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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(AMENDMENT NO. )
BARNEYS NEW YORK, INC.
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.01 PER SHARE 890333-10-7
(Title of Class of Securities) (CUSIP Number)
TED S. WAKSMAN, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153
(212) 310-8000
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(Name, Address and telephone Number of Person Authorized to Receive Notices and
Communications)
MARCH 23, 2000
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rules 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [_].
Note.Schedules filed in paper format shall include a signed
original and five copies of the schedule, including all exhibits. See
Rule 13d-7(b) for other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 7 Pages)
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CUSIP No. 06808T107 13D Page 2
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1 NAME OF REPORTING PERSON ALLEN I. QUESTROM
S.S. OR I.R.S. IDENTIFICATION NO. NOT APPLICABLE
OF ABOVE PERSON
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS: OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION: United States
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NUMBER OF 7 SOLE VOTING POWER: 0
SHARES ------------------- -------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 804,458
OWNED BY ------------------- -------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: 0
REPORTING ------------------- -------------------------------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 804,458
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON:
804,458
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES:
[_]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 5.8%
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14 TYPE OF REPORTING PERSON: IN
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SEE INSTRUCTIONS BEFORE FILLING OUT!
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Item 1. Security and Issuer.
-------------------
The title and class of equity security to which this Statement on
Schedule 13D relates is the common stock, par value $0.01 per share ("Common
Stock"), of Barneys New York, Inc., a Delaware corporation (the "Company"). The
address of the Company's principal executive offices is 575 Fifth Avenue, New
York, New York 10017.
Item 2. Identity and Background.
-----------------------
This statement is being filed by Allen I. Questrom (the "Reporting
Person" or "Mr. Questrom"), for and on behalf of himself. The business address
of Mr. Questrom is Barneys New York, Inc., 575 Fifth Avenue, New York, New York
10017. Mr. Questrom is the Chairman of the Board of Directors, President and
Chief Executive Officer of the Company. The Company is a leading upscale
retailer of men's and women's apparel and accessories and items for the home.
The address of the Company is 575 Fifth Avenue, New York, New York 10017. Mr.
Questrom is a citizen of the United States of America.
During the last five years the Reporting Person has not been (i)
convicted of any criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
The response to Item 4 hereof is incorporated herein by reference.
Item 4. Purpose of Transaction.
----------------------
Pursuant to an employment agreement effective as of May 5, 1999 and
dated February 1, 2000, between the Company and Mr. Questrom, Mr. Questrom has
been granted options (the "Options") to purchase up to 15% of the outstanding
shares of the Company's Common Stock, which will vest over the term of his
employment. A portion of the salary and bonus payable to Mr. Questrom, up to a
specified amount, will be retained by the Company to pay for the grant of a
portion of such Options. Pursuant to the terms of his employment agreement, Mr.
Questrom is entitled to antidilution protection pursuant to which he will
receive additional Options upon certain equity issuances by the Company. None of
the Options have been exercised as of March 23, 2000.
Pursuant to a stockholders agreement dated as of February 1, 2000, Bay
Harbour Management L.C. ("Bay Harbour"), Whippoorwill Associates, Inc.
("Whippoorwill") and Mr. Questrom have agreed to provide each other certain
co-sale rights in connection with any sales of their Common Stock. Mr. Questrom
also agreed to vote half of his shares as directed by Bay Harbour and half as
directed by Whippoorwill.
The Reporting Person acquired the Options for investment purposes. The
Reporting Person may acquire additional securities of the Company or dispose of
securities of the Company at any time and from time to time in the open market
or otherwise. Although the foregoing represents the range of activities
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presently contemplated by the Reporting Person with respect to the Company, it
should be noted that the possible activities of the Reporting Person are subject
to change at any time.
The Reporting Person is the Chairman of the Board of Directors,
President and Chief Executive Officer of the Company and, accordingly, will be
in a position to influence the operations and activities of the Company.
Except as set forth above, the Reporting Person does not have any
present plans or proposals which relate to or would result in any of the actions
described in subparagraphs (a) through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
------------------------------------
(a) As of March 23, 2000, the Reporting Person beneficially
owned 804,458 shares of Common Stock, representing
approximately 5.8% of the outstanding shares of Common
Stock.
(b) The responses of the Reporting Person to (i) Rows (7)
through (10) of the cover pages of this statement on
Schedule 13D and (ii) Item 5(a) hereof are incorporated
herein by reference.
(c) Except for the transaction described in Item 4 hereof, the
Reporting Person has not effected any transactions in the
Common Stock of the Company during the past 60 days.
(d), (e): Not Applicable
Item 6. Contracts, Arrangements, Understandings or Relationships With
-------------------------------------------------------------
Respect to Securities of the Issuer.
------------------------------------
On February 1, 2000, Mr. Questrom entered into a Registration Rights
Agreement with the Company (the "Registration Rights Agreement"). Pursuant to
the Registration Rights Agreement, Mr. Questrom may make a written request of
the Company for registration with the Securities and Exchange Commission under
and in accordance with the provisions of the Securities Act of 1933, as amended
(the "Securities Act"), of all or part of his registrable securities, which
include the Common Stock (a "Demand Registration"). The Company shall only be
required to file a registration statement in connection with such Demand
Registration after the later of (x) six months after the consummation of an
initial public offering of shares of Common Stock under the Securities Act and
(y) 12 months after a registration statement filed under the Securities Exchange
Act of 1934, as amended, in respect of shares of Common Stock shall have been
declared effective. Mr. Questrom shall be entitled to two (2) Demand
Registrations and unlimited piggyback registration rights.
In addition, the response to Item 4 hereof is incorporated herein by
reference.
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Item 7. Materials to be Filed as Exhibits.
---------------------------------
Exhibit 1 Registration Rights Agreement, dated as of February 1, 2000, by
and between Barneys New York, Inc. and Allen Questrom.
Exhibit 2 Stockholders Agreement, dated as of February 1, 2000, among Bay
Harbour Management L.C., Whippoorwill Associates, Inc. and Allen
Questrom.
Exhibit 3 Employment Agreement between Barneys New York, Inc. and Allen
I. Questrom effective as of May 5, 1999 and dated February 1,
2000.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: March 27, 2000
/s/ Allen I. Questrom
---------------------
Allen I. Questrom
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EXHIBIT INDEX
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Exhibit No. Description
- ----------- -----------
Exhibit 1 Registration Rights Agreement, dated as of February 1, 2000, by
and between Barneys New York, Inc. and Allen Questrom.
Exhibit 2 Stockholders Agreement, dated as of February 1, 2000, among Bay
Harbour Management L.C., Whippoorwill Associates, Inc. and Allen
Questrom.
Exhibit 3 Employment Agreement between Barneys New York, Inc. and Allen
I. Questrom effective as of May 5, 1999 and dated February 1,
2000.
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EXHIBIT 1
REGISTRATION RIGHTS AGREEMENT
-----------------------------
Registration Rights Agreement, dated as of February 1, 2000, by and
between Barneys New York, Inc., a Delaware corporation ("Company"), and Allen
Questrom (collectively with his heirs and testamentary assigns, "Executive").
W I T N E S S E T H :
WHEREAS, pursuant to an employment agreement of even date herewith
between Company and Executive (the "Employment Agreement"), Executive has been
granted options to purchase shares of common stock, $.01 par value of Company;
and
WHEREAS, in partial consideration for Executive entering into the
Employment Agreement, Company has agreed to grant certain rights to Executive as
set forth herein;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:
1. Definitions. The following shall have (unless otherwise provided
elsewhere in this Agreement) the following respective meanings (such meanings
being equally applicable to both the singular and plural form of the terms
defined):
"Action" shall have the meaning set forth in Section 6(e).
"Affiliate", with respect to a Person, means any other Person which
directly or indirectly, through one or more intermediaries controls, is
controlled by, or is under common control with, such Person.
"Agreement" shall mean this Registration Rights Agreement, including
all amendments, modifications and supplements and any exhibits or schedules to
any of the foregoing, and shall refer to the Agreement as the same may be in
effect at the time such reference becomes operative.
"Business Day" shall mean any day that is not a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Demanding Security Holders" shall have the meaning set forth in
Section 3.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
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"Indemnified Party" shall have the meaning set forth in Section 6(e).
"Indemnifying Party" shall have the meaning set forth in Section 6(e).
"NASD" shall mean the National Association of Securities Dealers, Inc.,
or any successor corporation thereto.
"Person" shall mean any individual, partnership (general, limited or
limited liability), corporation, limited liability company, trust,
unincorporated organization or other legal entity, and a government or agency or
political subdivision thereof.
"Registrable Securities" shall mean Shares beneficially owned by
Executive at any time after the date hereof, including without limitation,
Shares resulting from the exercise of any options held by Executive. As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities when (i) a Registration Statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such Registration
Statement, (ii) such securities shall have been sold pursuant to Rule 144 under
the Securities Act, or (iii) such securities shall have ceased to be
outstanding. For purposes of this Agreement, references to "beneficially owned"
or "beneficial ownership" mean such ownership within the meaning of Rule 13d-3
under the Exchange Act.
"Registration Statement" shall mean a registration statement of Company
as it may be amended or supplemented from time to time, including without
limitation, all exhibits, financial statements, schedules and attachments
thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Shares" shall mean the common stock, $.01 par value, of Company and
any capital stock of Company or any successor corporation into which such common
stock may hereafter be changed.
2. Required Registration. After receipt of a written request from
Executive requesting that Company effect the registration under the Securities
Act of Registrable Securities representing at least an aggregate of 10% of the
total of all Registrable Securities then beneficially owned (determined in
accordance with Rule 13d-3 promulgated under the Exchange Act) by Executive,
specifying the intended method or methods of disposition thereof, Company shall,
as expeditiously as is possible, use its best efforts to effect the registration
under the Securities Act of all Registrable Securities which Company has been so
requested to register by Executive for sale, all to the extent required to
permit the disposition (in accordance with the intended method or methods
thereof, as aforesaid) of the Registrable Securities so registered; provided,
however, that (x) Company shall not be required to effect more than two (2)
registrations of any Registrable Securities which shall have been declared
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effective by the Commission pursuant to this Section 2, and (y) Company shall
only be required to effect a registration of Registrable Securities pursuant to
this Section 2 after the later of (i) six months after it has consummated an
initial public offering of Shares under the Securities Act, and (ii) 12 months
after a registration statement filed under the Exchange Act in respect of the
Shares shall have been declared effective. Executive acknowledges and agrees
that if any Person shall request, pursuant to a contractual right of such
Person, that Shares held by such Person be included in any registration
statement filed pursuant to this Section 2, then the Shares to be registered on
behalf of such Person and Executive shall be subject to reduction as set forth
in the third sentence of the second paragraph of Section 3.
3. Incidental Registration. If Company at any time proposes to file on
its behalf and/or on behalf of any of its security holders (collectively, the
"Demanding Security Holders") a Registration Statement under the Securities Act
on any form (other than a Registration Statement on Form S-4 or S-8 or any
successor form for securities to be offered in a transaction of the type
referred to in Rule 145 under the Securities Act or to employees of Company
pursuant to any employee benefit plan, respectively) for the general
registration of Shares or other equity securities of Company, or securities
convertible into or exchangeable or exercisable for Shares or such other equity
securities, it will give written notice of such proposed filing to Executive
(unless Executive is a Demanding Security Holder) at least thirty (30) days
before the initial filing with the Commission of such Registration Statement,
which notice shall set forth the number and type of securities proposed to be
offered and a description of the intended method of disposition of such
securities. The notice shall offer to include in such filing such number of
Registrable Securities as Executive may request.
In the event that Executive desires to have Registrable Securities
registered under this Section 3, he shall advise Company in writing within
twenty (20) days after the date of receipt of such offer from Company, setting
forth the amount of such Registrable Securities for which registration is
requested. Company shall thereupon include in such filing the number of shares
of Registrable Securities for which registration is so requested, subject to the
next sentence, and shall use its best efforts to effect registration under the
Securities Act of such Registrable Securities. If the managing underwriter of a
proposed public offering shall advise Company in writing that, in its opinion,
the distribution of the Registrable Securities requested to be included in the
registration concurrently with the securities being registered by Company or
such Demanding Security Holder would materially and adversely affect the
distribution of such securities by Company or such Demanding Security Holder,
then Executive shall reduce the amount of securities he intended to distribute
through such offering, pro rata with the other Demanding Security Holders and
other selling security holders on the basis of the number of shares of
Registrable Securities to be offered for the account of Executive and such other
selling security holders. Except as otherwise provided in Section 5, all
expenses of such registration shall be borne by Company. No registration of
Registrable Securities under this Section 3 shall relieve Company of its
obligation to effect registrations under Section 2, or shall constitute a
request for registration by Executive under Section 2.
