payment by the
 Executive after such deferred compensation is due;
 
 (vi) the failure by the Company to continue in effect any then ongoing
 compensation or benefit plan in which the Executive participates
 immediately prior to the Change in Control and which is significant to
 the Executive's total compensation opportunity on either an annual or
 long-term basis, including, but not limited to, the Company's 2000
 Stock Incentive Plan, any other long-term incentive plan of the
 Company, or any substitute plan for any of the foregoing adopted prior
 to the Change in Control, unless an equitable arrangement (embodied in
 an ongoing substitute or alternative plan) has been made with respect
 to such plan, or the failure by the Company to continue the
 Executive's participation therein on a basis not significantly less
 favorable to Executive, in terms of the amount of the compensation
 opportunities so provided, to those provided to Executive immediately
 
 
 5
<PAGE> 6
 
 prior to the Change in Control, it being agreed, without limiting the
 foregoing, for the avoidance of doubt, that the Company shall be
 deemed to have failed to continue the Executive's participation in
 such plans on a basis not significantly less favorable to Executive in
 the event that Executive's target long-term incentive compensation
 opportunity (expressed as a percentage of Executive's base salary)
 subsequent to the Change of Control shall not equal or exceed his/her
 long-term incentive compensation opportunity (expressed as a
 percentage of Executive's base salary) as in effect immediately prior
 to the Change in Control;
 
 (vii) the failure by the Company to continue to provide the Executive
 with benefits comparable in the aggregate to those enjoyed by the
 Executive under the Company's retirement, life insurance, medical,
 dental, health, accident and disability plans in which the Executive
 was participating immediately prior to the Change in Control;
 
 (viii) the failure of the Company to obtain an agreement from any
 successor to assume and agree to perform this Agreement as
 contemplated by Section 9 below prior to the effective date of any
 such succession, or, if such an agreement is not so obtained, the
 failure of the Company, within three (3) business days after receiving
 a written request from the Executive for such agreement, to so provide
 such agreement; or
 
 (ix) any purported termination of the Executive's employment which is
 not effected pursuant to a Notice of Termination satisfying the
 requirements of Section 5(a) below.
 
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder. Notwithstanding the foregoing, the occurrence of an event that
would otherwise constitute Good Reason hereunder shall cease to be an event
constituting Good Reason if the Executive does not provide a Notice of
Termination to the Company within one hundred eighty (180) days of the date that
the Executive first becomes aware of the occurrence of such event.
 
 (c) For purposes of this Agreement, "Cause" shall mean and be limited to
(i) Executive's willful and intentional repeated failure or refusal, continuing
after notice that specifically identifies the breach(es) complained of, to
perform substantially his/her material duties, responsibilities and obligations
(other than a failure resulting from Executive's incapacity due to physical or
mental illness or other reasons beyond the control of Executive), and which
failure or refusal results in demonstrable direct and material injury to the
Company; (ii) any willful and intentional act or failure to act involving fraud,
misrepresentation, theft, embezzlement, dishonesty or moral turpitude
(collectively, "Fraud") which results in demonstrable direct and material injury
to the Company; (iii) conviction of (or a plea of nolo
 
 
 6
<PAGE> 7
 
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; or
(iv) the Executive's complete inability to perform his/her material duties,
responsibilities and obligations on account of a physical or mental incapacity
or impairment for a period of more than 180 consecutive days or for an aggregate
of 240 days within a 360-day period, which incapacity or impairment continues
for more than thirty (30) days after Executive's receipt of written notice from
the Company given after such 180 or 240 day period has run without Executive's
return, on a substantially full-time basis, to employment. For purposes of
determining whether Cause exists, no act, or failure to act, on Executive's part
shall be deemed "willful" or "intentional" unless done, or omitted to be done,
by Executive in bad faith, and without reasonable belief that his/her action or
omission was in the best interests of the Company. For purposes of clause (iv)
above, a determination of Executive's complete inability to perform his/her
material duties, responsibilities and obligations will be made by a single
physician satisfactory to both Executive and the Company; provided that if
Executive and the Company cannot agree as to a single physician, then each will
select a physician and these two together will select a third physician, whose
determination will be binding on Executive and the Company. Executive shall have
the right to present to the Company and such physician such information and
arguments on Executive's behalf as Executive deems appropriate, including the
opinion of Executive's personal physician.
 
 Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for "Cause" hereunder unless and until there shall have been
delivered to the Executive a copy of a resolution (a "Cause Resolution") duly
adopted by the affirmative vote of not less than two thirds (2/3) of the Board
then in office at a meeting of the Board called upon reasonable notice to all
Directors and held for such purpose, after reasonable notice to the Executive
and an opportunity for the Executive, together with his counsel (if the
Executive chooses to have counsel present at such meeting), to be heard before
the Board at such meeting, finding that, in the good faith opinion of the Board,
the Executive had committed an act constituting "Cause" as herein defined and
specifying the particulars thereof in detail. Nothing herein will
 
 
 7
<PAGE> 8
 
limit the right of the Executive or his beneficiaries to contest the validity or
propriety of any such determination and/or Cause Resolution.
 
 (d) Nothing contained in this Agreement is intended to, or shall operate
to, preclude the payment of any amounts (other than cash severance benefits)
otherwise payable to the Executive under any of the Company's employee benefit
plans, stock plans, programs and arrangements and/or under any employment
agreement, or to limit or otherwise adversely affect such rights as the
Executive may have under any contract or agreement with the Company.
 
4. Severance Payments and Benefits.
 
 (a) In lieu of any other cash severance payments to which the Executive may
otherwise be entitled (and which other cash severance payments the Executive
hereby expressly waives), and subject to the provisions regarding cutback of
benefits in certain circumstances as expressly provided in Section 6(h) below,
the Company shall pay or provide to the Executive the following amounts (the
"Severance Payments") upon the occurrence of a Covered Termination during the
Protected Period:
 
 (i) An amount equal to three (3) times the amount of Executive's
 effective annual base salary rate, as in effect immediately prior to a
 Change of Control or the Date of Termination (as defined in Section
 5(b), below), whichever amount is higher;
 
 (ii) an amount equal to three (3) times the average annual bonus
 earned by the Executive under the Company's cash incentive bonus plan
 in respect of the three fiscal years of the Company ending prior to
 (x) the date on which a Change of Control occurred or (y) the date on
 which the Date of Termination occurred, whichever amount is higher;
 
 (iii) an amount equal to the Executive's annual bonus earned or
 accrued in respect of any prior fiscal year of the Company but not yet
 paid as of the Date of Termination; and
 
 (iv) an amount equal to the product of (x) the greatest of (A) the
 Executive's target bonus opportunity under the Company's cash
 incentive bonus plan for the fiscal year in which the Date of
 Termination occurs; or (B) the average bonus the Executive earned for
 the three (3) fiscal years preceding the fiscal year in which the
 Change in Control occurred, multiplied by (y) a fraction, the
 numerator of which is the number of months and partial months expired
 in the fiscal year of the Company in which the Date of Termination
 occurs, through the Date of Termination, and the denominator of which
 is twelve (12).
 
 (b) In case of a Covered Termination during the Protected Period, in
addition to the payments provided for in Section 4(a) above, the Company shall,
during the period ending thirty six (36) months after the month in which the
Date of Termination occurs, arrange at the Company's sole expense to
 
 
 8
<PAGE> 9
 
provide the Executive and his/her dependents with life, medical, dental, health,
and disability insurance benefits at least equal, in type and level of coverage,
to those which the Executive and his/her dependents were receiving immediately
prior to the Notice of Termination (without, however, giving any effect to any
reduction in such benefits subsequent to a Change in Control). Benefits
otherwise receivable by the Executive pursuant to this Section 4(b) shall be
reduced to the extent that comparable benefits equal in type and level of
coverage are actually received by the Executive from, or made available to the
Executive by, a subsequent employer without greater cost to him/her than as
provided by the Company during such 24-month period (and any such benefits
received by or made available to the Executive shall be reported to the Company
by the Executive). In addition, in the event that the Executive and/or his/her
dependents are ineligible under the terms of any of the Company's plans to
continue to be so covered, the Company shall provide to the Executive a lump sum
payment (determined on a present value basis using the interest rate provided
for in Section 1274(b)(2)(B) of the Internal Revenue Code on the Date of
Termination) in such amount, after taxes, that shall be equal to the cost to the
Executive of procuring such coverage for such period.
 
