<PAGE>
As filed with the Securities and Exchange Commission on August 7, 1998.
Subject to amendment.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------
NORTON MCNAUGHTON, INC.
(Exact name of issuer as specified in its charter)
DELAWARE 13-3747173
(State or other jurisdiction (I.R.S. Employer
of incorporation Identification No.)
or organization)
----------
463 Seventh Avenue
New York, New York 10018
(Address of principal executive offices)
----------
NORTON MCNAUGHTON, INC.
1998 LONG TERM INCENTIVE PLAN
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
OPTION BONUS PLAN FOR SENIOR EXECUTIVES OF JJ ACQUISITION CORP.
(Full title of the plan)
----------
PETER BONEPARTH
President
Norton McNaughton, Inc.
463 Seventh Avenue
New York, New York 10018
(212) 947-2960
(Name, address and telephone number,
including area code, of agent for service)
----------
Copy to:
BRADLEY P. COST, ESQ.
Haythe & Curley
237 Park Avenue
New York, New York 10017
----------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the
Registration Statement becomes effective.
----------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================
Proposed
Title of Proposed maximum maximum Amount of
securities to Amount to offering aggregate registration
be registered be registered price per share/*/ offering price/*/ fee/**/
- -------------- ------------- ------------------ ----------------- -------------
<S> <C> <C> <C> <C>
Common Stock 1,450,000 $6.9375 $10,059,375 $2,967.52
($.01 par
value)
========================================================================================
</TABLE>
* Estimated solely for purposes of calculating the registration fee on the
basis of the average high and low prices of the Common Stock on August 4, 1998,
as reported on the NASDAQ National Market System.
** Computed in accordance with Rule 457(h)(1).
================================================================================
Page 1 of 134 pages
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
---------------------------------------
The Company hereby states that (i) the documents listed in (a) through
(e) below are incorporated by reference in this Registration Statement and (ii)
all documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended, prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Registration
Statement and to be a part hereof from the date of filing of such documents.
(a) The Company's Annual Report on Form 10-K for the fiscal year
ended November 1, 1997.
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
January 31, 1997.
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended
May 2, 1998.
(d) The Company's Current Reports on Form 8-K filed on December 15,
1997, April 22, 1998, May 29, 1998, June 22, 1998, July 2, 1998 and August 6,
1998.
(e) The description of the Company's Common Stock contained in the
Company's registration statement on Form 8-A (No. 34-23440) filed February 17,
1994.
Item 4. Description of Securities.
-------------------------
Not applicable.
Item 5. Interests of Named Experts and Counsel.
--------------------------------------
Bradley P. Cost, Esq., a partner in the law firm of Haythe & Curley,
the Company's counsel, is a director of the Company. As of July 15, 1998, Mr.
Cost held 5,000 shares of the Company's Common Stock, options under the
Company's 1994 Stock Option Plan to purchase 25,000 shares of the Company's
Common Stock and under the Company's Stock Option Plan For Non-Employee
Directors to purchase 5,000 shares of the Company's Common Stock.
II-1
<PAGE>
Item 6. Indemnification of Directors and Officers.
-----------------------------------------
Under Section 145 of the Delaware General Corporation Law, as amended,
the Company has the power to indemnify directors and officers under certain
prescribed circumstances and subject to certain limitations against certain
costs and expenses, including attorney's fees, actually and reasonably incurred
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which any of them is a party by reason of
such person's being a director or officer of the Company if it is determined
that such person acted in accordance with the applicable standard of conduct set
forth in such statutory provisions.
The Company's Certificate of Incorporation contains a provision which
eliminates the personal liability of a director of the Company to the Company or
to any of its stockholders for monetary damages for a breach of his fiduciary
duty as a director, except in the case where the director breached his duty of
loyalty, failed to act in good faith, engaged in intentional misconduct or
knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of Delaware corporate law, or obtained an improper
personal benefit.
The Company's Certificate of Incorporation also provides that the
Company will indemnify and hold harmless any director, officer, employee or
agent of the Company from and against any and all expenses and liabilities that
may be imposed upon or incurred by him in connection with, or as a result of,
any proceeding in which he may become involved, as a party or otherwise, by
reason of the fact that he is or was such a director, officer, employee or agent
of the Company, whether or not he continues to be such at the time such expenses
and liabilities shall have been imposed or incurred, to the extent permitted by
the laws of the State of Delaware, as they may be amended from time to time.
Item 7. Exemption from Registration Claimed.
-----------------------------------
Not applicable.
Item 8. Exhibits.
--------
The Exhibits required to be filed as part of this Registration
Statement are listed in the attached Index to Exhibits.
Item 9. Undertakings.
------------
II-2
<PAGE>
The undersigned Registrant hereby undertakes, except as otherwise
specifically provided in the rules of the Securities and Exchange Commission
promulgated under the Securities Act of 1933:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent post-
effective amendment hereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if this
Registration Statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in
this Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to
II-3
<PAGE>
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE>
POWER OF ATTORNEY
The Registrant and each person whose signature appears below hereby
appoints Sanford Greenberg and Peter Boneparth as attorneys-in-fact with full
power of substitution, severally, to execute in the name and on behalf of the
Registrant and each such person, individually and in each capacity stated below,
one or more post-effective amendments to this Registration Statement as the
attorney-in-fact acting in the premises deems appropriate and to file any such
amendment to this Registration Statement with the Securities and Exchange
Commission.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on the 5th day of August,
1998.
NORTON MCNAUGHTON, INC.
By: /s/ Sanford Greenberg
---------------------------
Sanford Greenberg
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Sanford Greenberg Chairman of the Board, August 5, 1998
- ----------------------------
Sanford Greenberg Chief Executive Officer
and Director (Principal
Executive Officer)
/s/ Peter Boneparth President, Chief August 5, 1998
- ----------------------------
Peter Boneparth Operating Officer
and Director
(Principal Operating
Officer)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Amanda J. Bokman Chief Financial August 5, 1998
- ---------------------
Amanda J. Bokman Officer, Vice President,
Secretary, Treasurer and
Director (Principal
Financial Officer)
/s/ Laura Lentini Assistant Secretary and August 5, 1998
- ---------------------
Controller (Principal
Accounting Officer)
_____________________ Director August __, 1998
David M. Blumberg
_____________________ Director August __, 1998
Stuart Bregman
/s/ Bradley P. Cost Director August 5, 1998
- ---------------------
Bradley P. Cost
_____________________ Director August __, 1998
Jerald S. Politzer
</TABLE>
II-6
<PAGE>
CONSENT OF COUNSEL
The consent of Haythe & Curley is contained in their opinion filed as
Exhibit 5 to this Registration Statement.
II-7
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration
statement on Form S-8 of Norton McNaughton, Inc. pertaining to the Norton
McNaughton, Inc. 1998 Long Term Incentive Plan, Stock Option Plan for Non-
employee Directors and Option Bonus Plan for Senior Executives of JJ Acquisition
Corp. of our report dated January 30, 1998, with respect to the consolidated
financial statements and schedules of Norton McNaughton, Inc. included in its
Annual Report (Form 10-K, as amended) for the year ended November 1, 1997 filed
with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
New York, New York
August 5, 1998
II-8
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration
statement on Form S-8 of Norton McNaughton, Inc. pertaining to the Norton
McNaughton, Inc. 1998 Long Term Incentive Plan, Stock Option Plan for Non-
employee Directors and Option Bonus Plan for Senior Executives of JJ Acquisition
Corp. of our report dated February 27, 1998, with respect to the combined
financial statements of Jeri-Jo Knitwear Inc. and Affiliate included in Norton
McNaughton, Inc.'s Form 8-K dated August 5, 1998 filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
New York, New York
August 5, 1998
II-9
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
registration statement on Form S-8 of Norton McNaughton, Inc. of our report
dated April 16, 1997, relating to the financial statements of Miss Erika, Inc.,
which appears in the Current Report on Form 8-K/A of Norton McNaughton, Inc.
filed with the Securities and Exchange Commission on December 15, 1997.
/s/ PricewaterhouseCoopers LLP
New York, New York
August 5, 1998
II-10
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration
statement on Form S-8 of Norton McNaughton, Inc. pertaining to the Norton
McNaughton, Inc. 1998 Long Term Incentive Plan, Stock Option Plan for Non-
employee Directors and Option Bonus Plan for Senior Executives of JJ Acquisition
Corp. of our report dated February 14, 1997, with respect to the combined
financial statements of Jeri-Jo Knitwear Inc. and Affiliate included in Norton
McNaughton, Inc.'s Form 8-K dated August 5, 1998 filed with the Securities and
Exchange Commission.
/s/ Friedman, Alpren & Green LLP
New York, New York
August 5, 1998
II-11
<PAGE>
INDEX TO EXHIBITS
Number Description of Exhibit Page
------ ---------------------- ----
4(i) - Norton McNaughton, Inc. 1998
Long Term Incentive Plan (the
"1998 Long Term Plan")
4(ii) - Form of a Qualified Stock Option
Certificate under the 1998 Long
Term Plan
4(iii) - Form of a Non-Qualified Stock
Option Certificate under the
1998 Long Term Plan
4(iv) - Norton McNaughton, Inc. Stock
Option Plan For Non-Employee
Directors (the "Non-Employee
Director Plan")
4(v) - Form of Stock Option Certificate
under the Non-Employee Director
Plan
4(vi) - Norton McNaughton, Inc. Option
Bonus Plan For Senior Executives
of JJ Acquisition Corp. (the
"Option Bonus Plan")
4(vii) - Employment Agreement dated as of
June 18, 1998 by and between JJ
Acquisition Corp. and Susan
Schneider ("Susan Schneider
Agreement"), including the form
of non-qualified stock option
certificate attached as Exhibit
A thereto
4(viii) - Employment Agreement dated as of
June 18, 1998 by and between JJ
Acquisition Corp. and Leslie
Schneider ("Leslie Schneider
Agreement"), including the form
of non-qualified stock option
certificate attached as Exhibit
A thereto
II-12
<PAGE>
Number Description of Exhibit Page
------ ---------------------- ----
4(ix) - Employment Agreement dated as of
June 18, 1998 by and between JJ
Acquisition Corp. and Scott
Schneider ("Scott Schneider
Agreement"), including the form
of non-qualified stock option
certificate attached as Exhibit
A thereto
5 - Opinion of Haythe & Curley --
23(i) - Consent of Ernst & Young LLP, --
Independent Auditors (see
"Consent of Independent
Auditors" in the Registration
Statement)
23(ii) - Consent of Ernst & Young LLP, --
Independent Auditors (see
"Consent of Independent
Auditors" in the Registration
Statement)
23(iii) - Consent of Price Waterhouse --
Coopers LLP, Independent
Auditors (see "Consent of
Independent Auditors" in the
Registration Statement)
23(iv) - Consent of Friedman Alpren & --
Green LLP, Independent Auditors
(see "Consent of Independent
Auditors" in the Registration
Statement)
23(v) - Consent of Haythe & Curley --
(contained in Exhibit 5)
24 - Power of Attorney (see "Power of --
Attorney" in the Registration
Statement)
II-13
<PAGE>
Exhibit 4(i)
NORTON MCNAUGHTON, INC.
1998 LONG TERM INCENTIVE PLAN
SECTION 1. Purpose. The purposes of this Norton McNaughton, Inc.
1998 Long Term Incentive Plan (the "Plan") are to encourage selected employees,
officers, directors and consultants of, and other individuals providing services
to, Norton McNaughton, Inc. (together with any successor thereto, the "Company")
and its Affiliates (as defined below) to acquire a proprietary interest in the
growth and performance of the Company, to generate an increased incentive to
contribute to the Company's future success and prosperity thus enhancing the
value of the Company for the benefit of its stockholders, and to enhance the
ability of the Company and its Affiliates to attract and retain exceptionally
qualified individuals upon whom, in large measure, the sustained progress,
growth and profitability of the Company depend.
SECTION 2. Definitions. As used in the Plan, the following terms
shall have the meanings set forth below:
"Affiliate" shall mean (i) any entity that, directly or through one or
more intermediaries, is controlled by the Company and (ii) any entity in which
the Company has a significant equity interest, as determined by the Committee.
"Award" shall mean any Option, Stock Appreciation Right, Restricted
Security, Performance Award, or Other Stock-Based Award granted under the Plan.
"Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan.
"Board" shall mean the Board of Directors of the Company.
"Cause", as used in connection with the termination of a Participant's
employment, shall mean (i) with respect to any Participant employed under a
written employment agreement with the Company or an Affiliate of the Company
which agreement includes a definition of "cause," "cause" as defined in such
agreement or, if such agreement contains no such definition, a material breach
by the Participant of such agreement, or (ii) with respect to any other
Participant, the failure to perform adequately in carrying out such
Participant's employment responsibilities, including any directives from the
Board, or engaging in such
<PAGE>
behavior in his personal or business life as to lead the Committee in its
reasonable judgment to determine that it is in the best interests of the Company
to terminate his employment.
"Common Stock" shall mean the common stock of the Company, $.01 par
value.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated thereunder.
"Committee" shall mean the Stock Option Committee or any other
committee of the Board designated by the Board to administer the Plan and
composed of not less than two non-employee directors.
"Common Shares" shall mean any or all, as applicable, of the Common
Stock and such other securities or property as may become the subject of Awards,
or become subject to Awards, pursuant to an adjustment made under Section 4(b)
of the Plan and any other securities of the Company or any Affiliate or any
successor that may be so designated by the Committee.
"Employee" shall mean any employee of the Company or of any Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean (A) with respect to any property other
than the Common Shares, the fair market value of such property determined by
such methods or procedures as shall be established from time to time by the
Committee; and (B) with respect to the Common Shares, the last sale price
regular way on the date of reference, or, in case no sale takes place on such
date, the average of the high bid and low asked prices, in either case on the
principal national securities exchange on which the Common Shares are listed or
admitted to trading, or if the Common Shares are not listed or admitted to
trading on any national securities exchange, the last sale price reported on the
National Market System of the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") on such date, or the average of the
closing high bid and low asked prices in the over-the-counter market reported on
NASDAQ on such date, whichever is applicable, or if there are no such prices
reported on NASDAQ on such date, as furnished to the Committee by any New York
Stock Exchange member selected from time to time by the Committee for such
purpose. If there is no bid or asked price reported on any such date, the Fair
Market Value shall be determined by the
2
<PAGE>
Committee in accordance with the regulations promulgated under Section 2031 of
the Code, or by any other appropriate method selected by the Committee.
"Good Reason", as used in connection with the termination of a
Participant's employment, shall mean (i) with respect to any Participant
employed under a written employment agreement with the Company or an Affiliate
of the Company, "good reason" as defined in such written agreement or, if such
agreement contains no such definition, a material breach by the Company of such
agreement, or (ii) with respect to any other Participant, a failure by the
Company to pay such Participant any amount otherwise vested and due and a
continuation of such failure for 30 business days following notice to the
Company thereof.
"Incentive Stock Option" shall mean an option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of the
Code or any successor provision thereto.
"Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
Any stock option granted by the Committee which is not designated an Incentive
Stock Option shall be deemed a Non-Qualified Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
"Other Stock-Based Award" shall mean any right granted under Section
6(e) of the Plan.
"Participant" shall mean any individual granted an Award under the
Plan.
"Performance Award" shall mean any right granted under Section 6(d) of
the Plan.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.
"Released Securities" shall mean securities that were Restricted
Securities but with respect to which all applicable restrictions have expired,
lapsed or been waived in accordance with the terms of the Plan or the applicable
Award Agreement.
"Restricted Securities" shall mean any Common Shares granted under
Section 6(c) of the Plan, any right granted under Section 6(c) of the Plan that
is denominated
3
<PAGE>
in Common Shares or any other Award under which issued and outstanding Common
Shares are held subject to certain restrictions.
"Rule 16a-1" and "Rule 16b-3" shall mean Rule 16a-1 and Rule 16b-3,
respectively, promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor rule or regulation thereto as in effect from time
to time.
"Stock Appreciation Right" shall mean any right granted under Section
6(b) of the Plan.
SECTION 3. Administration. The Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, and in addition
to other express powers and authorizations conferred on the Committee by the
Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to an
eligible Employee or other individual under the Plan; (iii) determine the number
and classification of Common Shares to be covered by (or with respect to which
payments, rights or other matters are to be calculated in connection with)
Awards; (iv) determine the terms and conditions of any Award; (v) determine
whether, to what extent, and under what circumstances Awards may be settled or
exercised in cash, Common Shares, other securities, other Awards or other
property, or canceled, forfeited or suspended, and the method or methods by
which Awards may be settled, exercised, canceled, forfeited or suspended; (vi)
determine requirements for the vesting of Awards or performance criteria to be
achieved in order for Awards to vest; (vii) determine whether, to what extent
and under what circumstances cash, Common Shares other securities, other Awards,
other property and other amounts payable with respect to an Award under the Plan
shall be deferred either automatically or at the election of the holder thereof
or of the Committee; (viii) interpret and administer the Plan and any instrument
or agreement relating to, or Award made under, the Plan; (ix) establish, amend,
suspend or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and (x) make any
other determination and take any other action that the Committee deems necessary
or desirable for the administration of the Plan. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be
final, conclusive and binding upon all Persons, including the Company, any
Affiliate, any Participant, any holder or beneficiary of any Award, any
shareholder and any Employee. Notwithstanding the foregoing,
4
<PAGE>
the maximum number of Awards which may be granted to any one Participant under
this Plan in any one-year period shall not exceed 150,000 Common Shares, subject
to the adjustments provided in Section 4(b) hereof and no Awards under this Plan
shall be granted after June 30, 2008.
SECTION 4. Common Shares Available for Awards.
(a) Common Shares Available. Subject to adjustment as provided in
Section 4(b):
(i) Calculation of Number of Common Shares Available. The number
of Common Shares available for granting Awards under the Plan shall be 300,000,
any or all of which may be or may be based on Common Stock, any other security
which becomes the subject of Awards, or any combination thereof. Initially
300,000 shares of Common Stock shall be reserved for Awards hereunder. Further,
if, after the effective date of the Plan, any Common Shares covered by an Award
granted under the Plan or to which such an Award relates, are forfeited, or if
an Award otherwise terminates or is canceled without the delivery of Shares or
of other consideration, then the Common Shares covered by such Award or to which
such Award relates, or the number of Common Shares otherwise counted against the
aggregate number of Common Shares available under the Plan with respect to such
Award, to the extent of any such forfeiture, termination or cancellation, shall
again be, or shall become, available for granting Awards under the Plan.
(ii) Accounting for Awards. For purposes of this Section 4:
(A) if an Award is denominated in or based upon Common
Shares, the number of Common Shares covered by such Award or to which such Award
relates shall be counted on the date of grant of such Award against the
aggregate number of Common Shares available for granting Awards under the Plan
and against the maximum number of Awards available to any Participant; and
(B) Awards not denominated in Common Shares may be counted
against the aggregate number of Common Shares available for granting Awards
under the Plan and against the maximum number of Awards available to any
participant in such amount and at such time as the Committee shall determine
under procedures adopted by the Committee consistent with the purposes of the
Plan;
provided, however, that Awards that operate in tandem with (whether
granted simultaneously with or at a different time from), or that are
substituted for, other Awards may be counted or not counted under procedures
5
<PAGE>
adopted by the Committee in order to avoid double counting. Any Common Shares
that are delivered by the Company, and any Awards that are granted by, or become
obligations of, the Company, through the assumption by the Company or an
Affiliate of, or in substitution for, outstanding awards previously granted by
an acquired company shall, in the case of Awards granted to Participants who are
officers or directors of the Company for purposes of Section 16 of the Exchange
Act, be counted against the Common Shares available for granting Awards under
the Plan.
(iii) Sources of Common Shares Deliverable Under Awards. Any
Common Shares delivered pursuant to an Award may consist, in whole or in part,
of authorized and unissued Common Shares or of treasury Common Shares.
(b) Adjustments. In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash, Common Shares,
other securities or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Common Shares or other securities of the
Company, issuance of warrants or other rights to purchase Common Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Common Shares such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of Common Shares (or other securities or property) which
thereafter may be made the subject of Awards, (ii) the number and kind of Common
Shares (or other securities or property) subject to outstanding Awards, and
(iii) the grant or exercise price with respect to any Award or, if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
Award; provided, however, that the number of Common Shares subject to any Award
denominated in Common Shares shall always be a whole number.
In connection with any merger or consolidation in which the Company is
not the surviving corporation and which results in the holders of the
outstanding voting securities of the Company (determined immediately prior to
such merger or consolidation) owning less than a majority of the outstanding
voting securities of the surviving corporation (determined immediately following
such merger or consolidation), or any sale or transfer by the Company of all or
substantially all its assets or any tender offer or exchange offer for or the
acquisition, directly or indirectly, by any person or group of all or a majority
of
6
<PAGE>
the then outstanding voting securities of the Company, all outstanding Options
under the Plan shall become exercisable in full, notwithstanding any other
provision of the Plan or of any outstanding options granted thereunder, on and
after (i) the fifteenth day prior to the effective date of such merger,
consolidation, sale, transfer or acquisition or (ii) the date of commencement of
such tender offer or exchange offer, as the case may be. The provisions of the
foregoing sentence shall apply to any outstanding Options which are Incentive
Stock Options to the extent permitted by Section 422(d) of the Code and such
outstanding Options in excess thereof shall, immediately upon the occurrence of
the event described in clause (i) or (ii) of the foregoing sentence, be treated
for all purposes of the Plan as Non-Qualified Stock Options and shall be
immediately exercisable as such as provided in the foregoing sentence.
SECTION 5. Eligibility. Any Employee, including any officer or
employee-director of the Company or of any Affiliate, and any consultant of, or
other individual providing services to, the Company or any Affiliate shall be
eligible to be designated a Participant. A non-employee director shall be
eligible to receive Non-Qualified Stock Options under the Plan.
SECTION 6. Awards.
(a) Options. The Committee is hereby authorized to grant to eligible
individuals options to purchase Common Shares (each, an "Option") which shall
contain the following terms and conditions and with such additional terms and
conditions, in either case not inconsistent with the provisions of the Plan, as
the Committee shall determine:
(i) Exercise Price. The purchase price per Common Share
purchasable under an Option shall be determined by the Committee; provided,
however, that such purchase price shall not be less than the Fair Market Value
of a Common Share on the date of grant of such Option, or such other price as
required under Subsection 6(a)(iv) hereof.
(ii) Time and Method of Exercise. Subject to the terms of
Section 6(a)(iii), the Committee shall determine the time or times at which an
Option may be exercised in whole or in part, and the method or methods by which,
and the form or forms (including, without limitation, cash, Common Shares,
outstanding Awards, or other property, or any combination thereof, having a Fair
Market Value on the exercise date equal to the relevant exercise price) in
which, payment of the exercise price with respect thereto may be made or deemed
to have been made.
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<PAGE>
(iii) Exercisability Upon Death, Retirement and Termination of
Employment. Subject to the condition that no Option may be exercised in whole or
in part after the expiration of the Option period specified in the applicable
Award Agreement (or in the absence of an Award Agreement, June 30, 2008):
(A) Subject to the terms of paragraph (D) below, upon the
death of a Participant while employed or within 3 months of retirement or
disability as defined in paragraph (B) below, the person or persons to whom such
Participant's rights with respect to any Option held by such Participant are
transferred by will or the laws of descent and distribution may, prior to the
expiration of the earlier of: (1) the outside exercise date determined by the
Committee at the time of granting the Option, or (2) nine months after such
Participant's death, purchase any or all of the Common Shares with respect to
which such Participant was entitled to exercise such Option immediately prior to
such Participant's death, and any Options not so exercisable will lapse on the
date of such Participant's death;
(B) Subject to the terms of paragraph (D) below, upon
termination of a Participant's employment with the Company (x) as a result of
retirement pursuant to a retirement plan of the Company or an Affiliate or
disability (as determined by the Committee) of such Participant, (y) by the
Company other than for Cause, or (z) by the Participant with Good Reason, such
Participant may, prior to the expiration of the earlier of: (1) the outside
exercise date determined by the Committee at the time of granting the Option, or
(2) three months after the date of such termination or such later time as shall
be prescribed by the Committee, purchase any or all of the Common Shares with
respect to which such Participant was entitled to exercise any Options
immediately prior to such termination, and any Options not so exercisable will
lapse on such date of termination;
(C) Subject to the terms of paragraph (D) below, upon
termination of a Participant's employment with the Company under any
circumstances not described in paragraphs (A) or (B) above, such Participant's
Options shall be canceled to the extent not theretofore exercised;
(D) Upon (i) the death of the Participant, or (ii)
termination of the Participant's employment with the Company (x) by the Company
other than for Cause (y) by the Participant with Good Reason or (z) as a result
of retirement or disability as defined in paragraph (B) above, the Company shall
have the right to cancel all of the Options such Participant was entitled to
exercise at the time of such death or termination (subject to the terms of
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<PAGE>
paragraphs (A) or (B) above) for a payment in cash equal to the excess, if any,
of the Fair Market Value of one Common Share on the date of death or termination
over the exercise price of such Option for one Common Share times the number of
Common Shares subject to the Option and exercisable at the time of such death or
termination; and
(E) Upon expiration of the respective periods set forth in
each of paragraphs (A) through (C) above, the Options of a Participant who has
died or whose employment has been terminated shall be canceled to the extent not
theretofore canceled or exercised.