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4. Registration Procedures. If Company is required by the provisions of
Section 2 or 3 to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act, Company will, as expeditiously
as possible:
(a) prepare and file with the Commission a Registration Statement
with respect to such securities and use its best efforts to cause such
Registration Statement to become and remain effective for a period of time
required for the disposition of such securities by Executive thereof, but not to
exceed two hundred seventy (270) days;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such Registration Statement until
the earlier of such time as all of such securities have been disposed of in a
public offering or the expiration of two hundred seventy (270) days;
(c) furnish to Executive and any underwriters such number of copies
of the Registration Statement as initially filed with the Commission and of each
pre-effective and post-effective amendment or supplement thereto (in each case
including at least one copy of all exhibits thereto and all documents
incorporated by reference therein) and of the prospectus included therein,
including the preliminary prospectus and any summary prospectus, and any other
prospectus filed under Rule 424 under the Securities Act in connection with the
disposition of any Registrable Securities covered by such Registration
Statement, and such other documents as Executive or any underwriter may
reasonably request;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such Registration Statement under such other securities or
blue sky laws of such jurisdictions within the United States and Puerto Rico as
Executive shall request (provided, however, that Company shall not be obligated
to qualify as a foreign corporation to do business under the laws of any
jurisdiction in which it is not then qualified or to file any general consent to
service of process to effect such registration), and do such other reasonable
acts and things as may be required of it to enable Executive to consummate the
disposition in such jurisdiction of the Registrable Securities covered by such
Registration Statement;
(e) furnish, at the request of Executive, if he has requested
registration of Registrable Securities pursuant to Section 2, on the date that
such shares of Registrable Securities are delivered to the underwriters for sale
pursuant to such registration or, if such Registrable Securities are not being
sold through underwriters, on the date that the Registration Statement with
respect to such Registrable Securities becomes effective, (1) an opinion, dated
such date, of the independent counsel representing Company for the purposes of
such registration, addressed to the underwriters, if any, and if such
Registrable Securities are not being sold through underwriters, then to
Executive, in customary form and covering matters of the type customarily
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covered in such legal opinions; and (2) a comfort letter dated such date, from
the independent certified public accountants who have issued an audit report on
Company's financial statements included or incorporated by reference in the
Registration Statement, addressed to the underwriters, if any, and if such
Registrable Securities are not being sold through underwriters, then to
Executive, and, if such accountants refuse to deliver such letter to Executive,
then to Company in a customary form and covering matters of the type customarily
covered by such comfort letters and as the underwriters or Executive shall
reasonably request. The opinion of counsel shall additionally cover such other
legal matters with respect to the registration in respect of which such opinion
is being given as Executive or any underwriter may reasonably request. Such
letter from the independent certified public accountants shall additionally
cover such other financial matters (including information as to the period
ending not more than five (5) Business Days prior to the date of such letter)
with respect to the registration in respect of which such letter is being given
as Executive or any underwriter may reasonably request;
(f) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities;
(g) use its commercially reasonable efforts to cause its senior
management to attend and make presentations regarding Company at all meetings
with prospective purchasers of Registrable Securities that are arranged by any
underwriter (provided that senior management has been given two (2) weeks
advance notice of the first of such meetings) in connection with any widely
distributed, underwritten offering of such Registrable Securities;
(h) use its best efforts to cause the Registrable Securities covered
by a Registration Statement to be listed on each national securities exchange,
the NASDAQ National Market or the NASDAQ Small Cap Market, as applicable, on
which Company's equity securities are then listed at the time of the sale of
such Registrable Securities pursuant to such Registration Statement;
(i) notify Executive and each underwriter, at any time when a
prospectus is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, such prospectus
(as then in effect) contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and as promptly as
practicable prepare and furnish to Executive and each underwriter such number of
copies of a supplement to or an amendment of such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(j) make available for inspection by Executive, any underwriter and
any attorney, accountant or other agent retained by Executive or any
underwriter, all financial and other records, pertinent corporate documents and
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properties of Company, and cause Company's officers, directors and employees to
supply all information reasonably requested by Executive, any underwriter or any
such attorney, accountant or agent in connection with such Registration
Statement;
(k) before filing any Registration Statement or amendment or
supplement thereto or to the prospectus used therewith, furnish to Executive,
any underwriters and their respective counsel drafts and/or copies of all
documents proposed to be filed with the Commission and an opportunity to comment
thereon; and
(l) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, but not later than eighteen (18)
months after the effective date of the Registration Statement, an earnings
statement covering the period of at least twelve (12) months beginning with the
first full month after the effective date of such Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
It shall be a condition precedent to the obligation of Company to take
any action pursuant to this Agreement in respect of the Registrable Securities
which are to be registered at the request of Executive that Executive shall
furnish to Company such information regarding the Registrable Securities held by
Executive and the intended method of disposition thereof as Company shall
reasonably request and as shall be required in connection with the action taken
by Company ("Executive Information").
5. Expenses. All expenses incurred in complying with this Agreement,
including, without limitation, all Commission or stock exchange registration and
filing fees (including all expenses incident to filing with the NASD), stock
exchange listing fees, printing expenses, fees and disbursements of counsel for
Company, expenses of complying with the securities or blue sky laws of any
jurisdiction pursuant to Section 4(d) hereof, underwriting expenses other than
underwriting discounts and commissions, the reasonable fees and expenses of one
counsel for Executive, fees of the Company's independent public accountants and
the expenses of any special audits incident to or required by any such
registration, and the expenses of complying with the securities or blue sky laws
of any jurisdiction pursuant to Section 4(d), shall be paid by Company, except
that:
(a) all such expenses in connection with any amendment or supplement
to the Registration Statement or prospectus filed more than two hundred seventy
(270) days after the effective date of such Registration Statement because
Executive has not effected the disposition of the securities requested to be
registered shall be paid by Executive; and
(b) Company shall not be liable for any underwriting discounts or
commissions in respect of the Registrable Securities sold by Executive.
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6. Indemnification and Contribution.
(a) In the event of any registration of any Registrable Securities
under the Securities Act pursuant to this Agreement, Company shall indemnify and
hold harmless Executive, Executive's agents, and each other Person (including
each underwriter) who participated in the offering of such Registrable
Securities against any losses, claims, damages or liabilities, joint or several,
to which Executive or any such agent or Person may become subject under the
Securities Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any Registration
Statement under which such Registrable Securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any alleged
violation by Company of the Securities Act, the Exchange Act or any state
securities laws in connection with the offering covered by such Registration
Statement, and shall reimburse Executive or such agent or Person for any legal
or any other expenses reasonably incurred by Executive or such agent or Person
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that Company shall not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon any actual or alleged untrue statement or actual or
alleged omission made in such Registration Statement, preliminary prospectus,
prospectus or amendment or supplement in reliance upon and in conformity with
Executive Information furnished in writing to Company by Executive specifically
for use therein or (in the case of any registration pursuant to Section 2) so
furnished for such purposes by any underwriter. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
Executive or such agent or Person and shall survive the transfer of such
Registrable Securities by Executive.
(b) Executive, by acceptance hereof, agrees to indemnify and hold
harmless Company, its directors and officers and each other person, if any, who
controls Company within the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint or several, to which Company or any such
director or officer or any such person may become subject under the Securities
Act or any other statute or at common law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of any material fact
contained, on the effective date thereof, in any Registration Statement under
which Registrable Securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto or (ii) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, if in any such case such statement or alleged
statement or omission or alleged omission was made in reliance on and in
conformity with Executive Information provided in writing to Company by
Executive specifically for use in such Registration Statement, preliminary
prospectus or final prospectus or any amendment or supplement thereto.
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Notwithstanding the provisions of this paragraph (b) or paragraph (c) below,
Executive shall not be required to indemnify any person pursuant to this Section
6 or to contribute pursuant to paragraph (c) below in an amount in excess of the
amount of the aggregate net proceeds received by Executive in connection with
any such registration under the Securities Act.
(c) If the indemnification provided for in this Section 6 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action; provided,
however, that notwithstanding the foregoing, no fault shall be attributed to
Executive as to any matters other than his provision of Executive Information in
writing to Company specifically for use in a Registration Statement, preliminary
prospectus or final prospectus or any amendment or supplement thereto. The
amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(c) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 6, the indemnifying
party shall indemnify the indemnified party to the full extent provided in
Section 6(a) or 6(b) hereof, as applicable, without regard to the relative fault
of the indemnifying party or the indemnified party or any other equitable
consideration provided for in this Section 6(c).
(d) The indemnification and contribution required by this Section 6
shall be made by periodic payment of the amount thereof during the course of the
investigation or defense, as and when bills are received or expenses are
incurred.
8
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(e) The party seeking indemnification pursuant to this Section 6 is
referred to as the "Indemnified Party" and the party from whom indemnification
is sought under this Section 6 is referred to as the "Indemnifying Party." The
Indemnified Party shall give prompt written notice to the Indemnifying Party of
the commencement of any action or proceeding involving a matter referred to in
Section 6(a) or 6(b) (an "Action"), if an indemnification claim in respect
thereof is to be made against the Indemnifying Party; provided, however, that
the failure to give such prompt notice shall not relieve the Indemnifying Party
of its indemnity obligations hereunder with respect to such Action, except to
the extent that the Indemnifying Party is materially prejudiced by such failure.
The Indemnifying Party shall be entitled to participate in and to assume the
defense of such Action, with counsel selected by the Indemnifying Party and
reasonably satisfactory to the Indemnified Party; provided, however, that (i)
the Indemnifying Party, within a reasonable period of time after the giving of
notice of such indemnification claim by the Indemnified Party, (x) notifies the
Indemnified Party of its intention to assume such defense and (y) appoints such
counsel, and (ii) the Indemnifying Party may not, without the consent of the
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such Action. If the Indemnifying Party so assumes the defense of
any such Action, (A) the Indemnifying Party shall pay all costs associated with,
any damages awarded in, and all expenses arising from the defense or settlement
of such Action, and (B) the Indemnified Party shall have the right to employ
separate counsel and to participate in (but not control) the defense, compromise
or settlement of such Action, but the fees and expenses of such counsel shall be
at the expense of the Indemnified Party unless (x) the Indemnifying Party has
agreed to pay such fees and expenses, (y) the Indemnified Party has been advised
by its counsel that there are likely to be one or more defenses available to it
which are different from or additional to those available to the Indemnifying
Party, and in any such case that portion of the reasonable fees and expenses of
such separate counsel that are reasonably related to matters covered by the
indemnity provided in this Section 6 shall be paid by the Indemnifying Party, or
(z) such counsel has been selected by the Indemnified Party solely due to a
conflict of interest which exists between counsel selected by the Indemnifying
Party and the Indemnified Party. If the Indemnifying Party does not so assume
the defense of such Action, the Indemnified Party shall be entitled to exercise
control of the defense, compromise or settlement of such Action. No Indemnified
Party shall settle or compromise any Action for which it is entitled to
indemnification under this Agreement without the prior written consent of the
Indemnifying Party (which consent may not be unreasonably withheld or delayed).
The other party shall cooperate with the party assuming the defense, compromise
or settlement of any Action in accordance with this Agreement in any manner that
such party reasonably may request and the party assuming the defense, compromise
or settlement of any Action shall keep the other party fully informed in the
defense of such Action.
9
<PAGE>
7. Certain Limitations on Registration Rights. Notwithstanding the
other provisions of this Agreement:
(a) Company shall not be obligated to register the Registrable
Securities of Executive if, in the opinion of counsel to Company reasonably
satisfactory to Executive and its counsel (or, if Executive has engaged an
investment banking firm, to such investment banking firm and its counsel), the
sale or other disposition of Executive's Registrable Securities, in the manner
proposed by Executive (or by such investment banking firm), may be effected
without registering such Registrable Securities under the Securities Act and
without any additional restrictions pursuant to any applicable exemptions from
the registration requirements under the Securities Act and the purchaser of such
Registrable Securities will take such Registrable Securities free from any
restrictions on transfer pursuant to the Securities Act and any applicable state
securities laws;
(b) Company shall not be obligated to register the Registrable
Securities of Executive pursuant to Section 2 if Company has had a Registration
Statement, under which Executive had a right to have its Registrable Securities
included pursuant to Section 2 or 3, declared effective within six months prior
to the date of the request pursuant to Section 2; and
(c) Company shall have the right to delay the filing or effectiveness
of a Registration Statement required pursuant to Section 2 hereof during one or
more periods aggregating not more than sixty (60) days in any twelve-month
period in the event that (i) Company would, in accordance with the advice of its
counsel, be required to disclose in the prospectus information not otherwise
then required by law to be publicly disclosed and (ii) in the judgment of
Company's Board of Directors, there is a reasonable likelihood that such
disclosure, or any other action to be taken in connection with the prospectus,
would materially and adversely affect any existing or prospective material
business situation, transaction or negotiation or otherwise materially and
adversely affect Company.
8. Underwriters. (a) The managing underwriter or underwriters for any
offering of Registrable Securities to be registered pursuant to Section 2 shall
be selected by Executive and shall be reasonably acceptable to Company.
(b) If requested by the underwriters for any underwritten
registration pursuant to Section 2, Company shall enter into an underwriting
agreement with such underwriters for such offering, such agreement to be
reasonably satisfactory in form and substance to Company, Executive and the
underwriters and to contain such representations and warranties by Company and
such other terms as are customarily contained in agreements of that type,
including without limitation, covenants to keep the Registration Statement
current, indemnities and contribution and the provision of opinions of counsel
and accountants' letters to the effect and to the extent provided in Section
4(e) hereof. Executive shall cooperate with Company in the negotiation of the
underwriting agreement and shall be party to such underwriting agreement.