 (c) In the case of a Covered Termination during the Protected Period (i)
any unvested amount credited to Executive's bookkeeping account under the
Company's Supplemental Executive Retirement Plan as in effect on the date
hereof, and as the same may be amended prior to any Change of Control ("SERP"),
will become fully vested as of the Date of Termination, and in such event such
bookkeeping account shall be increased as of the Date of Termination by the
aggregate amount of the unvested portion of any account maintained for Executive
under any of the Company's "qualified" retirement plans as of the Executive's
date of termination of employment; and (ii) Executive's SERP account shall be
distributed to the Executive as provided under the terms of the SERP and in
accordance with Executive's distribution election then in effect.
 
 (d) In the case of a Covered Termination during the Protected Period,
notwithstanding anything contained in the Liz Claiborne Retirement Income
Accumulation Plan as in effect on the date hereof, and as the same may be
amended prior to any Change of Control (the "Accumulation Plan"), any unvested
 
 
 9
<PAGE> 10
 
amount credited to Executive's retirement income account under the Accumulation
Plan will become fully vested as of the Date of Termination, and (ii) such
account shall be distributed to the Executive as provided under the terms of the
Accumulation Plan.
 
 (e) In the case of a Covered Termination during the Protected Period,
notwithstanding anything to the contrary contained herein, all outstanding stock
options and restricted share awards, if any, granted to Executive under any of
the Company's stock incentive plans or other similar plans shall be subject to
the applicable terms (including without limitation, except where otherwise
specifically provided at the time such awards were granted, as to the
accelerated vesting thereof under the terms of such plan) of the applicable plan
and award agreement or certificate.
 
 (f) In the case of a Covered Termination during the Protected Period, the
Company shall pay to the Executive all other amounts vested, accrued or earned
by the Executive through the Date of Termination and amounts otherwise owing
under the then existing plans and policies of the Company, including but not
limited to all compensation or other amounts previously deferred by the
Executive (together with any accrued interest thereon) and not yet paid by the
Company and all amounts vested under the Accumulation Plan.
 
 (g) The Company shall pay to the Executive the amount due pursuant to
Section 4(a) in a lump sum cash payment as soon as practicable, but in any event
by the fifth (5th) business day following the Date of Termination.
 
5. Notice of Termination and Date of Termination.
 
 (a) During the Protected Period, any termination of the Executive's
employment by the Executive for Good Reason or by the Company for Cause shall be
communicated by written Notice of Termination from the party terminating
employment hereunder to the other party hereto in accordance with Section 10
below. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice given in good faith and with a reasonable belief that Good Reason or
Cause, as the case may be, has occurred, which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the
 
 
 10
<PAGE> 11
 
Executive's employment under the provision so indicated. Any Notice of
Termination must specify a Date of Termination; any Notice of Termination for
Cause shall include a copy of the relevant Cause Resolution.
 
 (b) For purposes of this Agreement, "Date of Termination" shall mean (i) in
the case of a termination by the Company for Cause or by the Executive for Good
Reason, the date specified as Executive's last day of employment in the Notice
of Termination, which shall not be less than ten (10) business days after the
date such Notice of Termination is deemed given in accordance with Section 10
below, or (ii) in any other case, the last day worked by the Executive as
reflected on the Company's payroll records.
 
6. Tax Gross-Up; Potential Reduction in Severance Amount.
 
 (a) Anything in this Agreement to the contrary notwithstanding, but subject
to Section 6(h), in the event that a Covered Termination shall occur during the
Protected Period and it shall be determined (as hereafter provided) that any
payment (other than the Gross-Up payments provided for in this Section 6) or
distribution by the Company or any of its subsidiaries to or for the benefit of
the Executive, whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or pursuant to any other agreement, policy, plan,
program or arrangement, including without limitation any stock option, stock
appreciation right or similar right, restricted stock or deferred stock, or the
lapse or termination of any restriction on, deferral period or the vesting or
exercisability of any of the foregoing (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended Code") or any successor provision thereto, by reason of being considered
"contingent on a change in ownership or control" of the Company within the
meaning of Section 280G of the Code (or any successor provision thereto) or to
any similar tax imposed by state or local law, or any interest or penalties with
respect to such tax (such tax or taxes, together with any such interest and
penalties, being hereafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment or payments
(collectively, a "Gross-Up Payment") as provided herein. The Gross-Up Payment
shall be in an amount such that, after payment by the Executive of all taxes
(including any
 
 
 11
<PAGE> 12
 
interest or penalties imposed with respect to such taxes), including any Excise
Tax and any federal, state or local income tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payment.
 
