Exhibit 10.12

 

GEORGIA SHONK-SIMMONS
EMPLOYMENT AGREEMENT, AS AMENDED AND RESTATED

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is dated as of December 20,  2006,
and amended and restated December 23, 2008, by and between Coldwater Creek Inc.,
a Delaware corporation (the “Company”), and Georgia Shonk-Simmons (the
“Executive”).

 

WHEREAS, the Company desires to employ the Executive as its President and Chief
Merchandising Officer, and the Executive desires to accept such employment, on
the terms set forth below.

 

Accordingly, the parties hereto agree as follows:

 

1.                                       Term.  The Company hereby employs the
Executive, and the Executive hereby accepts such employment for an initial term
commencing as of the date hereof and ending December 20, 2009, unless sooner
terminated in accordance with the provisions of Section 4 or Section 5, and
which shall automatically renew for an additional one year term unless six
months advance notice is given of non-renewal (the period during which the
Executive is employed hereunder being hereinafter referred to as the “Term”).

 

2.                                       Duties.  The Executive, in her capacity
as President and Chief Merchandising Officer, shall faithfully perform for the
Company the duties of said office and shall perform such other duties of an
executive, managerial or administrative nature as shall be specified and
designated from time to time by the Chief Executive Officer or board of
directors or similar governing body of the Company (the “Board”) (including the
performance of services for, and serving on the Board of Directors of, any
subsidiary or affiliate of the Company without any additional compensation). 
The Executive will be based at the Company’s headquarters, presently located in
Sandpoint, Idaho.  The Executive shall devote substantially all of the
Executive’s business time and effort to the performance of the Executive’s
duties hereunder, provided that in no event shall this sentence prohibit the
Executive from performing personal and charitable activities and any other
activities approved by the Chief Executive Officer or the Board, so long as such
activities do not materially and adversely interfere with the Executive’s duties
for the Company.

 

3.                                       Compensation.

 

3.1                                 Salary.  The Company shall pay the Executive
during the Term a base salary at the rate of $600,000 per annum (the “Annual
Salary”), payable semi-monthly and subject to regular deductions and
withholdings as required by law.  The Annual Salary may be

 

--------------------------------------------------------------------------------

 

increased annually by an amount as may be approved by the Board or the
Compensation Committee of the Board of Directors (the “Compensation Committee”),
and, upon such increase, the increased amount shall thereafter be deemed to be
the Annual Salary for purposes of this Agreement.

 

3.2                                 Bonus.  The Executive will be entitled to
such bonuses as may be authorized by the Board.  The Executive’s target bonus
amount, when expressed as a percentage of Annual Salary, will be no less than
the target amount that was applicable for fiscal year 2006, provided, however,
that Executive’s Annual Bonus, if any, may be below, at, or above the target
based upon the achievement of individual and objective Company annual
performance criteria established by the Compensation Committee.  Any Annual
Bonus payable to the Executive hereunder shall be paid no later than 2 ½ months
of the fiscal year following the fiscal year with respect to which the bonus is
earned.

 

3.3                                 Equity-Based Awards.   The Executive may
from time to time be awarded such restricted stock units, stock options or other
equity-based awards as the Board or the Compensation Committee determines to be
appropriate.

 

3.4                                 Benefits – In General.  The Executive shall
be permitted during the Term to participate in any group life, hospitalization
or disability insurance plans, health programs, pension and profit sharing
plans, supplemental executive retirement plan and similar benefits that may be
available to other senior executives of the Company generally, on the same terms
as may be applicable to such other executives, in each case to the extent that
the Executive is eligible under the terms of such plans or programs.

 

3.5                                 Personal Days.  During the Term, the
Executive shall be entitled to the number of personal days per year as may be
prescribed from time to time pursuant to the Company’s human resources policies.

 

3.6                                 Expenses.  The Company shall pay or
reimburse the Executive for all ordinary and reasonable out-of-pocket expenses
actually incurred (and, in the case of reimbursement, paid) by the Executive
during the Term in the performance of the Executive’s services under this
Agreement, provided that the Executive submits such expenses in accordance with
the policies applicable to senior executives of the Company generally.

