Severance Agreement-Mr. Hoffman

 

 

 

EX-10.1 2 dex101.htm OFFER LETTER TO JOHN D. GOODMAN

Exhibit 10.1

LOGO

November 7, 2008

John Goodman

2347 Leavenworth St.

San Francisco, Ca 94133

Dear John:

In recognition of the important contributions we expect you will make to the success of Charlotte Russe Holding, Inc. and its subsidiaries (the “Company”), I am pleased to formalize in this agreement (the “Agreement”) our commitment to you concerning the terms of your employment as the Company’s Chief Executive Officer (“CEO”). Your employment with the Company would be expected to commence on or before November 17, 2008.

Duties. You will perform and discharge your duties and responsibilities faithfully, diligently and to the best of your ability. You will devote substantially all of your business time and efforts to the business and affairs of the Company. You shall be responsible for managing the Company’s day-to-day operations and supervising the Company’s other officers and employees. In addition, you will be responsible to perform such other duties as may be assigned to you by the Chairman or the Board of Directors, consistent with the position of CEO. You will report to the Company’s Board of Directors. Notwithstanding anything herein to the contrary, this Agreement shall not be interpreted to prohibit you from engaging in personal investment activities, attending educational classes, and performing charitable acts or services to family members, if those activities do not materially interfere with the services required under this Agreement, provided that you will not directly or indirectly acquire, hold or retain any material interest in any business competing, directly or indirectly, with the business of the Company, except for investments in mutual and other similar funds or investments of 1% or less of the equity of a publicly traded company.

Board Membership. No later than the commencement of the first regularly-scheduled meeting of the Company’s Board of Directors (the “Board”) following the commencement of your employment with the Company, you shall be elected as a member of the Board. Upon the termination of your service as CEO for any reason, to the extent requested by the Board, you shall immediately resign from the Board effective as of the date of such termination or such earlier date as may be agreed between you and the Board. In the event you fail to properly submit any such requested resignation pursuant to this paragraph, at the discretion of the Board, you may be removed from the Board and your Board membership may be terminated effective on the date of the termination of your service as CEO.

Base Salary. Your base salary will be paid at the rate of $75,000 per month ($900,000 gross annualized); paid bi-weekly with payroll. Annually throughout your employment, your performance and salary will be reviewed by the Compensation Committee of the Board and your base salary may not be decreased, except for decreases in base salary consistent with decreases applicable to the Company’s other executive officers, provided that your base salary will not be decreased during fiscal year 2009. All payments under this paragraph or any other paragraph of this Agreement will be made in accordance with the regular payroll practices of the Company, reduced by applicable federal and state withholdings.

Signing Bonus. On the first regular payroll date following your start date, you will receive $285,000 as a signing bonus. In the event that the Company terminates your employment for Cause (as defined below), or you terminate your employment without Good Reason (as defined below), in each case within 12 months of your start date, a portion of your signing bonus must be paid back to the Company. The amount which you must pay back to the Company shall be equal to the number of full months remaining until your 12-month anniversary with the Company, multiplied by $23,750.

 

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Cash Incentive Bonus. Commencing with the Company’s 2009 fiscal year, you will be eligible to receive an annual cash incentive bonus in accordance with the Company’s Executive Officer Compensation Program as in effect from time to time (the “Program”) and as determined by the Board or its Compensation Committee, in its sole discretion, based upon your achievement and the Company’s achievement of annual performance goals established by the Board or its Compensation Committee at the beginning of each fiscal year. For an executive at your level of seniority, the Program currently provides for annual cash incentive bonus guidelines (as a minimum, midpoint and maximum percentage of annual base salary) of 50%, 100% and 150% base salary, respectively. In order to receive any annual cash incentive bonus, you must be actively employed at the completion of the Company’s applicable fiscal year and at the time the annual incentive bonus is paid out. All decisions by the Board or its Compensation Committee pertaining to bonus eligibility and/or achievement are final. Notwithstanding the foregoing: 1) if your employment is terminated without Cause or for Good Reason, you shall be entitled to receive a pro-rated bonus for the fiscal year in which the termination occurs equal to the bonus that would have been paid to you had you remained with the Company through the time such bonus is paid out multiplied by a fraction equal to the number of days elapsed since the commencement of the applicable fiscal year of the Company (as of the date of your termination) divided by 360 (such bonus to be paid no later than 2  1/2 months following the end of the applicable fiscal year); and 2) you shall be entitled to receive all the earned, but unpaid bonuses with respect to the fiscal years of the Company preceding the fiscal years of your termination, with such amount being paid as soon as practical, but in no event later than seventy-five days following termination.