10
<PAGE>
9. Restrictions on Sale After Public Offering. Except for transfers
made in transactions exempt from the registration requirements under the
Securities Act (other than Rule 144 thereunder), Company and Executive hereby
agree not to offer, sell, contract to sell or otherwise dispose of any Shares or
other equity securities of Company, or securities convertible into or
exchangeable or exercisable for Shares or such other equity securities,
including without limitation, any sale pursuant to a brokerage transaction under
Rule 144 under the Securities Act, within a period of up to one hundred eighty
(180) days after the date of any final prospectus relating to the public
offering of Shares, if underwritten, whether by Company or by Executive, except
pursuant to such prospectus or with the written consent of the managing
underwriter or underwriters for such offering; provided, however, the
restriction period applicable to Executive pursuant hereto in connection with
any underwritten public offering shall not be longer than (x) the period
required by the underwriter pursuant to its underwriting agreement in connection
with such offering and (y) the period during which similar restrictions are
applicable to any holder of 10% of Company's outstanding Common Stock in
connection with such public offering.
10. Rule 144. So long as Company has securities registered under the
Exchange Act, it shall take all actions reasonably necessary to enable Executive
to sell Registrable Securities without registration under the Securities Act
within the limitations of the exemptions provided by (i) Rule 144 under the
Securities Act or (ii) any similar rule or regulation hereafter adopted by the
Commission, including, without limiting the generality of the foregoing, filing
on a timely basis all reports required to be filed by the Exchange Act. Upon
request of Executive, Company shall deliver to Executive a written statement as
to whether it has complied with such requirements.
11. Miscellaneous.
(a) No Inconsistent Agreements. Company will not hereafter enter into
any agreement with respect to its securities which is inconsistent with the
rights granted to Executive in this Agreement. Except for the Registration
Rights Agreement, dated as of January 28, 1999, by and among Barneys New York,
Inc. and the holders party thereto, Company has not previously entered into any
agreement with respect to any of its securities granting any registration rights
to any person. So long as any Registrable Securities are outstanding, Company
shall not grant to any holder of its securities rights to include such
securities in any Registration Statement filed pursuant to Section 2 hereof
which are senior to the rights of Executive to include shares in any such
Registration Statement, unless Executive has consented thereto in writing. It is
understood that the allocation provision in the third sentence of the second
paragraph of Section 3 hereof shall be deemed to be pari passu rights and not
senior rights.
(b) Remedies. Executive, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate. In any action or proceeding brought to enforce any provision
11
<PAGE>
of this Agreement or where any provision hereof is validly asserted as a
defense, the successful party shall be entitled to recover reasonable attorneys'
fees in addition to any other available remedy.
(c) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departure from the provisions hereof may not be given
unless Company has obtained the written consent of Executive. To the extent
permitted by law, no failure to exercise, and no delay on the part of Executive
in exercising, any power or right in connection with this Agreement, or
available at law or in equity, shall operate as a waiver thereof, and no single
or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such right or power, shall preclude any other
or further exercise thereof or the exercise of any other rights or powers. No
course of dealing among Executive, Company or any other Person shall operate as
a waiver of any right of Executive. Any written modification or waiver of any
provision of this Agreement shall be effective only in the specific instance and
for the purpose for which it is given.
(d) Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Agreement shall be deemed served and received: (i) when
delivered by hand to the recipient named below (or when delivery is refused);
(ii) on the date of delivery (or when delivery is refused) as confirmed by the
agency or firm making delivery (or attempting to make delivery when delivery is
refused) when the notice is delivered by private overnight courier service, such
as Federal Express; (iii) on the date delivered (or the date delivery is
refused) if sent via the United States Postal Service when sent by either
registered or certified mail, postage and postal charges prepaid, return receipt
requested; or (iv) if on a business day, on the date sent via telecopy, provided
such delivery is confirmed (via a fax confirmation report). Notices shall be
addressed by name and address to the recipient, as follows:
(i) If to Executive, at
Allen Questrom 200 East 69th
Street Apartment 43A New
York, New York 10021
Telecopier: 212-582-8364
with a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Roger C. Siske, Esq.
Telecopier: 312-876-7934
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<PAGE>
(ii) If to Company at
Barneys New York, Inc.
575 Fifth Avenue
New York, New York 10017
Attention: Marc H. Perlowitz, Esq.
Telecopier: 212-450-8480
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ted S. Waksman, Esq.
Telecopier: 212-310-8007
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback or five (5) Business Days after the same shall have been deposited in
the United States mail.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties hereto
including any Person to whom Registrable Securities are transferred.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law; Jurisdiction; Jury Waiver. This Agreement shall be
governed by, construed and enforced in accordance with the laws of the State of
New York without giving effect to the conflict of laws provisions thereof. Each
of the parties hereby submits to personal jurisdiction and waives any objection
as to venue in the County of New York, State of New York. Service of process on
the parties in any action arising out of or relating to this Agreement shall be
effective if mailed to the parties in accordance with Section 11(d) hereof. The
parties hereto waive all right to trial by jury in any action or proceeding to
enforce or defend any rights hereunder.
(h) Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
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<PAGE>
(i) Entire Agreement. This Agreement represents the complete
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, Company and Executive have executed this Agreement
as of the date first above written.
BARNEYS NEW YORK, INC.
By: /s/ Marc H. Perlowitz
-------------------------------
Name: Marc H. Perlowitz
Title: Executive Vice President
EXECUTIVE:
/s/ Allen Questrom
------------------
ALLEN QUESTROM
15
EXHIBIT 2
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of February 1, 2000 (this
"Agreement"), among Bay Harbour Management L.C. for its managed accounts ("Bay
Harbour"), Whippoorwill Associates, Inc. as agent and/or general partner for its
discretionary accounts and as investment advisor to Whippoorwill/Barney's
Obligations Trust - 1996 ("Whippoorwill" and, together with Bay Harbour, the
"Initial Stockholders"), and Allen Questrom (collectively with his heirs and
testamentary assigns, "Questrom", and Questrom together with the Initial
Stockholders being referred to as the "Stockholders").
W I T N E S S E T H :
WHEREAS, each of the Initial Stockholders presently owns shares of
Common Stock, $.01 par value (the "Common Stock"), of Barneys New York, Inc., a
Delaware corporation ("Barneys"); and
WHEREAS, pursuant to an employment agreement (the "Employment
Agreement") of even date herewith between Barneys and Questrom, Questrom has
been and will be granted options to purchase shares of Common Stock; and
WHEREAS, the Stockholders wish to provide for certain arrangements with
respect to the shares of Common Stock now owned or to be acquired in the future
by any of them;
NOW, THEREFORE, in consideration of the agreements, premises and mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Disposition of Common Stock.
---------------------------
(a) Restriction on Transfer of Shares. Each Initial Stockholder
agrees that, except in a transaction (or transactions) permitted by the first
sentence of Section 1(b) below or contemplated by Section 2 below, such Initial
Stockholder shall not, during the term of this Agreement, without the written
consent of Questrom, either directly or indirectly, transfer, sell, assign,
mortgage, hypothecate, pledge, create a security interest in or lien upon,
encumber, donate, contribute, place in trust (including a voting trust), or
otherwise voluntarily or involuntarily dispose of (each, a "Transfer") any
shares of Common Stock held by such Stockholder.
(b) Permitted Dispositions. Each Initial Stockholder shall, without
regard to the provisions of Sections 2 and 3 hereof, be entitled to, upon not
less than 5 Business Days' written notice to each other Stockholder, (i)
directly or indirectly Transfer all or any portion of its shares of Common Stock
to any Affiliate of such Initial Stockholder or to the other Initial Stockholder
or any of its affiliates, (ii) in connection with the liquidation, partial
liquidation,
NY2:\449949\07\9N6L07!.DOC\21645.0001
<PAGE>
winding up or termination of any account for which it is agent, general partner
or investment advisor in accordance with the terms of such account or pursuant
to a direction by the holder or holders of such account, either (A) directly or
indirectly Transfer all the shares of Common Stock allocable to such account to
the beneficiaries thereof, or (B) sell any or all the shares of Common Stock
allocable to such account to a third party, and (iii) in connection with a
request for redemption or partial redemption by any account (or the holder or
holders of such account) for which it is agent, general partner or investment
advisor, either (A) directly or indirectly Transfer that portion of the shares
of Common Stock allocable to such account to the beneficiaries thereof, or (B)
sell any or all the shares of Common Stock allocable to such account to a third
party, in each case, to the extent necessary to satisfy such request; provided,
however, that any redemption made pursuant to clause (iii) may only be made to
the extent such Initial Stockholder is unable to satisfy such request for
redemption by Transferring securities other than shares of Common Stock, using
commercially reasonable efforts consistent with such Initial Stockholder's
investment diversification policies consistently applied in good faith; and
provided further, however, that any Transfer or sale of shares of Common Stock
pursuant to clauses (ii) or (iii) above (other than distributions in kind
pursuant to clauses (ii)(A) or (iii)(A) above) shall not be made without
compliance with Sections 2 or 3 hereof to the extent any such Transfer or sale
would result in a Change of Control of Barneys, as such term is defined in the
Employment Agreement. No distributions in kind pursuant to clauses (ii)(A) or
(iii)(A) above may be made to any person or entity who, as a result of such
distribution in kind, would (x) cause the Stockholders and their respective
affiliates to beneficially own, in the aggregate, less than 40% of the Voting
Stock (as defined in the Employment Agreement) of the Company, and (y) become
the beneficial owner of more than the Voting Stock of the Company beneficially
owned, directly or indirectly, by the Stockholders and their respective
affiliates. As used in this Agreement, the terms "beneficially own" and
"beneficial owner" are used as defined in Rule 13d-3 of the Securities Exchange
Act of 1934, as amended. In addition, each Initial Stockholder shall be entitled
to, without regard to the provisions of Section 2 hereof, (A) sell or offer to
sell all or any portion of its shares of Common Stock pursuant to a public
offering (a "Public Offering") registered under the Securities Act of 1933, as
amended (the "Securities Act"), and (B) publicly sell or offer to sell all or
any portion of its shares of Common Stock pursuant to Rule 144 of the Securities
Act (other than paragraph (h) thereof) provided that Barneys is a reporting
company pursuant to the Securities Exchange Act of 1934, as amended. As used in
this Agreement, the term (i) "Affiliate" means, with respect to any person or
entity, any other person or entity that, within the meaning of Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as amended, "controls,"
is "controlled by" or is under "common control with" such person or entity, and
(ii) "Business Day" means any day other than a Saturday, a Sunday, or any other
day on which banking institutions in New York City are required or authorized to
close by law or executive order.
(c) Condition Precedent to Certain Permitted Dispositions. In the event
of any disposition pursuant to Section 1(b)(i) hereof, the transferee (and all
subsequent transferees permitted pursuant to Section 1(b)(i)) shall be bound and
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<PAGE>
obligated by, and shall be entitled to the rights and benefits afforded to the
Stockholders under the terms and provisions of, this Agreement. As a condition
precedent to any disposition by any Initial Stockholder of shares of Common
Stock permitted pursuant to Section 1(b)(i) above, each purchaser, transferee or
donee (other than a Stockholder who is already a party hereto) shall agree in
writing to be bound by all of the provisions and conditions of this Agreement
applicable to the transferor and shall become a Stockholder hereunder, and no
such purchaser, transferee or donee shall be permitted to effect any transfer,
sale or exchange of shares of Common Stock which the Stockholders are not
permitted to make under this Agreement.
2. Tag-Along Right.
---------------
(a) No Initial Stockholder shall Transfer any Common Stock, in a
single transaction or related series of transactions, to any third party unless
the Transfer is a bona fide sale to a party which is not an Affiliate of Barneys
or any Stockholder which was negotiated on an arms-length basis, and the terms
and conditions of such sale, (the "Third Party Disposition") to such third party
shall contain an offer to Questrom to include in such Third Party Disposition
such number of shares of Common Stock as is determined in accordance with
Section 2(b) below. At least 5 Business Days prior to effecting any Third Party
Disposition, such Initial Stockholder (the "Selling Stockholder") shall promptly
cause the terms and conditions of the Third Party Disposition to be reduced to a
reasonably detailed writing (which writing shall identify the third party
purchaser and shall include the offer to Questrom to purchase or otherwise
acquire its shares of Common Stock, according to the terms and subject to the
conditions of this Section 2), and shall deliver, or cause the third party to
deliver, written notice (the "Notice") of the terms of such Third Party
Disposition to Questrom. The Notice shall be accompanied by a true and correct
copy of the agreement, if any, embodying the terms and conditions of the
proposed Third Party Disposition or such written summary thereof if there is no
agreement. At any time after receipt of the Notice (but in no event later than 5
Business Days after receipt), Questrom may accept the offer included in the
Notice for up to such number of his shares of Common Stock, as determined in
accordance with the provisions of Section 2(b) below, by furnishing irrevocable
written notice of such acceptance to the Selling Stockholder and to the third
party. It is understood, however, that Questrom shall not be required to sell
his shares if the Third Party Disposition is not consummated by the Selling
Stockholder. If either Initial Stockholder is considering a possible Third Party
Disposition pursuant to which Questrom would have rights under this Section 2,
such Initial Stockholder agrees that, as soon as reasonably possible after its
receipt of an offer or proposal (other than ordinary broker inquiries) relating
to such potential Third Party Disposition, it will forward information relating
thereto to Questrom. The Initial Stockholders further agree to discuss with and,
to the extent in writing, provide copies of their assessments and evaluations of
such potential Third Party Disposition to Questrom. Questrom agrees that he will
not effectuate any sale of his shares of Common Stock to such potential
purchaser other than in accordance with the provisions of this Section 2, unless
the Initial Stockholders elect not to proceed with such Third Party Disposition.