 

4.                                       Termination upon Death or Disability. 
If the Executive dies during the Term, the obligations of the Company to or with
respect to the Executive shall terminate in their entirety except as otherwise
provided under this Section 4.  If the Executive becomes eligible for disability
benefits under the Company’s long-term disability plans and arrangements (or, if
none apply, would have been so eligible under the most recent plan or
arrangement), the Company shall have the right, to the extent permitted by law,
to terminate the employment of the Executive upon notice in writing to the
Executive and such termination in and of itself shall not be, nor shall it be
deemed to be, a breach of this Agreement; provided that,, the Company will have
no right to terminate the Executive’s employment if, in the opinion of a
qualified physician

 

2

--------------------------------------------------------------------------------

 

reasonably acceptable to the Company, it is reasonably certain that the
Executive will be able to resume the Executive’s duties on a regular full-time
basis within 90 days of the date the Executive receives notice of such
termination.

 

Upon death of the Executive or upon termination of the Executive’s employment by
virtue of disability the Executive (or the Executive’s estate or beneficiaries
in the case of the death of the Executive) shall have no right to receive any
compensation or benefit under this Agreement on and after the Effective Date of
the Termination (as defined below in this Section 4) other than the Annual
Salary earned and accrued under this Agreement prior to the Effective Date of
the Termination, a pro-rata bonus for the year of termination based on the
target and portion of year completed, and other benefits, including payment for
accrued but unused vacation, earned and accrued under this Agreement prior to
the Effective Date of the Termination (and reimbursement under this Agreement
for expenses incurred but not paid prior to the Effective Date of the
Termination).  In the event of termination by virtue of disability, in addition
to the foregoing, the Executive will also be entitled to monthly cash payments
equal to one twelfth (1/12th) of the Executive’s Annual Salary in effect on the
day of termination for a period of eighteen (18) months. This Agreement shall
otherwise terminate upon the Effective Date of the Termination and there shall
be no further rights with respect to the Executive hereunder (except as provided
in Section 7.13).  For purposes of this Section 4, the “Effective Date of the
Termination” shall mean the date of death or the date on which a notice of
termination by virtue of disability is given by the Company or any later date
set forth in such notice of termination.

 

For the avoidance of doubt, the Executive acknowledges and agrees that the
payments set forth in this Section 4 constitute liquidated damages for
termination of her employment during the Term upon her death or by virtue of her
disability.

 

5.                                       Other Terminations of Employment.

 

5.1                                 Termination for Cause; Termination of
Employment by the Executive Without Good Reason.

 

(a)                                  For purposes of this Agreement, “Cause”
shall mean:

 

(i)                                     the Executive’s commission of any
felony;

 

(ii)                                  the Executive’s commission of an act of
fraud, theft or dishonesty;

 

(iii)                               the continuing failure or habitual neglect
by the Executive to perform the Executive’s duties hereunder;

 

(iv)                              any material violation of Company policy,
including without limitation, the Company’s Corporate Standards of Conduct;

 

3

--------------------------------------------------------------------------------

 

(v)                                 any material violation by the Executive of
Section 6 below; or

 

(vi)                              the Executive’s material breach of this
Agreement.

 

Notwithstanding the foregoing, if there exists (without regard to this sentence)
an event or condition that constitutes Cause under clause (iii), (iv), (v) or
(vi) above, the Executive shall have 30 days from the date written notice is
given by the Company of such event or condition to cure such event or condition
and, if the Executive does so, such event or condition shall not constitute
Cause hereunder.

 

(b)                                 For purposes of this Agreement, “Good
Reason” shall mean, unless otherwise consented to by the Executive:

 

(i)                                     the material reduction of the
Executive’s authority, duties and responsibilities, or the assignment to the
Executive of duties materially and adversely inconsistent with the Executive’s
position or positions with the Company and its subsidiaries;

 

(ii)                                  a material reduction in Annual Salary of
the Executive except in connection with a reduction in compensation generally
applicable to senior management employees of the Company;

 

(iii)                               a requirement by the Company that the
Executive’s work location be moved more than 50 miles from the Company’s
principal place of business in Sandpoint, Idaho; or

 

(iv)                              the Company’s material and willful breach of
this Agreement.