(F) For purposes of paragraphs (A) through (D) above, the
period of service of an individual as a director or consultant of the Company or
an Affiliate shall be deemed the period of employment.
(iv) Incentive Stock Options. The following provisions shall
apply only to Incentive Stock Options granted under the Plan:
(A) No Incentive Stock Option shall be granted to any
eligible Employee who, at the time such Option is granted, owns securities
possessing more than ten percent (10%) of the total combined voting power of all
classes of securities of the Company or of any Affiliate, except that such an
Option may be granted to such an Employee if at the time the Option is granted
the option price is at least one hundred ten percent (110%) of the Fair Market
Value of the Common Shares (determined in accordance with Section 2) subject to
the Option, and the Option by its terms is not exercisable after the expiration
of five (5) years from the date the Option is granted; and
(B) To the extent that the aggregate Fair Market Value of
the Common Shares with respect to which Incentive Stock Options (without regard
to this subsection) are exercisable for the first time by any individual during
any calendar year (under all plans of the Company and its Affiliates) exceeds
$100,000, such Options shall be treated as Non-Qualified Stock Options. This
subsection shall be applied by taking Options into account in the order in which
they were granted. If some but not all Options granted on any one day are
subject to this subsection, then such Options shall be apportioned between
Incentive Stock Option and Non-Qualified Stock Option treatment in such manner
as the Committee shall determine. For purposes of this subsection, the Fair
Market Value of any Common Shares shall be determined, in accordance with
Section 2, as of the date the Option with respect to such Common Shares is
granted.
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<PAGE>
(v) Other Terms and Conditions of Options. Notwithstanding any
provision contained in the Plan to the contrary, during any period when any
member of the Committee shall not be a "non-employee director" as defined in
Rule 16b-3, then, the terms and conditions of Options granted under the Plan to
any director or officer, as defined in Rule 16a-1, of the Company during such
period unless, other terms and conditions are approved in advance by the Board,
shall be as follows:
(A) The price at which each Common Share subject to an
option may be purchased shall, subject to any adjustments which may be made
pursuant to Section 4, in no event be less than the Fair Market Value of a
Common Share on the date of grant, and provided further that in the event the
option is intended to be an Incentive Stock Option and the optionee owns on the
date of grant securities possessing more than ten percent (10%) of the total
combined voting power of all classes of securities of the Company or of any
Affiliate, the price per share shall not be less than one hundred ten percent
(110%) of the Fair Market Value per Common Share on the date of grant.
(B) The Option may be exercised to purchase Common Shares
covered by the Option not sooner than six (6) months following the date of
grant. The Option shall terminate and no Common Shares may be purchased
thereunder more than ten (10) years after the date of grant, provided that if
the Option is intended to be an Incentive Stock Option and the Optionee owns on
the date of grant securities possessing more than ten percent (10%) of the total
combined voting power of all classes of securities of the Company or of any
Affiliate, the Option shall terminate and no Common Shares may be purchased
thereunder more than five (5) years after the date of grant.
(b) Stock Appreciation Rights. The Committee is hereby authorized to
grant to eligible Employees "Stock Appreciation Rights." Each Stock Appreciation
Right shall consist of a right to receive the excess of (i) the Fair Market
Value of one Common Share on the date of exercise or, if the Committee shall so
determine in the case of any such right other than one related to any Incentive
Stock Option, at any time during a specified period before or after the date of
exercise over (ii) the grant price of the right as specified by the Committee,
which shall not be less than one hundred percent (100%) of the Fair Market Value
of one Common Share on the date of grant of the Stock Appreciation Right (or, if
the Committee so determines, in the case of any Stock Appreciation Right
retroactively granted in tandem with or in substitution for another Award, on
the date of grant of such other Award). Subject to the terms of the Plan and any
applicable Award Agreement, the grant price, term,
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methods of exercise, methods of settlement, and any other terms and conditions
of any Stock Appreciation Right granted under the Plan shall be as determined by
the Committee. The Committee may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it may deem appropriate.
(c) Restricted Securities.
(i) Issuance. The Committee is hereby authorized to grant to
eligible Employees "Restricted Securities" which shall consist of the right to
receive, by purchase or otherwise, Common Shares which are subject to such
restrictions as the Committee may impose (including, without limitation, any
limitation on the right to vote such Common Shares or the right to receive any
dividend or other right or property), which restrictions may lapse separately or
in combination at such time or times, in such installments or otherwise, as the
Committee may deem appropriate.
(ii) Registration. Restricted Securities granted under the Plan
may be evidenced in such manner as the Committee may deem appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates. In the event any stock certificate is issued in
respect of Restricted Securities granted under the Plan, such certificate shall
be registered in the name of the Participant and shall bear an appropriate
legend referring to the terms, conditions and restrictions applicable to such
Restricted Securities.
(iii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of a Participant's employment for any reason during
the applicable restriction period, all of such Participant's Restricted
Securities which had not become Released Securities by the date of termination
of employment shall be forfeited and reacquired by the Company; provided,
however, that the Committee may, when it finds that a waiver would be in the
best interests of the Company, waive in whole or in part any or all remaining
restrictions with respect to such Participant's Restricted Securities.
Unrestricted Common Shares, evidenced in such manner as the Committee shall deem
appropriate, shall be issued to the holder of Restricted Securities promptly
after such Restricted Securities become Released Securities.
(d) Performance Awards. The Committee is hereby authorized to grant
to eligible Employees "Performance Awards." Each Performance Award shall consist
of a right, (i) denominated or payable in cash, Common Shares, other securities
or other property (including, without limitation,
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<PAGE>
Restricted Securities), and (ii) which shall confer on the holder thereof rights
valued as determined by the Committee and payable to, or exercisable by, the
holder of the Performance Award, in whole or in part, upon the achievement of
such performance goals during such performance periods as the Committee shall
establish. Subject to the terms of the Plan and any applicable Award Agreement,
the performance goals to be achieved during any performance period, the length
of any performance period, the amount of any Performance Award granted, the
termination of a Participant's employment and the amount of any payment or
transfer to be made pursuant to any Performance Award shall be determined by the
Committee and by the other terms and conditions of any Performance Award. The
Committee shall issue performance goals prior to the commencement of the
performance period to which such performance goals pertain.
(e) Other Stock-Based Awards. The Committee is hereby authorized to
grant to eligible Employees "Other Stock Based Awards." Each Other Stock-Based
Award shall consist of a right (i) which is other than an Award or right
described in Section 6(a), (b), (c) or (d) above and (ii) which is denominated
or payable in, valued in whole or in part by reference to, or otherwise based on
or related to, Common Shares (including, without limitation, securities
convertible into Common Shares) as are deemed by the Committee to be consistent
with the purposes of the Plan; provided, however, that such right shall comply,
to the extent deemed desirable by the Committee, with Rule 16b-3 and applicable
law. Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the terms and conditions of Other Stock-Based Awards.
Common Shares or other securities delivered pursuant to a purchase right granted
under this Section 6(e) shall be purchased for such consideration, which may be
paid by such method or methods and in such form or forms, including, without
limitation, cash, Common Shares, other securities, other Awards, other property,
or any combination thereof, as the Committee shall determine.
(f) General.
(i) No Cash Consideration for Awards. Awards may be
granted for no cash consideration or for such minimal cash consideration as may
be required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards
may, in the discretion of the Committee, be granted either alone or in addition
to, in tandem with, or in substitution for any other Award, except that in no
event shall an Incentive Stock Option be granted together with a Non-Qualified
Stock Option in such a manner that the
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exercise of one Option affects the right to exercise the other.
Awards granted in addition to or in tandem with other Awards may be
granted either at the same time as or at a different time from the grant of such
other awards.
(iii) Forms of Payment Under Awards. Subject to the terms of the
Plan and of any applicable Award Agreement, payments or transfers to be made by
the Company or an Affiliate upon the grant, exercise or payment of an Award may
be made in such form or forms as the Committee shall determine, including,
without limitation, cash, Common Shares, other securities, other Awards, or
other property, or any combination thereof, and may be made in a single payment
or transfer, in installments, or on a deferred basis, in each case in accordance
with rules and procedures established by the Committee. Such rules and
procedures may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred payments. In
accordance with the above, the Committee may elect (i) to pay a Participant (or
such Participant's permitted transferee) upon the exercise of an Option in whole
or in part, in lieu of the exercise thereof and the delivery of Common Shares
thereunder, an amount of cash equal to the excess, if any, of the Fair Market
Value of one Common Share on the date of such exercise over the exercise price
of such Option for one Common Share times the number of Common Shares subject to
the Option or portion thereof so exercised or (ii) to settle other stock
denominated Awards in cash.
(iv) Limits on Transfer of Awards.
(A) No award (other than Released Securities), and no right
under any such Award, may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a Participant otherwise than by will or
by the laws of descent and distribution (or, in the case of Restricted
Securities, to the Company) and any such purported assignment, alienation,
pledge, attachment, sale or other transfer or encumbrance shall be void and
unenforceable against the Company or any Affiliate.
(B) Each award, and each right under any Award, shall be
exercisable during the Participant's lifetime only by the Participant or, if
permissible under applicable law, by the Participant's guardian or legal
representative.
(v) Terms of Awards. The term of each Award shall be for such period
as may be determined by the Committee; provided, however, that in no event shall
the
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<PAGE>
term of any Option exceed a period of ten years from the date of its grant.
(vi) Rule 16b-3 Six-Month Limitations. To the extent required
in order to maintain the exemption provided under Rule 16b-3 only, any equity
security offered pursuant to the Plan must be held for at least six months after
the date of grant, and with respect to any derivative security issued pursuant
to the Plan, at least six months must elapse from the date of acquisition of
such derivative security to the date of disposition of the derivative security
(other than upon exercise or conversion) or its underlying equity security.
Terms used in the preceding sentence shall, for the purposes of such sentence
only, have the meanings, if any, assigned or attributed to them under Rule 16b-
3.
(vii) Common Share Certificates. All certificates for Common
Shares delivered under the Plan pursuant to any Award or the exercise thereof
shall be subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the Plan or the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which such Common Shares are then listed, and any applicable Federal or state
securities laws, and the Committee may cause a legend or legends to be put on
any such certificates to make appropriate reference to such restrictions.
(viii) Delivery of Common Shares or Other Securities and Payment
by Participant of Consideration. No Common Shares or other securities shall be
delivered pursuant to any Award until payment in full of any amount required to
be paid pursuant to the Plan or the applicable Award Agreement is received by
the Company. Such payment may be made by such method or methods and in such form
or forms as the Committee shall determine, including, without limitation, cash,
Common Shares, other securities, other Awards or other property, or any
combination thereof; provided that the combined value, as determined by the
Committee, of all cash and cash equivalents and the Fair Market Value of any
such Common Shares or other property so tendered to the Company, as of the date
of such tender, is at least equal to the full amount required to be paid
pursuant to the Plan or the applicable Award Agreement to the Company.
SECTION 7. Amendments; Adjustments and Termination. Except to the
extent prohibited by applicable law and unless otherwise expressly provided in
an Award Agreement or in the Plan:
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<PAGE>
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of any stockholder,
Participant, other holder or beneficiary of an Award, or other Person; provided,
however, that, subject to the Company's rights to adjust Awards under Sections
7(c) and (d), any amendment, alteration, suspension, discontinuation, or
termination that would impair the rights of any Participant, or any other holder
or beneficiary of any Award theretofore granted, shall not to that extent be
effective without the consent of such Participant, other holder or beneficiary
of an Award, as the case may be; and provided further, however, that
notwithstanding any other provision of the Plan or any Award Agreement, without
the approval of the stockholders of the Company no such amendment, alteration,
suspension, discontinuation, or termination shall be made that would:
(i) increase the total number of Common Shares available for
Awards under the Plan, except as provided in Section 4 hereof; or
(ii) otherwise cause the Plan to cease to comply with any tax or
regulatory requirement, including for these purposes any approval or other
requirement which is or would be a prerequisite for exemptive relief from
Section 16(b) of the Exchange Act.
(b) Amendments to Awards. The Committee may waive any conditions or
rights under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, any Award theretofore granted, prospectively or retroactively;
provided, however, that, subject to the Company's rights to adjust Awards under
Sections 7(c) and (d), any amendment, alteration, suspension, discontinuation,
cancellation or termination that would impair the rights of any Participant or
holder or beneficiary of any Award theretofore granted, shall not to that extent
be effective without the consent of such Participant or holder or beneficiary of
an Award, as the case may be.
(c) Adjustment of Awards Upon Certain Acquisitions. In the event the
Company or any Affiliate shall assume outstanding employee awards or the right
or obligation to make future such awards in connection with the acquisition of
another business or another corporation or business entity, the Committee may
make such adjustments, not inconsistent with the terms of the Plan, in the terms
of Awards as it shall deem appropriate in order to achieve reasonable
comparability or other equitable relationship between the assumed awards and the
Awards granted under the Plan as so adjusted.
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<PAGE>
(d) Adjustments of Awards Upon the Occurrence of Certain Unusual or
Non-recurring Events. The Committee is hereby authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in recognition
of unusual or non-recurring events (including, without limitation, the events
described in Section 4(b) hereof) affecting the Company, any Affiliate, or the
financial statements of the Company or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
SECTION 8. General Provisions.
(a) No Right to Awards. No Employee or other Person shall have any
claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Employees, or holders or beneficiaries of Awards
under the Plan. The terms and conditions of Awards need not be the same with
respect to each recipient.
(b) Delegation. Subject to the terms of the Plan and applicable law,
the Committee may delegate to one or more officers or managers of the Company or
any Affiliate, or to a committee of such officers or managers, the authority,
subject to such terms and limitations as the Committee shall determine, to grant
Awards to, or to cancel, modify, waive rights with respect to, alter,
discontinue, suspend, or terminate Awards; provided, however, that, no such
delegation shall be permitted with respect to Awards held by Employees who are
officers or directors of the Company for purposes of Section 16 of the Exchange
Act, or any successor section thereto or who are otherwise subject to such
Section.
(c) Correction of Defects, Omissions, and Inconsistencies. The
Committee may correct any defect, supply any omission, or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry the Plan into effect.
(d) Withholding. The Company or any Affiliate shall be authorized to
withhold from any Award granted, from any payment due or transfer made under any
Award or under the Plan or from any compensation or other amount owing to a
Participant the amount (in cash, Common Shares, other securities, other Awards,
or other property) of withholding taxes due in respect of an Award, its
exercise, or any payment or transfer under such Award or under the Plan and to
take such other action as may be necessary in the opinion
16
<PAGE>
of the Company or Affiliate to satisfy all obligations for the payment of such
taxes.
(e) No Limit on Other Compensation Arrangements. Nothing contained
in the Plan shall prevent the Company or any Affiliate from adopting or
continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.
(f) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment, free from any liability, or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
(g) Governing Law. The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware and applicable Federal law.
(h) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction
or as to any Person or Award under any law deemed applicable by the Committee,
such provision shall be construed or deemed amended to conform to applicable
laws, or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan or
the Award, such provision shall be stricken as to such jurisdiction, Person or
Award and the remainder of the Plan and any such Award shall remain in full
force and effect.
(i) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(j) No Fractional Common Shares. No fractional Common Shares shall
be issued or delivered pursuant to the Plan or any Award, and the Committee
shall determine whether cash, other securities, or other property shall be paid
or transferred in lieu of any fractional Common Shares or whether such
fractional Common Shares or any rights thereto shall be canceled, terminated, or
otherwise eliminated.
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(k) Headings. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 9. Adoption, Approval and Effective Date of the Plan. The
Plan shall be considered adopted and shall become effective on the date the Plan
is approved by the Board; provided, however, that the Plan and any Awards
granted under the Plan shall be void, if the stockholders of the Company shall
not have approved the adoption of the Plan within twelve (12) months after the
effective date, by a majority of votes cast thereon at a meeting of stockholders
duly called and held for such purpose.
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Exhibit 4(ii)
NORTON MCNAUGHTON, INC.
Incentive Stock Option Certificate
Under the
1998 Long Term Incentive Plan
-----------------------------
Date of Grant:
Name of Optionee:
Number of Shares:
Price Per Share:
This is to certify that, effective on the date of grant specified
above, the Stock Option Committee (the "Committee") of the Board of Directors of
Norton McNaughton, Inc. (the "Company") has granted to the above-named optionee
(the "Optionee") an option to purchase from the Company, for the price per share
set forth above, the number of shares of Common Stock, $.01 par value per share
(the "Stock"), of the Company set forth above pursuant to the Norton McNaughton,
Inc. 1998 Long Term Incentive Plan (the "Plan"). Capitalized terms used and not
otherwise defined herein shall have the meaning set forth in the Plan. This
option is intended to be treated as an Incentive Stock Option within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The terms and conditions of the option granted hereby, in addition to
the terms and conditions contained in the Plan, are as follows:
<PAGE>
1. The price at which each share of Stock subject to this option may
be purchased shall be the price set forth above, subject to any adjustments
which may be made pursuant to Section 9 hereof, provided that it shall in no
event be less than the Fair Market Value per share of Stock on the date of
grant, and provided further that in the event the Optionee owns on the date of
grant securities possessing more than ten percent (10%) of the total combined
voting power of all classes of securities of the Company or of an Affiliate, the
price per share shall not be less than one hundred ten percent (110%) of the
Fair Market Value per share of Stock on the date of grant.
2. Subject to the terms and conditions set forth herein, this option
may be exercised at any time to purchase shares of Stock covered by this option
only in accordance with the following schedule:
Cumulative Percentage
of Aggregate Number of
Shares of Stock Covered
by Option Which May Be
Exercise Period Purchased
--------------- -----------------------
Within one year from date of
grant........................ 0%
Beginning one year from date
of grant..................... 33 1/3%
Beginning two years from date
of grant..................... 66 2/3%
Beginning three years from date
of grant..................... 100%
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<PAGE>
less, in the case of each exercise period, the number of shares of Stock, if
any, previously purchased hereunder. This option shall terminate and no shares
of Stock may be purchased hereunder more than ten (10) years after the date of
grant, provided that if the Optionee owns on the date of grant securities
possessing more than ten percent (10%) of the total combined voting power of all
classes of securities of the Company or of an Affiliate, this Option shall
terminate and no shares of Stock may be purchased hereunder more than five (5)
years after the date of grant.
3. Except as provided in Section 7 hereof, this option may not be
exercised unless the Optionee is in the employ of the Company or a subsidiary
at the time of such exercise and shall have been such an employee continuously
since the date of grant of this option.
4. Subject to the terms and conditions set forth herein, the
Optionee may exercise this option at any time as to all or any of the shares of
Stock by delivering to the Company written notice specifying:
(i) the number of whole shares of Stock to be purchased together
with payment in full of the aggregate option price of such shares, provided
that this option may not be exercised for less than ten (10) shares of Stock
or the number of shares of Stock remaining subject to option, whichever is
smaller;
(ii) the name or names in which the stock certificate or certificates
are to be registered;
(iii) the address to which dividends, notices, reports, etc. are to
be sent; and
(iv) the Optionee's social security number.
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Only one stock certificate will be issued unless the Optionee otherwise requests
in writing. Payment shall be in cash, or by certified or bank cashier's check
payable to the order of the Company, free from all collection charges. If the
Optionee so requests, shares of Stock purchased upon exercise of an option may
be issued in the name of the Optionee or another person. No Optionee shall be
entitled to any rights as a stockholder of the Company in respect of any shares
of Stock covered by this option until such shares of Stock shall have been paid
for in full and issued to the Optionee.
5. As soon as practicable after the Company receives payment for
shares of Stock covered by this option, it shall deliver a certificate or
certificates representing the shares of Stock so purchased to the Optionee.
Such certificate shall be registered in the name of the Optionee, or in such
other name or names as the Optionee shall request.
6. This option is personal to the Optionee and during the Optionee's
lifetime may be exercised only by the Optionee. This option shall not be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by the Optionee otherwise than by will or by the laws of descent and
distribution and any such purported assignment, alienation, pledge, attachment,
sale or other transfer or encumbrance shall be void and unenforceable against
the Company or any Affiliate.
4
<PAGE>
7. Subject to the condition that this option shall in no event be
exercisable after the date of termination of such option specified in Section 2
hereof:
(i) Subject to the terms of paragraph (iv) below, upon the death of
the Optionee while employed or within three (3) months of retirement or
disability as defined in paragraph (ii) below, the person or persons to whom
the Optionee's rights with respect to this option are transferred by will or
the laws of descent and distribution may, prior to the earlier of: (1) the
expiration date of this option, or (2) nine (9) months after the Optionee's
death, purchase any or all of the Stock with respect to which the Optionee
was entitled to exercise this option immediately prior to the Optionee's
death, and this option will lapse on the date of the Optionee's death to the
extent not so exercisable;
(ii) Subject to the terms of paragraph (iv) below, upon termination
of the Optionee's employment with the Company (x) as a result of retirement
pursuant to a retirement plan of the Company or an Affiliate or disability
(as determined by the Committee) of the Optionee, (y) by the Company other
than for Cause, or (z) by the Optionee with Good Reason, the Optionee may,
prior to the earlier of: (1) the expiration date of this option, or (2)
three (3) months after the date of such termination, purchase any or all of
the Stock with respect to which the Optionee was entitled to exercise this
option immediately prior to such termination, and this option will lapse on
such date of termination to the extent not so exercisable;
(iii) Subject to the terms of paragraph (iv) below, upon termination
of the Optionee's employment with the Company under any circumstances not
described in paragraphs (i) or (ii) above, this option shall be canceled to
the extent not theretofore exercised;
(iv) Upon the death of the Optionee, or termination of the
Optionee's employment with the Company (x) by the Company other than for
Cause (y) by the Optionee with Good Reason or (z) as a result of retirement
or disability as defined in paragraph (ii) above, the Company shall have the
right to cancel this option (subject to the terms of paragraphs (i) or (ii)
above) for a payment in cash equal to the excess, if any, of the Fair Market
Value of one share of Stock on the date of death or termination over the
exercise price of this option for one share of Stock times the number of
shares of Stock subject to this Option and
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<PAGE>
exercisable at the time of such death or termination; and
(v) Upon expiration of the respective periods set forth in each of
paragraphs (i) through (iii) above, the option of an Optionee who has died
or whose employment has been terminated shall be canceled to the extent not
theretofore canceled or exercised.
8. This option does not confer on the Optionee any right to continue
in the employ of the Company or interfere in any way with the right of the
Company to determine the terms of the Optionee's employment.
9. In the event that the Committee shall determine that any dividend
or other distribution (whether in the form of cash, Common Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Stock, or other similar corporate transaction or event
affects the Stock such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under this option, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of Shares of Stock subject to this option and (ii) the
exercise price of this option.
10. In connection with any merger or consolidation in which the
Company is not the surviving corporation and which results in the holders of the
outstanding voting
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securities of the Company (determined immediately prior to such merger or
consolidation) owning less than a majority of the outstanding voting securities
of the surviving corporation (determined immediately following such merger or
consolidation), or any sale or transfer by the Company of all or substantially
all of its assets or any tender offer or exchange offer for or the acquisition,
directly or indirectly, by any person or group of all or a majority of the then
outstanding voting securities of the Company, this option shall become
exercisable in full, notwithstanding any other provision of the Plan or of any
outstanding Options granted thereunder, on and after (i) the fifteenth day prior
to the effective date of such merger, consolidation, sale, transfer or
acquisition or (ii) the date of commencement of such tender offer or exchange
offer, as the case may be. The provisions of the foregoing sentence shall apply
to any outstanding Options which are Incentive Stock Options to the extent
permitted by Section 422(d) of the Code and such outstanding Options in excess
thereof shall, immediately upon the occurrence of the event described in clause
(i) or (ii) of the foregoing sentence, be treated for all purposes of the Plan
as Non-Qualified Stock Options and shall be immediately exercisable as such as
provided in the foregoing sentence. Notwithstanding the foregoing, in no event
shall this option be exercisable after the date of termination of the exercise
period of this option specified in Sections 2 and 7 hereof.
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<PAGE>
11. This option shall be subject to the requirement that if at any
time the Board of Directors shall determine that the registration, listing or
qualification of the shares of Stock covered hereby upon any securities exchange
or under any federal or state law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the granting of this option or the purchase of shares of Stock
hereunder, this option may not be exercised unless and until such registration,
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Board of Directors. The Committee
may require that the person exercising this option shall make such
representations and agreements and furnish such information as it deems
appropriate to assure compliance with the foregoing or any other applicable
legal requirements.