3
<PAGE>
(b) In the event that Questrom elects to accept the offer included in
the Notice described in Section 2(a) above, Questrom shall have the right to
sell, transfer or otherwise dispose of such number of his shares of Common Stock
pursuant to, and upon consummation of, the Third Party Disposition which is
equal to the product of (X) the total number of shares of Common Stock owned by
him and (Y) a fraction, the numerator of which shall equal the total number of
shares of Common Stock to be sold by the Initial Stockholders to the third
party, and the denominator of which shall equal the total number of shares of
Common Stock owned by all the Initial Stockholders. If the third party purchaser
is not willing to purchase such additional shares, the number of shares to be
sold by the Selling Stockholder and Questrom shall be proportionately reduced.
(c) The purchase of shares of Common Stock pursuant to this Section 2
shall be made on the same terms (including, without limitation, the per share
consideration and method of payment, and the date of sale, transfer or other
disposition), and subject to the same conditions, if any, as are provided to the
Selling Stockholder and stated in the Notice.
(d) Upon the consummation of the disposition of shares of Common
Stock to the third party pursuant to the Third Party Disposition, the Selling
Stockholder shall (i) cause the third party to remit directly to Questrom the
sales price of its shares of Common Stock disposed of pursuant thereto, and (ii)
furnish such other evidence of the completion and time of completion of such
disposition and the terms thereof as may reasonably be requested by Questrom.
(e) If Questrom has not delivered to the Selling Stockholder and to
the third party written notice of his acceptance of the offer contained in the
Notice within 5 Business Days after the receipt of such Notice, he shall be
deemed to have waived any and all rights pursuant to this Section 2 with respect
to the disposition of his shares of Common Stock described in the Notice, and
the Selling Stockholder shall have 30 days (calculated from the first day next
succeeding the expiration of the 5 Business Day acceptance period described
above), in which to complete the disposition of the aggregate amount of shares
of Common Stock described in the Notice to the third party identified in the
Notice, on terms not more favorable to the Selling Stockholder than those which
were set forth in the Notice. If Questrom has delivered irrevocable written
notice of acceptance as described in the preceding sentence and, if after 30
days following receipt of the Notice, the Selling Stockholder and the third
party shall not have completed the disposition of shares of Common Stock to be
sold in connection therewith in accordance with the terms of the Third Party
Disposition, all the restrictions on the disposition of shares of Common Stock
contained in this Section 2 shall again be in force and effect and Questrom
shall no longer be required to effectuate such sale.
3. Drag-Along Sales.
----------------
(a) If the Initial Stockholders elect to Transfer at least
seventy-five percent (75%) of their shares of Common Stock in a bona-fide
arm's-length transaction to any third party which is not an Affiliate of Barneys
or any Stockholder (the "Purchaser") other than pursuant to Section 1(b) hereof,
4
<PAGE>
then, at the election of both of the Initial Stockholders, Questrom shall be
required to sell (a "Drag Along Sale") that number of shares of Common Stock
equal to the product of (x) a fraction, the numerator of which equals the number
of shares of Common Stock to be Transferred by the Initial Stockholders pursuant
to this Section 3(a), and the denominator of which equals the total number of
shares owned by the Initial Stockholders at the time of such election, and (y)
the number of shares of Common Stock then held by Questrom ("Drag Along
Shares"), for the same consideration, and on the same terms and conditions, upon
which the Initial Stockholders propose to dispose of their shares of Common
Stock; provided, however, that Questrom shall have no obligation pursuant to
this Section 3 unless (x) upon the consummation of the Drag Along Sale, Questrom
shall receive the same forms and amounts of consideration per share as the
Initial Stockholders and their Affiliates, or if any Initial Stockholder or any
of their Affiliates are given an option as to the form and amount of
consideration to be received per share, Questrom shall be given the same option
and (y) no Initial Stockholder or any of their Affiliates shall receive any
other form of disproportionate benefit in connection with such Drag Along Sale.
If either Initial Stockholder is considering a possible Transfer pursuant to
which Questrom would have a Drag Along Sale obligation under this Section 3,
such Initial Stockholder agrees that, as soon as reasonably possible after its
receipt of an offer or proposal (other than ordinary broker inquiries), relating
to such potential Transfer, it will forward information relating thereto to
Questrom. The Initial Stockholders further agree to discuss with and, to the
extent in writing, provide copies of their assessments and evaluations of such
potential Transfer to Questrom. Questrom agrees that he will not effectuate any
sale of his shares of Common Stock to such potential purchaser other than in
accordance with the provisions of this Section 3, unless the Initial
Stockholders elect not to proceed with such Transfer.
(b) The Initial Stockholders shall deliver to Questrom written notice
(the "Drag Along Notice") of any sale to be made pursuant to Section 3(a), which
notice shall set forth the consideration to be paid by the Purchaser for each
share of Common Stock, the number of shares of Common Stock to be Transferred by
each Initial Stockholder, and the other terms and conditions, if any, of such
transaction. Within five (5) Business Days after the date of such notice,
Questrom shall promptly deliver to the Initial Stockholders a limited
power-of-attorney authorizing the Initial Stockholders to dispose of such Drag
Along Shares to the Purchaser and to execute all other documents required to be
executed in connection with such transaction. Pending consummation of the Drag
Along Sale, the Initial Stockholders shall promptly notify Questrom of any
changes in the proposed timing for the Drag Along Sale and any other material
developments in connection therewith.
(c) If, within thirty (30) days after receipt of the Drag Along
Notice by Questrom, no sale of the shares of Common Stock owned by the Initial
Stockholders in accordance with the provisions of this Section 3 shall have been
completed, (i) the Initial Stockholders shall promptly return to Questrom any
certificates or documents previously delivered by Questrom to the Initial
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<PAGE>
Stockholders, and (ii) all of the provisions of this Section 3 shall again be in
full force and effect.
(d) Simultaneously with the consummation of the sale of shares of
Common Stock pursuant to this Section 3, the Initial Stockholders shall cause
the Purchaser to remit directly to Questrom the consideration with respect to
the Drag Along Shares and shall furnish such other evidence of the completion
and time of completion of such sale and the terms and conditions, if any,
thereof as may reasonably be requested by Questrom. The Initial Stockholders
shall be primarily liable to Questrom for the full amount of such consideration
to the extent that such consideration is received by the Initial Stockholders.
4. Voting. On each matter submitted to a vote of the stockholders of
Barneys, Questrom agrees that he shall vote, direct the vote of, or furnish a
consent with respect to, 50% of all shares of Common Stock owned by him in the
manner directed by Bay Harbour, and 50% of all shares of Common Stock owned by
him in the manner directed by Whippoorwill. Such direction shall in each case be
given by Bay Harbour or Whippoorwill, as the case may be, by the delivery of
notice to Questrom in advance of the vote on each such matter. The provisions of
this Section 4 shall terminate on the earlier of (i) the later of January 31,
2003 or the expiration date of the Stockholders Agreement, dated as of November
13, 1998, between Bay Harbour and Whippoorwill, as the same may be amended,
restated, supplemented, modified or extended from time to time (the "Initial
Stockholders Agreement"), and (ii) a Change of Control (as such term is defined
in the Employment Agreement).
5. Equitable Relief. It is hereby acknowledged that irreparable harm
would occur in the event that any of the provisions of this Agreement were not
performed fully by the parties hereto in accordance with the terms specified
herein, and that monetary damages are an inadequate remedy for breach of this
Agreement because of the difficulty of ascertaining and quantifying the amount
of damage that will be suffered by the parties relying hereon in the event that
the undertakings and provisions contained in this Agreement were breached or
violated. Accordingly, each party hereto hereby agrees that each other party
hereto shall be entitled to an injunction or injunctions to restrain, enjoin and
prevent breaches of the undertakings and provisions hereof and to enforce
specifically the undertakings and provisions hereof in any court of the United
States or any state having jurisdiction over the matter; it being understood
that such remedies shall be in addition to, and not in lieu of, any other rights
and remedies available at law or in equity.
6. Miscellaneous.
-------------
(a) Notices. Any and all notices, designations, consents, offers,
acceptances, or any other communication provided for herein shall be made in
writing by personal-delivery, first-class mail (registered or certified, with
return receipt requested), telecopier (with "answer back" confirmation), or
overnight air courier guaranteeing next day delivery, to the address of such
party appearing under its or his name on Annex I hereto (or to such other
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address as may be designated in writing by any party in accordance with this
Section 6(a)). Such notices or communications shall be effective and deemed
given upon delivery to said address.
(b) Complete Agreement; Amendment. This Agreement constitutes the
complete understanding of the parties with respect to its subject matter and
supersedes any other agreement or understanding relating thereto, other than the
Initial Stockholders Agreement. No amendment, change or modification of this
Agreement shall be valid, binding or enforceable, unless the same shall be in
writing and signed by each of the Stockholders.
(c) Termination. Other than as provided in Section 4 hereof, this
Agreement may be terminated (i) at any time by an instrument in writing signed
by each of the Stockholders, or (ii) by any Stockholder on the date on which the
Initial Stockholders, together with their Affiliates, hold, in the aggregate,
less than 10% of the Common Stock then outstanding.
(d) Waiver. No failure or delay on the part of any Stockholder in
exercising any right, power or privilege hereunder, and no course of dealing
among the Stockholders, shall operate as a waiver thereof nor shall any single
or partial exercise of any right, power or privilege hereunder preclude the
simultaneous or later exercise of any other right, power or privilege. The
rights and remedies herein expressly provided are cumulative and not exclusive
of any rights and remedies which any Stockholder would otherwise have.
(e) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute but one and the same instrument.
(f) Governing Law; Waivers. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of New York
without giving effect to the conflict of laws provisions thereof. Each of the
parties hereby submits to personal jurisdiction and waives any objection as to
venue in the federal or New York State courts located in the County of New York,
State of New York. Service of process on the parties in any action arising out
of or relating to this Agreement shall be effective if mailed to the parties in
accordance with Section 6(a) hereof. The parties hereto waive all right to trial
by jury in any action or proceeding to enforce or defend any rights hereunder.
(g) Benefit and Binding Effect. All of the terms and provisions of
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns including any permitted
transferee of their shares of Common Stock pursuant to Section 1(b)(i) hereof.
Notwithstanding anything to the contrary contained herein, none of
Whippoorwill's rights or obligations hereunder shall apply with respect to any
account which is in the process of liquidating, winding up or terminating, which
accounts own in the aggregate not more than approximately $4,600,000 in Common
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Stock. References herein to a Stockholder shall include such Stockholder and any
of its successors and assigns pursuant hereto.
(h) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(i) After-Acquired Shares. All of the provisions of this Agreement
shall apply to all of the shares of capital stock of Barneys now owned either
directly or indirectly or which may be issued to or acquired by a Stockholder
either directly or indirectly in consequence of any additional issuance
(including, without limitation, by exercise of a right, option or warrant),
purchase, exchange, conversion or reclassification of stock, corporate
reorganization, or any other form of recapitalization, consolidation, merger,
stock split or stock dividend, or which are acquired either directly or
indirectly by a Stockholder in any other manner and for the purposes hereof the
term "Common Stock" shall include any and all such capital stock.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
BAY HARBOUR MANAGEMENT L.C., for its Managed Accounts
By: /s/ Douglas Teitelbaum
-----------------------------------
Name: Douglas Teitelbaum
Title: Principal and Portfolio
Manager
WHIPPOORWILL ASSOCIATES, INC., as agent and/or
general partner for its discretionary accounts and as
investment advisor to Whippoorwill/Barney's
Obligations Trust - 1996
By: /s/ David Strumwasser
-----------------------------------
Name: David Strumwasser
Title: Managing Director
/s/ Allen Questrom
-----------------------------------
ALLEN QUESTROM
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ANNEX I
-------
Stockholders
- ------------
If to Bay Harbour, to it at the following address:
Bay Harbour Management L.C.
885 Third Avenue, 34th Floor
New York, New York 10022
Attention: Douglas P. Teitelbaum
Telecopier: (212) 371-7497
Telephone Confirmation: (212) 371-2211
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ted S. Waksman, Esq.
Telecopier: (212) 310-8007
Telephone Confirmation: (212) 310-8000
If to Whippoorwill, to it at the following address:
Whippoorwill Associates, Inc.
11 Martine Avenue
White Plains, New York 10606
Attention: David A. Strumwasser
Telecopier: (914) 683-1242
Telephone Confirmation: (914) 683-1002
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ted S. Waksman, Esq.
Telecopier: (212) 310-8007
Telephone Confirmation: (212) 310-8000
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If to Questrom, to him at the following address:
Allen Questrom
200 East 69th Street
Apartment 43A
New York, New York 10021
Telecopier: (212) 582-8364
Telephone Confirmation: (212) 628-2848
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Roger C. Siske, Esq.