 

Notwithstanding the foregoing, if there exists (without regard to this sentence)
an event or condition that constitutes Good Reason, the Company shall have
thirty (30) days from the date on which the Executive gives the written notice
thereof to cure such event or condition (such notice from the Executive to be
given within ninety (90) days from the date the event or condition first occurs)
and, if the Company does so, such event or condition shall not constitute Good
Reason hereunder.  Further, an event or condition shall cease to constitute Good
Reason one hundred twenty (120) days after the event or condition first occurs. 
In addition, for a period of 30 days commencing on the first anniversary of the
Change in Control, a Change in Control shall constitute Good Reason, and in the
event Executive terminates employment, it will be deemed to have occurred within
12 months of a Change in Control for purposes of Section 5.2.

 

(c)                                  The Company may terminate the Executive’s
employment for Cause and such termination in and of itself shall not be, nor
shall it be deemed to be, a breach of this Agreement.  If the Company terminates
the Executive for Cause, (i) the Executive shall have

 

4

--------------------------------------------------------------------------------

 

no right to receive any compensation or benefit under this Agreement on and
after the Effective Date of the Termination (as defined below in this
Section 5.1(c)) other than Annual Salary and other benefits, including payment
for accrued but unused vacation (but excluding any bonuses) earned and accrued
under this Agreement prior to the Effective Date of the Termination (and
reimbursement under this Agreement for expenses incurred but not paid prior to
the Effective Date of the Termination), (ii) the provisions of Section 5.3 shall
apply and (iii) this Agreement shall otherwise terminate upon the Effective Date
of the Termination and the Executive shall have no further rights hereunder
(except as provided in Section 7.13).  For purposes of this Section 5.1(c), the
“Effective Date of the Termination” shall mean the date on which a notice of
termination is given by the Company or any later date set forth in such notice
of termination.

 

(d)                                 The Executive may terminate her employment
without Good Reason.  If the Executive terminates the Executive’s employment
with the Company without Good Reason: (i) the Executive shall have no right to
receive any compensation or benefit under this Agreement on and after the
Effective Date of the Termination (as defined below in this Section 5.1(d))
other than Annual Salary and other benefits, including payment for accrued but
unused vacation (but excluding any bonuses) earned and accrued under this
Agreement prior to the Effective Date of the Termination (and reimbursement
under this Agreement for expenses incurred but not paid prior to the Effective
Date of the Termination), (ii) the provisions of Section 5.3 shall apply and
(iii) this Agreement shall otherwise terminate upon the Effective Date of the
Termination and the Executive shall have no further rights hereunder (except as
provided in Section 7.13).  For purposes of this Section 5.1(d), the “Effective
Date of the Termination” shall mean the date on which a notice of termination is
given by the Executive or any later date set forth in such notice of
termination.

 

(e)                                  In the event the Executive or the Company
elects not to renew this Agreement pursuant to Section 1 above, (i) the
Executive shall have no right to receive any compensation or benefit under this
Agreement on and after the Effective Date of the Termination (as defined below
in this Section 5.1(e)) other than Annual Salary earned and accrued under this
Agreement prior to the Effective Date of the Termination, any bonus for any
prior years not yet paid, any bonus earned with respect to the calendar year in
which the Effective Date of Termination occurred, and other benefits, including
payment for accrued but unused vacation, earned and accrued under this Agreement
prior to the Effective Date of the Termination (and reimbursement under this
Agreement for expenses incurred but not paid prior to the Effective Date of the
Termination) and (ii) this Agreement shall otherwise terminate upon the
Effective Date of the Termination and there shall be no further rights with
respect to the Executive hereunder (except as provided in Section 7.13).  For
purposes of this Section 5.1(e), the “Effective Date of the Termination” shall
mean the date on which a notice of non-renewal is given by the Executive or the
Company, as applicable, or any later date set forth in such notice of
non-renewal.