12. This option and the terms and conditions herein set forth are
subject in all respects to the terms and conditions of the Plan, which shall be
controlling. All interpretations or determinations of the Committee shall be
binding and conclusive upon the Optionee and his legal representatives on any
question arising hereunder or under the Plan.
13. By acceptance of this option, the Optionee agrees that in the
event the Optionee sells or otherwise disposes of any shares of Stock subject to
this option on or
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prior to (i) the date two years from the date of the grant of this option, or
(ii) the date one year from the date of the transfer of any of such shares to
him pursuant to the exercise of this option or any portion thereof, the Optionee
shall promptly upon the occurrence of any such event (x) give notice to the
Company of the occurrence thereof, which notice shall specify the manner in
which such shares of Stock were sold or disposed of and the consideration
received therefor, (y) furnish to the Company such other information as may
reasonably be requested by the Company, and (z) pay to the Company, upon its
demand, such amount as may be requested by the Company for the purpose of
satisfying any liability to withhold federal, state or local income or other
taxes.
14. All notices hereunder to the Company shall be delivered or mailed
to the following address:
Norton McNaughton, Inc.
463 Seventh Avenue
New York, New York 10018
Attention: President
Such address for the service of notices may be changed at any time provided
notice of such change is furnished in advance to the Optionee.
NORTON MCNAUGHTON, INC.
By____________________________
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Exhibit 4(iii)
NORTON MCNAUGHTON, INC.
Stock Option Certificate
Under the
1998 Long Term Incentive Plan
-----------------------------
Date of Grant:
Name of Optionee:
Number of Shares:
Price Per Share:
This is to certify that, effective on the date of grant specified
above, the Stock Option Committee (the "Committee") of the Board of Directors of
Norton McNaughton, Inc. (the "Company") has granted to the above-named optionee
(the "Optionee") an option to purchase from the Company, for the price per share
set forth above, the number of shares of Common Stock, $.01 par value per share
(the "Stock"), of the Company set forth above pursuant to the Norton McNaughton,
Inc. 1998 Long Term Incentive Plan (the "Plan"). Capitalized terms used and not
otherwise defined herein shall have the meaning set forth in the Plan. This
option is not intended to be treated as an Incentive Stock Option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
<PAGE>
The terms and conditions of the option granted hereby, in addition to
the terms and conditions contained in the Plan, are as follows:
1. The price at which each share of Stock subject to this option may
be purchased shall be the price set forth above, subject to any adjustments
which may be made pursuant to Section 9 hereof. The amount set forth above is
the Fair Market Value per share of Stock on the date of grant.
2. Subject to the terms and conditions set forth herein, this option
may be exercised at any time to purchase shares of Stock covered by this option
only in accordance with the following schedule:
Cumulative Percentage
of Aggregate Number of
Shares of Stock Covered
by Option Which May Be
Exercise Period Purchased
--------------- -----------------------
Within one year from date of
grant........................ 0%
Beginning one year from date
of grant..................... 33 1/3%
Beginning two years from date
of grant..................... 66 2/3%
Beginning three years from date
of grant..................... 100%
less, in the case of each exercise period, the number of shares of Stock, if
any, previously purchased hereunder. This option shall terminate and no
shares of Stock may be
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purchased hereunder more than ten (10) years after the date of grant.
3. Except as provided in Section 7 hereof, this option may not be
exercised unless the Optionee is in the employ of the Company or an Affiliate at
the time of such exercise and shall have been such an employee continuously
since the date of grant of this option. For purposes of this option, service as
a director, officer or consultant of the Company or an Affiliate shall be
considered employment.
4. Subject to the terms and conditions set forth herein, the
Optionee may exercise this option at any time as to all or any of the shares of
Stock by delivering to the Company written notice specifying:
(i) the number of whole shares of Stock to be purchased together
with payment in full of the aggregate option price of such shares, provided
that this option may not be exercised for less than ten (10) shares of Stock
or the number of shares of Stock remaining subject to option, whichever is
smaller;
(ii) the name or names in which the stock certificate or
certificates are to be registered;
(iii) the address to which dividends, notices, reports, etc. are to
be sent; and
(iv) the Optionee's social security number.
Only one stock certificate will be issued unless the Optionee otherwise requests
in writing. Payment shall be in cash, or by certified or bank cashier's check
payable to the order of the Company, free from all collection charges. If the
Optionee so requests, shares of Stock purchased upon exercise of an option may
be issued in the name of the
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Optionee or another person. No Optionee shall be entitled to any rights as a
stockholder of the Company in respect of any shares of Stock covered by this
option until such shares of Stock shall have been paid for in full and issued to
the Optionee.
5. As soon as practicable after the Company receives payment for
shares of Stock covered by this option, it shall deliver a certificate or
certificates representing the shares of Stock so purchased to the Optionee.
Such certificate shall be registered in the name of the Optionee, or in such
other name or names as the Optionee shall request.
6. This option is personal to the Optionee and during the Optionee's
lifetime may be exercised only by the Optionee. This option shall not be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by the Optionee otherwise than by will or by the laws of descent and
distribution and any such purported assignment, alienation, pledge, attachment,
sale or other transfer or encumbrance shall be void and unenforceable against
the Company or any Affiliate.
7. Subject to the condition that this option shall in no event be
exercisable after the date of termination of such option specified in Section 2
hereof:
(i) Subject to the terms of paragraph (iv) below, upon the death of
the Optionee while employed or within three (3) months of retirement or
disability as defined in paragraph (ii) below, the person or persons to whom
the Optionee's rights with respect to this option are
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<PAGE>
transferred by will or the laws of descent and distribution may, prior to
the earlier of: (1) the expiration date of this option, or (2) nine (9)
months after the Optionee's death, purchase any or all of the Stock with
respect to which the Optionee was entitled to exercise this option
immediately prior to the Optionee's death, and this option will lapse on the
date of the Optionee's death to the extent not so exercisable;
(ii) Subject to the terms of paragraph (iv) below, upon termination of
the Optionee's employment with the Company (x) as a result of retirement
pursuant to a retirement plan of the Company or an Affiliate or disability
(as determined by the Committee) of the Optionee, (y) by the Company other
than for Cause, or (z) by the Optionee with Good Reason, the Optionee may,
prior to the earlier of: (1) the expiration date of this option, or (2)
three (3) months after the date of such termination, purchase any or all of
the Stock with respect to which the Optionee was entitled to exercise this
option immediately prior to such termination, and this option will lapse on
such date of termination to the extent not so exercisable;
(iii) Subject to the terms of paragraph (iv) below, upon termination
of the Optionee's employment with the Company under any circumstances not
described in paragraphs (i) or (ii) above, this option shall be canceled to
the extent not theretofore exercised;
(iv) Upon the death of the Optionee, or termination of the Optionee's
employment with the Company (x) by the Company other than for Cause (y) by
the Optionee with Good Reason or (z) as a result of retirement or disability
as defined in paragraph (ii) above, the Company shall have the right to
cancel this option (subject to the terms of paragraphs (i) or (ii) above)
for a payment in cash equal to the excess, if any, of the Fair Market Value
of one share of Stock on the date of death or termination over the exercise
price of this option for one share of Stock times the number of shares of
Stock subject to this Option and exercisable at the time of such death or
termination; and
(v) Upon expiration of the respective periods set forth in each of
paragraphs (i) through (iii) above, the option of an Optionee who has died
or whose employment has been terminated shall be canceled to the extent not
theretofore canceled or exercised.
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<PAGE>
For purposes of this Section 7, the period of service of an individual
as a director or consultant of the Company or an Affiliate shall be deemed the
period of employment.
8. This option does not confer on the Optionee any right to continue
in the employ of the Company or any Affiliate or interfere in any way with the
right of the Company to determine the terms of the Optionee's employment.
9. In the event that the Committee shall determine that any dividend
or other distribution (whether in the form of cash, Stock, other securities or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Stock or other securities of the Company, issuance of
warrants or other rights to purchase Stock or other securities of the Company,
or other similar corporate transaction or event affects the Stock such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under this option, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and kind of Shares of
Stock subject to this option and (ii) the exercise price of this option.
10. In connection with any merger or consolidation in which the
Company is not the surviving corporation and
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<PAGE>
which results in the holders of the outstanding voting securities of the Company
(determined immediately prior to such merger or consolidation) owning less than
a majority of the outstanding voting securities of the surviving corporation
(determined immediately following such merger or consolidation), or any sale or
transfer by the Company of all or substantially all of its assets or any tender
offer or exchange offer for or the acquisition, directly or indirectly, by any
person or group of all or a majority of the then outstanding voting securities
of the Company, this option shall become exercisable in full, notwithstanding
any other provision of the Plan or of any outstanding Options granted
thereunder, on and after (i) the fifteenth day prior to the effective date of
such merger, consolidation, sale, transfer or acquisition or (ii) the date of
commencement of such tender offer or exchange offer, as the case may be.
Notwithstanding the foregoing, in no event shall this option be exercisable
after the date of termination of the exercise period of this option specified in
Sections 2 and 7 hereof.
11. This option shall be subject to the requirement that if at any
time the Board of Directors shall determine that the registration, listing or
qualification of the shares of Stock covered hereby upon any securities exchange
or under any federal or state law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the granting of this option or the purchase of shares of Stock
7
<PAGE>
hereunder, this option may not be exercised unless and until such registration,
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Board of Directors. The Committee
may require that the person exercising this option shall make such
representations and agreements and furnish such information as it deems
appropriate to assure compliance with the foregoing or any other applicable
legal requirements.
12. This option and the terms and conditions herein set forth are
subject in all respects to the terms and conditions of the Plan, which shall be
controlling. All interpretations or determinations of the Committee shall be
binding and conclusive upon the Optionee and his legal representatives on any
question arising hereunder or under the Plan.
13. It shall be a condition to the obligation of the Company to issue
shares of Stock upon exercise of this option, that the Optionee (or any
beneficiary or person entitled to act under Section 7 hereof) pay to the
Company, upon its demand, such amount as may be requested by the Company for the
purpose of satisfying any liability to withhold federal, state or local income
or other taxes.
14. All notices hereunder to the Company shall be delivered or mailed
to the following address:
Norton McNaughton, Inc.
463 Seventh Avenue
New York, New York 10018
Attn: President
8
<PAGE>
Such address for the service of notices may be changed at any time provided
notice of such change is furnished in advance to the Optionee.
NORTON MCNAUGHTON, INC.
By____________________________
9
<PAGE>
Exhibit 4(iv)
NORTON MCNAUGHTON, INC.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
ARTICLE I
PURPOSE
This Stock Option Plan for Non-Employee Directors (the "Plan") is designed
to advance the interest of Norton McNaughton, Inc. (the "Company") and its
stockholders by providing an incentive to each member of the Board of Directors
of the Company (the "Board"), who is not a full-time or part-time employee of
the Company or its parent or subsidiary corporations ("Non-Employee Director"),
to continue in the service of the Company and by creating a direct interest of
the Non-Employee Directors in the future success of the Company's operations by
granting to such persons options to acquire shares of the common stock of the
Company, par value $.01 per share (the "Common Stock"). As used herein,
"parent" shall mean a "parent corporation" as defined in Section 424(e) of the
Internal Revenue Code of 1986, as amended (the "Code"), and "subsidiary" shall
mean a "subsidiary corporation" as defined in Section 424(f) of the Code.
ARTICLE II
ADMINISTRATION
The Plan shall be administered by the Stock Option Committee of the Board or
such other committee as may be appointed by the Board from among its members to
administer the Plan (the "Committee"). The Committee shall consist of not less
than two Non-Employee Directors who are "disinterested persons" within the
meaning of Rule 16b-3(c)(2)(i) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Committee shall have authority to adopt such
rules and regulations and to make such determinations as are not inconsistent
with the Plan and are necessary or desirable for its implementation and
administration. All decisions, determinations and interpretations of the
Committee shall be final and binding on all optionees.
It is intended that the Plan be nondiscretionary for purposes of Rule 16b-3
under the Exchange Act, and the powers of the Committee under the Plan shall be
limited to ministerial and nondiscretionary acts which do not affect the status
of the Plan as nondiscretionary.
<PAGE>
ARTICLE III
STOCK
The shares to be optioned under the Plan ("Option Shares") shall be shares
of authorized but unissued Common Stock of the Company. The total number of
shares of Common Stock subject to awards of nonqualified stock options
("Options") granted under the Plan shall not exceed in the aggregate 100,000,
except as such number of shares shall be adjusted in accordance with the
provisions of Article X hereof. The Options granted under the Plan are not
intended to qualify as incentive stock options under Section 422 of the Code.
If an Option should expire, terminate or become unexercisable for any reason
without having been exercised in full, the unpurchased Option Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for the grant of other Options under the Plan.
ARTICLE IV
ELIGIBILITY OF PARTICIPANTS
Each Non-Employee Director shall be eligible to receive Options in
accordance with the provisions of the Plan.
ARTICLE V
ANNUAL AWARDS
On April 15th of each year (or the next business day following April 15th,
if April 15th is not a business day), commencing on April 15, 1998, each Non-
Employee Director shall be granted an Option to purchase 5,000 shares of Common
Stock, subject to adjustment as provided in Article X below (the "Annual
Award"). In the event that the number of shares of Common Stock available for
grants under the Plan is insufficient to grant the number of Options determined
as provided above, Options for the remaining number of shares of Common Stock
available for grant under the Plan shall be granted in equal amounts to each
Non-Employee Director. Notwithstanding the foregoing, any Non-Employee Director
may elect (1) to decline an Annual Award, or (2) to revoke a previous election
to decline an Annual Award, in either event, at any time prior to the date such
Annual Award would otherwise be made. A Non-Employee Director who elects to
decline an Annual Award will receive no compensation in lieu of such Annual
Award (either at the time of such election or at any time thereafter).
2
<PAGE>
Upon the grant of each Annual Award, the Company shall deliver a stock
option certificate to each Non-Employee Director, which shall specify the date
of grant and the Option Price, as defined herein, and shall include or
incorporate by reference the substance of all of the provisions set forth in
Articles VI through IX below and such other provisions consistent with the Plan
as the Committee may determine. The Committee shall have no discretion to
select the Non-Employee Directors who will receive Annual Awards or to
determinate the number of Option Shares covered by such Annual Award, the Option
Price per Option Share, the circumstances under which an Annual Award may be
granted, or the period within which Options granted pursuant to Annual Awards
may be exercised or to alter any other terms or conditions in the Plan with
respect to Annual Awards to Non-Employee Directors, except for administering the
Plan subject to the express provisions of the Plan.
TIMING OF GRANTING ANNUAL AWARDS
Grants of Annual Awards shall be made automatically under this Article
without any action by the Committee.
ARTICLE VI
OPTION PRICE
The per share Option exercise price (the "Option Price") for all Options
granted under the Plan shall be the fair market value of the Common Stock of the
Company on the date the Annual Award is granted, subject to adjustments as
provided in Article X. If the Common Stock is listed for trading on any
national securities exchange, then the "fair market value" shall be the closing
sale price of the Common Stock on such exchange on the date of grant. If the
Common Stock is not listed for trading on a national securities exchange but is
traded on The NASDAQ Stock Market, then the "fair market value" shall be the
last sale price reported by The NASDAQ Stock Market on the date of grant. If
the Common Stock is neither traded on any national securities exchange nor
traded on The NASDAQ Stock Market, but is traded in the over-the-counter market,
then the "fair market value" shall be the average closing bid and asked prices
on the date of grant provided by any market maker in the Common Stock selected
by the Company to provide quotations for this purpose. If there is no market
maker in the Common Stock, the fair market value shall be the last sale price of
the Common Stock on the date of grant. In the event that on any date of the
grant of Options there is no sale of at least 100 shares of Common Stock, the
sale price or the bid and asked prices on the last day on which there was a sale
of at
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<PAGE>
least 100 shares of Common Stock shall be used to determine "fair market value."
ARTICLE VII
EXERCISE AND TERM OF OPTIONS
An Option shall not be exercisable unless: (a) the Option has become
exercisable as provided below; (b) the person exercising the Option has been at
all times during the period beginning with the date of grant of the Option and
ending on the date of exercise of the Option, a Non-Employee Director, except
that in the event (i) a Non-Employee Director ceases to be a Non-Employee
Director for any reason, such person may exercise any of such persons's
outstanding Options that are exercisable on the date such person ceases to be a
Non-Employee Director at any time within two years after such date, subject to
earlier termination of any such Option as provided herein, at the end of which
two-year period any such Option that has not been fully exercised shall
terminate, and (ii) an optionee shall die holding any outstanding Options that
are exercisable on the date of such person's death, such person's executors,
administrators, heirs or distributees, as the case may be, may exercise any such
Option at any time within two years after the date of such optionee's death,
even if such two-year period extends beyond the two-year period described in the
preceding clause (i), but subject to any other earlier termination of any such
Option as provided herein, at the end of which two-year period any such Option
that has not been fully exercised shall terminate; (c) payment in full is made
for the shares of Common Stock being acquired thereunder at the time of exercise
in United States dollars by cash or check or by shares of Common Stock having a
"fair market value" equal to the aggregate Option Price in respect of Options
being exercised; and (d) payment in full is made for any withholding obligation
as provided in Article VIII below.
Options granted under the Plan shall become exercisable as to one-half (1/2)
of the Options subject to a particular grant beginning one year from the date of
grant and as to all of the Options subject to a particular grant beginning two
years from the date of grant, in either case if on such date the Non-Employee
Director to whom any such Option was granted remains a Non-Employee Director.
In the event a Non-Employee Director ceases to be a Non-Employee Director, any
of such persons's then outstanding Options that have not become exercisable as
provided herein shall terminate immediately.
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<PAGE>
In addition, in the event of a merger or consolidation in which the Company
is not the surviving entity, or any other capital reorganization (including a
merger) in which more than 50% of the then outstanding shares of Common Stock
are exchanged, or the sale by the Company of all or substantially all of its
assets to another entity, any outstanding Option that was granted under the Plan
more than three months prior to the date of the Company's adoption of a plan or
definitive agreement in respect of such merger, consolidation, reorganization or
asset sale, as the case may be, shall become exercisable in full as of such
date. Ten business days following the effectiveness of such merger,
consolidation, reorganization or asset sale, as the case may be, any then
outstanding Option shall terminate.
Any other provision of the Plan notwithstanding, each Option shall terminate
of the tenth anniversary of the date of grant of such Option subject to earlier
termination as provided herein.
ARTICLE VIII
PAYMENT OF SHARES
Payment of the Option Price for Option Shares shall be made in full upon
exercise of the Option. Any rights of the Non-Employee Director to exercise an
Option shall be conditioned upon the Non-Employee Director forwarding to the
Company, in addition to the Option Price of the Option Shares, payment of an
amount equal to the amount the Company is required by law or regulation of any
governmental authority, whether federal, state or local, domestic or foreign, to
withhold in connection with such exercise of the Option, as determined by the
Committee in its discretion. The amount of such payment shall be communicated
to the Non-Employee Director as soon as practicable following receipt by the
Company of the Non-Employee Director's notice of exercise.
ARTICLE IX
NON-TRANSFERABILITY OF OPTION
No Option under the Plan shall be transferable except by will or the laws of
descent and distribution. During the lifetime of the optionee, an Option shall
be exercisable only by the optionee.
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<PAGE>
ARTICLE X
ADJUSTMENT FOR CHANGES IN CAPITALIZATION
Subject to Article VII hereof, if the number of issued and outstanding
shares of Common Stock as a whole are increased, decreased or changed into, or
exchanged for, a different number or kind of shares or securities of the
Company, whether through merger, consolidation, reorganization,
recapitalization, reclassification, stock dividend, stock split, combination of
shares, exchange of shares, change in corporate structure or the like, an
appropriate and proportionate adjustment shall be made in the number and kind of
shares subject to this Plan and in the number, kind, and per share Option Price
of shares subject to outstanding Options or portions thereof granted prior to
any such change. Any such adjustment in an outstanding Option, however, shall
be made without a change in the total price applicable to the unexercised
portion of the Option, but with a corresponding adjustment in the price for each
share covered by the Option. No fractional shares of Common Stock shall be
issued under the Plan on account of any adjustment specified above.
ARTICLE XII
NO OBLIGATION TO EXERCISE OPTION, ETC.
The granting of an Option shall impose no obligation on the recipient to
exercise such Option or to remain as a Non-Employee Director.
ARTICLE XIII
RIGHTS AS A STOCKHOLDER
An optionee or a permitted transferee of an Option shall have no right as
stockholder with respect to any Option Shares covered by an Option until such
person shall have become the holder of such Option Shares, and such person shall
not be entitled to any dividends or distributions of other rights in respect of
such Option Shares for which the record date is prior to the date on which such
person shall have become the holder of record thereof.
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ARTICLE XIV
REGULATORY MATTERS
Every Option under the Plan is granted upon the express condition that the
inability of the Company to comply with, or any delay in complying with, any
laws, rules or regulations governing the issuance of Option Shares necessary to
satisfy such Option (including but not limited to complying with the Securities
Act of 1933, as amended (the "Act") and all rules and regulations thereunder),
the fulfillment of which condition is deemed necessary by counsel for the
Company to the lawful issuance or transfer of any such shares, shall relieve the
Company of any liability for the non-issuance or non-transfer, or any delay in
the issuance or transfer of such shares. Further, it is the intention of the
Company that the Plan comply in all respects with Rule 16b-3 under the Exchange
Act ("Rule 16b-3"). If any Plan provision is found not to be in compliance with
Rule 16b-3, the provision shall be deemed null and void.
ARTICLE XV
AMENDMENTS OR DISCONTINUANCE OF THE PLAN
The Plan may be amended at any time and from time to time by the Board as
the Board shall deem advisable; provided, however that except as provided in
Article X above, the Board may not, without further approval by the stockholders
of the Company, increase the maximum numbers of shares of Common Stock as to
which Options may be granted under the Plan, extend the period during which
Options may be granted or exercised under the Plan, or change the class of
persons eligible to receive Options under the Plan. No amendment of the Plan
shall materially and adversely affect any right of any Non-Employee Director
with respect to any Option theretofore granted without such Non-Employee
Director's written consent. Notwithstanding the foregoing, the Plan may not be
amended to change the amount, price or timing of the Annual Award until at least
six months (or such longer or shorter period required by Rule 16b-3) after the
date of the last preceding amendment, except to comport with changes in the
Code, the Exchange Act, the Act, the Employee Retirement Income Security Act, or
the rules and regulations promulgated thereunder.
7
<PAGE>
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Except as expressly provided for in the Plan, no Non-Employee Director or
other person shall have any claim or right to be granted an Option under the
Plan. The expenses of the Plan shall be borne by the Company.
ARTICLE XVII
TERMINATION
This Plan shall terminate upon the adoption of a resolution of the Board
terminating the Plan. No termination of the Plan shall materially and adversely
affect any of the rights or obligations of any person, without written consent,
under any Option theretofore granted under the Plan, except that upon the
dissolution or liquidation of the Company, this Plan and the Options issued
hereunder shall terminate.
ARTICLE XVIII
EFFECTIVENESS
The Plan shall become effective upon approval by the Company's stockholders.
8
<PAGE>
Exhibit 4(v)
NORTON MCNAUGHTON, INC.
Stock Option Certificate
Under the
Stock Option Plan for Non-Employee Directors
--------------------------------------------
Date of Grant:
Name of Optionee:
Number of Shares:
Price Per Share:
This is to certify that, effective on the date of grant specified
above, the Stock Option Committee (the "Committee") of the Board of Directors of
Norton McNaughton, Inc. (the "Company") has granted to the above-named optionee
(the "Optionee") an option to purchase from the Company, for the price per share
set forth above, the number of shares of Common Stock, $.01 par value per share
(the "Stock"), of the Company set forth above pursuant to the Norton McNaughton,
Inc. Stock Option Plan for Non-Employee Directors (the "Plan"). Capitalized
terms used and not otherwise defined herein shall have the meaning set forth in
the Plan. This option is not intended to be treated as an Incentive Stock
Option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
<PAGE>
The terms and conditions of the option granted hereby, in addition to
the terms and conditions contained in the Plan, are as follows:
1. The price at which each share of Stock subject to this option may
be purchased shall be the price set forth above, subject to any adjustments
which may be made pursuant to Section 9 hereof. The amount set forth above is
the fair market value per share of Stock on the date of grant.
2. Subject to the terms and conditions set forth herein, this option
may be exercised at any time to purchase shares of Stock covered by this option
only in accordance with the following schedule:
Cumulative Percentage
of Aggregate Number of
Shares of Stock Covered
by Option Which May Be
Exercise Period Purchased
--------------- -----------------------
Within one year from date of
grant........................ 0%
Beginning one year from date
of grant..................... 50%
Beginning two years from date
of grant..................... 100%
less, in the case of each exercise period, the number of shares of Stock, if
any, previously purchased hereunder. This option shall terminate and no shares
of Stock may be purchased hereunder more than ten (10) years after the date of
grant.