Telecopier: (312) 876-7934
Telephone Confirmation: (312) 876-8000
or to such other address as any of the parties hereto shall have specified by
notice in writing to the others.
11
EXHIBIT 3
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of May 5, 1999 ("Agreement Date"), is made
between Barneys New York, Inc., a Delaware corporation having its principal
place of business at 575 Fifth Avenue, New York, New York 10017 ("Company"), and
Allen I. Questrom ("Executive"), residing at 200 East 69th Street, Apartment
43A, New York, New York 10021.
ARTICLE I
PURPOSES
The Board of Directors of the Company ("Board") has determined that it
is in the best interests of the Company and its stockholders to obtain the
services of the Executive on the terms and conditions set forth herein.
ARTICLE II
CERTAIN DEFINITIONS
In addition to the terms specifically defined elsewhere in this
Agreement, the following terms shall have the respective meanings indicated
(unless the context indicates otherwise):
2.1 "Article" means an article of this Agreement.
2.2 "Cause" means any of the following:
(a) Executive's final conviction of a felony or plea of nolo contendere
to a felony charge, which conviction is non-appealable or for which the
period for filing an appeal has expired;
(b) Executive's material willful breach of his duties under this
Agreement which is not cured by the Executive within ten (10) days of
receipt of written notice thereof from the Board to the Executive;
provided, that the following acts or omissions are not curable: (i)
repeated instances of such breach; (ii) any material willful breach by the
Executive of the covenants set forth in ARTICLE X; (iii) any knowing and
intentional or willful material misrepresentation or omission by the
Executive to the Board, Executive Committee or Principal Stockholders in
the performance of his duties under this Agreement regarding the financial
condition of the Company or any other material aspect of the Company's
business; (iv) any act or omission by the Executive taken with the intent
of the Executive to gain, directly or indirectly, a profit to which the
Executive was not legally entitled; (v) willful theft of material
property; (vi) willful physical assault (excluding incidental, accidental
or inconsequential contact) of any other individual on the premises of the
Company or in the course of performing services for the Company; and (vii)
material fraud perpetrated on the Company; or
NY2:\853160\03\21645.0001
<PAGE>
(c) Executive's habitual neglect of his duties which is not cured
within ten (10) days of receipt of written notice thereof from the Board
to the Executive.
Cause shall not include any one or more of the following: (i)
negligence of the Executive (other than his habitual neglect of duty); (ii) any
act or omission believed by the Executive in good faith to have been in and not
opposed to the interests of the Company and its Subsidiaries (without intent of
the Executive to gain, directly or indirectly, a profit to which the Executive
was not legally entitled) and reasonably believed by the Executive not to have
been improper or unlawful; (iii) an error in judgment made by the Executive in
good faith and not constituting a willful neglect or disregard of his duties
hereunder; or (iv) any act or omission with respect to which Notice of
Termination of employment of the Executive is given more than twelve (12) months
after the earliest date on which any non-employee director of the Company, who
was not a party to the act or omission, knew of such act or omission.
2.3 "Change of Control" of the Company means the occurrence of any of the
following:
(a) (x) any person or other entity (other than any of the Company's
Subsidiaries, the Principal Stockholders, the Executive and their
affiliates), including any person as defined in Section 13(d)(3) of the
1934 Act, becomes the beneficial owner, as defined in Rule 13d-3 of the
1934 Act, directly or indirectly, of more than (i) fifty percent (50%) of
the Voting Stock of the Company or (ii) the Voting Stock of the Company
beneficially owned, directly or indirectly, by the Principal Stockholders,
the Executive and their respective affiliates ("Principal Stockholders
Group"), and (y) in the case of clause (ii) only, the Principal
Stockholders Group own, in the aggregate, less than forty percent (40%) of
the Voting Stock of the Company;
(b) the Board approves the sale of all or substantially all of the
property or assets of the Company and such sale is consummated;
(c) the Board approves a consolidation or merger of the Company with
another corporation (other than with any of the Company's Subsidiaries)
and such consolidation or merger is consummated, unless such consummation
would result in the stockholders of the Company immediately before the
occurrence of such consolidation or merger owning, in the aggregate, (i)
at least sixty-five percent (65%) of the Voting Stock of the surviving
entity, or (ii) more than fifty percent (50%) of the Voting Stock of the
surviving entity, and the Principal Stockholders Group own, in the
aggregate, at least thirty-five percent (35%) of the Voting Stock of the
surviving entity; or
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(d) a change in the Board occurs with the result that the members of
the Board on the Agreement Date ("Incumbent Directors") no longer
constitute a majority of such Board; provided, that any person becoming a
director whose election or nomination for election was supported by a
majority of the Incumbent Directors shall be considered an Incumbent
Director for purposes hereof; and provided, further, that any director
whose appointment or nomination occurs and is required and made by any
person other than the Company and its affiliates (including the Principal
Stockholders) in connection with an acquisition of Voting Stock of the
Company pursuant to a merger, consolidation, purchase of shares or similar
transaction involving the Company shall not be treated as an Incumbent
Director.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Disability" means any medically determinable physical or mental
impairment that has lasted for a period of at least six (6) months, can be
expected to be permanent or of indefinite duration, and renders the Executive
unable to perform the duties required under this Agreement, as certified by a
physician jointly selected by the Company or its insurers and the Executive or
the Executive's legal representative.
2.6 "EBITDA" means, with respect to each fiscal year of the Company, the
Company's consolidated earnings before interest, income taxes, depreciation,
amortization and extraordinary items for such fiscal year, as determined in
accordance with generally accepted accounting principles and certified to by the
Company's outside independent auditors.
2.7 "Executive Committee" means the Executive Committee of the Board as
appointed from time to time.
2.8 "Good Reason" means any of the following:
(a) the assignment to the Executive of any duties materially
inconsistent with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities
as contemplated by Section 3.1, or any other action by the Company which
results in a material diminution in such position, authority, duties or
responsibilities, excluding for this purpose an action not taken in bad
faith and which is remedied by the Company within ten (10) days after
receipt of written notice thereof given by the Executive, provided that
repeated instances of such action shall be evidence of the bad faith of
the Company;
(b) any material failure by the Company to comply with any provision of
this Agreement, other than a failure not occurring in bad faith and which
is remedied by the Company within ten (10) days after receipt of written
notice thereof given by the Executive, provided that repeated failures
shall be evidence of the bad faith of the Company;
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(c) failure of the Executive to be elected or reelected Chairman of the
Board and Chief Executive Officer of the Company or to be elected or
reelected to membership on the Board;
(d) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement;
(e) the delivery to Executive of a Notice of Consideration pursuant to
Section 4.3(b) if, within a period of 90 days thereafter, the Board fails
for any reason to terminate Executive for Cause in compliance with all of
the substantive and procedural requirements of Section 4.3; or
(f) a termination of employment by the Executive for any reason or no
reason during the three-month period commencing on the date of a Change of
Control that has not been agreed to in writing by the Executive.
2.9 "IRS" means the Internal Revenue Service.
2.10 "1934 Act" means the Securities Exchange Act of 1934, as amended.
2.11 "Notice of Termination" means a written notice given in accordance
with Section 12.8 and which sets forth (a) the specific termination provision in
this Agreement relied upon by the party giving such notice, (b) in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under such termination provision, and (c) if the
Termination Date is other than the date of receipt of such Notice of
Termination, the Termination Date.
2.12 "Principal Stockholders" means Bay Harbour Management L.C.,
Whippoorwill Associates, Inc and their respective affiliates (other than the
Company and its Subsidiaries).
2.13 "Stock Options" means "Initial Options" (as defined in Section
3.5(a)), additional options issued pursuant to Section 3.5(h) and "Additional
Options" (as defined in Section 3.6).
2.14 "Subsidiary" means a corporation as defined in Section 424(f) of the
Code with the Company being treated as the employer corporation for purposes of
this definition.
2.15 "Termination Date" means the date of receipt of the Notice of
Termination or any later date specified in such notice, which date shall be not
more than fifteen (15) days after the giving of such notice; provided, however,
that (a) if the Executive's employment is terminated by reason of death, then
the Termination Date shall be the date of Executive's death and (b) if the
Executive's employment is terminated by reason of Disability, then the
Termination Date shall be the date on which such Disability is certified to by a
jointly selected physician in accordance with Section 2.5.
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2.16 "Voting Stock" of a corporation means all classes of capital stock of
such corporation normally entitled to vote for the election of directors of such
corporation.
ARTICLE III
POSITION, DUTIES, COMPENSATION AND BENEFITS
3.1 Position and Duties.
(a) During the Agreement Term, the Executive shall be employed as the
Chairman of the Board, President and Chief Executive Officer of the
Company with duties, responsibilities, powers and authorities commensurate
with such positions. The Executive shall have broad discretion and
authority to manage and direct the day-to-day affairs of the Company.
Neither the Board nor the Executive Committee shall manage and direct the
day-to-day affairs of the Company, except to the extent affected by the
exercise by the Board or Executive Committee of its corporate governance
duties and responsibilities, including, but not limited to, issuance of
shares of common or preferred stock of the Company; material financing
transactions; approval, adoption and amendment of employee compensation
and benefit plans, programs or policies; administration of executive
incentive compensation plans, programs or policies; and approval of any
annual business plan and capital expenditure plan. The Executive shall
meet with the Board on a periodic basis and shall meet with the Executive
Committee on a monthly basis (if requested by the Co-Chairs of the
Executive Committee) regarding the Company's performance sufficient to
enable the Board and the Executive Committee to fulfill their corporate
governance responsibilities. The Executive promptly shall disclose to the
Executive Committee and other members of the Board any indication of
interest by any person (as defined in Section 13(d)(3) of the 1934 Act) to
purchase shares of the Company's common stock or any other transaction
which could result in a Change of Control of the Company. Executive's
services shall be performed principally at the Company's corporate offices
in New York City, New York.
(b) During the Agreement Term (other than any periods of vacation, sick
leave or Disability to which the Executive is entitled), the Executive
shall devote substantially all of the Executive's attention and time to
the business and affairs of the Company to discharge the duties assigned
to the Executive in accordance with this Agreement, and to use the
Executive's best efforts to perform faithfully and efficiently such
duties. During the Agreement Term, the Executive may (1) serve on
corporate, civic or charitable boards or committees, (2) deliver lectures,
fulfill speaking engagements or teach at educational institutions, (3)
provide consulting services to other business entities, including those in
the retail clothing industry, and (4) manage personal investments, so long
as such activities, either individually or in the aggregate, do not
materially interfere or conflict with the performance of the Executive's
duties under this Agreement and subject to the covenants set forth in
ARTICLE X.
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3.2 Agreement Term. The term of this Agreement means the period commencing
on the Agreement Date and ending on January 31, 2003 ("Agreement Term").
3.3 Salary and Bonus.
(a) Upon signing this Agreement, the Executive shall be paid by the
Company as soon as practicable thereafter a cash lump sum equal to
$64,500.
(b) During the Agreement Term, the Executive shall earn a salary
("Salary") at the rate of $100,000 per month, which amount shall be
retained by the Company as described in Section 3.5(i).
(c) During the Agreement Term constituting the period commencing on May
5, 1999 and ending on January 31, 2000, the Executive shall earn
additional compensation ("Additional Compensation") of $50,000 per month,
which amount shall be retained by the Company as described in Section
3.5(i).
(d) During the Agreement Term constituting the period commencing on
February 1, 2000 and ending on January 31, 2003, the Executive shall also
earn an annual bonus for each fiscal year of the Company ("Bonus") equal
to the following amount: (1) if the Company achieves 100% of business plan
target EBITDA for such fiscal year, 50% of annual Salary ("Target Bonus");
(2) if the Company achieves 125% or more of business plan target EBITDA
for such fiscal year, 100% of annual Salary; and (3) if the Company
achieves between 100% and 125% of business plan target EBITDA for such
fiscal year, the sum of (i) Target Bonus and (ii) for each 1% above 100%
of business plan target EBITDA, an additional 2% of annual Salary. The
Bonus for each fiscal year shall be paid to Executive by the Company in
cash not later than the March 31 next following the end of such fiscal
year or, if later, the fifth (5th) business day after the Company's
receipt of its audited financial statements for such fiscal year, unless
such Bonus is retained by the Company as described in Section 3.5(i).
3.4 Other Benefits.
(a) Specified Benefits. During the Agreement Term, the Executive shall
be entitled to receive the following benefits from the Company:
(1) Air Travel. First class airfare (i) for all
business-related travel of the Executive and (ii) for the
Executive's spouse for all business-related travel of the Executive
with respect to which the Executive, in his sole and absolute
discretion, elects to be accompanied by his spouse.
(2) Automobile. On-call, 24-hour limousine services.
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(3) Executive Secretary. A full-time executive secretary
reasonably selected by the Executive.
(4) Employee Discount. An employee discount on all purchases
from the Company equivalent to the employee discount provided from
time to time to members of the Board, without any limitation on the
total amount of purchases subject to such discount.
(b) Savings and Retirement Plans. During the Agreement Term, the
Executive shall be entitled to participate in all savings and retirement
plans (other than the Barneys Employees Stock Plan) provided by the
Company from time to time applicable to senior executives of the Company
generally.