 

5.2                                 Termination Without Cause; Termination for
Good Reason.  The Company may terminate the Executive’s employment at any time
without Cause, for any reason

 

5

--------------------------------------------------------------------------------

 

or no reason, and the Executive may terminate the Executive’s employment with
the Company for Good Reason.  If the Company or the Executive terminates the
Executive’s employment and such termination is not described in Section 4 or
Section 5.1, (i) the Executive shall have no right to receive any compensation
or benefit hereunder on and after the Effective Date of the Termination (as
defined below in this Section 5.2) other than Annual Salary earned and accrued
under this Agreement prior to the Effective Date of the Termination, any bonus
for the prior year not yet paid, a pro rata bonus for any pending bonus periods
in the current year (and if such Effective Date of Termination is after
December 20, 2009, the pro rata bonus with respect to any pending bonus period
shall be paid only to the extent the performance goals for such pending bonus
period are subsequently determined to have been achieved) and other benefits,
including payment for accrued but unused vacation, earned and accrued under this
Agreement prior to the Effective Date of the Termination (and reimbursement
under this Agreement for expenses incurred but not paid prior to the Effective
Date of the Termination), (ii) the Executive shall receive a cash payment equal
to the Severance Payment (as defined below in this Section 5.2) payable no later
than 30 days after the Effective Date of the Termination, (iii) all unvested
equity awards held by the Executive shall fully vest, provided, however, that if
the equity awards are subject to performance vesting requirements and such
Effective Date of Termination is after December 20, 2009, such vesting will only
occur to the extent the performance goals for any pending bonus period are
subsequently determined to have been achieved, (iv) the Executive shall receive
accelerated full vesting of Executive’s supplemental executive retirement plan
and payment in accordance with its terms (v) the Executive shall continue to
receive health benefits for 18 months and (vi) this Agreement shall otherwise
terminate upon the Effective Date of the Termination and the Executive shall
have no further rights hereunder (except as provided in Section 7.13). 
Notwithstanding the foregoing sentence, if the Company terminates Executive’s
employment without Cause or Executive terminates employment for Good Reason on
or within 12 months after a Change in Control,  the Executive shall have no
right to receive any compensation or benefit hereunder on and after the
Effective Date of the Termination (as defined below in this Section 5.2) other
than (i) the Executive shall receive her Annual Salary earned and accrued under
this Agreement prior to the Effective Date of the Termination, any bonus for the
prior year not yet paid, a pro rata bonus (based on target level) for any
pending bonus periods in the current year and other benefits, including payment
for accrued but unused vacation, earned and accrued under this Agreement prior
to the Effective Date of the Termination (and reimbursement under this Agreement
for expenses incurred but not paid prior to the Effective Date of the
Termination), (ii) the Executive shall receive the applicable Severance Payment,
payable no later than 30 days after the Effective Date of the Termination
(iii) the Executive shall receive continuation of health benefits for 18 months,
(iv) all unvested equity awards held by the Executive shall fully vest, (v) the
Executive shall receive accelerated full vesting of Executive’s supplemental
executive retirement plan and payment in accordance with its terms, and
(vi) this Agreement shall otherwise terminate upon the Effective Date of the
Termination and the Executive shall have no further rights hereunder (except as
provided in Section 7.13).  The “Severance Payment” means one and one-half (1
1/2) times the Executive’s Annual Salary and annual bonus at target level in
effect on the day of termination, provided that, if the Effective Date of
Termination is after December 20, 2009 the Severance Payment will be two and
one-half

 

6

--------------------------------------------------------------------------------

 

(2 1/2) times the Executive’s Annual Salary; and provided further that, if the
Effective Date of Termination occurs within 365 days following the occurrence of
a Change in Control pursuant to the Company’s termination without Cause or the
Executive’s termination for Good Reason (as defined below in this
Section 5.1(b)), the Severance Payment means two and one-half (2 1/2) times
Executive’s Annual Salary and annual bonus at target level in effect on the day
of termination.  For purposes of this Section 5.2, (i) the “Effective Date of
the Termination” shall mean the date of termination specified in the Company’s
or the Executive’s notice of termination, as applicable, and (ii) a “Change in
Control” shall mean: (a) the acquisition directly or indirectly by any person or
related group of persons (other than the Company or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company prior to the transaction) of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Company’s outstanding
securities; (b) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in office
at the time such election or nomination was approved by the Board; or (c) a sale
of all or substantially all of the assets of the Company to another person or
entity (other than a person or entity that directly or indirectly controls, is
controlled by, or is under common control with, the Company prior to the
transaction).