3. Except as provided in Section 7 hereof, this option may not be
exercised unless the Optionee has been at
2
<PAGE>
all times during the period beginning with the date of grant of the Option and
ending on the date of exercise of the Option, a Non-Employee Director.
4. Subject to the terms and conditions set forth herein, the Optionee
may exercise this option at any time as to all or any of the shares of Stock by
delivering to the Company written notice specifying:
(i) the number of whole shares of Stock to be purchased together with
payment in full of the aggregate option price of such shares, provided that
this option may not be exercised for less than ten (10) shares of Stock or
the number of shares of Stock remaining subject to option, whichever is
smaller;
(ii) the name or names in which the stock certificate or certificates
are to be registered;
(iii) the address to which dividends, notices, reports, etc. are to
be sent; and
(iv) the Optionee's social security number.
Only one stock certificate will be issued unless the Optionee otherwise requests
in writing. Payment shall be in cash, or by certified or bank cashier's check
payable to the order of the Company, free from all collection charges. If the
Optionee so requests, shares of Stock purchased upon exercise of an option may
be issued in the name of the Optionee or another person. No Optionee shall be
entitled to any rights as a stockholder of the Company in respect of any shares
of Stock covered by this option until such shares of Stock shall have been paid
for in full and issued to the Optionee.
3
<PAGE>
5. As soon as practicable after the Company receives payment for
shares of Stock covered by this option, it shall deliver a certificate or
certificates representing the shares of Stock so purchased to the Optionee.
Such certificate shall be registered in the name of the Optionee, or in such
other name or names as the Optionee shall request.
6. This option is personal to the Optionee and during the Optionee's
lifetime may be exercised only by the Optionee. This option shall not be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by the Optionee otherwise than by will or by the laws of descent and
distribution and any such purported assignment, alienation, pledge, attachment,
sale or other transfer or encumbrance shall be void and unenforceable against
the Company.
7. Subject to the condition that this option shall in no event be
exercisable after the date of termination of such option specified in Section 2
hereof:
(i) in the event a Non-Employee Director ceases to be a Non-Employee
Director for any reason, such person may exercise any of such persons's
outstanding Options that are exercisable on the date such person ceases to
be a Non-Employee Director at any time within two years after such date,
subject to earlier termination of any such Option as provided in the Plan,
at the end of which two-year period any such Option that has not been fully
exercised shall terminate; and
(ii) in the event an Optionee shall die holding any outstanding Options
that are exercisable on the date of such person's death, such person's
executors, administrators, heirs or distributees, as the case may be, may
exercise any such Option at any time within two
4
<PAGE>
years after the date of such optionee's death, even if such two-year period
extends beyond the two-year period described in the preceding clause (i),
but subject to any other earlier termination of any such Option as provided
herein, at the end of which two-year period any such Option that has not
been fully exercised shall terminate.
8. This option does not confer on the Optionee any right to continue
as a Non-Employee Director of the Company.
9. In the event that the Committee shall determine that any dividend
or other distribution (whether in the form of cash, Stock, other securities or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Stock or other securities of the Company, issuance of
warrants or other rights to purchase Stock or other securities of the Company,
or other similar corporate transaction or event affects the Stock such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under this option, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number shares of Stock (or
other securities or property) subject to this option and (ii) the exercise price
of this option.
10. In the event of a merger or consolidation in which the Company is
not the surviving entity, or any other capital reorganization (including a
merger) in which more
5
<PAGE>
than 50% of the then outstanding shares of Common Stock are exchanged, or the
sale by the Company of all or substantially all of its assets to another entity,
any outstanding Option that was granted under the Plan more than three months
prior to the date of the Company's adoption of a plan or definitive agreement in
respect of such merger, consolidation, reorganization or asset sale, as the case
may be, shall become exercisable in full as of such date. Ten (10) business
days following the effectiveness of such merger, consolidation, reorganization
or asset sale, as the case may be, any then outstanding Option shall terminate.
Notwithstanding the foregoing, in no event shall this option be exercisable
after the date of termination of the exercise period of this option specified in
Sections 2 and 7 hereof.
11. This option shall be subject to the requirement that if at any
time the Board of Directors shall determine that the registration, listing or
qualification of the shares of Stock covered hereby upon any securities exchange
or under any federal or state law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the granting of this option or the purchase of shares of Stock
hereunder, this option may not be exercised unless and until such registration,
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Board of Directors. The Committee
may require that the person exercising this option
6
<PAGE>
shall make such representations and agreements and furnish such information as
it deems appropriate to assure compliance with the foregoing or any other
applicable legal requirements.
12. This option and the terms and conditions herein set forth are
subject in all respects to the terms and conditions of the Plan, which shall be
controlling. All interpretations or determinations of the Committee shall be
binding and conclusive upon the Optionee and his legal representatives on any
question arising hereunder or under the Plan.
13. It shall be a condition to the obligation of the Company to issue
shares of Stock upon exercise of this option, that the Optionee (or any
beneficiary or person entitled to act under Section 7 hereof) pay to the
Company, upon its demand, such amount as may be requested by the Company for the
purpose of satisfying any liability to withhold federal, state or local income
or other taxes.
14. All notices hereunder to the Company shall be delivered or mailed
to the following address:
Norton McNaughton, Inc.
463 Seventh Avenue
New York, New York 10018
Attn: President
Such address for the service of notices may be changed at any time provided
notice of such change is furnished in advance to the Optionee.
NORTON MCNAUGHTON, INC.
By____________________________
7
<PAGE>
EXHIBIT 4(vi)
NORTON MCNAUGHTON, INC. OPTION BONUS PLAN
FOR SENIOR EXECUTIVES OF JJ ACQUISITION CORP.
1. Establishment. This Plan, which shall be known as the Norton
-------------
McNaughton, Inc. Option Bonus Plan for Senior Executives of JJ Acquisition Corp.
(the "Bonus Plan"), is hereby established by JJ Acquisition Corp. (the
"Company") to provide incentives for senior executives providing services to the
Company and to aid the Company in retaining such senior executives upon whose
efforts the Company's success and future growth depends.
2. Administration. The Bonus Plan shall be administered by the Board
--------------
of Directors of the Company (the "Board"). For purposes of administration, the
Board, subject to the terms of the Bonus Plan, shall have authority, acting in
good faith, to establish such rules and regulations, to make such determinations
and interpretations, and to take such other administrative actions as it deems
necessary or advisable.
3. Participants. The participants in the Plan shall be Susan
------------
Schneider, Leslie Schneider and Scott Schneider, in each case for so long as
such individual is employed by the Company pursuant to an Employment Agreement
to which this Bonus Plan is an Exhibit (each, a "Participant" and collectively,
the "Participants"); provided, however, that nothing contained herein shall be
construed as creating a guarantee of employment for any Participant.
4. Bonus Options.
-------------
4.1 GRANT. In the event that EBITDA (as defined in the Agreement of
Purchase and Sale by and among Jeri-Jo Knitwear Inc., Jamie Scott, Inc., the
Stockholders of Jamie Scott, Inc., JJ Acquisition Corp. and Norton McNaughton,
Inc. (the "Purchase Agreement")) attained by the Company in Year 1 or Year 2 (as
defined in the Purchase Agreement, and each, a "Year") is equal to or in excess
of $17,000,000, the Company shall cause to be granted to the Participants by the
Board of Directors of Norton McNaughton, Inc. a Delaware corporation ("Norton"),
options to purchase an aggregate of 50,000 (or such lesser number as shall be
necessary to allocate such options in accordance with Section 4.2 below) shares
of common stock, par value $.01 per share of Norton (the "Common Stock") in each
Year that EBITDA in excess of $17,000,000 is so attained. In addition, for each
$1,000,000 of EBITDA in excess of $17,000,000 attained by
<PAGE>
the Company in each of the Years, the Company shall cause to be granted to the
Participants by the Board of Directors of Norton, options to purchase an
aggregate of 30,000 (or such lesser number as shall be necessary to allocated
such options in accordance with Section 4.2 below) shares of Common Stock. Any
options granted as aforesaid shall be hereinafter referred to as "Bonus
Options". The Bonus Options shall be granted, if at all, on the dates of
delivery to the Company and Norton of the EBITDA Notice and EBITDA Statement
(pursuant to Section 2.02(b)(i) of the Purchase Agreement) for the applicable
Year and shall have an exercise price per share equal to the fair market value
of the Common Stock on the date of grant.
4.2 ALLOCATION OF BONUS OPTIONS. The Bonus Options shall be allocated
40% to Susan Schneider, 40% to Leslie Schneider and 20% to Scott Schneider, or
in the case of the death of any such Participant during a Year, the estate of
such Participant.
4.3 EXERCISE. The Bonus Options shall be fully vested and exercisable
on and after the date of grant.
4.4 TERM OF OPTIONS. Except as provided below, the term of the Bonus
Options shall be ten years.
(i) If a Participant's employment with the Company terminates
pursuant to Section 6.1 of his or her Employment Agreement or is terminated by
the Company or by the Participant pursuant to Section 6.2 of his or her
Employment Agreement, is terminated by the Employee pursuant to Section 6.4 of
his or her Employment Agreement, or terminated for any other reason (except as
provided in clause (ii) below), the Bonus Options may be exercised by the
Participant (or his or her estate or legal representative) within one (1) year
after such termination; and
(ii) In the event of termination of the employment of a
Participant (a) by the Company pursuant to Section 6.3 of his or her Employment
Agreement or (b) by the Participant other than pursuant to Sections 6.1, 6.2 or
6.4 of his or her Employment Agreement, no Bonus Options shall be exercisable.
4.5 ADJUSTMENTS. In the event of any dividend or other distribution
(whether in the form of cash, Common Stock, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of Common
Stock or other securities of Norton, issuance of warrants or other rights to
purchase Common Stock, the Board of Directors shall, in
2
<PAGE>
good faith adjust the number of shares of Common Stock (or other securities or
property) subject to the Bonus Options, the exercise price with respect to any
Bonus Options, or both.
4.6 No Participant shall be entitled to Bonus Options for any Year of
the Company subsequent to the Year in which his or her termination of employment
(for any or no reason) occurs.
4.7 In the event of termination of the employment of a Participant
prior to the end of a Year, pursuant to his or her Employment Agreement, such
Participant (or his or her estate or other legal representative) shall be
granted such Bonus Options for such Year only as provided in this Section 4.7.
The number of Bonus Options to which the Participant (or his or her estate or
legal representative) shall be entitled for such Year (which shall be granted at
the time that the Bonus Options are granted to the other Participants) shall be
equal to the product of (x) the number of Bonus Options, if any, which would
have been granted to the Participant pursuant to Sections 4.1 and 4.2 of this
Bonus Plan for such Year if the employment of the Participant had not so
terminated, multiplied by (y) a fraction, the numerator of which is the number
of days from the beginning of such Year to the date of termination, and the
denominator of which is 365. The terms and conditions of any such Bonus Options
shall be as otherwise provided in this Section 4.
4.8 If any portion of the Bonus Options shall not be allocated or
granted by reason of this Section 4, such Bonus Options shall be retained by the
Company or granted to other Participants or to new participants, all as
determined by the Board, after good faith consideration of any recommended
course of action submitted to the Board by the remaining Participants.
4.9 CHANGE OF CONTROL. In the event that there shall occur a Change
of Control (as defined in the Purchase Agreement) during either of the Years,
the Participants in this Bonus Plan shall be entitled to receive, in lieu of
Bonus Options contemplated by Section 4.1 of this Bonus Plan (unless such Bonus
Options have heretofore been granted, in which case such granted Bonus Options
shall be retained), a number of Bonus Options (allocated as set forth in Section
4.2 above) equal to (i) in the event that the Change of Control occurs during
Year 1, 100,000 Bonus Options or (ii) in the event that the Change of Control
occurs during Year 2, 50,000 Bonus Options. The terms and conditions of any
such Bonus Options shall be as otherwise provided in this Section 4.
3
<PAGE>
Exhibit 4(vii)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of the 18th day of June, 1998 by and between Jeri-Jo
Knitwear, Inc., a Delaware corporation f/k/a JJ Acquisition Corp. (the
"Company"), and Susan Schneider (the "Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company, a wholly owned subsidiary of Norton McNaughton,
Inc., a Delaware corporation ("Norton"), and certain other parties (which
parties include the Employee) have entered into an Agreement of Purchase and
Sale dated as of April 15, 1998 (the "Purchase Agreement"), providing, inter
-----
alia, for the purchase by the Company of substantially all of the assets of
- ----
Jeri-Jo Knitwear Inc., a New York corporation ("J-J Knitwear") and Jamie Scott,
Inc., a New York corporation ("Jamie Scott"; and together with J-J Knitwear and
Jamie Scott, the "Jeri-Jo Group"); and
WHEREAS, the Company desires to secure the employment of the Employee
with the Company and the Employee desires to be employed by the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto hereby agree as follows:
1. Employment, Term.
----------------
1.1 The Company agrees to employ the Employee, and the Employee agrees
to serve in the employ of the Company, for the term set forth in Section 1.2, in
the positions and with the responsibilities, duties and authority set forth in
Section 2 and on the other terms and conditions set forth in this Agreement.
1.2 The term of the Employee's employment under this Agreement (the
"Term") shall commence on the date hereof and shall terminate on the second
anniversary of the Closing Date (as defined in the Purchase Agreement) (the
"Expiration Date"), unless sooner terminated in accordance with this Agreement.
2. Positions, Duties. The Employee shall serve in the positions of
-----------------
Co-President and Co-Chief Executive Officer of the Company. The Employee shall
perform, faithfully and diligently, such duties and shall have such other
responsibilities, appropriate to said position, as shall be assigned to her from
time to time by the Vice Chairman (the "Vice Chairman") (currently, Peter
Boneparth); provided, however, that in any event said duties and
<PAGE>
responsibilities shall be consistent with the terms and provisions of Section
7.12 of the Purchase Agreement. The Employee shall report solely to the Vice
Chairman (currently, Peter Boneparth), but if Mr. Boneparth changes titles with
the Purchaser, then to Mr. Boneparth in such capacity. The Employee shall
devote her complete and undivided attention to the performance of her duties and
responsibilities hereunder during the normal working hours of executive
employees of the Company. The Employee's services under this Agreement shall be
performed principally at the executive offices and warehouses of the Company to
be located, during the Term, in New York City and New Jersey, respectively
(unless otherwise agreed between the Vice Chairman and the Employee).
3. Compensation.
------------
3.1 Salary. During the Term, in consideration of the performance by
------
the Employee of the services set forth in Section 2 and her observance of the
other covenants set forth herein, the Company shall pay the Employee, and the
Employee shall accept, a base salary at a rate of $400,000 per annum (which may
be increased, but not decreased), payable in accordance with the standard
payroll practices of the Company.
3.2 Bonus. During the Term, in addition to the salary provided for
-----
in Section 3.1 and the Bonus Plan described in Section 3.4, the Employee shall
be eligible to participate, subject to the terms thereof, in any bonus plan for
executives of Norton or the Company in effect during the Term.
3.3 Stock Options.
-------------
(a) GRANT. On the date hereof, Norton shall grant to the
Employee, an option to purchase an aggregate number of shares of common stock,
par value $.01 per share (the "Common Stock"), of Norton, at an exercise price
per share equal to the Closing Market Value (as defined in the Purchase
Agreement) (the "Option"), which number shall equal the sum of (i) 180,000 (the
"Base Option Number") and (ii) a number (the "Additional Option Number") equal
to the Base Option Number multiplied by a fraction, the numerator of which shall
be the positive excess, if any, of the Closing Market Value over the Signing
Market Value (as such terms defined in the Purchase Agreement) and the
denominator of which shall be the Signing Market Value. The Option shall be
vested and exercisable on and after (i) the date hereof, as to 40,000 shares of
Common Stock and (ii) the date which is nine years and six months from the
Closing Date, as to the remainder of the number of shares of Common Stock
subject to the Option (the "Remainder"), but shall be sooner
2
<PAGE>
exercisable as to the Remainder (i)(A) with respect to a number of shares of
Common Stock equal to 140,000 shares of Common Stock, on the Earn Out Payment
Date (as defined in the Purchase Agreement) if and only if the 1998/1999 EBITDA
(as defined in the definition of 1998/1999 EBITDA in the Purchase Agreement)
shall equal or exceed $11,000,000 but be less than $15,000,000, (B) in full, on
the Earn Out Payment Date, if and only if the 1998/1999 EBITDA shall equal or
exceed $15,000,000; (ii) in full, on the date, if any, that the Employee's
employment terminates hereunder by reason of death or Disability or by the
Employee for Good Reason or by the Company without Due Cause (as said terms are
hereinafter defined); and (iii) in full, upon the occurrence of any Acceleration
Event (as defined in the Purchase Agreement).
(b) TERM OF OPTION. Except as provided below, the term of the
Option shall be ten years.
(i) In the event of a termination of employment of the Employee
with the Company pursuant to Section 6.1, Section 6.2 or Section 6.4, the Option
may be exercised by the Employee or, in the event of the Employee's death, her
estate or legal representative during the remainder of the term of the Option;
and
(ii) In the event of termination of the employment of the Employee
with the Company (a) by the Company pursuant to Section 6.3 or (b) by the
Employee during the Term, other than pursuant to Sections 6.1, 6.2 or 6.4, the
Option shall not thereafter be exercisable.
(c) ADJUSTMENTS. In the event of any dividend or other
distribution (whether in the form of cash, Common Stock, other securities or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Common Stock or other securities of Norton, issuance
of warrants or other rights to purchase Common Stock, the Board of Directors
shall, in good faith, adjust the number of shares of Common Stock (or other
securities or property) subject to the Option, the exercise price with respect
to any Option, or all of the foregoing.
(d) STOCK OPTION CERTIFICATE. The Options shall be represented by
a stock option certificate in the form of Exhibit A hereto and shall otherwise
be subject to the terms and conditions of such stock option certificate.
(e) REGISTRATION OF SHARES. Norton shall, as promptly as
practicable following the commencement of the Employee's employment hereunder,
file a registration
3
<PAGE>
statement on Form S-8, or any successor to such Form, with respect to the shares
of Common Stock covered by the Option.
3.4 Bonus Options. During the Term, the Employee shall be eligible to
-------------
receive Bonus Options (as defined in the Norton McNaughton, Inc. Bonus Option
Plan for Senior Executives of JJ Acquisition Corp. (the "Executive Option Bonus
Plan")) in accordance with the terms set forth in the Executive Option Bonus
Plan, a copy of which is attached hereto as Exhibit B.
4. Expense Reimbursement. During the Term, (i) the Company shall
---------------------
reimburse the Employee for all reasonable and necessary out-of-pocket expenses
incurred by her in connection with the performance of her duties hereunder, upon
the presentation of proper accounts therefor in accordance with Norton's
policies and (ii) the Company shall pay for the benefit of the Employee all
reasonable and necessary expenses incurred by her in the ordinary and usual
course of business and in accordance with Norton's policies (in any case, as
such policies are adopted from time to time by the Compensation Committee of
Norton).
5. Benefits.
--------
5.1 Benefit Plans. In addition to the benefits under Section 7.07 of
-------------
the Purchase Agreement, during the Term, the Employee shall be entitled to
participate in all employee benefit plans and programs offered by Norton or the
Company for similarly situated executives and shall be entitled to equitable
treatment in respect of new benefits, if any, to be received under such employee
benefit plans and programs by similarly situated executives.
5.2 Vacation. During the Term, the Employee shall be entitled to paid
--------
vacation in accordance with Norton's policy for its executive employees, but not
less than five weeks.
4
<PAGE>
6. Termination of Employment.
-------------------------
6.1 Death. In the event of the death of the Employee during the Term,
-----
the Company shall pay to the estate or other legal representative of the
Employee (1) the base salary provided for in Section 3.1 accrued to the date of
the Employee's death and not theretofore paid to the Employee, (2) a pro rata
bonus in an amount equal to the product of (i) the Employee's most recent bonus,
if any, paid under Section 3.2, and (ii)(A) the number of months (including
partial months) worked during the year in which the Employee's date of death
occurs, divided by (b) 12, and (3) Bonus Options in accordance with Section 4 of
the Executive Option Bonus Plan. Rights and benefits of the estate or other
legal representative of the Employee under the benefit plans and programs of the
Company shall be determined in accordance with the provisions of such plans and
programs. Neither the estate or other legal representative of the Employee nor
the Company shall have any further rights or obligations under this Agreement
except as provided in Section 3.3(b)(i).
6.2 Disability. If during the Term the Employee shall become
----------
incapacitated by reason of physical or mental disability and shall be unable to
perform her normal duties hereunder for a cumulative period of six (6) months in
any period of twelve (12) consecutive months, the employment of the Employee
hereunder may be terminated by the Company or the Employee upon notice to the
other (a "Disability"). In the event of such termination, the Company shall pay
to the Employee (1) the salary provided for in Section 3.1 accrued to the date
of such termination and not theretofore paid to the Employee, (2) a pro rata
bonus in an amount equal to the product of (i) the Employee's most recent bonus,
if any, paid under Section 3.2, and (ii)(A) the number of months (including
partial months) employed during the year in which the Employee's termination
occurs, divided by (b) 12, and (3) Bonus Options in accordance with Section 4 of
the Executive Option Bonus Plan. Rights and benefits of the Employee under the
benefit plans and programs of the Company shall be determined in accordance with
the provisions of such plans and programs. Neither the Employee nor the Company
shall have any further rights or obligations under this Agreement, except as
provided in Sections 3.3(b)(i), 7, 8, 9 and 10.
6.3 Due Cause. The employment of the Employee hereunder may be
---------
terminated by the Company at any time during the Term for Due Cause (as
hereinafter defined). In the event of such termination, the Company shall pay
to the Employee the salary provided for in Section 3.1 accrued to
5
<PAGE>
the date of such termination and not theretofore paid to the Employee. Rights
and benefits of the Employee under the benefit plans and programs of the Company
shall be determined in accordance with the provisions of such plans and
programs. After the satisfaction of any claim of the Company against the
Employee incidental to such Due Cause, neither the Employee nor the Company
shall have any further rights or obligations under this Agreement, except as
provided in Sections 7, 8, 9 and 10. For purposes hereof, "Due Cause" shall
mean the Employee's conviction or other adjudication of a felony or any crime or
offense involving fraud that is materially injurious to the Company or Norton;
provided, however, that the Employee shall be given written notice by a majority
of the Board of Directors of the Company that it intends to terminate the
Employee's employment for Due Cause under this Section, which written notice
shall specify the act or acts upon the basis of which the majority of the Board
of Directors of the Company intends so to terminate the Employee's employment,
and the Employee shall then be given the opportunity, within fifteen (15) days
of her receipt of such notice, to have a meeting with the Board of Directors of
the Company to discuss such act or acts.
6.4 Termination by the Employee with Good Reason or by the Company not
------------------------------------------------------------------
for Due Cause. The Employee may at any time terminate her employment with the
- -------------
Company with Good Reason (as hereinafter defined). For purposes hereof, Good
Reason shall mean (i) the breach by the Company of any material provision of
this Agreement or of Section 7.12 of the Purchase Agreement, in any case, for a
period of 30 days after written notice of such breach by the Employee to the
Company; (ii) the failure of the Company to pay the Earn Out Payment (as defined
in the Purchase Agreement) as and when such is due and payable in accordance
with the terms of the Purchase Agreement, including any amounts payable under
the Earn Out Letter of Credit (as defined in the Purchase Agreement); and (iii)
the occurrence of an Acceleration Event (as defined in the Purchase Agreement).
If the Company terminates the Employee's employment other than for disability
pursuant to Section 6.2 or Due Cause pursuant to Section 6.3, or if the Employee
terminates her employment for Good Reason pursuant to Section 6.4, the Employee
shall be entitled (a) to continue to receive from the Company her base salary
for the remainder of the Term and (b) to continue to participate for the
remainder of the Term in all employee benefit plans and programs (including any
bonus plan) in which the Employee participated on the date of termination.
6
<PAGE>
7. Confidential Information.
------------------------
7.1 The Employee shall, during the Term and for the two-year period
thereafter (unless the Term terminates in accordance with Section 6.4, in which
case the limits imposed on the Employee under this Section 7.1 shall expire on
the date of such termination), treat as confidential and, except as required in
the performance of her duties and responsibilities under this Agreement, not
disclose, publish or otherwise make available to the public or to any
individual, firm or corporation any confidential material (as hereinafter
defined), except, on a need to know basis, to the Employee's attorney,
accountant or personal advisor. The Employee agrees that all confidential
material, together with all notes and records of the Employee relating thereto,
and all copies or facsimiles thereof in the possession of the Employee, are the
exclusive property of the Company and the Employee agrees to return such
material to the Company promptly upon the termination of the Employee's
employment with the Company.