Equity Compensation. On the date of commencement of your employment, you will receive a nonstatutory stock option (“Option”) covering Two Hundred Thousand (200,000) shares with an exercise price equal to the NASDAQ closing price of the Company’s stock on the date of grant. In addition, on the date of commencement of your employment, you will receive Restricted Stock Units (“RSUs”) covering Ninety-One Thousand (91,000) shares of the Company’s stock. The Option and the RSUs will be subject to the terms and conditions of the Company’s 1999 Equity Incentive Plan (the “Plan”) and will be subject to the following vesting schedule: 33 1/3% of the shares subject to each of the Option and RSUs shall vest (and, for the Option, be exercisable) on the first anniversary of the date of grant; the next 33 1/3% of the shares subject to each of the Option and RSUs shall vest (and, for the Option, be exercisable) on the second anniversary of the date of grant; and the remaining 33 1/3% of the shares subject to each of the Option and RSUs shall vest (and, for the Option, be exercisable) on the third anniversary of the date of grant, provided that you are employed by the Company on the applicable vesting date(s). In addition, within sixty (60) days of the date of commencement of your employment, you will receive Performance Share Units (“PSUs”) covering Fifty-Three Thousand Five Hundred (53,500) shares of the Company’s stock. The PSUs will be subject to the terms and conditions of the Company’s Plan and, contingent on the satisfaction of performance goals established by the Compensation Committee of the Board developed with your input and with a performance period of the Company’s 2009 fiscal year, will be subject to the following vesting schedule: 25% of the shares subject to the PSUs shall vest on the first anniversary of your date of hire, the next 25% of the shares shall vest on the second anniversary of your date of hire; the next 25% of the shares subject to the PSUs shall vest on the third anniversary of your date of hire; and the remaining 25% of the shares subject to the PSUs shall vest on the fourth anniversary of your date of hire, provided that you are employed by the Company on the applicable vesting date(s). The Plan or the agreements to be entered into between you and the Company with respect to the Option, RSUs and PSUs shall provide that all of your equity awards thereunder shall become immediately vested and fully exercisable upon a Change of Control (as defined in the Plan); provided that, with respect to PSUs for which the performance period has expired and the performance goals were not achieved, no such acceleration shall occur. In addition, the shares underlying the RSUs and PSUs shall be issued to you upon vesting; provided that, if you are prevented from selling shares of the company’s stock (either due to applicable securities laws or company policy regarding window period trading), then the shares shall be issued to you as soon as you are no longer so prevented from selling the shares, but not beyond the 15th day of the third month of the calendar year following the calendar year in which such shares vest.

Commencing with the Company’s 2010 fiscal year, you will be eligible to receive additional annual equity compensation in accordance with the Program and as determined by the Board or its Compensation Committee, in its sole discretion.

Benefits. You will accrue four weeks of paid vacation per year, to be taken at such times as you and the Company mutually agree upon. Any additional weeks of vacation earned per year will accrue according to Company policy. In addition, you will also accrue five health leave days per year. You will be eligible to participate in all benefit and welfare plans made generally available to senior management executives of the Company, as in effect from time to time, subject to Company’s right to modify or terminate such plans or benefits at any time with respect to employees of similar rank and title.

 

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Relocation Expenses. The Company shall reimburse reasonable and verifiable, out-of-pocket expenses incurred by you in connection with the possible relocation of your principal residence to the San Diego, California area, including legal expenses, expenses incurred in connection with the sale or rental of your home (such as brokerage fees and closing costs and the costs of preparing the home for the market), plus moving expenses, but excluding expenses incurred by you in connection with purchasing or renting a home (including loan fees and “points”), all provided that you complete such relocation of your principal residence not later than the second anniversary of the commencement of your employment with the Company and submit such expenses not later than sixty (60) days after such relocation expenses are incurred. The Company shall pay additional compensation to you in an amount necessary to reimburse you, on an after-tax basis, for the additional income and employment taxes incurred by you as a result of the reimbursement of such expenses. Such additional compensation shall be paid to you not later than the end of the calendar year following the calendar year in which you incur the expense being reimbursed.

401(k). Eligibility for enrollment occurs quarterly after one year of continuous employment. As an additional benefit, the Company will match your contribution at the rate of 25% for up to 4% of your eligible pay. The Company match portion of this savings plan has a vesting schedule of 25% per employment year.