(c) Welfare Benefit Plans. During the Agreement Term, the Executive and
the Executive's spouse and children shall be eligible to participate in,
and receive, without duplication, all benefits under, welfare benefit
plans provided from time to time by the Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
individual life, group life, dependent life, accidental death and travel
accident insurance plans) applicable to senior executives of the Company
and their spouses and children generally and in accordance with the terms
of such plans; provided, however, that the Executive shall not be entitled
to participate in any severance pay plan of the Company except to the
extent the amount of severance pay under any such plan exceeds the amount
payable under Article V.
(d) Other Fringe Benefits. During the Agreement Term, the Executive
shall be entitled to fringe benefits (in addition to the specified
benefits described in Section 3.4(a)) provided by the Company from time to
time in accordance with the most favorable fringe benefit plans applicable
to senior executives of the Company generally.
(e) Expenses. During the Agreement Term, the Executive shall be
entitled to reimbursement of all reasonable business-related expenses
incurred by the Executive upon the Company's receipt of accountings in
accordance with the terms of the most favorable policies applicable to
senior executives of the Company generally.
(f) Office and Support Staff. During the Agreement Term, the Executive
shall be entitled to an office or offices of a size and with furnishings
and other appointments and to secretarial and other assistance, provided
by the Company from time to time, in each case in accordance with the most
favorable policies applicable to senior executives of the Company
generally.
(g) Vacation. During the Agreement Term, the Executive shall be
entitled to paid vacation provided by the Company from time to time in
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accordance with the most favorable policies applicable to senior
executives of the Company generally, but in no event less than five weeks
per year.
3.5 Initial Options.
(a) Grant of Initial Options. The Company shall grant to the Executive
nonqualified options to purchase 2,234,559 shares of the Company's common
stock ("Initial Options"). The Initial Options constituting Full Price
Options (as defined below) shall be granted as of May 5, 1999. The Initial
Options constituting Discounted Options (as defined below) shall be
granted as of January 21, 2000 (or earlier as provided in Section (f))
unless the Executive provides a Notice of Termination before such date.
(b) Exercise Price of Initial Options. The exercise price of the
Initial Options covering 744,853 shares of the Company's common stock
shall be $8.68 per share ("Full Price Options"). The exercise price of the
remaining Initial Options covering 1,489,706 shares of the Company's
common stock shall be $4.34 per share ("Discounted Options").
(c) Vesting of Initial Options.
(1) Twenty-five percent (25%) of the Full Price Options shall
be fully vested and immediately exercisable, in whole or in part, on
May 5, 1999, and an additional twenty-five (25%) of the Full Price
Options shall become fully vested and immediately exercisable, in
whole or in part, as of May 5 of each of 2000, 2001 and 2002;
provided, that the Executive remains employed by the Company on such
dates.
(2) Fifty percent (50%) of the Discounted Options shall vest
at the same rate that compensation is earned by the Executive and
retained by the Company in accordance with Section 3.5(i) ("Earned
Discounted Options"); provided, that no vesting shall occur prior to
May 22, 2000 but shall occur on May 22, 2000 and thereafter; and
provided, further, that the Executive remains employed by the
Company on such dates. The remaining fifty percent (50%) of the
Discounted Options shall vest on January 31, 2003 ("Matching
Discounted Options"); provided, that the Executive remains employed
by the Company on such date.
(d) Exercise Period of Initial Options. Subject to the other provisions
of this Section 3.5, each Initial Option shall, upon becoming vested and
exercisable, remain exercisable through and including May 5, 2007.
(e) Death or Disability.
(1) In the event of the Executive's termination of employment
on account of the Executive's death or Disability during the
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Agreement Term, in each case solely as a result of an injury
sustained in an accident occurring while the Executive was
performing work for the Company (including business travel), 100% of
the unvested Full Price Options and 100% of a number of the Matching
Discounted Options equal to the number of vested Earned Discounted
Options immediately prior to the date of such death or Disability,
as the case may be, shall become fully vested and immediately
exercisable, in whole or in part, upon the date of such death or
Disability, as the case may be.
(2) In the event of the Executive's termination of employment
on account of the Executive's death or Disability as a result of any
other reason, fifty percent (50%) of the unvested Full Price Options
and fifty percent (50%) of a number of the Matching Discounted
Options equal to the number of vested Earned Discounted Options
immediately prior to the date of such death or Disability, as the
case may be, shall become fully vested and immediately exercisable,
in whole or in part, upon the date of such death or Disability, as
the case may be.
(3) None of the unvested Earned Discounted Options or Matching
Discounted Options equal to the number of such unvested Earned
Discounted Options immediately prior to the date of the Executive's
death or Disability shall vest on account of the Executive's death
or Disability as a result of any reason. However, in the event that
the Executive, his legal representative or his estate elects within
180 days after the date of such death or Disability, as the case may
be, to pay $4.34 (exclusive of the exercise price) for up to fifty
percent (50%) of the unvested Earned Discounted Options, the number
of such unvested Earned Discounted Options so elected, plus an equal
number of Matching Discounted Options, shall become fully vested and
immediately exercisable, in whole or in part, upon such payment.
(f) Termination by Company without Cause or by Executive for Good
Reason; Change of Control. All Initial Options to be granted shall be
granted and all Initial Options shall become fully vested and immediately
exercisable, in whole or in part, upon (1) Executive's termination of
employment by the Company without Cause (other than as a result of
Executive's death or Disability), (2) Executive's termination of
employment for Good Reason, or (3) a Change of Control of the Company.
(g) Termination by Company for Cause or by Executive without Good
Reason. Notwithstanding any other provision of this Section 3.5 and
subject to Section 5.6, in the event that the Executive's employment is
terminated by the Company for Cause or by the Executive without Good
Reason (other than as a result of Executive's death or Disability) prior
to the end of the Agreement Term, (1) the vested portion of the Initial
Options may be exercised until the earlier of (A) the last day of the
24-month period commencing on the date of such termination of employment
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or (B) the expiration of the term of the Initial Options; (2) Executive
shall forfeit vested Full Price Options with respect to a number of shares
that exceeds the number of shares that would have vested if such Full
Price Options vested ratably on a monthly basis over the Agreement Term;
and (3) Executive shall forfeit unvested Earned Discounted Options and all
Matching Discounted Options.
(h) Anti-Dilution Adjustment of Initial Options. If at any time on or
before May 16, 2000, the Company issues, or the Board commits to be
issued, additional equity of the Company (including upon exercise or
conversion of options and warrants outstanding as of the Agreement Date
and including upon conversion of any convertible stock issued after the
Agreement Date, but excluding conversion of any convertible preferred
stock outstanding as of the Agreement Date) in the aggregate up to twenty
million dollars ($20,000,000) to the Principal Stockholders or any other
person (excluding employees, officers and directors of the Company), the
Company shall, as of the date the additional equity actually is issued,
grant to the Executive nonqualified options equal to fifteen percent (15%)
of such additional equity at the same purchase or exercise price and with
the same vesting schedules as are applicable to the Initial Options
constituting Full Price Options and Matching Discounted Options (i.e.,
two-thirds vest when the Full Price Options vest and one-third vests on
January 31, 2003, provided, that the Executive remains employed by the
Company on such dates; all such additional options shall become fully
vested and immediately exercisable, in whole or in part, upon (1)
Executive's termination of employment by the Company without Cause (other
than as a result of Executive's death or Disability), (2) Executive's
termination of employment for Good Reason, (3) a Change of Control of the
Company or (4) Executive's termination of employment on account of the
Executive's death or Disability, in each case solely as a result of an
injury sustained in an accident occurring while the Executive was
performing work for the Company (including business travel); and one-half
of such additional options that are then unvested shall become fully
vested and immediately exercisable, in whole or in part, upon Executive's
termination of employment on account of Executive's death or Disability as
a result of any other reason) and shall remain exercisable for the same
period as the Initial Options described in this Section 3.5. Any
additional options granted pursuant to this Section 3.5(h) shall be
rounded to the nearest whole share. There shall be no other adjustment to
the Initial Options on account of the presently outstanding options,
warrants and convertible securities of the Company.
(i) Deferral of Compensation. The Executive shall defer, and the
Company shall retain, on a pre-tax basis the Executive's Salary and Bonus
earned under this Agreement (including amounts payable under Article V in
lieu thereof) to pay for the grant of the Discounted Options: (1) the
Executive's Salary and Additional Compensation for each month during the
period May 5, 1999 through January 31, 2000, totaling $1,350,000, (2) the
Executive's Salary for each month during the period February 1, 2000
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through January 31, 2001, totaling $1,200,000, (3) the Executive's Bonus
with respect to the Company's fiscal year ending on January 31, 2001, up
to $682,662, to provide a total aggregate amount equal to $3,232,662, and
(4) if the Executive's Bonus with respect to the Company's fiscal year
ending on January 31, 2001 is less than $682,662, such amount of the
Executive's Salary for each month or portion thereof after January 31,
2001 as necessary to provide a total aggregate amount equal to $3,232,662.
3.6 Additional Options:
(a) Grant of Additional Stock Options. If at any time prior to January
3, 2001, the Company issues in the aggregate up to five percent (5%) of
the currently outstanding number of shares of common stock (whether as
stock or stock options) to existing executive vice presidents or other
senior executives ("Additional Equity"), the Company shall, as of the date
the Additional Equity actually is issued, grant to the Executive
nonqualified options equal to fifteen percent (15%) of such Additional
Equity ("Additional Options"). Any Additional Options granted pursuant to
this Section 3.6(a) shall be rounded to the nearest whole share.
(b) Exercise Price of Additional Options. The per share exercise price
of each Additional Option shall be equal to the same purchase or exercise
price as the Additional Equity, as evidenced by the purchase price or
other consideration given for the Additional Equity.
(c) Vesting and Exercise Period of Additional Options. Additional
Options shall vest and become exercisable in accordance with the same
vesting schedules as are applicable to the Initial Options constituting
Full Price Options and Matching Discounted Options (i.e., two-third vest
when the Full Price Options vest and one-third vests on January 31, 2003,
provided, that the Executive remains employed by the Company on such
dates; all such Additional Options shall become fully vested and
immediately exercisable, in whole or in part, upon (1) Executive's
termination of employment by the Company without Cause (other than as a
result of Executive's death or Disability), (2) Executive's termination of
employment for Good Reason, (3) a Change of Control of the Company or (4)
Executive's termination of employment on account of the Executive's death
or Disability, in each case solely as a result of an injury sustained in
an accident occurring while the Executive was performing work for the
Company (including business travel); and one-half of such Additional
Options that are then unvested shall become fully vested and immediately
exercisable, in whole or in part, upon Executive's termination of
employment on account of Executive's death or Disability as a result of
any other reason) and shall remain exercisable for the same period as the
Initial Options described in Section 3.5.
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ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1 Disability. The Executive's employment shall terminate automatically
upon the Executive's Disability during the Agreement Term.
4.2 Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Agreement Term.
4.3 Cause.
(a) Subject to the provisions of Section 4.3(b), during the Agreement
Term, the Company may terminate the Executive's employment for Cause.
(b) The Company may not terminate the Executive's employment for Cause
unless:
(1) no fewer than forty-five (45) days prior to the
Termination Date, the Company provides Executive with written notice
(the "Notice of Consideration") of its intent to consider
termination of Executive's employment for Cause, including a
detailed description of the specific reasons which form the basis
for such consideration;
(2) for a period of not less than thirty (30) days after the
date Notice of Consideration is provided, Executive shall have the
opportunity to appear before the Board, with or without legal
representation, at Executive's election, to present arguments and
evidence on his own behalf; and
(3) following the presentation to the Board as provided in
clause (2) above or following Executive's failure to appear before
the Board at a date and time specified in the Notice of
Consideration (which date shall not be less than thirty (30) days
after the date the Notice of Consideration is provided), the
Executive may be terminated for Cause if (A) the Board, by a more
than seventy-five percent (75%) vote of its members (excluding
Executive if he is a member of the Board and any other member of the
Board reasonably believed by the Board to be involved in the events
leading the Board to terminate Executive for Cause), determines that
the actions or inactions of the Executive specified in the Notice of
Consideration occurred, that such actions or inactions constitute
Cause, and that Executive's employment should accordingly be
terminated for Cause; and (B) the Board provides Executive with
Notice of Termination.
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(c) A passage of time of less than twelve (12) months prior to delivery
of Notice of Termination or a failure by the Company to include in the
Notice of Termination any fact or circumstance which contributes to a
showing of Cause shall not waive any right of the Company under this
Agreement or preclude the Company from asserting such fact or circumstance
in enforcing rights under this Agreement, provided that such fact or
circumstance is a basis to support Executive's termination of employment
for Cause as specified in both the Notice of Consideration and Notice of
Termination.
(d) The Board, by unanimous vote of its members (excluding Executive if
he is a member of the Board and any other member of the Board reasonably
believed by the Board to be involved in the events leading the Board to
terminate Executive for Cause), may relieve the Executive of his duties,
without such act constituting Good Reason, during the consideration of his
termination for Cause following a Notice of Consideration. The Executive
shall be restored to his duties if the Board fails to issue a Notice of
Termination within thirty (30) days following the Executive's appearance
before the Board or, if Executive does not request or fails to make an
appearance before the Board.