7.2 Subject to Section 7.12 of the Purchase Agreement, for the
purposes hereof, the term "confidential material" shall mean all information
acquired by the Employee in the course of the Employee's prior employment with
any member of the Jeri-Jo Group and in the course of the Employee's employment
with the Company in any way concerning the products, projects, activities,
business or affairs of the Company, the Jeri-Jo Group, or Norton or and other
subsidiary, direct or indirect, of Norton (the "Norton Group"), or the
customers, suppliers or agents of the Company, the Jeri-Jo Group or any member
of the Norton Group, including, without limitation, all information concerning
trade secrets and the preparation of raw material for, manufacture of, or
finishing processes utilized in the production of, the products or projects of
the Company, any member of the Jeri-Jo Group or any member of the Norton Group
or any improvements therein, all sales and financial information concerning the
Company, any member of the Jeri-Jo Group or any member of the Norton Group, all
customer and supplier lists, all information concerning projects in research and
development or marketing plans for any such products or projects, and all
information in any way concerning the products, projects, activities, business
or affairs of customers of the Company, the Jeri-Jo Group or any member of the
Norton Group which is furnished to the Employee by the Company or any of its
employees (current or former), agents, customers or suppliers, as such;
provided, however, that the term "confidential material" shall not include
information which (a) becomes generally available to the public or the apparel
industry in general other than as a result of a disclosure by the Employee, (b)
was available to the Employee on a non-confidential basis prior to her
7
<PAGE>
employment with the Company, (c) becomes available to the Employee on a non-
confidential basis from a source other than the Company or any of its agents,
suppliers or customers, provided that the Employee has no knowledge that such
source is not bound by a confidentiality agreement with the Company or any of
such agents, customers or suppliers, or (d) if disclosed by the Employee would
not have a significant detrimental effect on the business of the Company.
8. Inventions. Subject to Section 7.12 of the Purchase Agreement and
----------
subject to the Employee's right to the registered trademark Rachel Max(R) (but
subject to Section 7.15 of the Purchase Agreement) any and all material
inventions, material innovations or material improvements ("inventions") made,
developed or created by the Employee (whether at the request or suggestion of
the Company or otherwise, whether alone or in conjunction with others, and
whether during regular hours of work or otherwise) during the period of her
employment with the Company which may be directly useful in, or relate to, the
Business (as defined in the Purchase Agreement), shall be promptly and fully
disclosed by the Employee to the Board of Directors of the Company and shall be
the Company's exclusive property as against the Employee, and the Employee shall
promptly deliver to an appropriate representative of the Company as designated
by the Board of Directors all papers, drawings, models, data and other material
relating to any inventions made, developed or created by her as aforesaid. The
Employee shall, at the request of the Company and without any payment therefor,
execute any documents necessary or advisable in the opinion of the Company's
counsel to direct issuance of patents, trademarks or copyrights to the Company
with respect to such inventions as are to be the Company's exclusive property as
against the Employee or to vest in the Company title to such inventions as
against the Employee. The expense of securing any such patent, trademark or
copyright shall be borne by the Company.
9. Non-Competition. The Employee acknowledges that the services to
---------------
be rendered by her to the Company are of a special and unique character. In
consideration of her employment hereunder, the Employee agrees, for the benefit
of the Company, that she will not, during the period of her employment with the
Company and thereafter for a period (the "Period") of two (2) years commencing
on the date of termination of her employment with the Company (other than a
termination by the Employee for Good Reason or by the Company not for Due Cause,
in which case, the Period shall be the remainder of the Term following the date
of such termination), (a) engage, directly or indirectly, whether as principal,
agent, distributor, representative, consultant, employee, partner, stockholder,
limited partner or other
8
<PAGE>
investor (other than an investment of not more than (i) five percent (5%) of the
stock or equity of any corporation the capital stock of which is publicly traded
or (ii) five percent (5%) of the ownership interest of any limited partnership
or other entity) or otherwise, anywhere in the United States, in any business
activity or business venture which is in competition with the Business (as
defined in the Purchase Agreement), it being understood and agreed that
ownership or operation of the business presently conducted by Creative
Retailers, Inc. shall not be prohibited by this Section 9, (b) solicit or entice
or endeavor to solicit or entice away from the Company or any member of the
Norton Group any person who was an officer, employee or consultant of the
Company, either for her own account or for any individual, firm or corporation,
whether or not such person would commit any breach of his contract of employment
by reason of leaving the service of the Company, and the Employee agrees not to
employ, directly or indirectly, any person who was an officer or employee of the
Company, or (c) solicit or entice or endeavor to solicit or entice away from the
Company any supplier or customer of the Company, either for her own account or
for any individual, firm or corporation, which, in any case would have a
significant detrimental effect on the business of the Company.
10. Equitable Relief, Etc.
---------------------
In the event of a breach or threatened breach by the Employee of any of
the provisions of Sections 7, 8 or 9, the Employee hereby consents and agrees
that the Company shall be entitled to an injunction or similar equitable relief
from any court of competent jurisdiction restraining the Employee from
committing or continuing any such breach or threatened breach or granting
specific performance of any act required to be performed by the Employee under
any of such provisions, without the necessity of showing any actual damage or
that money damages would not afford an adequate remedy and without the necessity
of posting any bond or other security. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies at law or in equity
which it may have with respect to any such breach or threatened breach.
11. Successors and Assigns.
----------------------
11.1 Assignment by the Company. The Company may not assign this
-------------------------
Agreement or any part thereof without the prior written consent of the Employee.
11.2 Assignment by the Employee. The Employee may not assign this
--------------------------
Agreement or any part thereof without the prior written consent of a majority of
the Board of Directors of the Company (other than the Employee if she is
9
<PAGE>
a member of such Board at the time); provided, however, that nothing herein
shall preclude one or more beneficiaries of the Employee from receiving any
amount that may be payable following the occurrence of her legal incompetency or
her death and shall not preclude the legal representative of her estate from
receiving such amount or from assigning any right hereunder to the person or
persons entitled thereto under her will or, in the case of intestacy, to the
person or persons entitled thereto under the laws of intestacy applicable to her
estate. The term "beneficiaries", as used in this Agreement, shall mean a
beneficiary or beneficiaries so designated to receive any such amount or, if no
beneficiary has been so designated, the legal representative of the Employee (in
the event of her incompetency) or the Employee's estate.
12. Governing Law. This Agreement shall be deemed a contract made
-------------
under, and for all purposes shall be construed in accordance with, the laws of
the State of New York applicable to contracts to be performed entirely within
such State.
13. Entire Agreement. This Agreement contains all the understandings
----------------
and representations between the parties hereto pertaining to the subject matter
hereof. This Agreement supersedes all understandings and agreements, whether
oral or in writing, if any, previously entered into by the Company or any member
of Jeri-Jo Group with the Employee in any way relating to the employment of the
Employee by the Company or by any member of the Jeri-Jo Group, all of which
agreements and understandings are hereby terminated and all rights and
entitlements thereunder are hereby waived and released.
14. Amendment, Modification, Waiver. No provision of this Agreement
-------------------------------
may be amended or modified unless such amendment or modification is agreed to in
writing and signed by the Employee and by a representative of the Company (other
than the Employee) who have been duly authorized by the Board of Directors of
the Company to do so (other than the Employee if she is a member of such Board
at the time). Except as otherwise specifically provided in this Agreement, no
waiver by either party hereto of any breach by the other party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar provision or condition at
the same or any prior or subsequent time, nor shall the failure of or delay by
either party hereto in exercising any right, power or privilege hereunder
operate as a waiver thereof to preclude any other or further exercise thereof or
the exercise of any other such right, power or privilege.
10
<PAGE>
15. Notices. All notices, requests or instructions hereunder shall be
-------
in writing and delivered personally, sent by telecopy, sent by registered or
certified mail, postage prepaid, or sent by Federal Express or any other
nationally recognized overnight courier service, as follows:
If to the Company:
c/o Norton McNaughton, Inc.
463 Seventh Avenue
New York, New York 10018
Attention: President
Telecopy: (212) 563-2766
with a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Attention: Bradley P. Cost, Esq.
Telecopy: (212) 682-0200
If to the Employee:
Susan Schneider
c/o Friedman Alpren & Green LLP
1700 Broadway
New York, New York 10019
Attention: Bruce A. Madnick, CPA
Telecopy No.: (212) 265-4761
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: James Alterbaum, Esq.
Telecopy: (212) 704-6288
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, telecopied, or sent by Federal Express or any other
recognized overnight courier service, and three (3) business days after the date
of mailing, if mailed by registered or certified mail, return receipt requested.
11
<PAGE>
16. Arbitration. Any controversy or claim arising out of or relating
-----------
to this Agreement, or any breach thereof, shall, except as provided in Section
10, be settled by binding arbitration in accordance with the rules of the
American Arbitration Association then in effect and judgment upon such award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitration shall be held in New York, New York.
17. Severability. Should any provision of this Agreement be held by a
------------
court or arbitration panel of competent jurisdiction to be enforceable only if
modified, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties
hereto with any such modification to become a part hereof and treated as though
originally set forth in this Agreement. In any event, should one or more of the
provisions of this Agreement be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, and if such provision or provisions are not
modified as provided above, this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been set forth herein.
18. Authority. The Company and Norton represent and warrant to the
---------
Employee that the execution and delivery of this Agreement by the Company and
the performance by the Company of its covenants and agreements hereunder have
been duly authorized by all necessary corporate action and that this Agreement
has been duly executed and delivered on behalf of the Company.
19. Withholding. Anything to the contrary notwithstanding, all
-----------
payments required to be made by the Company hereunder to the Employee or her
beneficiaries, including her estate, shall be subject to withholding of such
amounts relating to taxes as the Company may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Company, may, in its sole discretion,
accept other provision for payment of taxes as permitted by law, provided it is
satisfied in its sole discretion that all requirements of law affecting its
responsibilities to withhold such taxes have been satisfied.
20. Subsidiaries, etc. The Employee shall be deemed to resign as an
------------------
officer and, if applicable, director of the Company and of any parent,
subsidiary or affiliate of the Company upon termination of her employment with
the Company.
12
<PAGE>
21. Survivorship. The respective rights and obligations of the
------------
Employee and the Company hereunder shall survive any termination of this
Agreement to the extent necessary to the intended preservation of such rights
and obligations.
22. Titles. Titles of the sections of this Agreement are intended
------
solely for convenience and no provision of this Agreement is to be construed by
reference to the title of any section.
23. Counterparts. This Agreement may be executed in two or more
------------
counterpart copies, each of which shall be deemed to be an original and all of
which taken together shall be deemed one document.
* * *
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
JJ ACQUISITION CORP.
By:_______________________________
Name: Amanda J. Bokman
Title: Vice President
EMPLOYEE
__________________________________
Name: Susan Schneider
14
<PAGE>
EXHIBIT A
NORTON MCNAUGHTON, INC.
Stock Option Certificate
Date of Grant: _____ __, 1998
Name of Optionee: Susan Schneider
Number of Shares:
Price Per Share:
This is to certify that, effective on the date of grant specified
above, the Board of Directors of Norton McNaughton, Inc. (the "Company") has
granted to the above-named optionee (the "Optionee") an option to purchase from
the Company, for the price per share set forth above, the number of shares of
Common Stock, $.01 par value (the "Stock"), of the Company set forth above
pursuant and subject to the terms of Section 3.3 of that certain Employment
Agreement dated as of _____ __, 1998 by and between JJ Acquisition Corp. (now
known as Jeri-Jo Knitwear, Inc.), a Delaware corporation and wholly owned
subsidiary of the Company ("JJ"), and the Optionee (the "Plan"). This option is
not intended to be treated as an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The terms and conditions of the option granted hereby, in addition to
the terms and conditions contained in the Plan, are as follows:
1. The price at which each share of Stock subject to this option may
be purchased shall be the price set forth above, subject to any adjustments
which may be made pursuant to Section 8 hereof.
2. Subject to the terms and conditions set forth herein and in
Section 3.3 of the Plan, this option shall be exercisable (x) as to 40,000
shares of Stock, on the date hereof and (y) as to the remaining shares of Stock
subject to this Option (the "Remainder"), beginning on the date which is nine
years and six months from the date of grant, provided that this option shall be
sooner exercisable as to the Remainder (i)(A) with respect to a number of shares
of Stock equal to 140,000 shares of Stock, on the Earn Out Payment Date (as
defined in the Purchase Agreement referred to in the Plan) if and only if the
1998/1999 EBITDA (as
<PAGE>
defined in the Purchase Agreement referred to in the Plan) shall equal or exceed
$11,000,000 but be less than $15,000,000 and (B) in full, on the Earn Out
Payment Date if and only if the 1998/1999 EBITDA shall equal or exceed
$15,000,000; (ii) in full, on the date, if any, that the Employee's employment
under the Plan terminates by reason of death or Disability or by the Optionee
for Good Reason or by JJ without Due Cause (as said terms are defined in the
Plan) and (iii) in full, upon the occurrence of an Acceleration Event (as
defined in the Purchase Agreement referred to in the Plan).
3. Subject to the terms and conditions set forth herein, the Optionee
may exercise this option at any time as to all or any of the shares of Stock
purchasable in accordance with Section 2 hereof by delivering to the Company
written notice specifying:
(i) the number of whole shares of Stock to be purchased together
with payment in full of the aggregate option price of such shares, provided
that this option may not be exercised for less than ten (10) shares of Stock
or the number of shares of Stock remaining subject to option, whichever is
smaller;
(ii) the name or names in which the stock certificate or
certificates are to be registered;
(iii) the address to which dividends, notices, reports, etc. are to
be sent; and
(iv) the Optionee's social security number.
Only one stock certificate will be issued unless the Optionee otherwise requests
in writing. Payment shall be in cash, or by certified or bank cashier's check
payable to the order of the Company, free from all collection charges (including
by means of a broker assisted simultaneous exercise and sale); provided,
however, that payment may be made in shares of Stock owned by the Optionee
having a market value on the date of exercise equal to the aggregate purchase
price, or in a combination of cash and Stock. For purposes of this option and
the Plan, the market value per share of Stock shall be the last sale price
regular way on the date of reference, or, in case no sale takes place on such
date, the average of the closing high bid and low asked prices regular way, in
either case on the principal national securities exchange on which the Stock is
listed or admitted to trading, or if the Stock is not listed or admitted to
trading on any national securities exchange, the last sale price reported on the
National Market System of the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") on such date, or the average of the
closing high
2
<PAGE>
bid and low asked prices of the Stock in the over-the-counter market reported on
NASDAQ on such date, whichever is applicable, or if there are no such prices
reported on NASDAQ on such date, as furnished to the Stock Option Committee of
the Board of Directors (the "Committee") by any New York Stock Exchange member
selected from time to time by the Committee for such purpose. If there is no bid
or asked price reported on any such date, the market value shall be determined
by the Committee in accordance with the regulations promulgated under Section
2031 of the Code, or by any other appropriate method selected by the Committee.
If the Optionee so requests, shares of Stock purchased upon exercise of an
option may be issued in the name of the Optionee or, provided that the Optionee
pays any applicable taxes, another person. No Optionee shall be entitled to any
rights as a stockholder of the Company in respect of any shares of Stock covered
by this option until such shares of Stock shall have been paid for in full and
issued to the Optionee.
4. As soon as practicable after the Company receives payment for
shares of Stock covered by this option, it shall deliver a certificate or
certificates representing the shares of Stock so purchased to the Optionee.
Such certificate shall be registered in the name of the Optionee, or, subject to
Section 3 hereof, in such other name or names as the Optionee shall request.
5. This option is personal to the Optionee and during the Optionee's
lifetime may be exercised only by the Optionee. This option shall not be
transferable other than by will or the laws of descent and distribution.
6. In the event that the Optionee's employment as an employee of the
Company or of any Subsidiary or Parent (within the meaning of Sections 424(e)
and 424(f) of the Code) (hereinafter the "Optionee's employment") is terminated
for any reason prior to the time that this option has been fully exercised, this
option shall be exercisable, if at all, as to any remaining vested shares of
Stock subject hereto, only in accordance with the terms (x) hereof (including
without limitation, Section 2 hereof) and (y) of Sections 3.3(a) and 3.3(b) of
the Plan. Notwithstanding the foregoing, this option shall in no event be
exercisable after the date of termination of such option specified in Section 2
hereof.
7. This option does not confer on the Optionee any right to continue
in the employ of the Company, any Subsidiary or Parent, or interfere in any way
with the right of the Company, any Subsidiary or Parent to determine the terms
of the Optionee's employment.
3
<PAGE>
8. In the event of a reorganization, recapitalization, stock split,
stock dividend, combination of shares, merger, consolidation, rights offering,
or any other change in the corporate structure or shares of the Company, the
Committee shall in good faith, adjust the number of shares of Stock (or other
securities or property) subject to this option, the exercise price with respect
to this option, or all of the foregoing.
9. This option and the terms and conditions herein set forth are
subject in all respects to the terms and conditions of the Plan, which shall be
controlling.
10. It shall be a condition to the obligation of the Company to issue
shares of Stock upon exercise of this option, that the Optionee (or any
beneficiary or person entitled to act) pay to the Company, upon its demand, such
amount as may be requested by the Company for the purpose of satisfying any
liability to withhold federal, state or local income or other taxes.
11. All notices hereunder to the Company shall be delivered or mailed
to the following address:
Norton McNaughton, Inc.
463 Seventh Avenue
New York, New York 10018
Attention: Chief Financial Officer
Such address for the service of notices may be changed at any time provided
notice of such change is furnished in advance to the Optionee.
NORTON MCNAUGHTON, INC.
By____________________________
Name: Peter Boneparth
Title: President and Chief
Operating Officer
4
<PAGE>
EXHIBIT B
NORTON MCNAUGHTON, INC. OPTION BONUS PLAN
FOR SENIOR EXECUTIVES OF JJ ACQUISITION CORP.
1. Establishment. This Plan, which shall be known as the Norton
-------------
McNaughton, Inc. Option Bonus Plan for Senior Executives of JJ Acquisition Corp.
(the "Bonus Plan"), is hereby established by JJ Acquisition Corp. (the
"Company") to provide incentives for senior executives providing services to the
Company and to aid the Company in retaining such senior executives upon whose
efforts the Company's success and future growth depends.
2. Administration. The Bonus Plan shall be administered by the Board
--------------
of Directors of the Company (the "Board"). For purposes of administration, the
Board, subject to the terms of the Bonus Plan, shall have authority, acting in
good faith, to establish such rules and regulations, to make such determinations
and interpretations, and to take such other administrative actions as it deems
necessary or advisable.
3. Participants. The participants in the Plan shall be Susan
------------
Schneider, Leslie Schneider and Scott Schneider, in each case for so long as
such individual is employed by the Company pursuant to an Employment Agreement
to which this Bonus Plan is an Exhibit (each, a "Participant" and collectively,
the "Participants"); provided, however, that nothing contained herein shall be
construed as creating a guarantee of employment for any Participant.
4. Bonus Options.
-------------
4.1 GRANT. In the event that EBITDA (as defined in the Agreement of
Purchase and Sale by and among Jeri-Jo Knitwear Inc., Jamie Scott, Inc., the
Stockholders of Jamie Scott, Inc., JJ Acquisition Corp. and Norton McNaughton,
Inc. (the "Purchase Agreement")) attained by the Company in Year 1 or Year 2 (as
defined in the Purchase Agreement, and each, a "Year") is equal to or in excess
of $17,000,000, the Company shall cause to be granted to the Participants by the
Board of Directors of Norton McNaughton, Inc. a Delaware corporation ("Norton"),
options to purchase an aggregate of 50,000 (or such lesser number as shall be
necessary to allocate such options in accordance with Section 4.2 below) shares
of common stock, par value $.01 per share of Norton (the "Common Stock") in each
Year that EBITDA in excess of $17,000,000 is so attained. In addition, for each
$1,000,000 of EBITDA in excess of $17,000,000 attained by
<PAGE>
the Company in each of the Years, the Company shall cause to be granted to the
Participants by the Board of Directors of Norton, options to purchase an
aggregate of 30,000 (or such lesser number as shall be necessary to allocated
such options in accordance with Section 4.2 below) shares of Common Stock. Any
options granted as aforesaid shall be hereinafter referred to as "Bonus
Options". The Bonus Options shall be granted, if at all, on the dates of
delivery to the Company and Norton of the EBITDA Notice and EBITDA Statement
(pursuant to Section 2.02(b)(i) of the Purchase Agreement) for the applicable
Year and shall have an exercise price per share equal to the fair market value
of the Common Stock on the date of grant.
4.2 ALLOCATION OF BONUS OPTIONS. The Bonus Options shall be allocated
40% to Susan Schneider, 40% to Leslie Schneider and 20% to Scott Schneider, or
in the case of the death of any such Participant during a Year, the estate of
such Participant.
4.3 EXERCISE. The Bonus Options shall be fully vested and exercisable
on and after the date of grant.
4.4 TERM OF OPTIONS. Except as provided below, the term of the Bonus
Options shall be ten years.
(i) If a Participant's employment with the Company terminates
pursuant to Section 6.1 of his or her Employment Agreement or is terminated by
the Company or by the Participant pursuant to Section 6.2 of his or her
Employment Agreement, is terminated by the Employee pursuant to Section 6.4 of
his or her Employment Agreement, or terminated for any other reason (except as
provided in clause (ii) below), the Bonus Options may be exercised by the
Participant (or his or her estate or legal representative) within one (1) year
after such termination; and
(ii) In the event of termination of the employment of a
Participant (a) by the Company pursuant to Section 6.3 of his or her Employment
Agreement or (b) by the Participant other than pursuant to Sections 6.1, 6.2 or
6.4 of his or her Employment Agreement, no Bonus Options shall be exercisable.
4.5 ADJUSTMENTS. In the event of any dividend or other distribution
(whether in the form of cash, Common Stock, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of Common
Stock or other securities of Norton, issuance of warrants or other rights to
purchase Common Stock, the Board of Directors shall, in
2
<PAGE>
good faith adjust the number of shares of Common Stock (or other securities or
property) subject to the Bonus Options, the exercise price with respect to any
Bonus Options, or both.
4.6 No Participant shall be entitled to Bonus Options for any Year of
the Company subsequent to the Year in which his or her termination of employment
(for any or no reason) occurs.
4.7 In the event of termination of the employment of a Participant
prior to the end of a Year, pursuant to his or her Employment Agreement, such
Participant (or his or her estate or other legal representative) shall be
granted such Bonus Options for such Year only as provided in this Section 4.7.
The number of Bonus Options to which the Participant (or his or her estate or
legal representative) shall be entitled for such Year (which shall be granted at
the time that the Bonus Options are granted to the other Participants) shall be
equal to the product of (x) the number of Bonus Options, if any, which would
have been granted to the Participant pursuant to Sections 4.1 and 4.2 of this
Bonus Plan for such Year if the employment of the Participant had not so
terminated, multiplied by (y) a fraction, the numerator of which is the number
of days from the beginning of such Year to the date of termination, and the
denominator of which is 365. The terms and conditions of any such Bonus Options
shall be as otherwise provided in this Section 4.
4.8 If any portion of the Bonus Options shall not be allocated or
granted by reason of this Section 4, such Bonus Options shall be retained by the
Company or granted to other Participants or to new participants, all as
determined by the Board, after good faith consideration of any recommended
course of action submitted to the Board by the remaining Participants.
4.9 CHANGE OF CONTROL. In the event that there shall occur a Change
of Control (as defined in the Purchase Agreement) during either of the Years,
the Participants in this Bonus Plan shall be entitled to receive, in lieu of
Bonus Options contemplated by Section 4.1 of this Bonus Plan (unless such Bonus
Options have heretofore been granted, in which case such granted Bonus Options
shall be retained), a number of Bonus Options (allocated as set forth in Section
4.2 above) equal to (i) in the event that the Change of Control occurs during
Year 1, 100,000 Bonus Options or (ii) in the event that the Change of Control
occurs during Year 2, 50,000 Bonus Options. The terms and conditions of any
such Bonus Options shall be as otherwise provided in this Section 4.
3
<PAGE>
EXHIBIT 4(VIII)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of the 18th day of June, 1998 by and between Jeri-Jo
Knitwear, Inc., a Delaware corporation f/k/a JJ Acquisition Corp. (the
"Company"), and Leslie Schneider (the "Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company, a wholly owned subsidiary of Norton McNaughton,
Inc., a Delaware corporation ("Norton"), and certain other parties (which
parties include the Employee) have entered into an Agreement of Purchase and
Sale dated as of April 15, 1998 (the "Purchase Agreement"), providing, inter
-----
alia, for the purchase by the Company of substantially all of the assets of
- ----
Jeri-Jo Knitwear Inc., a New York corporation ("J-J Knitwear") and Jamie Scott,
Inc., a New York corporation ("Jamie Scott"; and together with J-J Knitwear and
Jamie Scott, the "Jeri-Jo Group"); and
WHEREAS, the Company desires to secure the employment of the Employee
with the Company and the Employee desires to be employed by the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto hereby agree as follows:
1. Employment, Term.
----------------
1.1 The Company agrees to employ the Employee, and the Employee agrees
to serve in the employ of the Company, for the term set forth in Section 1.2, in
the positions and with the responsibilities, duties and authority set forth in
Section 2 and on the other terms and conditions set forth in this Agreement.