Termination of Employment and Severance. You understand and agree that this Agreement is not meant to constitute a contract of employment for a specific term, and consequently your employment will be “at-will”. What this means is that either you or the Company may terminate your employment at any time, without notice and with or without Cause. If the Company terminates your employment for Cause, or you terminate your employment without Good Reason, the Company’s only obligation to you under this Agreement will be to continue to pay your base salary and earned but unpaid compensation (including bonus) through the date of termination and pay to you any unused earned vacation as of the last date of your employment (collectively referred to as the Accrued Compensation”). If, however, the Company terminates your employment for any reason other than for Cause, excluding your death or disability (defined as your inability to perform your duties hereunder by reason of any physical or mental incapacity that results in your satisfaction of all requirements necessary to receive benefits under the Company’s long-term disability plan due to a total disability), or you terminate your employment with Good Reason, the Company shall (i) make a lump sum payment to you of any Accrued Compensation within ten days of the termination of your employment; (ii) continue to pay your base salary at regular pay-date installments for a period of 24 months following the effectiveness of the General Release (as defined below) (the “Severance Period”); (iii) pay you any pro-rated bonus to which you may become entitled as described in the Cash Incentive Bonus Section above,: (iv) permit you to exercise all vested options you hold in the Company’s stock for a period of 6 months following such termination (but not to exceed the original term of such options); and (v) provided you timely elect to continue health insurance benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, provide you and your eligible dependents with such continued health insurance benefits during the Severance Period without cost to you; provided that if you are a “specified employee” within the meaning of U.S. Internal Revenue Code Section 409A (“Section 409A”) at the time your employment terminates, any payment that is not exempt from Section 409A but that would otherwise be payable within the six-month period beginning with your termination date shall be paid on the first day of the month that follows the end of such six-month period. For these purposes, each such installment shall be treated as a “separate payment” under Section 409A.

There are certain conditions that must be met in order for you to receive any severance payment under this Agreement. First, you must sign a general release agreement in favor of the Company and in a form reasonably acceptable to the Company (the “General Release”), within the applicable time period set forth therein, but in no event more than 45 days following termination, and permit the release of claims contained therein to become effective in accordance with its terms. Second, you must abide by all terms of this Agreement. The Company shall have the right to cease making any severance payment under this Agreement in the event you breach any provision of it. Third, any severance payment(s) made to you under this Agreement shall be offset by the amount of any income earned by you from employment or providing services following your termination and will cease altogether when you obtain a new position which pays you compensation equal to or higher than your rate of compensation as of the last date of your employment with the Company. You will not be entitled to any fringe benefits following termination of employment, except as specifically provided in writing in the applicable benefit plan or policy.

 

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For purposes of this Agreement, “Cause” means (i) willful breach of duty, gross neglect of duty, gross carelessness or gross misconduct in the performance of your duties; (ii) commission of a felony or other crime involving moral turpitude; (iii) commission of any act of material dishonesty involving injury to the Company; (iv) the willful unauthorized disclosure of material privileged or confidential information related to the Company or its employees, except as may be compelled by legal process or court order; (v) the commission of a willful act or omission which violates material written Company policy or procedures; (vi) alcohol or controlled substance abuse that materially impacts the performance of your duties; or (vii) any other willful act of misconduct which, in the opinion of the Board has, or is reasonably likely to have, a material adverse impact upon the Company; provided, however, that with respect to the first occurrence of any of the acts specified in clauses (i), (v), (vi) and (vii) above, you will have a reasonable opportunity to cure such act, violation or condition after receiving written notice from the Company, which shall not be greater than thirty (30) days.

For purposes of this Agreement, “Good Reason” for you to terminate your employment hereunder shall mean your termination within 90 days of the occurrence, without your consent, of any of the following events: (1) a material reduction in your duties, position, authority, reporting or responsibilities relative to your duties, position, authority, reporting or responsibilities in effect immediately prior to such reduction; (2) the relocation of the Company’s executive offices or principal business location to a location more than 60 miles outside the greater metropolitan areas of San Diego, California and Los Angeles, California (including Orange and the adjacent counties); (3) a material reduction by the Company of your base salary as initially set forth herein or as the same may be increased from time to time other than decreases in base salary consistent with decreases applicable to the Company’s other executive officers; or (4) any material breach of this Agreement; provided, however, that such termination by you shall only be deemed for Good Reason pursuant to the foregoing definition if: (i) you give the Company written notice of your intent to terminate for Good Reason within 30 days following the first occurrence of the condition(s) that you believe constitute Good Reason, which notice shall describe such condition(s); (ii) the Company fails to remedy such condition(s) within 30 days following receipt of the written notice (the “Cure Period”); and (iii) you terminate your employment within 30 days following the end of the Cure Period.

Restricted Activities. During the term of your employment with the Company, you will not, directly or indirectly, be connected as an officer, employee, board member, consultant, advisor, owner or otherwise (whether or not for compensation) with any business which competes with any business of the Company or its subsidiaries in any area where such business is then being conducted or actively planned by the Company or a subsidiary. During the term of your employment with the Company, and for a period of two years thereafter, you will not, and you will not assist any other person or entity to, hire or solicit the employment of any employees of the Company or any of its subsidiaries (or any person who in the prior six months was such an employee) or otherwise seek to induce any such employee to terminate his or her employment with the Company or any of its subsidiaries. Other than in connection with the performance of your duties for the Company or in case of a court order or subpoena, you will not disclose to any person or entity any information obtained by you while in the employ of the Company, the disclosure of which may be adverse to the interests of the Company, or use any such information to the detriment of the Company. You understand that your commitments in this paragraph are in exchange for the Company’s commitments to you in this Agreement, and that the restrictions contained in the preceding two sentences apply after your employment terminates, regardless of the reason for such termination.