4.4 Good Reason.
(a) During the Agreement Term, the Executive may terminate his
employment for Good Reason provided that the Executive has (i) provided at
least ten (10) days prior written notice to the Board of his intent to
resign for Good Reason, including a detailed description of the specific
reasons which form the basis for Good Reason and (ii) if requested by any
member of the Board, attend a meeting of the Board or the Executive
Committee to be held within fifteen (15) days following such notice to
discuss his resignation for Good Reason.
(b) Any termination of employment by the Executive for Good Reason
shall be communicated to the Company by Notice of Termination. A passage
of time of less than twelve (12) months prior to delivery of Notice of
Termination or a failure by the Executive to include in the Notice of
Termination any fact or circumstance which contributes to a showing of
Good Reason shall not waive any right of the Executive under this
Agreement or preclude the Executive from asserting such fact or
circumstance in enforcing rights under this Agreement.
4.5 Other Resignation. During the period after January 31, 2000 and before
the twenty-first (21st) day after the Company's audited financial statements for
the year ending January 31, 2000 have been delivered to the Company (but not
later than May 21, 2000), the Executive may terminate his employment for any
reason or no reason by delivery of a Notice of Termination to the Board.
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ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION OF EMPLOYMENT
5.1 If by the Executive for Good Reason or by the Company Other Than for
Cause or Disability or Death. If, during the Agreement Term, the Company shall
terminate Executive's employment other than for Cause, Disability or death, or
if the Executive shall terminate employment for Good Reason, the Company's
obligations to the Executive shall be as follows:
(a) The Company shall immediately pay the Executive, in addition to all
vested rights arising from the Executive's employment as specified in
Article III, a cash amount equal to the sum of the following amounts:
(1) all amounts of Salary, Additional Compensation and Bonus
previously accrued to the benefit of the Executive and not retained
by the Company pursuant to Section 3.5(i) ("Accrued Obligations");
and
(2) an amount equal to the product of (A) the number of years
(including a fraction of a year determined by dividing the number of
days in a partial year by 365) remaining in the Agreement Term as of
the Termination Date, multiplied by (B) the sum of (i) annual Salary
and (ii) Target Bonus, and subject to retention by the Company
pursuant to Section 3.5(i).
(b) On the Termination Date, the Executive shall become fully vested
in, and may thereupon exercise, in whole or in part, any and all Stock
Options granted to the Executive subject to the other provisions of the
Agreement.
(c) Until the last day of the Agreement Term, the Company shall
continue to provide to the Executive and the Executive's spouse and
children medical, prescription, dental, individual life and group life
insurance plans and programs, in accordance with the most favorable plans
provided from time to time by the Company applicable to senior executives
and their spouses and children generally. The Executive's rights under
this Section 5.1(c) shall be in addition to, and not in lieu of, any
post-termination continuation coverage or conversion rights the Executive
may have pursuant to applicable law, including without limitation,
continuation coverage required by 4980 of the Code.
5.2 If by the Company for Cause. If, during the term of the Agreement
Term, the Company shall terminate the Executive's employment for Cause, this
Agreement (other than Articles X and XI) shall terminate without further
obligation by the Company to the Executive, other than (a) the obligation
immediately to pay Executive in cash all Accrued Obligations and (b) the
obligations of the Company under all Stock Options granted to the Executive that
have vested as of the Termination Date, subject to Article III.
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5.3 If by the Executive Other Than for Good Reason. If, during the term of
the Agreement Term, the Executive shall terminate employment during the
Agreement Term other than for Good Reason, Disability or death, this Agreement
(other than Articles X and XI) shall terminate without further obligation by the
Company, other than (a) the obligation immediately to pay the Executive in cash
all Accrued Obligations and (b) the obligations of the Company under all Stock
Options granted to the Executive that have vested as of the Termination Date,
subject to Article III.
5.4 If upon Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Agreement Term, this Agreement
(other than Articles X and XI) shall terminate without further obligation to the
Executive, other than (a) the obligation immediately to pay the Executive or his
legal representative in cash all Accrued Obligations, (b) the Executive's right
after the date of Executive's Disability to receive disability and other
benefits in accordance with the disability and other applicable benefit plans in
effect on the date of Executive's Disability and (c) the obligations of the
Company under all Stock Options granted to the Executive pursuant to Article
III.
5.5 If upon Death. If the Executive's employment is terminated by reason
of the Executive's death during the Agreement Term, this Agreement shall
terminate without further obligation to the Executive's legal representatives
under this Agreement, other than (a) the obligation immediately to pay the
Executive's estate or beneficiary in cash all Accrued Obligations, (b) the right
of the Executive's family to receive benefits in accordance with the applicable
benefit plans in effect on the date of Executive's death, and (c) the
obligations of the Company under all Stock Options granted to the Executive
pursuant to Article III.
5.6 Other Resignation. If the Executive shall terminate employment
pursuant to 4.5 (other than for Good Reason pursuant to 4.4), (a) Executive
shall immediately receive the compensation deferred in accordance with 3.5(i),
(b) Executive shall not be entitled to earn any Bonus in accordance with 3.3(d),
(c) Executive shall forfeit his rights to all Stock Options, and (d) the
Executive shall be subject to the covenants set forth in s 10.1 and 10.2. In the
event of such termination, Executive shall earn additional compensation of
$50,000 per month during the period commencing on February 1, 2000 and ending on
the Termination Date. The Executive agrees to continue employment with the
Company and use the Executive's best efforts to ensure a smooth transition
through the earliest of (a) the date that a new Chief Executive Officer has been
employed by the Company, (b) a period of four (4) months has elapsed since the
date of the Executive's Notice of Termination, or (c) such date as the Company
elects after receipt of the Executive's Notice of Termination.
In the event that the Executive's employment is terminated during the Agreement
Term for any reason, Executive shall resign as Chairman of the Board and as a
member of the Board, and all other positions with the Company and its
subsidiaries, unless otherwise mutually agreed in writing by the Company and the
Executive.
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ARTICLE VI
EQUITY OWNERSHIP PROVISIONS
6.1 Tag-Along Rights. The Executive shall have tag-along rights as set
forth in that certain Stockholders Agreement, dated as of the date hereof, among
Bay Harbour Management L.C. for its managed accounts, Whippoorwill Associates,
Inc. as agent and/or general partner for its discretionary accounts and as
investment advisor to Whippoorwill/Barney's Obligations Trust - 1996, and the
Executive ("Stockholders Agreement").
6.2 Drag-Along Rights. The Executive shall be subject to certain
drag-along rights as set forth in the Stockholders Agreement.
6.3 Voting of Shares. The Executive agrees to vote the shares of the
Company's common stock hold by him from time to time as set forth in the
Stockholders Agreement.
6.4 Registration. The Executive shall have certain rights to request
registration of his shares of Company common stock under the Securities Act of
1933, as amended, as set forth in that certain Registration Rights Agreement,
dated as of the date hereof, between the Company and the Executive.
ARTICLE VII
CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
7.1 Gross-up for Certain Taxes. If it is determined (by the reasonable
computation of the Company's independent auditors, which determination shall be
certified to by such auditors and set forth in a written certificate and may set
forth assumptions upon which such determination is based ("Certificate")
delivered to the Executive and the Company) that any benefit received or deemed
received by the Executive from the Company pursuant to this Agreement or
otherwise (collectively, "Payments") is or will become subject to any excise tax
under 4999 of the Code or any similar tax payable under any United States
federal, state, local or other law (such excise tax and all such similar taxes
collectively, "Excise Taxes"), then the Company shall, as soon as practicable
after receipt of such Certificate, pay the Executive an amount ("Gross-up
Payment") equal to the product of :
(a) the amount of such Excise Taxes
multiplied by
(b) the Gross-up Multiple (as defined in 7.4).
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The Gross-up Payment is intended to compensate the Executive for the Excise
Taxes and any federal, state, local or other income or excise taxes or other
taxes payable by the Executive with respect to the Gross-up Payment.
The Executive or the Company may at any time request the preparation
and delivery to the Executive and the Company of a Certificate. The Company
shall, in addition to complying with 7.2, cause all determinations and
certifications under this Article VII to be made as soon as reasonably possible
and in adequate time to permit the Executive to prepare and file the Executive's
individual tax returns on a timely basis (including any extension thereof).
7.2 Determination by the Executive.
(a) If the Company shall fail to deliver a Certificate to the Executive
and to pay to the Executive the amount of the Gross-up Payment, if any,
within thirty (30) days after receipt from the Executive of a written
request for a Certificate, or if at any time following receipt of a
Certificate the Executive disputes the amount of the Gross-up Payment set
forth therein, the Executive may elect to demand the payment of the amount
which the Executive, in accordance with an opinion of counsel to the
Executive ("Executive Counsel Opinion"), determines to be the Gross-up
Payment. Any such demand by the Executive shall be made by delivery to the
Company of a written notice which specifies the Gross-up Payment
determined by the Executive and an Executive Counsel Opinion (including
applicable worksheets) regarding such Gross-up Payment (such written
notice and opinion collectively, "Executive's Determination"). Within
thirty (30) days after delivery of the Executive's Determination to the
Company, the Company shall either (1) pay the Executive the Gross-up
Payment set forth in the Executive's Determination (less the portion of
such amount, if any, previously paid to the Executive by the Company) or
(2) deliver to the Executive a Certificate specifying the Gross-up Payment
determined by the Company's independent auditors, together with an opinion
of the Company's counsel ("Company Counsel Opinion"), and pay the
Executive the Gross-up Payment specified in such Certificate.
(b) If the Executive does not make a request for, and the Company does
not deliver to the Executive, a Certificate, the Company shall, for
purposes of 7.3, be deemed to have determined that no Gross-up Payment is
due.
7.3 Additional Gross-up Amounts. If, despite the initial conclusion of the
Company and/or the Executive that certain Payments are neither subject to Excise
Taxes nor to be counted in determining whether other Payments are subject to
Excise Taxes (any such item, a "Non-Parachute Item"), it is later determined
(pursuant to the subsequently-enacted provisions of the Code, final regulations
or published rulings of the IRS, final judgment of a court of competent
jurisdiction or the Company's independent auditors) that any of the
Non-Parachute Items are subject to Excise Taxes, or are to be counted in
determining whether any Payments are subject to Excise Taxes, with the result
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that the amount of Excise Taxes payable by the Executive is greater than the
amount determined by the Company or the Executive pursuant to 7.1 or 7.2, as
applicable, then the Company shall pay the Executive an amount (which shall also
be deemed a Gross-up Payment) equal to the product of
(a) the sum of (1) such additional Excise Taxes and (2) any interest,
fines, penalties, or expenses incurred by the Executive as a result of
having taken a position in accordance with a determination made pursuant
to 7.1 or 7.2, as applicable,
multiplied by
(b) the Gross-up Multiple.
7.4 Gross-up Multiple. The Gross-up Multiple shall equal a fraction, the
numerator of which is one (1.0), and the denominator of which is one (1.0) minus
the sum, expressed as a decimal fraction, of the effective rates of all federal,
state, local and other income and other taxes and any Excise Taxes applicable to
the Gross-up Payment. (If different rates of tax are applicable to various
portions of a Gross-up Payment, the weighted average of such rates shall be
used.)
7.5 Opinion of Counsel. "Executive Counsel Opinion" means a legal opinion
of nationally recognized employee benefits tax counsel that there is a
reasonable basis to support a conclusion that the Gross-up Payment determined by
the Executive has been calculated in accordance with this Article VII and
applicable law. "Company Counsel Opinion" means a legal opinion of nationally
recognized employee benefits tax counsel that there is a reasonable basis and
substantial authority (within the meaning of Internal Revenue Code 6662(d)) to
support a conclusion that the Gross-up Payment set forth in the Certificate of
the Company's independent auditors has been calculated in accord with this
Article VII and applicable law.
7.6 Amount Increased or Contested. The Executive shall notify the Company
in writing of any claim by the IRS or other taxing authority that, if
successful, would require the payment by the Company of a Gross-up Payment. Such
notice shall include the nature of such claim and the date on which such claim
is due to be paid. The Executive shall give such notice as soon as practicable,
but no later than ten (10) business days after the Executive first obtains
actual knowledge of such claims; provided, however, that any failure to give or
delay in giving such notice shall affect the Company's obligations under this
Article VII only if and to the extent that such failure results in actual
prejudice to the Company. The Executive shall not pay such claim less than
thirty (30) days after the Executive gives such notice to the Company (or, if
sooner, the date on which payment of such claim is due). If the Company notifies
the Executive in writing before the expiration of such period that it desires to
contest such claim, the Executive shall:
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(a) give the Company any information that it reasonably requests
relating to such claim,
(b) take such action in connection with contesting such claim as the
Company reasonably requests in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(c) cooperate with the Company in good faith to contest such claim, and
(d) 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 additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including related interest
and penalties, imposed as a result of such representation and payment of
reasonable costs and expenses. Without limiting the foregoing, the Company shall
control all proceedings in connection with such contest 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 and may, at
its sole option, either direct the Executive to pay the tax claimed and sue for
a refund or contest the claim in any permissible manner. 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 such claim 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 the Executive, on an after-tax basis, for any Excise Tax or income
tax, including related interest or penalties, imposed with respect to such
advance; and provided, further, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount. The Company's control of the contest shall be limited to
issues with respect to which a Gross-up Payment would be payable. The Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the IRS or other taxing authority.