1.2 The term of the Employee's employment under this Agreement (the
"Term") shall commence on the date hereof and shall terminate on the second
anniversary of the Closing Date (as defined in the Purchase Agreement) (the
"Expiration Date"), unless sooner terminated in accordance with this Agreement.
2. Positions, Duties. The Employee shall serve in the positions of
-----------------
Co-President and Co-Chief Executive Officer of the Company. The Employee shall
perform, faithfully and diligently, such duties and shall have such other
responsibilities, appropriate to said position, as shall be assigned to her from
time to time by the Vice Chairman (the "Vice Chairman") (currently, Peter
Boneparth); provided, however, that in any event said duties and
<PAGE>
responsibilities shall be consistent with the terms and provisions of Section
7.12 of the Purchase Agreement. The Employee shall report solely to the Vice
Chairman (currently, Peter Boneparth), but if Mr. Boneparth changes titles with
the Purchaser, then to Mr. Boneparth in such capacity. The Employee shall devote
her complete and undivided attention to the performance of her duties and
responsibilities hereunder during the normal working hours of executive
employees of the Company. The Employee's services under this Agreement shall be
performed principally at the executive offices and warehouses of the Company to
be located, during the Term, in New York City and New Jersey, respectively
(unless otherwise agreed between the Vice Chairman and the Employee).
3. Compensation.
------------
3.1 Salary. During the Term, in consideration of the performance by
------
the Employee of the services set forth in Section 2 and her observance of the
other covenants set forth herein, the Company shall pay the Employee, and the
Employee shall accept, a base salary at a rate of $400,000 per annum (which may
be increased, but not decreased), payable in accordance with the standard
payroll practices of the Company.
3.2 Bonus. During the Term, in addition to the salary provided for
-----
in Section 3.1 and the Bonus Plan described in Section 3.4, the Employee shall
be eligible to participate, subject to the terms thereof, in any bonus plan for
executives of Norton or the Company in effect during the Term.
3.3 Stock Options.
-------------
(a) GRANT. On the date hereof, Norton shall grant to the Employee,
an option to purchase an aggregate number of shares of common stock, par value
$.01 per share (the "Common Stock"), of Norton, at an exercise price per share
equal to the Closing Market Value (as defined in the Purchase Agreement) (the
"Option"), which number shall equal the sum of (i) 180,000 (the "Base Option
Number") and (ii) a number (the "Additional Option Number") equal to the Base
Option Number multiplied by a fraction, the numerator of which shall be the
positive excess, if any, of the Closing Market Value over the Signing Market
Value (as such terms defined in the Purchase Agreement) and the denominator of
which shall be the Signing Market Value. The Option shall be vested and
exercisable on and after (i) the date hereof, as to 40,000 shares of Common
Stock and (ii) the date which is nine years and six months from the Closing
Date, as to the remainder of the number of shares of Common Stock subject to the
Option (the "Remainder"), but shall be sooner
2
<PAGE>
exercisable as to the Remainder (i)(A) with respect to a number of shares of
Common Stock equal to 140,000 shares of Common Stock, on the Earn Out Payment
Date (as defined in the Purchase Agreement) if and only if the 1998/1999 EBITDA
(as defined in the definition of 1998/1999 EBITDA in the Purchase Agreement)
shall equal or exceed $11,000,000 but be less than $15,000,000, (B) in full, on
the Earn Out Payment Date, if and only if the 1998/1999 EBITDA shall equal or
exceed $15,000,000; (ii) in full, on the date, if any, that the Employee's
employment terminates hereunder by reason of death or Disability or by the
Employee for Good Reason or by the Company without Due Cause (as said terms are
hereinafter defined); and (iii) in full, upon the occurrence of any Acceleration
Event (as defined in the Purchase Agreement).
(b) TERM OF OPTION. Except as provided below, the term of the
Option shall be ten years.
(i) In the event of a termination of employment of the Employee
with the Company pursuant to Section 6.1, Section 6.2 or Section 6.4, the Option
may be exercised by the Employee or, in the event of the Employee's death, her
estate or legal representative during the remainder of the term of the Option;
and
(ii) In the event of termination of the employment of the Employee
with the Company (a) by the Company pursuant to Section 6.3 or (b) by the
Employee during the Term, other than pursuant to Sections 6.1, 6.2 or 6.4, the
Option shall not thereafter be exercisable.
(c) ADJUSTMENTS. In the event of any dividend or other
distribution (whether in the form of cash, Common Stock, other securities or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Common Stock or other securities of Norton, issuance
of warrants or other rights to purchase Common Stock, the Board of Directors
shall, in good faith, adjust the number of shares of Common Stock (or other
securities or property) subject to the Option, the exercise price with respect
to any Option, or all of the foregoing.
(d) STOCK OPTION CERTIFICATE. The Options shall be represented by
a stock option certificate in the form of Exhibit A hereto and shall otherwise
be subject to the terms and conditions of such stock option certificate.
(e) REGISTRATION OF SHARES. Norton shall, as promptly as
practicable following the commencement of the Employee's employment hereunder,
file a registration
3
<PAGE>
statement on Form S-8, or any successor to such Form, with respect to the shares
of Common Stock covered by the Option.
3.4 Bonus Options. During the Term, the Employee shall be eligible to
-------------
receive Bonus Options (as defined in the Norton McNaughton, Inc. Bonus Option
Plan for Senior Executives of JJ Acquisition Corp. (the "Executive Option Bonus
Plan")) in accordance with the terms set forth in the Executive Option Bonus
Plan, a copy of which is attached hereto as Exhibit B.
4. Expense Reimbursement. During the Term, (i) the Company shall
---------------------
reimburse the Employee for all reasonable and necessary out-of-pocket expenses
incurred by her in connection with the performance of her duties hereunder, upon
the presentation of proper accounts therefor in accordance with Norton's
policies and (ii) the Company shall pay for the benefit of the Employee all
reasonable and necessary expenses incurred by her in the ordinary and usual
course of business and in accordance with Norton's policies (in any case, as
such policies are adopted from time to time by the Compensation Committee of
Norton).
5. Benefits.
--------
5.1 Benefit Plans. In addition to the benefits under Section 7.07 of
-------------
the Purchase Agreement, during the Term, the Employee shall be entitled to
participate in all employee benefit plans and programs offered by Norton or the
Company for similarly situated executives and shall be entitled to equitable
treatment in respect of new benefits, if any, to be received under such employee
benefit plans and programs by similarly situated executives.
5.2 Vacation. During the Term, the Employee shall be entitled to paid
--------
vacation in accordance with Norton's policy for its executive employees, but not
less than five weeks.
4
<PAGE>
6. Termination of Employment.
-------------------------
6.1 Death. In the event of the death of the Employee during the Term,
-----
the Company shall pay to the estate or other legal representative of the
Employee (1) the base salary provided for in Section 3.1 accrued to the date of
the Employee's death and not theretofore paid to the Employee, (2) a pro rata
bonus in an amount equal to the product of (i) the Employee's most recent bonus,
if any, paid under Section 3.2, and (ii)(A) the number of months (including
partial months) worked during the year in which the Employee's date of death
occurs, divided by (b) 12, and (3) Bonus Options in accordance with Section 4 of
the Executive Option Bonus Plan. Rights and benefits of the estate or other
legal representative of the Employee under the benefit plans and programs of the
Company shall be determined in accordance with the provisions of such plans and
programs. Neither the estate or other legal representative of the Employee nor
the Company shall have any further rights or obligations under this Agreement
except as provided in Section 3.3(b)(i).
6.2 Disability. If during the Term the Employee shall become
----------
incapacitated by reason of physical or mental disability and shall be unable to
perform her normal duties hereunder for a cumulative period of six (6) months in
any period of twelve (12) consecutive months, the employment of the Employee
hereunder may be terminated by the Company or the Employee upon notice to the
other (a "Disability"). In the event of such termination, the Company shall pay
to the Employee (1) the salary provided for in Section 3.1 accrued to the date
of such termination and not theretofore paid to the Employee, (2) a pro rata
bonus in an amount equal to the product of (i) the Employee's most recent bonus,
if any, paid under Section 3.2, and (ii)(A) the number of months (including
partial months) employed during the year in which the Employee's termination
occurs, divided by (b) 12, and (3) Bonus Options in accordance with Section 4 of
the Executive Option Bonus Plan. Rights and benefits of the Employee under the
benefit plans and programs of the Company shall be determined in accordance with
the provisions of such plans and programs. Neither the Employee nor the Company
shall have any further rights or obligations under this Agreement, except as
provided in Sections 3.3(b)(i), 7, 8, 9 and 10.
6.3 Due Cause. The employment of the Employee hereunder may be
---------
terminated by the Company at any time during the Term for Due Cause (as
hereinafter defined). In the event of such termination, the Company shall pay
to the Employee the salary provided for in Section 3.1 accrued to
5
<PAGE>
the date of such termination and not theretofore paid to the Employee. Rights
and benefits of the Employee under the benefit plans and programs of the Company
shall be determined in accordance with the provisions of such plans and
programs. After the satisfaction of any claim of the Company against the
Employee incidental to such Due Cause, neither the Employee nor the Company
shall have any further rights or obligations under this Agreement, except as
provided in Sections 7, 8, 9 and 10. For purposes hereof, "Due Cause" shall mean
the Employee's conviction or other adjudication of a felony or any crime or
offense involving fraud that is materially injurious to the Company or Norton;
provided, however, that the Employee shall be given written notice by a majority
of the Board of Directors of the Company that it intends to terminate the
Employee's employment for Due Cause under this Section, which written notice
shall specify the act or acts upon the basis of which the majority of the Board
of Directors of the Company intends so to terminate the Employee's employment,
and the Employee shall then be given the opportunity, within fifteen (15) days
of her receipt of such notice, to have a meeting with the Board of Directors of
the Company to discuss such act or acts.
6.4 Termination by the Employee with Good Reason or by the Company not
------------------------------------------------------------------
for Due Cause. The Employee may at any time terminate her employment with the
- -------------
Company with Good Reason (as hereinafter defined). For purposes hereof, Good
Reason shall mean (i) the breach by the Company of any material provision of
this Agreement or of Section 7.12 of the Purchase Agreement, in any case, for a
period of 30 days after written notice of such breach by the Employee to the
Company; (ii) the failure of the Company to pay the Earn Out Payment (as defined
in the Purchase Agreement) as and when such is due and payable in accordance
with the terms of the Purchase Agreement, including any amounts payable under
the Earn Out Letter of Credit (as defined in the Purchase Agreement); and (iii)
the occurrence of an Acceleration Event (as defined in the Purchase Agreement).
If the Company terminates the Employee's employment other than for disability
pursuant to Section 6.2 or Due Cause pursuant to Section 6.3, or if the Employee
terminates her employment for Good Reason pursuant to Section 6.4, the Employee
shall be entitled (a) to continue to receive from the Company her base salary
for the remainder of the Term and (b) to continue to participate for the
remainder of the Term in all employee benefit plans and programs (including any
bonus plan) in which the Employee participated on the date of termination.
6
<PAGE>
7. Confidential Information.
------------------------
7.1 The Employee shall, during the Term and for the two-year period
thereafter (unless the Term terminates in accordance with Section 6.4, in which
case the limits imposed on the Employee under this Section 7.1 shall expire on
the date of such termination), treat as confidential and, except as required in
the performance of her duties and responsibilities under this Agreement, not
disclose, publish or otherwise make available to the public or to any
individual, firm or corporation any confidential material (as hereinafter
defined), except, on a need to know basis, to the Employee's attorney,
accountant or personal advisor. The Employee agrees that all confidential
material, together with all notes and records of the Employee relating thereto,
and all copies or facsimiles thereof in the possession of the Employee, are the
exclusive property of the Company and the Employee agrees to return such
material to the Company promptly upon the termination of the Employee's
employment with the Company.
7.2 Subject to Section 7.12 of the Purchase Agreement, for the
purposes hereof, the term "confidential material" shall mean all information
acquired by the Employee in the course of the Employee's prior employment with
any member of the Jeri-Jo Group and in the course of the Employee's employment
with the Company in any way concerning the products, projects, activities,
business or affairs of the Company, the Jeri-Jo Group, or Norton or and other
subsidiary, direct or indirect, of Norton (the "Norton Group"), or the
customers, suppliers or agents of the Company, the Jeri-Jo Group or any member
of the Norton Group, including, without limitation, all information concerning
trade secrets and the preparation of raw material for, manufacture of, or
finishing processes utilized in the production of, the products or projects of
the Company, any member of the Jeri-Jo Group or any member of the Norton Group
or any improvements therein, all sales and financial information concerning the
Company, any member of the Jeri-Jo Group or any member of the Norton Group, all
customer and supplier lists, all information concerning projects in research and
development or marketing plans for any such products or projects, and all
information in any way concerning the products, projects, activities, business
or affairs of customers of the Company, the Jeri-Jo Group or any member of the
Norton Group which is furnished to the Employee by the Company or any of its
employees (current or former), agents, customers or suppliers, as such;
provided, however, that the term "confidential material" shall not include
information which (a) becomes generally available to the public or the apparel
industry in general other than as a result of a disclosure by the Employee, (b)
was available to the Employee on a non-confidential basis prior to her
7
<PAGE>
employment with the Company, (c) becomes available to the Employee on a non-
confidential basis from a source other than the Company or any of its agents,
suppliers or customers, provided that the Employee has no knowledge that such
source is not bound by a confidentiality agreement with the Company or any of
such agents, customers or suppliers, or (d) if disclosed by the Employee would
not have a significant detrimental effect on the business of the Company.
8. Inventions. Subject to Section 7.12 of the Purchase Agreement and
----------
subject to the Employee's right to the registered trademark Rachel Max(R) (but
subject to Section 7.15 of the Purchase Agreement) any and all material
inventions, material innovations or material improvements ("inventions") made,
developed or created by the Employee (whether at the request or suggestion of
the Company or otherwise, whether alone or in conjunction with others, and
whether during regular hours of work or otherwise) during the period of her
employment with the Company which may be directly useful in, or relate to, the
Business (as defined in the Purchase Agreement), shall be promptly and fully
disclosed by the Employee to the Board of Directors of the Company and shall be
the Company's exclusive property as against the Employee, and the Employee shall
promptly deliver to an appropriate representative of the Company as designated
by the Board of Directors all papers, drawings, models, data and other material
relating to any inventions made, developed or created by her as aforesaid. The
Employee shall, at the request of the Company and without any payment therefor,
execute any documents necessary or advisable in the opinion of the Company's
counsel to direct issuance of patents, trademarks or copyrights to the Company
with respect to such inventions as are to be the Company's exclusive property as
against the Employee or to vest in the Company title to such inventions as
against the Employee. The expense of securing any such patent, trademark or
copyright shall be borne by the Company.
9. Non-Competition. The Employee acknowledges that the services to
---------------
be rendered by her to the Company are of a special and unique character. In
consideration of her employment hereunder, the Employee agrees, for the benefit
of the Company, that she will not, during the period of her employment with the
Company and thereafter for a period (the "Period") of two (2) years commencing
on the date of termination of her employment with the Company (other than a
termination by the Employee for Good Reason or by the Company not for Due Cause,
in which case, the Period shall be the remainder of the Term following the date
of such termination), (a) engage, directly or indirectly, whether as principal,
agent, distributor, representative, consultant, employee, partner, stockholder,
limited partner or other
8
<PAGE>
investor (other than an investment of not more than (i) five percent (5%) of the
stock or equity of any corporation the capital stock of which is publicly traded
or (ii) five percent (5%) of the ownership interest of any limited partnership
or other entity) or otherwise, anywhere in the United States, in any business
activity or business venture which is in competition with the Business (as
defined in the Purchase Agreement), it being understood and agreed that
ownership or operation of the business presently conducted by Creative
Retailers, Inc. shall not be prohibited by this Section 9, (b) solicit or entice
or endeavor to solicit or entice away from the Company or any member of the
Norton Group any person who was an officer, employee or consultant of the
Company, either for her own account or for any individual, firm or corporation,
whether or not such person would commit any breach of his contract of employment
by reason of leaving the service of the Company, and the Employee agrees not to
employ, directly or indirectly, any person who was an officer or employee of the
Company, or (c) solicit or entice or endeavor to solicit or entice away from the
Company any supplier or customer of the Company, either for her own account or
for any individual, firm or corporation, which, in any case would have a
significant detrimental effect on the business of the Company.
10. Equitable Relief, Etc.
---------------------
In the event of a breach or threatened breach by the Employee of any of
the provisions of Sections 7, 8 or 9, the Employee hereby consents and agrees
that the Company shall be entitled to an injunction or similar equitable relief
from any court of competent jurisdiction restraining the Employee from
committing or continuing any such breach or threatened breach or granting
specific performance of any act required to be performed by the Employee under
any of such provisions, without the necessity of showing any actual damage or
that money damages would not afford an adequate remedy and without the necessity
of posting any bond or other security. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies at law or in equity
which it may have with respect to any such breach or threatened breach.
11. Successors and Assigns.
----------------------
11.1 Assignment by the Company. The Company may not assign this
-------------------------
Agreement or any part thereof without the prior written consent of the Employee.
11.2 Assignment by the Employee. The Employee may not assign this
--------------------------
Agreement or any part thereof without the prior written consent of a majority of
the Board of Directors of the Company (other than the Employee if she is
9
<PAGE>
a member of such Board at the time); provided, however, that nothing herein
shall preclude one or more beneficiaries of the Employee from receiving any
amount that may be payable following the occurrence of her legal incompetency or
her death and shall not preclude the legal representative of her estate from
receiving such amount or from assigning any right hereunder to the person or
persons entitled thereto under her will or, in the case of intestacy, to the
person or persons entitled thereto under the laws of intestacy applicable to her
estate. The term "beneficiaries", as used in this Agreement, shall mean a
beneficiary or beneficiaries so designated to receive any such amount or, if no
beneficiary has been so designated, the legal representative of the Employee (in
the event of her incompetency) or the Employee's estate.
12. Governing Law. This Agreement shall be deemed a contract made
-------------
under, and for all purposes shall be construed in accordance with, the laws of
the State of New York applicable to contracts to be performed entirely within
such State.
13. Entire Agreement. This Agreement contains all the understandings
----------------
and representations between the parties hereto pertaining to the subject matter
hereof. This Agreement supersedes all understandings and agreements, whether
oral or in writing, if any, previously entered into by the Company or any member
of Jeri-Jo Group with the Employee in any way relating to the employment of the
Employee by the Company or by any member of the Jeri-Jo Group, all of which
agreements and understandings are hereby terminated and all rights and
entitlements thereunder are hereby waived and released.
14. Amendment, Modification, Waiver. No provision of this Agreement
-------------------------------
may be amended or modified unless such amendment or modification is agreed to in
writing and signed by the Employee and by a representative of the Company (other
than the Employee) who have been duly authorized by the Board of Directors of
the Company to do so (other than the Employee if she is a member of such Board
at the time). Except as otherwise specifically provided in this Agreement, no
waiver by either party hereto of any breach by the other party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar provision or condition at
the same or any prior or subsequent time, nor shall the failure of or delay by
either party hereto in exercising any right, power or privilege hereunder
operate as a waiver thereof to preclude any other or further exercise thereof or
the exercise of any other such right, power or privilege.
10
<PAGE>
15. Notices. All notices, requests or instructions hereunder shall be
-------
in writing and delivered personally, sent by telecopy, sent by registered or
certified mail, postage prepaid, or sent by Federal Express or any other
nationally recognized overnight courier service, as follows:
If to the Company:
c/o Norton McNaughton, Inc.
463 Seventh Avenue
New York, New York 10018
Attention: President
Telecopy: (212) 563-2766
with a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Attention: Bradley P. Cost, Esq.
Telecopy: (212) 682-0200
If to the Employee:
Leslie Schneider
c/o Friedman Alpren & Green LLP
1700 Broadway
New York, New York 10019
Attention: Bruce A. Madnick, CPA
Telecopy No.: (212) 265-4761
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: James Alterbaum, Esq.
Telecopy: (212) 704-6288
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, telecopied, or sent by Federal Express or any other
recognized overnight courier service, and three (3) business days after the date
of mailing, if mailed by registered or certified mail, return receipt requested.
11
<PAGE>
16. Arbitration. Any controversy or claim arising out of or relating
-----------
to this Agreement, or any breach thereof, shall, except as provided in Section
10, be settled by binding arbitration in accordance with the rules of the
American Arbitration Association then in effect and judgment upon such award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitration shall be held in New York, New York.
17. Severability. Should any provision of this Agreement be held by a
------------
court or arbitration panel of competent jurisdiction to be enforceable only if
modified, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties
hereto with any such modification to become a part hereof and treated as though
originally set forth in this Agreement. In any event, should one or more of the
provisions of this Agreement be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, and if such provision or provisions are not
modified as provided above, this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been set forth herein.
18. Authority. The Company and Norton represent and warrant to the
---------
Employee that the execution and delivery of this Agreement by the Company and
the performance by the Company of its covenants and agreements hereunder have
been duly authorized by all necessary corporate action and that this Agreement
has been duly executed and delivered on behalf of the Company.
19. Withholding. Anything to the contrary notwithstanding, all
-----------
payments required to be made by the Company hereunder to the Employee or her
beneficiaries, including her estate, shall be subject to withholding of such
amounts relating to taxes as the Company may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Company, may, in its sole discretion,
accept other provision for payment of taxes as permitted by law, provided it is
satisfied in its sole discretion that all requirements of law affecting its
responsibilities to withhold such taxes have been satisfied.
20. Subsidiaries, etc. The Employee shall be deemed to resign as an
------------------
officer and, if applicable, director of the Company and of any parent,
subsidiary or affiliate of the Company upon termination of her employment with
the Company.
12
<PAGE>
21. Survivorship. The respective rights and obligations of the
------------
Employee and the Company hereunder shall survive any termination of this
Agreement to the extent necessary to the intended preservation of such rights
and obligations.
22. Titles. Titles of the sections of this Agreement are intended
------
solely for convenience and no provision of this Agreement is to be construed by
reference to the title of any section.
23. Counterparts. This Agreement may be executed in two or more
------------
counterpart copies, each of which shall be deemed to be an original and all of
which taken together shall be deemed one document.
* * *
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
JJ ACQUISITION CORP.
By:___________________________
Name: Amanda J. Bokman
Title: Vice President
EMPLOYEE
______________________________
Name: Leslie Schneider
14
<PAGE>
EXHIBIT A
NORTON MCNAUGHTON, INC.
Stock Option Certificate
Date of Grant: _____ __, 1998
Name of Optionee: Leslie Schneider
Number of Shares:
Price Per Share:
This is to certify that, effective on the date of grant specified
above, the Board of Directors of Norton McNaughton, Inc. (the "Company") has
granted to the above-named optionee (the "Optionee") an option to purchase from
the Company, for the price per share set forth above, the number of shares of
Common Stock, $.01 par value (the "Stock"), of the Company set forth above
pursuant and subject to the terms of Section 3.3 of that certain Employment
Agreement dated as of _____ __, 1998 by and between JJ Acquisition Corp. (now
known as Jeri-Jo Knitwear, Inc.), a Delaware corporation and wholly owned
subsidiary of the Company ("JJ"), and the Optionee (the "Plan"). This option is
not intended to be treated as an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The terms and conditions of the option granted hereby, in addition to
the terms and conditions contained in the Plan, are as follows:
1. The price at which each share of Stock subject to this option may
be purchased shall be the price set forth above, subject to any adjustments
which may be made pursuant to Section 8 hereof.
2. Subject to the terms and conditions set forth herein and in
Section 3.3 of the Plan, this option shall be exercisable (x) as to 40,000
shares of Stock, on the date hereof and (y) as to the remaining shares of Stock
subject to this Option (the "Remainder"), beginning on the date which is nine
years and six months from the date of grant, provided that this option shall be
sooner exercisable as to the Remainder (i)(A) with respect to a number of shares
of Stock equal to 140,000 shares of Stock, on the Earn Out Payment Date (as
defined in the Purchase Agreement referred to in the Plan) if and only if the
1998/1999 EBITDA (as
<PAGE>
defined in the Purchase Agreement referred to in the Plan) shall equal or exceed
$11,000,000 but be less than $15,000,000 and (B) in full, on the Earn Out
Payment Date if and only if the 1998/1999 EBITDA shall equal or exceed
$15,000,000; (ii) in full, on the date, if any, that the Employee's employment
under the Plan terminates by reason of death or Disability or by the Optionee
for Good Reason or by JJ without Due Cause (as said terms are defined in the
Plan) and (iii) in full, upon the occurrence of an Acceleration Event (as
defined in the Purchase Agreement referred to in the Plan).