Successors. The Company shall obtain from any successor, prior to or concurrently with the succession, an agreement to assume the obligations and perform all of the terms and conditions of this Agreement.

Director and Officer Insurance and Indemnification. The Company shall obtain and pay the premiums for a director and officer insurance policy with scope and amounts of coverage consistent with coverage provided to other members of the Board and shall name you as an insured under the policy with the same coverage at such time as other current and former directors and officers of the Company. The Company shall further indemnify you and hold you harmless and advance expenses as provided under the Company’s certificate of incorporation and by-laws in effect from time to time to the fullest extent permitted under applicable law.

 

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Miscellaneous. The headings in this Agreement are for convenience only and do not affect the meaning hereof. This Agreement (together with the Program) constitutes the entire agreement between the Company and you, and supersedes any prior communications, agreements and understandings, whether written or oral, with respect to your employment and compensation and all matters pertaining thereto. This Agreement shall be governed by and construed in accordance with the law of the State of California. Please also understand that by no means does the Company wish you to undertake any activities on behalf of Charlotte Russe that would cause you to violate the terms of any noncompete agreement or any other obligation you may be under by virtue of your employment prior to the Company or otherwise, and you expressly agree that you shall not do so in connection with your employment with the Company.

Legal Fees. The Company will reimburse the Employee for reasonable and verifiable legal fees incurred in connection with the preparation of this Agreement in an amount not to exceed $15,000, subject to the Employee’s provision of invoices or other documentation evidencing such expenses no later than 90 days after Employee incurred such expenses. Such reimbursement payment shall be made by the Company as soon as practicable following its receipt of such documentation, but in no event later than the end of the Employee’s taxable year following the year in which the Employee incurred such expenses.

Disputes. Any dispute between the Company and you concerning the meaning or interpretation of this Agreement, or any alleged breach thereof, shall be resolved in a binding arbitration to be conducted in San Diego, California before a single neutral arbitrator to be selected by the parties from a list of arbitrators on the Employment Dispute Panel of the Judicial Arbitration and Mediation Service. Arbitration shall be initiated by the party desiring arbitration by serving written notice to the other party. Said arbitration shall be conducted no later than 120 days following the date of said written notice, absent the written agreement of the parties otherwise.

Partial Invalidity. If the application of any provision of this Agreement is held invalid or unenforceable, the remaining provisions shall not be affected, but will continue to be given full force and in effect as if the part held invalid or unenforceable had not been included.

Acceptance. In accepting the terms and conditions reflected in this Agreement, you represent that you have not relied on any agreement or representation, oral or written, express or implied, that is not set forth expressly in this Agreement. If this Agreement reflects your understanding, please sign and return a copy to me, whereupon it shall become a binding agreement between the Company and you.

 

 

 

 

 

 

 

 

 

 

Very truly yours,

 

 

 

 

 

 

 

 

 

 

Charlotte Russe Holding, Inc.

 

 

 

 

 

 

 

 

 

 

 

By:

 

/s/ Jennifer Salopek

 

 

 

 

 

 

 

 

Jennifer Salopek

 

 

 

 

 

 

 

 

Chairman of the Board

 

 

 

 

 

 

 

Accepted and Agreed To:

 

 

 

 

/s/ John Goodman

 

 

 

 

 

11/7/08            

John Goodman

 

 

 

 

 

Date

 

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EX-10.1 2 dex101.htm SEVERANCE AGREEMENT

Exhibit 10.1

Charlotte Russe Holding, Inc.

.4645 Morena Blvd. San Diego CA 92117

July 20, 2008

Mark A. Hoffman

P.O. Box 8083

Rancho Sante Fe, CA 92067

Dear Mark:

This letter represents the agreement between Charlotte Russe Holding, Inc. (“Charlotte Russe” or the “Company”) and Mark A. Hoffman (“you” and collectively with the Company, the “Parties”) with respect to your relationships with the Company (the “Agreement”). The effective date of this Agreement is July 20, 2008 (the “Effective Date”).

1. Resignation from the Board of Directors; Retirement. At the request of the Board of Directors (the “Board”) (including as to timing) and in consideration for the Company’s commitments contained in this Agreement, you hereby resign voluntarily from the Board and terminate all your other management positions with the Company and (if applicable) its subsidiaries by retiring, both on July 20, 2008 (the “Retirement Date”). During the period between the Retirement Date and March 16, 2009, you agree at the Company’s request to be available at reasonable times by telephone to provide cooperation and transition services to the Company but for no more than 10 hours per month with the Company providing a comparable level of indemnification rights as for prior to the Retirement Date. You will not represent yourself as an agent of the Company to any third party without the Company’s written consent.