 (b) Subject to the provisions of Section 6(f) below, all determinations
required to be made under this Section 6, including the determination as to
whether an Excise Tax is payable by the Executive and the amount of such Excise
Tax and whether a Gross-Up Payment is required to be paid by the Company to the
Executive and the amount of such Gross-Up Payment, if any, shall be made by a
nationally recognized accounting firm (the "Accounting Firm") selected by the
Executive in his sole discretion. The Executive shall direct the Accounting Firm
to submit its determination and detailed supporting calculations to both the
Company and the Executive within 30 calendar days after the date of the Change
in Control, the Date of Termination, if applicable, and any such other time or
times as may be requested by the Company or the Executive. If the Accounting
Firm determines that any Excise Tax is payable by the Executive, the Company
shall pay the required Gross-Up Payment to the Executive within five business
days after receipt of such determination and calculations with respect to any
Payment to the Executive. If the Accounting Firm determines that no Excise Tax
is payable by the Executive, it shall, at the same time as it makes such
determination, furnish the Company and the Executive an opinion that the
Executive has substantial authority not to report any Excise Tax on his federal,
state or local income or other tax return. As a result of the uncertainty in the
application of Section 4999 of the Code (or any successor provision thereto) and
the possibility of similar uncertainty regarding applicable state or local tax
law at the time of any determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (an "Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts or fails
to pursue its remedies pursuant to Section 6(f) below and the Executive
thereafter is required to make a payment of any Excise Tax, the Executive shall
direct the Accounting Firm to determine the amount of the Underpayment that has
occurred and to submit its determination and detailed supporting calculations to
both the Company and the Executive as promptly as possible. Any such
Underpayment
 
 
 12
<PAGE> 13
 
shall be promptly paid by the Company to, or for the benefit of, the Executive
within five (5) business days after receipt of such determination and
calculations.
 
 (c) The Company and the Executive shall each provide the Accounting Firm
access to and copies of any books, records and documents in the possession of
the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determinations and calculations
contemplated by Section 6(b) above. Any determination by the Accounting Firm as
to the amount of the Gross-Up Payment shall be binding upon the Company and the
Executive.
 
 (d) The federal, state and local income or other tax returns filed by the
Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Payment, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his/her federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment. If
prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive shall within five business days after receipt of the Accounting Firm's
determination pay to the Company the amount of such reduction.
 
 (e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Section 6(b)
above shall be borne solely by the Company. If such fees and expenses are
initially paid by the Executive, the Company shall reimburse the Executive the
full amount of such fees and expenses within five (5) business days after
receipt from the Executive of a statement therefor and reasonable evidence of
the payment thereof.
 
 (f) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by the Company of a
 
 
 13
<PAGE> 14
 
Gross-Up Payment or any additional Gross-Up Payment. Such notification shall be
given as promptly as practicable but no later than ten (10) business days after
the Executive actually receives notice of such claim and the Executive shall
further apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid (in each case, to the extent known by the
Executive). The Executive shall not pay such claim prior to the earlier of (x)
the expiration of the thirty (30)-calendar day period following the date on
which he gives such notice to the Company and (y) the date that any payment of
amount with respect to such claim is due. If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
 
 (i) provide the Company with any written records or documents in his
 possession relating to such claim reasonably requested by the Company;
 
 (ii) take such action in connection with contesting such claim as the
 Company shall reasonably request in writing from time to time,
 including without limitation accepting legal representation with
 respect to such claim by an attorney competent in respect of the
 subject matter and reasonably selected by the Company;
 
 (iii) cooperate with the Company in good faith in order effectively to
 contest such claim; and
 