 

5.3                                 Nature of Payments.  For the avoidance of
doubt, the Executive acknowledges and agrees that the Company’s payment
obligations set forth in this Section 5 constitute liquidated damages for
termination of the Executive’s employment during the Term.

 

6.                                       Noncompetition.

 

6.1                                 Noncompetition.  The Executive agrees with
the Company that, during the Term of this Agreement and for eighteen (18) months
thereafter (the “Non-Competition Restriction Period”), the Executive will not,
directly or indirectly (whether as an officer, director, employee, consultant,
agent, advisor, stockholder, partner, joint venturer, proprietor or otherwise)
engage or otherwise become interested in any business or activity that directly
or indirectly competes with any business of the Company or any of its
subsidiaries (or any of their successors) as conducted or contemplated during
her period of employment with the Company.

 

6.2                                 Reasonable and Necessary Restrictions.  The
Executive acknowledges that the restrictions, prohibitions and other provisions
hereof, including, without limitation the Restriction Period, are reasonable,
fair and equitable in terms of duration, scope and geographic area, are
necessary to protect the legitimate business interests of the Company and are a
material inducement to the Company to enter into this Agreement.

 

7

--------------------------------------------------------------------------------

 

6.3                                 Forfeiture of Severance Payments.  In the
event the Executive breaches any provision of Section 6.1, in addition to any
other remedies that the Company may have at law or in equity, the Executive
shall promptly reimburse the Company for any Severance Payments received from,
or payable by, the Company.  In addition, the Company shall be entitled in its
sole discretion to offset all or any portion of the amount of any unpaid
reimbursements against any amount owed by the Company to the Executive.

 

7.                                       Other Provisions.

 

7.1                                 Specific Performance.  The Executive
acknowledges that the obligations undertaken by such Executive pursuant to
Section 6 of this Agreement are unique and that the Company likely will have no
adequate remedy at law if the Executive shall fail to perform any of such
Executive’s obligations hereunder, and the Executive therefore confirms that the
Company’s right to specific performance of the terms of Section 6 of this
Agreement is essential to protect the rights and interests of the Company. 
Accordingly, in addition to any other remedies that the Company may have at law
or in equity, the Company shall have the right to have all obligations,
covenants, agreements and other provisions of Section 6 of this Agreement
specifically performed by the Executive, and the Company shall have the right to
obtain preliminary and permanent injunctive relief to secure specific
performance and to prevent a breach or contemplated breach of this Agreement by
the Executive.  The Executive hereby acknowledges and warrants that she will be
fully able to earn a livelihood for herself and her dependents if these
covenants are specifically enforced against her.  The Executive hereby further
acknowledges and agrees that the Company shall not be required to post bond as a
condition to obtaining or exercising such remedies, and the Executive hereby
waives any such requirement or condition.

 

7.2                                 Severability.  The Executive acknowledges
and agrees that the Executive has had an opportunity to seek advice of counsel
in connection with this Agreement.  If it is determined that any of the
provisions of this Agreement, or any part thereof, is invalid or unenforceable,
the remainder of the provisions of this Agreement shall not thereby be affected
and shall be given full affect, without regard to the invalid portions.

 

7.3                                 Attorneys’ Fees.  In the event of any legal
proceeding relating to this Agreement or any term or provision thereof, the
losing party shall be responsible to pay or reimburse the prevailing party for
all reasonable attorneys’ fees incurred by the prevailing party in connection
with such proceeding.

 

7.4                                 Notices.  All notices, requests, demands,
claims, and other communications hereunder shall be in writing.  Any notice,
request, demand, claim, or other communication hereunder shall be deemed duly
delivered (i) two business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, (ii) when received if it is
sent by facsimile communication during normal business hours on a business day
or one business day after it is sent by facsimile and received if sent other
than during business hours on a business day, (iii) one business day after it is
sent via a reputable overnight courier service,

 

8

--------------------------------------------------------------------------------

 

charges prepaid, or (iv) when received if it is delivered by hand, in each case
to the intended recipient as set forth below:

 

(i)            if to the Executive, to the address set forth in the records of
the Company; and

 

(ii)           if to the Company,

 

Coldwater Creek, Inc.