2. Accrued Obligations. Whether or not you sign this Agreement, the Parties recognize that you are already entitled to the following:

(a) Timely payment/providing of all: statutory “wages,” Company benefits (of any and all kinds), Company equity (in all forms) and reimbursable business expenses, all in accordance with the terms of the applicable pre-existing Company plans and agreements, that were/are earned/accrued up through and including the Retirement Date (or later if allowed by the underlying Company plan or policy).

 

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(b) Your contractual severance amount of $735,000 (pursuant to the terms of your Employment Agreement (as defined below), as the Company confirms that there are no “for Cause” reasons to terminate your employment). This severance amount is payable in equal installments over a one-year period following the Retirement Date on Charlotte Russe’s normal payroll dates; provided, however, that because of the distribution delay requirements of Section 409(A)(2)(B)(i) of the Internal Revenue Code (“Code) (see paragraph 9 below), the payments of this severance amount that otherwise would be paid within the six month period following the Retirement Date will instead accrue and be paid on the first business day following the six-month anniversary of the Retirement Date and any remaining severance amount shall be paid at the same time as otherwise specified pursuant to this Agreement. Payments of this severance amount will cease when the payments made to you total the full $735,000 owed.

3. Additional Payments and Benefits. In exchange for your execution of this Agreement (which includes a release), the Company will make the following additional payments and provide the following additional benefits:

(a) The amount of $186,875 will both be made payable to and be paid to you during the first full week of January 2009.

(b) You will be reimbursed up to a maximum of $18,000 toward the total cost of your professionals’ work to help effectuate this Agreement with the Company’s professional advisors, provided that you provide evidence to the Company of payment of your professional costs by the end of August 2008, for which you will be reimbursed within 10 days of receipt of such proof.

(c) As of the Retirement Date, the Company agrees that you/ your spouse will have fully qualified for the Retirement Benefit Program, relating to your/ her retiree medical coverage. If you obtain employment after the Retirement Date which provides you and her with medical insurance coverage, you/ she must elect that coverage and promptly so advise the Company in writing. At that time that you/ she qualify for medical insurance coverage by any successor employer of yours and thereafter through the rest of your/ your spouse’s lives, the Company will provide sufficient medical insurance coverage for you and your spouse, such that the aggregate medical insurance coverage provided is commensurate with that being provided to you and your spouse on the day prior to the Retirement Date. Coverage under the Retirement Benefit Program relating to retiree medical coverage is subject to paragraph 9, below.

(d) Notwithstanding any other prior agreements to the contrary, the following terms in this paragraph also apply. On the Retirement Date, you will be entitled to retain fully vested options to purchase a total of 137,667 shares of common stock

 

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(the “Retained Options”) of the Company granted to you under the Company’s 1999 Equity Incentive Plan, of which (i) options to purchase 104,000 shares were already fully vested prior to the Retirement Date, (ii) options to purchase 20,000 shares of common stock, that would have vested on August 9, 2008, will instead become fully vested on the Retirement Date and (iii) options to purchase 13,667 shares of common stock, that would have vested on October 1, 2008, will instead become fully vested on the Retirement Date. The Retained Options are fully exercisable in accordance with the terms of the Plan and your option award certificates, except that you will also have the right to exercise any or all of the Retained Options before and through March 16, 2009. On the Retirement Date, you will forfeit your other unvested options to purchase 147,333 shares of common stock of the Company. On the Retirement Date you will be entitled to also receive fully vested the 6,000 shares of restricted stock granted to you under the Plan that would have otherwise vested on October 1, 2008, and such shares are no longer subject to any forfeiture or other time-based limitation under the Plan or your restricted stock award agreement. On the Retirement Date, you will forfeit the remaining unvested 36,000 shares of Restricted Stock of the Company granted to you under the Plan.

(e) You may retain possession and free and clear ownership of the Company laptop computer and all associated peripherals (e.g., carrying case) that you have been most recently using in your Company work. You shall return your laptop and peripherals no later than the third business day following the Retirement Date and the Company shall have the right to remove all Company-related files from such laptop and peripherals and will deliver the laptop and peripherals to you within ten (10) days after the Retirement Date.

4. Benefit Plans. Except to the extent inconsistent with the terms of this Agreement (which govern in such case), your benefits and rights under all employee benefit plans and arrangements with Charlotte Russe will otherwise be governed by the terms and conditions of such other plans, including the Company’s stock option and restricted stock plans and arrangements.

5. Withholdings. The Company may withhold. from any payments under this agreement all taxes that the Company reasonably determines to be required to be withheld pursuant to law, regulation or ruling.