 (iv) permit the Company to participate in any proceedings relating to
 such claim; provided, however, that the Company shall bear and pay
 directly all costs and expenses (including interest and penalties)
 incurred in connection with such contest and shall indemnify and hold
 harmless the Executive, on an after-tax basis, for and against any
 Excise Tax or income tax, including interest and penalties with
 respect thereto, imposed as a result of such contest and payment of
 costs and expenses. Without limiting the foregoing provisions of this
 Section 6(f), the Company shall control all proceedings taken in
 connection with the contest of any claim contemplated by this Section
 6(f) and, at its sole option, may pursue or forego any and all
 administrative appeals, proceedings, hearings and conferences with the
 taxing authority in respect of such claim (provided, however, that the
 Executive may participate therein at his/her own cost and expense) and
 may, at its option, either direct the Executive to pay the tax claimed
 and sue for a refund or contest the claim in any permissible manner,
 and the Executive agrees to prosecute such contest to a determination
 before any administrative tribunal, in a court of initial jurisdiction
 and in one or more appellate courts, as the Company shall determine;
 provided, however, that if the Company directs the Executive to pay
 the tax claimed and sue for a refund, the Company shall advance the
 amount of such payment to the Executive on an interest-free basis and
 shall indemnify and hold the Executive harmless, on an after-tax
 basis, from any Excise Tax or income or other tax, including interest
 or penalties with respect thereto, imposed with respect to such
 advance; and provided further, however, that any extension of the
 statute of limitations relating to payment of taxes for the taxable
 year of the Executive with respect to which the contested amount is
 claimed to be due is limited solely to such contested amount.
 Furthermore, the Company's control of any such contested claim shall
 be limited to issues with respect to which a Gross-Up Payment would be
 payable hereunder and the Executive
 
 
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<PAGE> 15
 
 shall be entitled to settle or contest, as the case may be, any other
 issue raised by the Internal Revenue Service or any other taxing
 authority.
 
 (g) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 6(f), the Executive receives any refund with respect
to such claim, the Executive shall (subject to the Company's complying with the
requirements of Section 6(f)) above promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 6(f), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial or refund prior to the expiration of thirty (30) calendar days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of any such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid by the
Company to the Executive pursuant to this Section 6.
 
 (h) Notwithstanding any provision of this Agreement to the contrary, if but
for this sentence, the Company would be obligated to make "parachute payments"
to the Executive, whether under this Agreement, the terms of any stock-based
compensation award or any other agreement, contract or arrangement, but the
aggregate "present value" of all such parachute payments does not exceed (x)
1.05 multiplied by (y) three (3) times the Executive's "base amount," then the
payments and benefits to be paid or provided under this Agreement will be
reduced to the minimum extent necessary (but in no event to less than zero) so
that no portion of the total payments or benefits due to the Executive on
account of a change in control of the Company, determined after the reduction
under this Agreement, constitutes an "excess parachute payment." For purposes of
this Section 6(h), the terms "change in control," "excess parachute payment,"
"present value," parachute payment," and "base amount" have the meanings
assigned to them by Section 280G of the Code. The determination of whether any
reduction in such payments or benefits to be provided under this Agreement is
required pursuant to the preceding sentence will be made, if requested by the
Executive or the Company, at the expense of the Company by the
 
 
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<PAGE> 16
 
Company's regular outside accounting firm. The fact that the Executive's right
to payments or benefits may be reduced by reason of the limitations contained in
this Section 6(h) will not of itself limit or otherwise affect any other rights
of the Executive other than pursuant to this Agreement. In the event that any
payment or benefit intended to be provided under this Agreement is required to
be reduced pursuant to this Section 6(h), the Executive will be entitled to
designate the payments and/or benefits to be so reduced in order to give effect
to this Section 6(h). The Company will provide the Executive with all
information reasonably requested by the Executive to permit the Executive to
make such designation. In the event that the Executive fails to make such
designation within ten (10) business days of the Termination Date, the Company
may effect such reduction in any manner it deems appropriate. If, despite a
reduction in payments and/or benefits in accordance with this Section 6(h),
Executive is required, after notice to the Company pursuant to Section 6(f), to
pay an Excise Tax, Executive shall be paid a Gross-Up Payment in accordance with
Section 6(a), but shall not be entitled to any additional amounts relating to
such reduction in payments and/or benefits, notwithstanding the failure of the
reduction to achieve the goal of avoiding an Excise Tax liability.
 