7.7 Refunds. If, after the receipt by the Executive of an amount advanced
by the Company pursuant to 7.6, the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall promptly pay the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to 7.6, 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
determination before the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be required to
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be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-up Payment required to be paid. Any contest of a denial of
refund shall be controlled by Section 7.6.
ARTICLE VIII
EXPENSES AND INTEREST
8.1 Legal Fees and Other Expenses.
(a) If the Executive incurs reasonable legal fees in an effort to
secure, establish entitlement to, or obtain benefits under this Agreement
(including, without limitation, the fees and other expenses of the
Executive's legal counsel in connection with the delivery of the Executive
Counsel Opinion referred to in Section 7.5 or in connection with enforcing
the Executive's rights to indemnification in Article XI) and the Executive
prevails, the Company shall reimburse the Executive for such fees and
expenses.
(b) The Company will pay the Executive (i) for the Executive's
reasonable legal fees and expenses in negotiating this Agreement and (ii)
as may be necessary or appropriate, the Executive's reasonable legal fees
and expenses up to $25,000 annually for Executive to consult with counsel
regarding the Executive's compliance with the terms of this Agreement.
8.2 Interest. If the Company does not pay any amount due to the Executive
under this Agreement within three (3) days after such amount became due and
owing, interest shall accrue on such amount from the date it became due and
owing until the date of payment at an annual rate equal to two percent (2.0%)
above the base commercial lending rate announced by The Chase Manhattan Bank in
effect from time to time during the period of such nonpayment.
ARTICLE IX
NO SET-OFF OR MITIGATION
9.1 No Set-off by Company. The Executive's right to receive when due the
payments and other benefits provided for under and in accordance with the terms
of this Agreement is absolute, unconditional and subject to no set-off,
counterclaim or legal or equitable defense. Any claim which the Company may have
against the Executive, whether for a breach of this Agreement or otherwise,
shall be brought in a separate action or proceeding and not as part of any
action or proceeding brought by the Executive to enforce any rights against the
Company under this Agreement.
9.2 No Mitigation. The Executive shall not have any duty to mitigate the
amounts payable by the Company under this Agreement upon any termination of
employment by seeking new employment following termination. Except as
specifically otherwise provided in this Agreement, all amounts payable pursuant
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to this Agreement shall be paid without reduction regardless of any amounts of
salary, compensation or other amounts which may be paid or payable to the
Executive as the result of the Executive's employment by another employer;
provided, however, that after a termination of employment by the Executive for
Good Reason as defined in Section 2.8(f), any amounts payable under ARTICLE V to
the Executive shall be subject to mitigation to the extent of compensation
arising from or attributable to services performed, directly or indirectly, by
the Executive as a consultant, employee, officer or director for the Company or
any of its affiliates or successors, if the Executive's principal duties and
responsibilities with respect to such services pertain to or include the
Company's business.
ARTICLE X
CONFIDENTIALITY AND NONCOMPETITION
10.1 Confidentiality. Executive acknowledges that it is the policy of the
Company and its Subsidiaries to maintain as secret and confidential all valuable
and unique information and techniques acquired, developed or used by the Company
and its Subsidiaries relating to their business, operations, employees and
customers, which gives the Company and its Subsidiaries a competitive advantage
in the retail clothing industry and other businesses in which the Company and
its Subsidiaries are engaged, including trade secrets ("Confidential
Information"). Executive recognizes that all such Confidential Information is
the sole and exclusive property of the Company and its Subsidiaries, and that
disclosure of Confidential Information would cause damage to the Company and its
Subsidiaries. Executive agrees that, except as required by the duties of his
employment with the Company and/or its Subsidiaries and except in connection
with enforcing the Executive's rights under this Agreement or if compelled by a
court or governmental agency, in each case provided that prior written notice is
given to the Company, he will not, without the consent of the Company,
disseminate or otherwise disclose any Confidential Information obtained during
his employment with the Company and/or its Subsidiaries for so long as such
information is valuable and unique.
10.2 Nonsolicitation. During the Agreement Term and, if Executive's
employment is terminated for any reason, thereafter for a period of one (1)
year, Executive shall not (a) employ any employee of the Company and/or its
Subsidiaries or (b) interfere with the Company's or any of its Subsidiaries'
relationship with, or endeavor to entice away from the Company and/or its
Subsidiaries any person, firm, corporation, or other business organization who
or which at any time (whether before or after the date of Executive's
termination of employment), was an employee, customer, vendor or supplier of, or
maintained a business relationship with, any business of the Company and/or its
Subsidiaries which was conducted at any time during the period commencing one
(1) year prior to the termination of employment.
10.3 Noncompetition. During the Agreement Term prior to Executive's
termination of employment, and if the Executive is terminated for Cause or
resigns without Good Reason, thereafter for a period of one (1) year, Executive
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shall not engage in any Competitive Activity (as defined below) without the
prior approval of the Board. "Competitive Activity" means, directly or
indirectly, to carry on, be engaged in or have any financial interest, either as
principal, manager, agent, consultant, officer, stockholder, partner, investor,
lender or employee or in any other capacity, in any of the following
corporations or their respective Subsidiaries: Saks Fifth Avenue, Neiman Marcus
Corporation, Bergdorf Goodman or Nordstrom. After Executive's termination of
employment, unless Executive is terminated for Cause or resigns without Good
Reason (other than pursuant to Section 4.5), Executive shall not be implicitly
or explicitly restricted from engaging in Competitive Activity subject to his
satisfaction of his obligations under Sections 10.1 and 10.2.
10.4 Remedy. Executive and the Company specifically agree that, in the
event that Executive shall breach his obligations under this Article X, the
Company and its Subsidiaries will suffer irreparable injury and shall be
entitled to injunctive relief therefor, and shall not be precluded from pursuing
any and all remedies it may have at law or in equity for breach of such
obligations; provided, however, that such breach shall not in any manner or
degree whatsoever limit, reduce or otherwise affect the obligations of the
Company under this Agreement, and in no event shall an asserted breach of the
Executive's obligations under this Article X constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this Agreement;
and provided, further, that any breach of Section 10.3 shall not include a claim
for injunctive relief against the Executive.
10.5 This Article X shall survive any termination of this Agreement.
ARTICLE XI
INDEMNIFICATION; NON-EXCLUSIVITY OF RIGHTS
11.1 Indemnification. The Executive shall be indemnified and held harmless
by the Company to the greatest extent permitted under applicable Delaware law as
the same now exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Company to provide
broader indemnification than was permitted prior to such amendment) if Executive
was, is, or is threatened to be made, a party to any pending, completed or
threatened action, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding whether civil,
criminal, administrative or investigative, and whether formal or informal, by
reason of the fact that Executive is or was, or had agreed to become, a
director, officer, employee, agent, or fiduciary of the Company or any other
entity which Executive is or was serving at the request of the Company
("Proceeding"), against all expenses (including without limitation, all
reasonable attorneys' fees, retainers, court costs, transcripts, fees of
experts, witness fees, travel expenses, duplicating costs, printing and binding
costs, telephone charges, postage, delivery service fees, and all other
reasonable disbursements or expenses customarily required in connection with
asserting or defending claims) ("Expenses") and all claims, damages, liabilities
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and losses (including, without limitation, judgments; fines; liabilities under
the Code or the Employee Retirement Income Security Act of 1974, as amended, for
damages, excise taxes or penalties; damages, fines or penalties arising out of
violation of any law related to the protection of the public health, welfare or
the environment; and amounts paid or to be paid in settlement) incurred or
suffered by the Executive or to which the Executive may become subject for any
reason. A Proceeding shall not include any proceeding to the extent it concerns
or relates to a matter described in Section 8.1(a).
11.2 Advancement of Expenses and Costs. All Expenses incurred by or on
behalf of the Executive in defending or otherwise being involved in a Proceeding
shall be paid by the Company in advance of the final disposition of a
Proceeding, including any appeal therefrom, within thirty (30) days after the
receipt by the Company of a statement or statements from the Executive
requesting such advance or advances from time to time. Such statement or
statements shall evidence the Expenses incurred by the Executive in connection
therewith, together with supporting invoices, receipts and other documentation.
11.3 Effect of Certain Proceedings. The termination of any Proceeding by
judgment, order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, except, in each case, to the extent that the terms thereof
expressly so provide, shall not, of itself (a) adversely affect the rights of
the Executive to indemnification, or (b) create a presumption that the Executive
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification or contribution is not
permitted by applicable law.
11.4 Other Rights to Indemnification. The Executive's rights of
indemnification and advancement of Expenses provided by this Article XI shall
not be deemed exclusive of any other rights to which the Executive may now or in
the future be entitled under applicable law, the certificate of incorporation,
by-laws, agreement, vote of stockholders, or resolution of the Board of the
Company, or other provisions of this Agreement or any other agreement, or
otherwise.
11.5 Representations. The Company represents and warrants that this
Article XI does not conflict with or violate its certificate of incorporation or
by-laws, and agrees that it will not amend its certificate of incorporation or
by-laws in a manner that would limit the rights of the Executive hereunder. The
Company represents that the execution, delivery and performance of this
Agreement by the Company has been duly and validly authorized by its Board.
11.6 Survival of Indemnity. This Article XI shall survive any termination
of the relationship of the Executive with the Company, and shall be binding on,
and inure to the benefit of the successors and assigns of the Company and the
successors, assigns, heirs and personal representatives of the Executive.
11.7 Non-Exclusivity of Rights. This Agreement shall not prevent or limit
the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans provided by the Company or any of its Subsidiaries and
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for which the Executive may qualify, nor shall this Agreement limit or otherwise
affect such rights as the Executive may have under any other agreements with the
Company or any of its Subsidiaries. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan of the Company or
any of its Subsidiaries and any other payment or benefit required by law at or
after the Termination Date shall be payable in accordance with such plan or
applicable law except as expressly modified by this Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 Representations; Nondisclosure. The Executive will not disclose to
the Company or use, or induce the Company to use, any proprietary information,
trade secrets or confidential business information of others. The Executive
represents and warrants that he is not a party to any agreement, contract or
understanding, employment or otherwise, which would restrict or prohibit him in
any way from undertaking or performing employment in accordance with the terms
and conditions of this Agreement.
12.2 No Assignability. This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
12.3 Successors. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns. The Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company 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. Any successor to the business
and/or assets of the Company which assumes or agrees to perform this Agreement
by operation of law, contract, or otherwise shall be jointly and severally
liable with the Company under this Agreement as if such successor were the
Company.
12.4 Payments to Beneficiary. If the Executive dies before receiving
amounts to which the Executive is entitled under this Agreement, such amounts
shall be paid in a lump sum to the beneficiary designated in writing by the
Executive, or if none is so designated, to the Executive's estate.
12.5 Non-alienation of Benefits. Benefits payable under this Agreement
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of any
kind, either voluntary or involuntary, before actually being received by the
Executive, and any such attempt to dispose of any right to benefits payable
under this Agreement shall be void.
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12.6 Severability. If any one or more articles, sections or other portions
of this Agreement are declared by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any article, section or other portion not so declared to be unlawful
or invalid. Any article, section or other portion so declared to be unlawful or
invalid shall be construed so as to effectuate the terms of such article,
section or other portion to the fullest extent possible while remaining lawful
and valid.
12.7 Amendments. This Agreement shall not be altered, amended or modified
except by written instrument executed by the Company and Executive.
12.8 Notices. All notices and other communications under this Agreement
shall be in writing and delivered by hand or by first class registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Allen I. Questrom
200 East 69th Street
Apartment 43A
New York, New York 10021
with a copy to:
Sonnenschein, Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Roger C. Siske, Esq.
If to the Company:
Barneys New York, Inc.
575 Fifth Avenue
New York, New York 10017
Attention: Marc H. Perlowitz, Esq.
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ted S. Waksman, Esq.
or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.
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12.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
12.10 Governing Law. This Agreement shall be interpreted and construed in
accordance with the laws of the State of New York, without regard to its
conflict of laws principles.
12.11 Captions. The captions of this Agreement are not a part of the
provisions hereof and shall have no force or effect.
12.12 Tax Withholding. The Company may withhold from any amounts payable
under this Agreement any federal, state or local taxes that are required to be
withheld pursuant to any applicable law or regulation.
12.13 No Waiver. The Executive's failure to insist upon strict compliance
with any provision of this Agreement shall not be deemed a waiver of such
provision or any other provision of this Agreement. A waiver of any provision of
this Agreement shall not be deemed a waiver of any other provision, and any
waiver of any default in any such provision shall not be deemed a waiver of any
later default thereof or of any other provision.
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12.14 Entire Agreement. This Agreement contains the entire understanding
of the Company and the Executive with respect to its subject matter.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement effective as of the date first above written, executed February 1,
2000.
BARNEYS NEW YORK, INC.
By: /s/ Marc H. Perlowitz
------------------------------
Title: Executive Vice President
---------------------------
/s/ Allen I. Questrom
---------------------
ALLEN I. QUESTROM
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