6. Releases. In consideration of Charlotte Russe’s commitment to the various arrangements described in this Agreement that are beyond those to which the Parties agree you are already entitled to receive, and except as specified in this Section 6 of this Agreement, you otherwise hereby generally and completely release the Company and its directors, officers, employees, shareholders, members, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns (the “Company Releasees”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to your signing this Agreement. This general release includes, but

 

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is not limited to: (1) all claims arising out of or in any way related to your employment with the Company or the termination of that employment; (2) all claims arising from or related to the Amended and Restated Employment Agreement between you and the Company made and entered into as of January 4, 2008 (your “Employment Agreement”); (3) all claims related to your compensation or benefits from the Company, including, but not limited to, salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (4) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (5) all tort claims, including, but not limited to, claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (6) all federal, state, and local statutory claims, including, but not limited to, claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, and the California Fair Employment and Housing Act (as amended). The Parties further acknowledge that each has been advised by this writing that its/ his waivers and releases do not apply to any rights or claims that may arise after the execution date of this Agreement. In granting the releases herein, the Parties hereby acknowledge that each has read and understand Section 1542 of the California Civil Code: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” The Parties hereby each expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to the Parties’ mutual releases of claims hereby.

Nevertheless, none of the waivers and releases anywhere in this Agreement shall waive, release, or limit in any way: a) your rights that are not subject to waiver by private agreement and/or are created and/or maintained in this Agreement; b) any claims arising under either state unemployment insurance (which the Company agrees this Agreement does not limit any right you may otherwise later have to such) or workers’ compensation laws; c) your rights, if any, to indemnification, duty to defend, and to be held harmless by the Company (with respect to all of your prior, existing and continuing capacities with, and efforts for, the Company) pursuant to all applicable: existing agreements or contracts in any written form, Company insurance policies, statutes, common law, corporate bylaws, articles of incorporation; d) your legally-vested rights accrued as of the Retirement Date through your employment, officership and/or Board membership under any Company or Company-sponsored agreement (e.g., the Company’s current standard Indemnification Agreement covering its senior executives), benefit or benefit plan and/or pursuant to any Company insurance policies (e.g., 401(k), various forms of insurance, stock option and/or stock grant plans and/or agreements); e) except as set forth in Section 11 below, your rights as a current and future Company shareholder and stock option holder; f) your rights to enforce the terms of this Agreement; and g) your rights regarding the Company’s or the Company’s Releasees’ acts or omissions that occur after the Effective Date.

 

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7. Representation Concerning Filing of Legal Actions; No Knowledge of Claims. Each Party represents that, as of the date of this Agreement, he/it has not knowingly filed any lawsuits, charges, complaints, petitions, administrative claims or any other formal accusatory pleadings against the other Party or any of their associated Releasees in any court or with any governmental agency or other decision-making authority. Further, the Company hereby represents and warrants it is are unaware of any claims that it may have against you or of any reasonable basis for any such claim. Similarly, the Company is not aware of any claim or any assertion of any basis for any claim that any third party may have against you.

8. Confidentiality.

(a) You previously executed and agreed to abide by the legally enforceable provisions of the Trade Secret and Confidentiality Agreement (the “Confidentiality Agreement”) attached as Exhibit A to your Employment Agreement. You acknowledge that you will continue to be bound by sections 2, 3, 4, 6, and 7 of the Confidentiality Agreement to the extent not modified in this Agreement which is controlling. You covenant and agree that you will not disclose to any person or entity, or use or otherwise exploit for your benefit or the benefit of another person or entity, any confidential information that was disclosed to you or came within your knowledge while an employee of the Company that continues to be confidential, including but not limited to such confidential information of the Company and/or its clients, and you shall keep and hold all such confidential information completely secret and confidential.

(b) Nothing in this Agreement shall limit any rights or remedies of any Party under the California Uniform Trade Secrets Act (California Civil Code § 3426 et seq.) or otherwise available under law (e.g., California Bus. & Prof. Code Sec. 16600 and 17200).

9. Section 409A. This Agreement shall be interpreted to ensure that the payments made to you are exempt from, or comply with, Section 409A of the Internal Revenue Code (“409A”); provided, however, that nothing in this Agreement shall be interpreted or construed to transfer any liability for any tax (including a tax or penalty due as a result of a failure to comply with 409A) from you to the Company or to any other individual or entity.

(a) It is intended that the amounts payable under paragraphs 2(a)(wages, equity awards, and expenses), 3(a) (bonus), (b) (professionals’ fees), (d) (retained options), and (e) (company laptop) are exempt from 409A pursuant to the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations or otherwise.

(b) With respect to amounts payable under paragraph 2(b) (severance):

(i) such amounts are payable solely upon a “separation from service” within the meaning of Code Section 409A(a)(2)(A)(i); and

 

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(ii) such amounts are subject to delay pursuant to Code Section 409A(a)(2)(B)(i).

(c) With respect to amounts payable under paragraph 3(c) (retiree medical), to the extent such benefits are taxable:

(i) the only reimbursements of medical expenses or other medical benefits that shall be paid during the first six months following the Retirement Date are reimbursements that meet the following requirements: (A) the expenses are incurred and paid by you (or incurred by you and paid by the Company directly to the service provider on your behalf); (B) the expenses would be allowable as a deduction to you under Section 213 of the Code (disregarding the requirement that the deduction under that section apply only to expenses that exceed 7.5% of adjusted gross income); and (C) the expenses are not reimbursed from a source other than the Company.