7. No Mitigation Obligation or Permitted Offset. Executive will not be required
to mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise, nor will any profits, income, earnings or other
benefits from any source whatsoever create any mitigation, offset, reduction or
any other obligation on the part of the Executive hereunder or otherwise, except
as expressly provided in the penultinate sentence of Section 4(b) above with
respect to the provision of comparable welfare benefits by a subsequent
employer. The Company shall not be permitted to reduce any payment owed to
Executive under this Agreement by any amount owed, or allegedly owed, to the
Company by the Executive.
 
8. Arbitration; Payment of Legal Fees.
 
 (a) All claims by the Executive for payments and other benefits under this
Agreement shall be in writing and directed to the Board. Any denial by the Board
of a claim for benefits under this Agreement shall be delivered to the Executive
in writing and shall set forth the specific reasons for the
 
 
 16
<PAGE> 17
 
denial and the specific provisions of this Agreement relied upon. The Board
shall afford a reasonable opportunity to the Executive for a review of the
decision denying a claim and shall further allow the Executive to appeal to the
Board any decision of the Board within sixty (60) days after notification by the
Board that the Executive's claim has been denied. Any dispute, claim or
controversy arising out of or relating to this Agreement or the breach hereof
shall be settled by arbitration in the State, City and County 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. 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.
 
 (b) In the event of any dispute, claim or controversy arising out of or in
connection with this Agreement, including without limitation in connection with
Executive's seeking to obtain or enforce any right or benefit provided by this
Agreement, if the Executive prevails on any of the material issues involved in
any such dispute, claim or controversy, the Company shall pay to the Executive
immediately upon demand all reasonable expenses (including without limitation
attorneys' fees) incurred by the Executive in connection therewith. Any such
reimbursement shall be in addition to the Company's obligations to pay or
reimburse Executive's fees and expenses as provided in Section 6 above.
 
9. Successors.
 
 (a) In addition to any obligation imposed by law upon any successor to the
Company, the Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.
 
 (b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If
 
 
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<PAGE> 18
 
the Executive dies while any amounts are payable to Executive hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to his estate.
 
10. Notices.
 
All notices or communications 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 below or at such
other address as may be designated in writing by either party to the other in
the manner set forth herein. Notices and communications which are delivered
personally, by confirmed facsimile transmission, or by courier as aforesaid,
will be deemed effectively given on the date of delivery; those delivered by
mail as aforesaid will be deemed effectively given upon the fifth (5th) calendar
day subsequent to the postmark date thereof.
 
 If to the Company:
 
 Liz Claiborne, Inc.
 1441 Broadway
 New York, NY 10047
 Attention: Chief Executive Officer
 
 with a copy to:
 
 Liz Claiborne, Inc.
 One Claiborne Avenue
 North Bergen, NJ 07047
 Attention: General Counsel
 
 If to the Executive:
 At the address set forth opposite Executive's name
 on the signature page hereof
 
11. Governing Law.
 
This Agreement has been made and will be governed in all respects by the
internal laws of the State of Delaware applicable to contracts made and to be
wholly performed within such state (without regard to principles of conflict of
laws) and the parties hereby irrevocably consent to the jurisdiction of the
federal and state courts sitting in the State of Delaware for the purpose of
enforcing this Agreement.
 
 
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<PAGE> 19
 
12. Miscellaneous.
 
 (a) No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
the Executive and the Company. No waiver by either party hereto at any time of
any breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or any
prior or subsequent time.
 
 (b) This Agreement, taken together with the provisions of any employment
agreement or other written agreement relating to Executive, sets forth the
entire agreement by and between the Company and the Executive with respect to
the subject matter hereof .
 
 (c) Nothing expressed or implied in this Agreement will create any right or
duty on the part of the Company or the Executive to have the Executive remain in
the employment of the Company or any subsidiary prior to or following any Change
in Control.
 
 (d) The Company may withhold from any amounts payable under this Agreement
all federal, state, city or other taxes as the Company is required to withhold
pursuant to any law or government regulation or ruling.
 