3. Subject to the terms and conditions set forth herein, the Optionee
may exercise this option at any time as to all or any of the shares of Stock
purchasable in accordance with Section 2 hereof by delivering to the Company
written notice specifying:
(i) the number of whole shares of Stock to be purchased together
with payment in full of the aggregate option price of such shares, provided
that this option may not be exercised for less than ten (10) shares of Stock
or the number of shares of Stock remaining subject to option, whichever is
smaller;
(ii) the name or names in which the stock certificate or
certificates are to be registered;
(iii) the address to which dividends, notices, reports, etc. are to
be sent; and
(iv) the Optionee's social security number.
Only one stock certificate will be issued unless the Optionee otherwise requests
in writing. Payment shall be in cash, or by certified or bank cashier's check
payable to the order of the Company, free from all collection charges (including
by means of a broker assisted simultaneous exercise and sale); provided,
however, that payment may be made in shares of Stock owned by the Optionee
having a market value on the date of exercise equal to the aggregate purchase
price, or in a combination of cash and Stock. For purposes of this option and
the Plan, the market value per share of Stock shall be the last sale price
regular way on the date of reference, or, in case no sale takes place on such
date, the average of the closing high bid and low asked prices regular way, in
either case on the principal national securities exchange on which the Stock is
listed or admitted to trading, or if the Stock is not listed or admitted to
trading on any national securities exchange, the last sale price reported on the
National Market System of the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") on such date, or the average of the
closing high
2
<PAGE>
bid and low asked prices of the Stock in the over-the-counter market reported on
NASDAQ on such date, whichever is applicable, or if there are no such prices
reported on NASDAQ on such date, as furnished to the Stock Option Committee of
the Board of Directors (the "Committee") by any New York Stock Exchange member
selected from time to time by the Committee for such purpose. If there is no
bid or asked price reported on any such date, the market value shall be
determined by the Committee in accordance with the regulations promulgated under
Section 2031 of the Code, or by any other appropriate method selected by the
Committee. If the Optionee so requests, shares of Stock purchased upon exercise
of an option may be issued in the name of the Optionee or, provided that the
Optionee pays any applicable taxes, another person. No Optionee shall be
entitled to any rights as a stockholder of the Company in respect of any shares
of Stock covered by this option until such shares of Stock shall have been paid
for in full and issued to the Optionee.
4. As soon as practicable after the Company receives payment for
shares of Stock covered by this option, it shall deliver a certificate or
certificates representing the shares of Stock so purchased to the Optionee.
Such certificate shall be registered in the name of the Optionee, or, subject to
Section 3 hereof, in such other name or names as the Optionee shall request.
5. This option is personal to the Optionee and during the Optionee's
lifetime may be exercised only by the Optionee. This option shall not be
transferable other than by will or the laws of descent and distribution.
6. In the event that the Optionee's employment as an employee of the
Company or of any Subsidiary or Parent (within the meaning of Sections 424(e)
and 424(f) of the Code) (hereinafter the "Optionee's employment") is terminated
for any reason prior to the time that this option has been fully exercised, this
option shall be exercisable, if at all, as to any remaining vested shares of
Stock subject hereto, only in accordance with the terms (x) hereof (including
without limitation, Section 2 hereof) and (y) of Sections 3.3(a) and 3.3(b) of
the Plan. Notwithstanding the foregoing, this option shall in no event be
exercisable after the date of termination of such option specified in Section 2
hereof.
7. This option does not confer on the Optionee any right to continue
in the employ of the Company, any Subsidiary or Parent, or interfere in any way
with the right of the Company, any Subsidiary or Parent to determine the terms
of the Optionee's employment.
3
<PAGE>
8. In the event of a reorganization, recapitalization, stock split,
stock dividend, combination of shares, merger, consolidation, rights offering,
or any other change in the corporate structure or shares of the Company, the
Committee shall in good faith, adjust the number of shares of Stock (or other
securities or property) subject to this option, the exercise price with respect
to this option, or all of the foregoing.
9. This option and the terms and conditions herein set forth are
subject in all respects to the terms and conditions of the Plan, which shall be
controlling.
10. It shall be a condition to the obligation of the Company to issue
shares of Stock upon exercise of this option, that the Optionee (or any
beneficiary or person entitled to act) pay to the Company, upon its demand, such
amount as may be requested by the Company for the purpose of satisfying any
liability to withhold federal, state or local income or other taxes.
11. All notices hereunder to the Company shall be delivered or mailed
to the following address:
Norton McNaughton, Inc.
463 Seventh Avenue
New York, New York 10018
Attention: Chief Financial Officer
Such address for the service of notices may be changed at any time provided
notice of such change is furnished in advance to the Optionee.
NORTON MCNAUGHTON, INC.
By____________________________
Name: Peter Boneparth
Title: President and Chief
Operating Officer
4
<PAGE>
EXHIBIT B
NORTON MCNAUGHTON, INC. OPTION BONUS PLAN
FOR SENIOR EXECUTIVES OF JJ ACQUISITION CORP.
1. Establishment. This Plan, which shall be known as the Norton
-------------
McNaughton, Inc. Option Bonus Plan for Senior Executives of JJ Acquisition Corp.
(the "Bonus Plan"), is hereby established by JJ Acquisition Corp. (the
"Company") to provide incentives for senior executives providing services to the
Company and to aid the Company in retaining such senior executives upon whose
efforts the Company's success and future growth depends.
2. Administration. The Bonus Plan shall be administered by the Board
--------------
of Directors of the Company (the "Board"). For purposes of administration, the
Board, subject to the terms of the Bonus Plan, shall have authority, acting in
good faith, to establish such rules and regulations, to make such determinations
and interpretations, and to take such other administrative actions as it deems
necessary or advisable.
3. Participants. The participants in the Plan shall be Susan
------------
Schneider, Leslie Schneider and Scott Schneider, in each case for so long as
such individual is employed by the Company pursuant to an Employment Agreement
to which this Bonus Plan is an Exhibit (each, a "Participant" and collectively,
the "Participants"); provided, however, that nothing contained herein shall be
construed as creating a guarantee of employment for any Participant.
4. Bonus Options.
-------------
4.1 GRANT. In the event that EBITDA (as defined in the Agreement of
Purchase and Sale by and among Jeri-Jo Knitwear Inc., Jamie Scott, Inc., the
Stockholders of Jamie Scott, Inc., JJ Acquisition Corp. and Norton McNaughton,
Inc. (the "Purchase Agreement")) attained by the Company in Year 1 or Year 2 (as
defined in the Purchase Agreement, and each, a "Year") is equal to or in excess
of $17,000,000, the Company shall cause to be granted to the Participants by the
Board of Directors of Norton McNaughton, Inc. a Delaware corporation ("Norton"),
options to purchase an aggregate of 50,000 (or such lesser number as shall be
necessary to allocate such options in accordance with Section 4.2 below) shares
of common stock, par value $.01 per share of Norton (the "Common Stock") in each
Year that EBITDA in excess of $17,000,000 is so attained. In addition, for each
$1,000,000 of EBITDA in excess of $17,000,000 attained by
1
<PAGE>
the Company in each of the Years, the Company shall cause to be granted to the
Participants by the Board of Directors of Norton, options to purchase an
aggregate of 30,000 (or such lesser number as shall be necessary to allocated
such options in accordance with Section 4.2 below) shares of Common Stock. Any
options granted as aforesaid shall be hereinafter referred to as "Bonus
Options". The Bonus Options shall be granted, if at all, on the dates of
delivery to the Company and Norton of the EBITDA Notice and EBITDA Statement
(pursuant to Section 2.02(b)(i) of the Purchase Agreement) for the applicable
Year and shall have an exercise price per share equal to the fair market value
of the Common Stock on the date of grant.
4.2 ALLOCATION OF BONUS OPTIONS. The Bonus Options shall be allocated
40% to Susan Schneider, 40% to Leslie Schneider and 20% to Scott Schneider, or
in the case of the death of any such Participant during a Year, the estate of
such Participant.
4.3 EXERCISE. The Bonus Options shall be fully vested and exercisable
on and after the date of grant.
4.4 TERM OF OPTIONS. Except as provided below, the term of the Bonus
Options shall be ten years.
(i) If a Participant's employment with the Company terminates
pursuant to Section 6.1 of his or her Employment Agreement or is terminated by
the Company or by the Participant pursuant to Section 6.2 of his or her
Employment Agreement, is terminated by the Employee pursuant to Section 6.4 of
his or her Employment Agreement, or terminated for any other reason (except as
provided in clause (ii) below), the Bonus Options may be exercised by the
Participant (or his or her estate or legal representative) within one (1) year
after such termination; and
(ii) In the event of termination of the employment of a
Participant (a) by the Company pursuant to Section 6.3 of his or her Employment
Agreement or (b) by the Participant other than pursuant to Sections 6.1, 6.2 or
6.4 of his or her Employment Agreement, no Bonus Options shall be exercisable.
4.5 ADJUSTMENTS. In the event of any dividend or other distribution
(whether in the form of cash, Common Stock, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of Common
Stock or other securities of Norton, issuance of warrants or other rights to
purchase Common Stock, the Board of Directors shall, in
2
<PAGE>
good faith adjust the number of shares of Common Stock (or other securities or
property) subject to the Bonus Options, the exercise price with respect to any
Bonus Options, or both.
4.6 No Participant shall be entitled to Bonus Options for any Year of
the Company subsequent to the Year in which his or her termination of employment
(for any or no reason) occurs.
4.7 In the event of termination of the employment of a Participant
prior to the end of a Year, pursuant to his or her Employment Agreement, such
Participant (or his or her estate or other legal representative) shall be
granted such Bonus Options for such Year only as provided in this Section 4.7.
The number of Bonus Options to which the Participant (or his or her estate or
legal representative) shall be entitled for such Year (which shall be granted at
the time that the Bonus Options are granted to the other Participants) shall be
equal to the product of (x) the number of Bonus Options, if any, which would
have been granted to the Participant pursuant to Sections 4.1 and 4.2 of this
Bonus Plan for such Year if the employment of the Participant had not so
terminated, multiplied by (y) a fraction, the numerator of which is the number
of days from the beginning of such Year to the date of termination, and the
denominator of which is 365. The terms and conditions of any such Bonus Options
shall be as otherwise provided in this Section 4.
4.8 If any portion of the Bonus Options shall not be allocated or
granted by reason of this Section 4, such Bonus Options shall be retained by the
Company or granted to other Participants or to new participants, all as
determined by the Board, after good faith consideration of any recommended
course of action submitted to the Board by the remaining Participants.
4.9 CHANGE OF CONTROL. In the event that there shall occur a Change
of Control (as defined in the Purchase Agreement) during either of the Years,
the Participants in this Bonus Plan shall be entitled to receive, in lieu of
Bonus Options contemplated by Section 4.1 of this Bonus Plan (unless such Bonus
Options have heretofore been granted, in which case such granted Bonus Options
shall be retained), a number of Bonus Options (allocated as set forth in Section
4.2 above) equal to (i) in the event that the Change of Control occurs during
Year 1, 100,000 Bonus Options or (ii) in the event that the Change of Control
occurs during Year 2, 50,000 Bonus Options. The terms and conditions of any such
Bonus Options shall be as otherwise provided in this Section 4.
3
<PAGE>
Exhibit 4(ix)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of the 18th day of June, 1998 by and between Jeri-Jo
Knitwear, Inc., a Delaware corporation f/k/a JJ Acquisition Corp. (the
"Company"), and Scott Schneider (the "Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company, a wholly owned subsidiary of Norton McNaughton,
Inc., a Delaware corporation ("Norton"), and certain other parties (which
parties include the Employee) have entered into an Agreement of Purchase and
Sale dated as of April 15, 1998 (the "Purchase Agreement"), providing, inter
-----
alia, for the purchase by the Company of substantially all of the assets of
- ----
Jeri-Jo Knitwear Inc., a New York corporation ("J-J Knitwear") and Jamie Scott,
Inc., a New York corporation ("Jamie Scott"; and together with J-J Knitwear and
Jamie Scott, the "Jeri-Jo Group"); and
WHEREAS, the Company desires to secure the employment of the Employee
with the Company and the Employee desires to be employed by the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto hereby agree as follows:
1. Employment, Term.
----------------
1.1 The Company agrees to employ the Employee, and the Employee agrees
to serve in the employ of the Company, for the term set forth in Section 1.2, in
the positions and with the responsibilities, duties and authority set forth in
Section 2 and on the other terms and conditions set forth in this Agreement.
1.2 The term of the Employee's employment under this Agreement (the
"Term") shall commence on the date hereof and shall terminate on the second
anniversary of the Closing Date (as defined in the Purchase Agreement) (the
"Expiration Date"), unless sooner terminated in accordance with this Agreement.
2. Positions, Duties. The Employee shall serve in the position of
-----------------
Executive Vice President of the Company. The Employee shall perform, faithfully
and diligently, such duties and shall have such other responsibilities,
appropriate to said position, as shall be assigned to him from time to time by
the Vice Chairman (the "Vice Chairman") (currently, Peter Boneparth); provided,
however, that in any event said duties and responsibilities shall be consistent
with the terms and provisions of Section 7.12 of the
4
<PAGE>
Purchase Agreement. The Employee shall report solely to the Vice Chairman
(currently, Peter Boneparth), but if Mr. Boneparth changes titles with the
Purchaser, then to Mr. Boneparth in such capacity. The Employee shall devote
his complete and undivided attention to the performance of his duties and
responsibilities hereunder during the normal working hours of executive
employees of the Company. The Employee's services under this Agreement shall be
performed principally at the executive offices and warehouses of the Company to
be located, during the Term, in New York City and New Jersey, respectively
(unless otherwise agreed between the Vice Chairman and the Employee).
3. Compensation.
------------
3.1 Salary. During the Term, in consideration of the performance by
------
the Employee of the services set forth in Section 2 and his observance of the
other covenants set forth herein, the Company shall pay the Employee, and the
Employee shall accept, a base salary at a rate of $250,000 per annum (which may
be increased, but not decreased), payable in accordance with the standard
payroll practices of the Company.
3.2 Bonus. During the Term, in addition to the salary provided for
-----
in Section 3.1 and the Bonus Plan described in Section 3.4, the Employee shall
be eligible to participate, subject to the terms thereof, in any bonus plan for
executives of Norton or the Company in effect during the Term.
3.3 Stock Options.
-------------
(a) GRANT. On the date hereof, Norton shall grant to the
Employee, an option to purchase an aggregate number of shares of common stock,
par value $.01 per share (the "Common Stock"), of Norton, at an exercise price
per share equal to the Closing Market Value (as defined in the Purchase
Agreement) (the "Option"), which number shall equal the sum of (i) 90,000 (the
"Base Option Number") and (ii) a number (the "Additional Option Number") equal
to the Base Option Number multiplied by a fraction, the numerator of which shall
be the positive excess, if any, of the Closing Market Value over the Signing
Market Value (as such terms defined in the Purchase Agreement) and the
denominator of which shall be the Signing Market Value. The Option shall be
vested and exercisable on and after (i) the date hereof, as to 20,000 shares of
Common Stock and (ii) the date which is nine years and six months from the
Closing Date, as to the remainder of the number of shares of Common Stock
subject to the Option (the "Remainder"), but shall be sooner exercisable as to
the Remainder (i)(A) with respect to a number of shares of Common Stock equal to
70,000 shares of
5
<PAGE>
Common Stock, on the Earn Out Payment Date (as defined in the Purchase
Agreement) if and only if the 1998/1999 EBITDA (as defined in the definition of
1998/1999 EBITDA in the Purchase Agreement) shall equal or exceed $11,000,000
but be less than $15,000,000, (B) in full, on the Earn Out Payment Date, if and
only if the 1998/1999 EBITDA shall equal or exceed $15,000,000; (ii) in full, on
the date, if any, that the Employee's employment terminates hereunder by reason
of death or Disability or by the Employee for Good Reason or by the Company
without Due Cause (as said terms are hereinafter defined); and (iii) in full,
upon the occurrence of any Acceleration Event (as defined in the Purchase
Agreement).
(b) TERM OF OPTION. Except as provided below, the term of the
Option shall be ten years.
(i) In the event of a termination of employment of the Employee
with the Company pursuant to Section 6.1, Section 6.2 or Section 6.4, the Option
may be exercised by the Employee or, in the event of the Employee's death, his
estate or legal representative during the remainder of the term of the Option;
and
(ii) In the event of termination of the employment of the
Employee with the Company (a) by the Company pursuant to Section 6.3 or (b) by
the Employee during the Term, other than pursuant to Sections 6.1, 6.2 or 6.4,
the Option shall not thereafter be exercisable.
(c) ADJUSTMENTS. In the event of any dividend or other
distribution (whether in the form of cash, Common Stock, other securities or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Common Stock or other securities of Norton, issuance
of warrants or other rights to purchase Common Stock, the Board of Directors
shall, in good faith, adjust the number of shares of Common Stock (or other
securities or property) subject to the Option, the exercise price with respect
to any Option, or all of the foregoing.
(d) STOCK OPTION CERTIFICATE. The Options shall be represented
by a stock option certificate in the form of Exhibit A hereto and shall
otherwise be subject to the terms and conditions of such stock option
certificate.
(e) REGISTRATION OF SHARES. Norton shall, as promptly as
practicable following the commencement of the Employee's employment hereunder,
file a registration statement on Form S-8, or any successor to such Form, with
respect to the shares of Common Stock covered by the Option.
6
<PAGE>
3.4 Bonus Options. During the Term, the Employee shall be eligible to
-------------
receive Bonus Options (as defined in the Norton McNaughton, Inc. Bonus Option
Plan for Senior Executives of JJ Acquisition Corp. (the "Executive Option Bonus
Plan")) in accordance with the terms set forth in the Executive Option Bonus
Plan, a copy of which is attached hereto as Exhibit B.
4. Expense Reimbursement. During the Term, (i) the Company shall
---------------------
reimburse the Employee for all reasonable and necessary out-of-pocket expenses
incurred by him in connection with the performance of his duties hereunder, upon
the presentation of proper accounts therefor in accordance with Norton's
policies and (ii) the Company shall pay for the benefit of the Employee all
reasonable and necessary expenses incurred by him in the ordinary and usual
course of business and in accordance with Norton's policies (in any case, as
such policies are adopted from time to time by the Compensation Committee of
Norton).
5. Benefits.
--------
5.1 Benefit Plans. In addition to the benefits under Section 7.07 of
-------------
the Purchase Agreement, during the Term, the Employee shall be entitled to
participate in all employee benefit plans and programs offered by Norton or the
Company for similarly situated executives and shall be entitled to equitable
treatment in respect of new benefits, if any, to be received under such employee
benefit plans and programs by similarly situated executives.
5.2 Vacation. During the Term, the Employee shall be entitled to paid
--------
vacation in accordance with Norton's policy for its executive employees, but not
less than five weeks.
7
<PAGE>
6. Termination of Employment.
-------------------------
6.1 Death. In the event of the death of the Employee during the Term,
-----
the Company shall pay to the estate or other legal representative of the
Employee (1) the base salary provided for in Section 3.1 accrued to the date of
the Employee's death and not theretofore paid to the Employee, (2) a pro rata
bonus in an amount equal to the product of (i) the Employee's most recent bonus,
if any, paid under Section 3.2, and (ii)(A) the number of months (including
partial months) worked during the year in which the Employee's date of death
occurs, divided by (b) 12, and (3) Bonus Options in accordance with Section 4 of
the Executive Option Bonus Plan. Rights and benefits of the estate or other
legal representative of the Employee under the benefit plans and programs of the
Company shall be determined in accordance with the provisions of such plans and
programs. Neither the estate or other legal representative of the Employee nor
the Company shall have any further rights or obligations under this Agreement
except as provided in Section 3.3(b)(i).
6.2 Disability. If during the Term the Employee shall become
----------
incapacitated by reason of physical or mental disability and shall be unable to
perform his normal duties hereunder for a cumulative period of six (6) months in
any period of twelve (12) consecutive months, the employment of the Employee
hereunder may be terminated by the Company or the Employee upon notice to the
other (a "Disability"). In the event of such termination, the Company shall pay
to the Employee (1) the salary provided for in Section 3.1 accrued to the date
of such termination and not theretofore paid to the Employee, (2) a pro rata
bonus in an amount equal to the product of (i) the Employee's most recent bonus,
if any, paid under Section 3.2, and (ii)(A) the number of months (including
partial months) employed during the year in which the Employee's termination
occurs, divided by (b) 12, and (3) Bonus Options in accordance with Section 4 of
the Executive Option Bonus Plan. Rights and benefits of the Employee under the
benefit plans and programs of the Company shall be determined in accordance with
the provisions of such plans and programs. Neither the Employee nor the Company
shall have any further rights or obligations under this Agreement, except as
provided in Sections 3.3(b)(i), 7, 8, 9 and 10.
6.3 Due Cause. The employment of the Employee hereunder may be
---------
terminated by the Company at any time during the Term for Due Cause (as
hereinafter defined). In the event of such termination, the Company shall pay
to the Employee the salary provided for in Section 3.1 accrued to
8
<PAGE>
the date of such termination and not theretofore paid to the Employee. Rights
and benefits of the Employee under the benefit plans and programs of the Company
shall be determined in accordance with the provisions of such plans and
programs. After the satisfaction of any claim of the Company against the
Employee incidental to such Due Cause, neither the Employee nor the Company
shall have any further rights or obligations under this Agreement, except as
provided in Sections 7, 8, 9 and 10. For purposes hereof, "Due Cause" shall
mean the Employee's conviction or other adjudication of a felony or any crime or
offense involving fraud that is materially injurious to the Company or Norton;
provided, however, that the Employee shall be given written notice by a majority
of the Board of Directors of the Company that it intends to terminate the
Employee's employment for Due Cause under this Section, which written notice
shall specify the act or acts upon the basis of which the majority of the Board
of Directors of the Company intends so to terminate the Employee's employment,
and the Employee shall then be given the opportunity, within fifteen (15) days
of his receipt of such notice, to have a meeting with the Board of Directors of
the Company to discuss such act or acts.
6.4 Termination by the Employee with Good Reason or by the Company not
------------------------------------------------------------------
for Due Cause. The Employee may at any time terminate his employment with the
- -------------
Company with Good Reason (as hereinafter defined). For purposes hereof, Good
Reason shall mean (i) the breach by the Company of any material provision of
this Agreement or of Section 7.12 of the Purchase Agreement, in any case, for a
period of 30 days after written notice of such breach by the Employee to the
Company; (ii) the failure of the Company to pay the Earn Out Payment (as defined
in the Purchase Agreement) as and when such is due and payable in accordance
with the terms of the Purchase Agreement, including any amounts payable under
the Earn Out Letter of Credit (as defined in the Purchase Agreement); and (iii)
the occurrence of an Acceleration Event (as defined in the Purchase Agreement).
If the Company terminates the Employee's employment other than for disability
pursuant to Section 6.2 or Due Cause pursuant to Section 6.3, or if the Employee
terminates his employment for Good Reason pursuant to Section 6.4, the Employee
shall be entitled (a) to continue to receive from the Company his base salary
for the remainder of the Term and (b) to continue to participate for the
remainder of the Term in all employee benefit plans and programs (including any
bonus plan) in which the Employee participated on the date of termination.
9
<PAGE>
7. Confidential Information.
------------------------
7.1 The Employee shall, during the Term and for the two-year period
thereafter (unless the Term terminates in accordance with Section 6.4, in which
case the limits imposed on the Employee under this Section 7.1 shall expire on
the date of such termination), treat as confidential and, except as required in
the performance of his duties and responsibilities under this Agreement, not
disclose, publish or otherwise make available to the public or to any
individual, firm or corporation any confidential material (as hereinafter
defined), except, on a need to know basis, to the Employee's attorney,
accountant or personal advisor. The Employee agrees that all confidential
material, together with all notes and records of the Employee relating thereto,
and all copies or facsimiles thereof in the possession of the Employee, are the
exclusive property of the Company and the Employee agrees to return such
material to the Company promptly upon the termination of the Employee's
employment with the Company.
7.2 Subject to Section 7.12 of the Purchase Agreement, for the
purposes hereof, the term "confidential material" shall mean all information
acquired by the Employee in the course of the Employee's prior employment with
any member of the Jeri-Jo Group and in the course of the Employee's employment
with the Company in any way concerning the products, projects, activities,
business or affairs of the Company, the Jeri-Jo Group, or Norton or and other
subsidiary, direct or indirect, of Norton (the "Norton Group"), or the
customers, suppliers or agents of the Company, the Jeri-Jo Group or any member
of the Norton Group, including, without limitation, all information concerning
trade secrets and the preparation of raw material for, manufacture of, or
finishing processes utilized in the production of, the products or projects of
the Company, any member of the Jeri-Jo Group or any member of the Norton Group
or any improvements therein, all sales and financial information concerning the
Company, any member of the Jeri-Jo Group or any member of the Norton Group, all
customer and supplier lists, all information concerning projects in research and
development or marketing plans for any such products or projects, and all
information in any way concerning the products, projects, activities, business
or affairs of customers of the Company, the Jeri-Jo Group or any member of the
Norton Group which is furnished to the Employee by the Company or any of its
employees (current or former), agents, customers or suppliers, as such;
provided, however, that the term "confidential material" shall not include
information which (a) becomes generally available to the public or the apparel
industry in general other than as a result of a disclosure by the Employee, (b)
was available to the Employee on a non-confidential basis prior to his
10
<PAGE>
employment with the Company, (c) becomes available to the Employee on a non-
confidential basis from a source other than the Company or any of its agents,
suppliers or customers, provided that the Employee has no knowledge that such
source is not bound by a confidentiality agreement with the Company or any of
such agents, customers or suppliers, or (d) if disclosed by the Employee would
not have a significant detrimental effect on the business of the Company.