(ii) Any benefit that is prevented from being paid by clause (i) above shall instead be paid on the first business day following the six-month anniversary of the Retirement Date.

(iii) In addition, beginning on the first business day following the six-month anniversary of the Retirement Date, retiree medical benefits shall be provided pursuant to paragraph 3(c) subject to the following requirements: (1) all benefits shall be provided pursuant to a written plan or program that provides an objectively determinable nondiscretionary description of the reimbursements or in-kind benefits provided; (2) all reimbursements shall be paid no later than the end of the calendar year following the year in which the expense was incurred; (3) the amount of in-kind benefit or reimbursable expense incurred in one year shall not affect the amount of benefit or reimbursement available in another year (except to the extent that medical expense reimbursements are subject to annual, lifetime, or similar limits under the terms of the applicable plan).

10. Nonsolicitation. You covenant and agree that for a period of one year (1) year following the Retirement Date, you will not, directly or knowingly indirectly, either for yourself or for any other person, firm, corporation or legal entity, solicit any individual who, during the term of your employment, was or is an employee of the Company or any affiliate thereof, to leave the employment of the Company or any such affiliate.

11. No Acquisitions, Beneficial Ownership, Mergers or Other Business Combination. In consideration of Charlotte Russe’s commitment to the various arrangements described in this Agreement, you agree that for a period of one year after the Retirement Date, you will not, without the prior written consent of the Company, directly or knowingly indirectly: (i) acquire (other than

 

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through the exercise of your Company stock options), or offer to acquire, by purchase or otherwise, beneficial ownership (as defined under Section 13D of the Securities Exchange Act of 1934) of any equity securities of the Company, (ii) acquire (other than through the exercise of your Company stock options), or offer to acquire, beneficial ownership of any options or other rights to acquire any equity securities of the Company (whether or not exercisable only after the passage of time or the occurrence of an event), (iii) initiate, or actively support, other than related to your potential voting of your Company shares for such, an offer to enter into any merger, business combination, sale of all or substantially all assets, or similar transaction involving the Company or any acquisition of voting control of the Company, (iv) make, or in any way participate in the making of, any “solicitation” of “proxies” (as such terms are used in the rules of the Securities and Exchange Commission) to vote, or seek to advise or influence any person or entity with respect to the voting of, any securities of the Company, (v) directly or indirectly attempt to cause the formation of, any group (as defined under Section 13D of the Securities Exchange Act of 1934) which seeks to do any of the foregoing, (vi) propose, or publicly announce or otherwise disclose any request for permission or any consent in respect of any of the foregoing (other than through the exercise of your Company stock options), or (vii) in any way to affirmatively and specifically advise, assist or encourage any other person to do any of the foregoing. Nothing in this Agreement will prevent or prohibit for instance the acquisition, receipt or exchange by you of the direct and/or beneficial ownership of any equity securities of the Company from the Company or pursuant to existing contracts to which the Company is a party.

12. Additional Covenants.

(a) Cooperation. You covenant and agree to reasonably (e.g., for reasonable payment for your time and reimbursement of your costs incurred for) cooperate with and make yourself reasonably available to Charlotte Russe or its General Counsel, as Charlotte Russe may reasonably request, to assist it in any Company matter involving your past Company knowledge, including but not limited to, providing information, giving truthful testimony in any litigation or potential litigation over which you may have knowledge, information or expertise, and signing routine documents for administrative purposes.

(b) Return of Company Property. You covenant and agree that you will promptly return any and all property of the Company (except as specified in this Agreement or otherwise allowed by applicable law), including but not limited to all such records, files, notes, memoranda, reports, work product and similar items and any manuals, drawings, sketches, plans, tape recordings, computer programs, computers, disks cassettes and other physical representations of such, whether or not constituting confidential information, and you have a continuing obligation to return to the Company any of the same that you discover over time and return of such then will not be in breach of this provision. You shall not retain any copies of any such information returned to the Company. The Company will reasonably cooperate to return to you your personal property which the Company represents it has not disturbed and will not disturb.

 

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(c) Nondisparagement. You covenant and agree that you will not directly make any statements, written or oral (or intentionally encourage others to make any such statements) that materially, wrongfully: defame, disparage or in any way criticize the personal and/or business reputations, practices or conduct of the Company, its employees, officers and directors. The Company agrees that it will not make any critical or disparaging statements about you. This non-disparagement provision shall not apply to any truthful statements, or any statements that are reasonably believed by the maker to be true, that are made (1) in response to a subpoena or other legal process, (2) to a governmental or regulatory entity (e.g., any SEC filings), (3) in any legal, arbitral, or mediation proceeding, or (4) as otherwise required by law.