 (e) In the event that the Company refuses or otherwise fails to make a
payment when due and it is ultimately decided that the Executive is entitled to
such payment, such payment shall be increased to reflect an interest factor,
compounded annually, equal to the prime rate in effect as of the date the
payment was first due plus five (5) points. For this purpose, the prime rate
shall be based on the rate identified by Chase Manhattan Bank as its prime rate
in New York City.
 
 (f) The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
 
 (g) This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign or transfer this Agreement or
any rights or obligations hereunder, except as provided in Section 9 above.
Without limiting the foregoing, the Executive's right to receive payments
 
 
 19
<PAGE> 20
 
hereunder shall not be assignable or transferable, whether by pledge, creation
of a security interest or otherwise, other than a transfer by his/her will or by
the laws of descent or distribution, and in the event of any attempted
assignment or transfer by Executive contrary to this Section 12(g) the Company
shall have no liability to pay any amount so attempted to be assigned or
transferred to any person other than the Executive or, in the event of his/her
death, his/her estate.
 
 (h) This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same agreement.
 
 
 
 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year first above set forth.
 
 
 LIZ CLAIBORNE, INC.
 
 By: /s/ Michael Scarpa
 ------------------
 Michael Scarpa
 Vice President-Finance and Chief Financial Officer
 
 
 
 
 PAUL R. CHARRON
 
 : /s/ Paul R. Charron
 -------------------
 
 Address: ***********************
 
 
 ***********************
 
 Social Security Number: ***-**-****
 
 
 
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 FIRST AMENDMENT TO
 ------------------
 EXECUTIVE TERMINATION BENEFITS AGREEMENT
 ----------------------------------------
 
THIS FIRST AMENDMENT TO THE EXECUTIVE TERMINATION BENEFITS AGREEMENT (this
"Amendment") is made as of November 3, 2003 by and among Liz Claiborne, Inc.
(the "Company") and Paul R. Charron (the "Executive) (the Company and the
Executive together, the "Parties"). Unless otherwise specified, capitalized
terms herein shall have the meaning ascribed to them in the Change in Control
Agreement (as defined herein).
 
 WITNESSETH:
 -----------
 
WHEREAS, the Parties are the parties to that certain Executive Termination
Benefits Agreement, dated as of January 1, 2001 (the "Change in Control
Agreement").
 
WHEREAS, the Parties desire to amend the Change in Control Agreement as set
forth in this Amendment.
 
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements contained in this Amendment, and intending to be legally bound
hereby, the parties hereto agree as follows:
 
 1. Amendment of Section 1(a). Section 1(a) of the Change in Control
 -------------------------
Agreement is amended by replacing the phrase "December 31, 2003" in Section
1(a)(i) with "December 31, 2006," and by eliminating the portion of such Section
1(a) that follows such reference to December 31, 2003.
 
 2. Amendment of Section 2(a)(iii). Section 2(a)(iii) of the Change in
 ------------------------------
Control Agreement is amended by replacing the phrase "sixty percent (60%)" with
the phrase "fifty percent (50%)."
 
 3. Counterparts; Effectiveness. This Amendment may be executed by facsimile
 ---------------------------
and in one or more counterparts, all of which shall be considered one and the
same agreement. Except as expressly amended hereby, the terms and conditions of
the Change in Control Agreement shall remain in full force and effect.
 
 4. Controlling Law. This Amendment shall be construed in accordance with
 ---------------
the laws of the State of Delaware with respect to contracts to be performed
exclusively therein without regard to its conflict of laws rules.
 
 
 
 
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<PAGE>
 
 
IN WITNESS WHEREOF, the undersigned have hereunto set their hands to this
Amendment to the Change in Control Agreement and consented to the amendments to
the Change in Control Agreement contemplated hereby as of the date set forth
above.
 
 LIZ CLAIBORNE INC.
 
 
 By: /s/ Michael Scarpa
 -------------------------------------
 Name: Michael Scarpa
 Title: Senior Vice President -
 Chief Financial Officer
 
 
 
 
 /s/ Paul R. Charron
 ----------------------------------------
 Paul R. Charron
 
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