8. Inventions. Subject to Section 7.12 of the Purchase Agreement and
----------
subject to the Employee's right to the registered trademark Rachel Max(R) (but
subject to Section 7.15 of the Purchase Agreement) any and all material
inventions, material innovations or material improvements ("inventions") made,
developed or created by the Employee (whether at the request or suggestion of
the Company or otherwise, whether alone or in conjunction with others, and
whether during regular hours of work or otherwise) during the period of his
employment with the Company which may be directly useful in, or relate to, the
Business (as defined in the Purchase Agreement), shall be promptly and fully
disclosed by the Employee to the Board of Directors of the Company and shall be
the Company's exclusive property as against the Employee, and the Employee shall
promptly deliver to an appropriate representative of the Company as designated
by the Board of Directors all papers, drawings, models, data and other material
relating to any inventions made, developed or created by him as aforesaid. The
Employee shall, at the request of the Company and without any payment therefor,
execute any documents necessary or advisable in the opinion of the Company's
counsel to direct issuance of patents, trademarks or copyrights to the Company
with respect to such inventions as are to be the Company's exclusive property as
against the Employee or to vest in the Company title to such inventions as
against the Employee. The expense of securing any such patent, trademark or
copyright shall be borne by the Company.
9. Non-Competition. The Employee acknowledges that the services to
---------------
be rendered by him to the Company are of a special and unique character. In
consideration of his employment hereunder, the Employee agrees, for the benefit
of the Company, that he will not, during the period of his employment with the
Company and thereafter for a period (the "Period") of two (2) years commencing
on the date of termination of his employment with the Company (other than a
termination by the Employee for Good Reason or by the Company not for Due Cause,
in which case, the Period shall be the remainder of the Term following the date
of such termination), (a) engage, directly or indirectly, whether as principal,
agent, distributor, representative, consultant, employee, partner, stockholder,
limited partner or other
11
<PAGE>
investor (other than an investment of not more than (i) five percent (5%) of the
stock or equity of any corporation the capital stock of which is publicly traded
or (ii) five percent (5%) of the ownership interest of any limited partnership
or other entity) or otherwise, anywhere in the United States, in any business
activity or business venture which is in competition with the Business (as
defined in the Purchase Agreement), it being understood and agreed that
ownership or operation of the business presently conducted by Creative
Retailers, Inc. shall not be prohibited by this Section 9, (b) solicit or entice
or endeavor to solicit or entice away from the Company or any member of the
Norton Group any person who was an officer, employee or consultant of the
Company, either for his own account or for any individual, firm or corporation,
whether or not such person would commit any breach of his contract of employment
by reason of leaving the service of the Company, and the Employee agrees not to
employ, directly or indirectly, any person who was an officer or employee of the
Company, or (c) solicit or entice or endeavor to solicit or entice away from the
Company any supplier or customer of the Company, either for his own account or
for any individual, firm or corporation, which, in any case would have a
significant detrimental effect on the business of the Company.
10. Equitable Relief, Etc.
---------------------
In the event of a breach or threatened breach by the Employee of any of
the provisions of Sections 7, 8 or 9, the Employee hereby consents and agrees
that the Company shall be entitled to an injunction or similar equitable relief
from any court of competent jurisdiction restraining the Employee from
committing or continuing any such breach or threatened breach or granting
specific performance of any act required to be performed by the Employee under
any of such provisions, without the necessity of showing any actual damage or
that money damages would not afford an adequate remedy and without the necessity
of posting any bond or other security. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies at law or in equity
which it may have with respect to any such breach or threatened breach.
11. Successors and Assigns.
----------------------
11.1 Assignment by the Company. The Company may not assign this
-------------------------
Agreement or any part thereof without the prior written consent of the Employee.
11.2 Assignment by the Employee. The Employee may not assign this
--------------------------
Agreement or any part thereof without the prior written consent of a majority of
the Board of Directors of the Company (other than the Employee if he is a
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<PAGE>
member of such Board at the time); provided, however, that nothing herein shall
preclude one or more beneficiaries of the Employee from receiving any amount
that may be payable following the occurrence of his legal incompetency or his
death and shall not preclude the legal representative of his estate from
receiving such amount or from assigning any right hereunder to the person or
persons entitled thereto under his will or, in the case of intestacy, to the
person or persons entitled thereto under the laws of intestacy applicable to his
estate. The term "beneficiaries", as used in this Agreement, shall mean a
beneficiary or beneficiaries so designated to receive any such amount or, if no
beneficiary has been so designated, the legal representative of the Employee (in
the event of his incompetency) or the Employee's estate.
12. Governing Law. This Agreement shall be deemed a contract made
-------------
under, and for all purposes shall be construed in accordance with, the laws of
the State of New York applicable to contracts to be performed entirely within
such State.
13. Entire Agreement. This Agreement contains all the understandings
----------------
and representations between the parties hereto pertaining to the subject matter
hereof. This Agreement supersedes all understandings and agreements, whether
oral or in writing, if any, previously entered into by the Company or any member
of Jeri-Jo Group with the Employee in any way relating to the employment of the
Employee by the Company or by any member of the Jeri-Jo Group, all of which
agreements and understandings are hereby terminated and all rights and
entitlements thereunder are hereby waived and released.
14. Amendment, Modification, Waiver. No provision of this Agreement
-------------------------------
may be amended or modified unless such amendment or modification is agreed to in
writing and signed by the Employee and by a representative of the Company (other
than the Employee) who have been duly authorized by the Board of Directors of
the Company to do so (other than the Employee if he is a member of such Board at
the time). Except as otherwise specifically provided in this Agreement, no
waiver by either party hereto of any breach by the other party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar provision or condition at
the same or any prior or subsequent time, nor shall the failure of or delay by
either party hereto in exercising any right, power or privilege hereunder
operate as a waiver thereof to preclude any other or further exercise thereof or
the exercise of any other such right, power or privilege.
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<PAGE>
15. Notices. All notices, requests or instructions hereunder shall be
-------
in writing and delivered personally, sent by telecopy, sent by registered or
certified mail, postage prepaid, or sent by Federal Express or any other
nationally recognized overnight courier service, as follows:
If to the Company:
c/o Norton McNaughton, Inc.
463 Seventh Avenue
New York, New York 10018
Attention: President
Telecopy: (212) 563-2766
with a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Attention: Bradley P. Cost, Esq.
Telecopy: (212) 682-0200
If to the Employee:
Scott Schneider
c/o Friedman Alpren & Green LLP
1700 Broadway
New York, New York 10019
Attention: Bruce A. Madnick, CPA
Telecopy No.: (212) 265-4761
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: James Alterbaum, Esq.
Telecopy: (212) 704-6288
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, telecopied, or sent by Federal Express or any other
recognized overnight courier service, and three (3) business days after the date
of mailing, if mailed by registered or certified mail, return receipt requested.
14
<PAGE>
16. Arbitration. Any controversy or claim arising out of or relating
-----------
to this Agreement, or any breach thereof, shall, except as provided in Section
10, be settled by binding arbitration in accordance with the rules of the
American Arbitration Association then in effect and judgment upon such award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitration shall be held in New York, New York.
17. Severability. Should any provision of this Agreement be held by a
------------
court or arbitration panel of competent jurisdiction to be enforceable only if
modified, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties
hereto with any such modification to become a part hereof and treated as though
originally set forth in this Agreement. In any event, should one or more of the
provisions of this Agreement be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, and if such provision or provisions are not
modified as provided above, this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been set forth herein.
18. Authority. The Company and Norton represent and warrant to the
---------
Employee that the execution and delivery of this Agreement by the Company and
the performance by the Company of its covenants and agreements hereunder have
been duly authorized by all necessary corporate action and that this Agreement
has been duly executed and delivered on behalf of the Company.
19. Withholding. Anything to the contrary notwithstanding, all
-----------
payments required to be made by the Company hereunder to the Employee or his
beneficiaries, including his estate, shall be subject to withholding of such
amounts relating to taxes as the Company may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Company, may, in its sole discretion,
accept other provision for payment of taxes as permitted by law, provided it is
satisfied in its sole discretion that all requirements of law affecting its
responsibilities to withhold such taxes have been satisfied.
20. Subsidiaries, etc. The Employee shall be deemed to resign as an
------------------
officer and, if applicable, director of the Company and of any parent,
subsidiary or affiliate of the Company upon termination of his employment with
the Company.
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<PAGE>
21. Survivorship. The respective rights and obligations of the
------------
Employee and the Company hereunder shall survive any termination of this
Agreement to the extent necessary to the intended preservation of such rights
and obligations.
22. Titles. Titles of the sections of this Agreement are intended
------
solely for convenience and no provision of this Agreement is to be construed by
reference to the title of any section.
23. Counterparts. This Agreement may be executed in two or more
------------
counterpart copies, each of which shall be deemed to be an original and all of
which taken together shall be deemed one document.
* * *
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
JJ ACQUISITION CORP.
By:___________________________
Name: Amanda J. Bokman
Title: Vice President
EMPLOYEE
______________________________
Name: Scott Schneider
17
<PAGE>
EXHIBIT A
NORTON MCNAUGHTON, INC.
Stock Option Certificate
Date of Grant: _____ __, 1998
Name of Optionee: Scott Schneider
Number of Shares:
Price Per Share:
This is to certify that, effective on the date of grant specified
above, the Board of Directors of Norton McNaughton, Inc. (the "Company") has
granted to the above-named optionee (the "Optionee") an option to purchase from
the Company, for the price per share set forth above, the number of shares of
Common Stock, $.01 par value (the "Stock"), of the Company set forth above
pursuant and subject to the terms of Section 3.3 of that certain Employment
Agreement dated as of _____ __, 1998 by and between JJ Acquisition Corp. (now
known as Jeri-Jo Knitwear, Inc.), a Delaware corporation and wholly owned
subsidiary of the Company ("JJ"), and the Optionee (the "Plan"). This option is
not intended to be treated as an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The terms and conditions of the option granted hereby, in addition to
the terms and conditions contained in the Plan, are as follows:
1. The price at which each share of Stock subject to this option may
be purchased shall be the price set forth above, subject to any adjustments
which may be made pursuant to Section 8 hereof.
2. Subject to the terms and conditions set forth herein and in
Section 3.3 of the Plan, this option shall be exercisable (x) as to 40,000
shares of Stock, on the date hereof and (y) as to the remaining shares of Stock
subject to this Option (the "Remainder"), beginning on the date which is nine
years and six months from the date of grant, provided that this option shall be
sooner exercisable as to the Remainder (i)(A) with respect to a number of shares
of Stock equal to 140,000 shares of Stock, on the Earn Out Payment Date (as
defined in the Purchase Agreement referred to in the Plan) if and only if the
1998/1999 EBITDA (as
<PAGE>
defined in the Purchase Agreement referred to in the Plan) shall equal or exceed
$11,000,000 but be less than $15,000,000 and (B) in full, on the Earn Out
Payment Date if and only if the 1998/1999 EBITDA shall equal or exceed
$15,000,000; (ii) in full, on the date, if any, that the Employee's employment
under the Plan terminates by reason of death or Disability or by the Optionee
for Good Reason or by JJ without Due Cause (as said terms are defined in the
Plan) and (iii) in full, upon the occurrence of an Acceleration Event (as
defined in the Purchase Agreement referred to in the Plan).
3. Subject to the terms and conditions set forth herein, the Optionee
may exercise this option at any time as to all or any of the shares of Stock
purchasable in accordance with Section 2 hereof by delivering to the Company
written notice specifying:
(i) the number of whole shares of Stock to be purchased together
with payment in full of the aggregate option price of such shares, provided
that this option may not be exercised for less than ten (10) shares of Stock
or the number of shares of Stock remaining subject to option, whichever is
smaller;
(ii) the name or names in which the stock certificate or
certificates are to be registered;
(iii) the address to which dividends, notices, reports, etc. are to
be sent; and
(iv) the Optionee's social security number.
Only one stock certificate will be issued unless the Optionee otherwise requests
in writing. Payment shall be in cash, or by certified or bank cashier's check
payable to the order of the Company, free from all collection charges (including
by means of a broker assisted simultaneous exercise and sale); provided,
however, that payment may be made in shares of Stock owned by the Optionee
having a market value on the date of exercise equal to the aggregate purchase
price, or in a combination of cash and Stock. For purposes of this option and
the Plan, the market value per share of Stock shall be the last sale price
regular way on the date of reference, or, in case no sale takes place on such
date, the average of the closing high bid and low asked prices regular way, in
either case on the principal national securities exchange on which the Stock is
listed or admitted to trading, or if the Stock is not listed or admitted to
trading on any national securities exchange, the last sale price reported on the
National Market System of the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") on such date, or the average of the
closing high
2
<PAGE>
bid and low asked prices of the Stock in the over-the-counter market reported on
NASDAQ on such date, whichever is applicable, or if there are no such prices
reported on NASDAQ on such date, as furnished to the Stock Option Committee of
the Board of Directors (the "Committee") by any New York Stock Exchange member
selected from time to time by the Committee for such purpose. If there is no
bid or asked price reported on any such date, the market value shall be
determined by the Committee in accordance with the regulations promulgated under
Section 2031 of the Code, or by any other appropriate method selected by the
Committee. If the Optionee so requests, shares of Stock purchased upon exercise
of an option may be issued in the name of the Optionee or, provided that the
Optionee pays any applicable taxes, another person. No Optionee shall be
entitled to any rights as a stockholder of the Company in respect of any shares
of Stock covered by this option until such shares of Stock shall have been paid
for in full and issued to the Optionee.
4. As soon as practicable after the Company receives payment for
shares of Stock covered by this option, it shall deliver a certificate or
certificates representing the shares of Stock so purchased to the Optionee.
Such certificate shall be registered in the name of the Optionee, or, subject to
Section 3 hereof, in such other name or names as the Optionee shall request.
5. This option is personal to the Optionee and during the Optionee's
lifetime may be exercised only by the Optionee. This option shall not be
transferable other than by will or the laws of descent and distribution.
6. In the event that the Optionee's employment as an employee of the
Company or of any Subsidiary or Parent (within the meaning of Sections 424(e)
and 424(f) of the Code) (hereinafter the "Optionee's employment") is terminated
for any reason prior to the time that this option has been fully exercised, this
option shall be exercisable, if at all, as to any remaining vested shares of
Stock subject hereto, only in accordance with the terms (x) hereof (including
without limitation, Section 2 hereof) and (y) of Sections 3.3(a) and 3.3(b) of
the Plan. Notwithstanding the foregoing, this option shall in no event be
exercisable after the date of termination of such option specified in Section 2
hereof.
7. This option does not confer on the Optionee any right to continue
in the employ of the Company, any Subsidiary or Parent, or interfere in any way
with the right of the Company, any Subsidiary or Parent to determine the terms
of the Optionee's employment.
3
<PAGE>
8. In the event of a reorganization, recapitalization, stock split,
stock dividend, combination of shares, merger, consolidation, rights offering,
or any other change in the corporate structure or shares of the Company, the
Committee shall in good faith, adjust the number of shares of Stock (or other
securities or property) subject to this option, the exercise price with respect
to this option, or all of the foregoing.
9. This option and the terms and conditions herein set forth are
subject in all respects to the terms and conditions of the Plan, which shall be
controlling.
10. It shall be a condition to the obligation of the Company to issue
shares of Stock upon exercise of this option, that the Optionee (or any
beneficiary or person entitled to act) pay to the Company, upon its demand, such
amount as may be requested by the Company for the purpose of satisfying any
liability to withhold federal, state or local income or other taxes.
11. All notices hereunder to the Company shall be delivered or mailed
to the following address:
Norton McNaughton, Inc.
463 Seventh Avenue
New York, New York 10018
Attention: Chief Financial Officer
Such address for the service of notices may be changed at any time provided
notice of such change is furnished in advance to the Optionee.
NORTON MCNAUGHTON, INC.
By____________________________
Name: Peter Boneparth
Title: President and Chief
Operating Officer
4
<PAGE>
EXHIBIT B
NORTON MCNAUGHTON, INC. OPTION BONUS PLAN
FOR SENIOR EXECUTIVES OF JJ ACQUISITION CORP.
1. Establishment. This Plan, which shall be known as the Norton
-------------
McNaughton, Inc. Option Bonus Plan for Senior Executives of JJ Acquisition Corp.
(the "Bonus Plan"), is hereby established by JJ Acquisition Corp. (the
"Company") to provide incentives for senior executives providing services to the
Company and to aid the Company in retaining such senior executives upon whose
efforts the Company's success and future growth depends.
2. Administration. The Bonus Plan shall be administered by the Board
--------------
of Directors of the Company (the "Board"). For purposes of administration, the
Board, subject to the terms of the Bonus Plan, shall have authority, acting in
good faith, to establish such rules and regulations, to make such determinations
and interpretations, and to take such other administrative actions as it deems
necessary or advisable.
3. Participants. The participants in the Plan shall be Susan
------------
Schneider, Leslie Schneider and Scott Schneider, in each case for so long as
such individual is employed by the Company pursuant to an Employment Agreement
to which this Bonus Plan is an Exhibit (each, a "Participant" and collectively,
the "Participants"); provided, however, that nothing contained herein shall be
construed as creating a guarantee of employment for any Participant.
4. Bonus Options.
-------------
4.1 GRANT. In the event that EBITDA (as defined in the Agreement of
Purchase and Sale by and among Jeri-Jo Knitwear Inc., Jamie Scott, Inc., the
Stockholders of Jamie Scott, Inc., JJ Acquisition Corp. and Norton McNaughton,
Inc. (the "Purchase Agreement")) attained by the Company in Year 1 or Year 2 (as
defined in the Purchase Agreement, and each, a "Year") is equal to or in excess
of $17,000,000, the Company shall cause to be granted to the Participants by the
Board of Directors of Norton McNaughton, Inc. a Delaware corporation ("Norton"),
options to purchase an aggregate of 50,000 (or such lesser number as shall be
necessary to allocate such options in accordance with Section 4.2 below) shares
of common stock, par value $.01 per share of Norton (the "Common Stock") in each
Year that EBITDA in excess of $17,000,000 is so attained. In addition, for each
$1,000,000 of EBITDA in excess of $17,000,000 attained by
<PAGE>
the Company in each of the Years, the Company shall cause to be granted to the
Participants by the Board of Directors of Norton, options to purchase an
aggregate of 30,000 (or such lesser number as shall be necessary to allocated
such options in accordance with Section 4.2 below) shares of Common Stock. Any
options granted as aforesaid shall be hereinafter referred to as "Bonus
Options". The Bonus Options shall be granted, if at all, on the dates of
delivery to the Company and Norton of the EBITDA Notice and EBITDA Statement
(pursuant to Section 2.02(b)(i) of the Purchase Agreement) for the applicable
Year and shall have an exercise price per share equal to the fair market value
of the Common Stock on the date of grant.
4.2 ALLOCATION OF BONUS OPTIONS. The Bonus Options shall be allocated
40% to Susan Schneider, 40% to Leslie Schneider and 20% to Scott Schneider, or
in the case of the death of any such Participant during a Year, the estate of
such Participant.
4.3 EXERCISE. The Bonus Options shall be fully vested and exercisable
on and after the date of grant.
4.4 TERM OF OPTIONS. Except as provided below, the term of the Bonus
Options shall be ten years.
(i) If a Participant's employment with the Company terminates
pursuant to Section 6.1 of his or her Employment Agreement or is terminated by
the Company or by the Participant pursuant to Section 6.2 of his or her
Employment Agreement, is terminated by the Employee pursuant to Section 6.4 of
his or her Employment Agreement, or terminated for any other reason (except as
provided in clause (ii) below), the Bonus Options may be exercised by the
Participant (or his or her estate or legal representative) within one (1) year
after such termination; and
(ii) In the event of termination of the employment of a
Participant (a) by the Company pursuant to Section 6.3 of his or her Employment
Agreement or (b) by the Participant other than pursuant to Sections 6.1, 6.2 or
6.4 of his or her Employment Agreement, no Bonus Options shall be exercisable.
4.5 ADJUSTMENTS. In the event of any dividend or other distribution
(whether in the form of cash, Common Stock, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of Common
Stock or other securities of Norton, issuance of warrants or other rights to
purchase Common Stock, the Board of Directors shall, in
2
<PAGE>
good faith adjust the number of shares of Common Stock (or other securities or
property) subject to the Bonus Options, the exercise price with respect to any
Bonus Options, or both.
4.6 No Participant shall be entitled to Bonus Options for any Year of
the Company subsequent to the Year in which his or her termination of employment
(for any or no reason) occurs.
4.7 In the event of termination of the employment of a Participant
prior to the end of a Year, pursuant to his or her Employment Agreement, such
Participant (or his or her estate or other legal representative) shall be
granted such Bonus Options for such Year only as provided in this Section 4.7.
The number of Bonus Options to which the Participant (or his or her estate or
legal representative) shall be entitled for such Year (which shall be granted at
the time that the Bonus Options are granted to the other Participants) shall be
equal to the product of (x) the number of Bonus Options, if any, which would
have been granted to the Participant pursuant to Sections 4.1 and 4.2 of this
Bonus Plan for such Year if the employment of the Participant had not so
terminated, multiplied by (y) a fraction, the numerator of which is the number
of days from the beginning of such Year to the date of termination, and the
denominator of which is 365. The terms and conditions of any such Bonus Options
shall be as otherwise provided in this Section 4.
4.8 If any portion of the Bonus Options shall not be allocated or
granted by reason of this Section 4, such Bonus Options shall be retained by the
Company or granted to other Participants or to new participants, all as
determined by the Board, after good faith consideration of any recommended
course of action submitted to the Board by the remaining Participants.
4.9 CHANGE OF CONTROL. In the event that there shall occur a Change
of Control (as defined in the Purchase Agreement) during either of the Years,
the Participants in this Bonus Plan shall be entitled to receive, in lieu of
Bonus Options contemplated by Section 4.1 of this Bonus Plan (unless such Bonus
Options have heretofore been granted, in which case such granted Bonus Options
shall be retained), a number of Bonus Options (allocated as set forth in Section
4.2 above) equal to (i) in the event that the Change of Control occurs during
Year 1, 100,000 Bonus Options or (ii) in the event that the Change of Control
occurs during Year 2, 50,000 Bonus Options. The terms and conditions of any
such Bonus Options shall be as otherwise provided in this Section 4.
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<PAGE>
EXHIBIT 5
[Letterhead of Haythe & Curley]
August __, 1998
Norton McNaughton, Inc.
463 Seventh Avenue
New York, New York 10018
Dear Sir or Madam:
We have acted as counsel for Norton McNaughton, Inc., a Delaware
corporation (the "Company"), in connection with the registration statement on
Form S-8 being filed by the Company under the Securities Act of 1933, as
amended, with respect to 300,000 shares (the "Long Term Plan Shares") of the
Company's common stock, $.01 par value (the "Common Stock"), which have been or
are to be offered by the Company pursuant to the Company's 1998 Long Term
Incentive Plan (the "Long Term Plan"), with respect to 100,000 shares (the "Non-
Employee Director Shares") of the Common Stock, which have been or are to be
offered by the Company pursuant to the Company's Stock Option Plan For Non-
Employee Directors (the "Non-Employee Director Plan"), with respect to 1,050,000
shares (the "Option Bonus Plan Shares") of Common Stock, which may be offered
pursuant to the Company's Option Bonus Plan For Senior Executives of JJ
Acquisition Corp. and to each of Susan Schneider, Leslie Schneider and Scott
Schneider pursuant to their respective Employment Agreements dated as of June
18, 1998 with Jeri-Jo Knitwear, Inc., a Delaware corporation (the "Option Bonus
Plan").
In connection with such registration statement, we have examined such
records and documents and such questions of law as we have deemed appropriate
for purposes of this opinion. On the basis of such examination, we advise you
that in our opinion:
2
<PAGE>
(1) the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of
Delaware; and
(2) the Long Term Plan Shares, the Non-Employee Director Shares and
the Option Bonus Shares have been duly and validly authorized and,
when issued and paid for in accordance with the terms of the Long
Term Plan, the Non-Employee Director Plan and the Option Bonus
Plan, respectively, and stock options duly granted or to be
granted thereunder, will be validly issued, fully paid and non-
assessable.
We hereby consent to the filing of this opinion as an exhibit to the
aforesaid registration statement.
Very truly yours,
/s/ Haythe & Curley
3