(d) References. If any Company employee or management team member (including Board members) receives an inquiry from any third party, the recipient of such contact shall inform the inquiring party, except as otherwise authorized by you in writing or as required by law, that the Company’s policy permits him or her to disclose only the following information about you: (a) the facts and dates of your executive employment and director relationships; (b) your compensation levels as of the Retirement Date; (c) that you resigned from the Board and retired from the Company, and (d) that you are eligible for re-hire.

13. No Admission of Liability. By entering into this Agreement, the Parties do not admit and specifically deny, any liability or wrongdoing as to each other, and it is expressly understood and agreed that this Agreement is being entered into solely for the purposes of avoiding and amicably resolving all disputes and potential claims between the Parties.

14. Reemployment or Reinstatement. You agree that the Company has no obligation, contractual or otherwise, to rehire, reemploy or recall you in the future.

15. Entire Agreement and Severability. The Parties each agree that this Agreement may not be modified, altered or changed except by a written agreement signed by the Parties. Except as provided otherwise in this Agreement, the Parties acknowledge that this expressly constitutes the entire agreement on the matters addressed herein and except as set forth/ referenced herein, otherwise supersedes all prior agreements or understandings between the Parties with respect thereto, including without limitation the Employment Agreement. If the application of any provision of this Agreement, or any section, subsection, subdivision, sentence, clause, phrase, word or portion of this Agreement is held to be invalid or unenforceable, the remaining provisions shall remain in full force and effect.

 

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16. Remedies. The Parties each acknowledge that damages at law would be an inadequate remedy for material breaches of Paragraphs 8, 10 and 12(c) and agree in the event of any such material breach that the injured Party may obtain temporary and permanent injunctive relief restraining the breaching Party from such material breach, and, to the extent permissible under the applicable statutes and rules of procedure, a temporary injunction may be granted immediately upon the commencement of any such suit. Nothing contained herein shall be construed as prohibiting either Party from pursuing any other remedies available at law or equity for such material breach or threatened material breach.

17. Choice of Law and Jurisdiction. The governing law of this Agreement shall be the substantive and procedural law of the State of California, without regard to conflict of law principles, and the venue of any litigation commenced hereunder shall be San Diego, California. The Parties hereby submit to the jurisdiction of such California and federal courts with jurisdiction over that venue.

18. Notices. Notices given under this Agreement may be given by registered or certified mail, return receipt requested, or by personal delivery. In your case, mailed notices shall be addressed to you at the home address that you have then most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its General Counsel. A mailed notice by either Party shall be deemed received three (3) business days after postmarked and mailed.

19. Counterparts; Exchange. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and shall constitute an effective and binding agreement on the part of the undersigned Parties, but all of which shall constitute one and the same instrument. This Agreement may be exchanged by hand, mail, email, or facsimile/PDF, and such shall be treated as fully enforceable upon the Agreement’s Effective Date if promptly exchanged then or thereafter.

20. No Assignment. This Assignment may not be assigned or encumbered in any way by any Party, except the Company may assign this Agreement to any bona fide successor (whether by merger, consolidation, or purchase of the Company’s stock) to all or a controlling interest in the Company’s business, in which case this Agreement shall be binding upon and inure to the benefit of such successors and assigns.

21. Authority. Each signatory expressly represents and warrants that he and/or she has the full authority and capacity to sign this Agreement on in your case, your behalf and in the case of the Company, the Company’s behalf.

22. Acknowledgment. Each Party acknowledges having carefully read this Agreement and understanding all of its terms including the full and final release of claims set forth above. Each Party further acknowledges having had adequate time to consider

 

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the terms of this Agreement and knowingly and voluntarily entered into it; that each Party has not relied upon any representation or statement, written or oral, not either set forth or referenced in this Agreement; that the only consideration for signing this Agreement is as set forth herein; that at least some of the consideration received for executing this Agreement is greater than that to which each Party may otherwise be entitled; and that this document gives each Party the opportunity and advises each Party to consult with legal counsel of each Party’s choosing and to have this Agreement reviewed by such counsel and tax advisor prior to signing it (and each Party acknowledges having done so or voluntarily choosing not to). You also acknowledge that you have seven days after signing this Agreement to revoke it in writing. Accordingly, no payments required under this Agreement shall be made until the seven (7) days following your execution of this Agreement has expired and you have not revoked this Agreement during that period. You acknowledge that revocation of this Agreement does not reinstate you as Chief Executive Officer of the Company. You further acknowledge that the revocation of this Agreement does not reinstate you as a member of the Board of Directors of the Company.

Each Party indicates that Party’s acceptance of the terms of this Agreement by signing that Party’s representative’s name in the space provided below.

ACCEPTED AND AGREED:

 

 

 

 

On behalf of Charlotte Russe Holding, Inc.

 

/s/    Jennifer Salopek

By:

 

Jennifer Salopek

Title:

 

Chairman of the Board

 

Dated: July 20, 2008

 

 

/s/    Mark A. Hoffman

Mark A. Hoffman

Dated: July 21, 2008

 

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