One Coldwater Creek Drive

Sandpoint, Idaho 83864

Attention:  Chief Executive Officer

Facsimile:  [                           ]

 

Any such person may by notice given in accordance with this Section to the other
parties hereto designate another address or person for receipt by such person of
notices hereunder.

 

7.5                                 Entire Agreement.  This Agreement, and the
Coldwater Creek Inc.  Confidentiality and Intellectual Property Agreement and
Agreement for Non-Solicitation or Recruitment, contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, written or oral, with the Company or its subsidiaries (or any
predecessor of either).

 

7.6                                 Waivers and Amendments.  This Agreement may
be amended, superseded, canceled, renewed or extended, and the terms hereof may
be waived, only by a written instrument signed by the parties or, in the case of
a waiver, by the party waiving compliance.  No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege nor any single or partial exercise of any such right, power or
privilege, preclude any other or further exercise thereof or the exercise of any
other such right, power or privilege.

 

7.7                                 GOVERNING LAW.  THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF IDAHO
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

 

7.8                                 Assignment.  This Agreement, and the
Executive’s rights and obligations hereunder, may not be assigned by the
Executive; any purported assignment by the Executive in violation hereof shall
be null and void.  In the event of any Change in Control, the Company may assign
this Agreement and its rights hereunder.

 

7.9                                 Withholding.  The Company shall be entitled
to withhold from any payments or deemed payments any amount of withholding
required by law.  No other taxes, fees,

 

9

--------------------------------------------------------------------------------

 

impositions, duties or other charges or offsets of any kind shall be deducted or
withheld from amounts payable hereunder, unless otherwise required by law.

 

7.10                           No Duty to Mitigate.  The Executive shall not be
required to mitigate damages or the amount of any payment provided for under
this Agreement by seeking other employment or otherwise, nor will any payments
hereunder be subject to offset in the event the Executive does mitigate.

 

7.11                           Binding Effect.  This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors,
permitted assigns, heirs, executors and legal representatives.

 

7.12                           Counterparts.  This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all such counterparts together shall
constitute one and the same instrument.  Each counterpart may consist of two
copies hereof each signed by one of the parties hereto.

 

7.13                           Survival.  Anything contained in this Agreement
to the contrary notwithstanding, the provisions of Sections 4 through 6 (to the
extent necessary to effectuate the post-termination obligations set forth
therein) and of Section 7 shall survive termination of this Agreement and any
termination of the Executive’s employment hereunder.

 

7.14                           Existing Agreements.  The Executive represents to
the Company that the Executive is not subject or a party to any employment or
consulting agreement, non-competition covenant or other agreement, covenant or
understanding which might prohibit the Executive from executing this Agreement
or limit the Executive’s ability to fulfill the Executive’s responsibilities
hereunder.

 

7.15                           Headings.  The headings in this Agreement are for
reference only and shall not affect the interpretation of this Agreement.

 

7.16                           Parachute Provisions.  If any amount payable to
or other benefit receivable by the Executive pursuant to this Agreement is
deemed to constitute a Parachute Payment (as defined below in this Section 7.16)
alone or when added to any other amount payable or paid to or other benefit
receivable or received by the Executive which is deemed to constitute a
Parachute Payment (whether or not under an existing plan, arrangement or other
agreement), and would result in the imposition on the Executive of an excise tax
under Section 4999 of the Internal Revenue Code of 1986, as amended
(“Section 4999”), then, in addition to any other benefits to which the Executive
is entitled under this Agreement, the Executive shall be paid by the Company an
amount in cash equal to the sum of the excise taxes payable by the Executive by
reason of receiving Parachute Payments plus the amount necessary to put the
Executive in the same after-tax position (taking into account any and all
applicable federal, state and local excise, income or other taxes at the highest
applicable rates on such Parachute Payments and on any payments under this
Section 7.16 ) as if no excise taxes had been imposed

 

10

--------------------------------------------------------------------------------

 

with respect to Parachute Payments (the “Gross-Up Payment”).  Notwithstanding
the foregoing, if the Parachute Payment does not exceed 110% of three (3) times
the Executive’s “base amount” as defined within Section 280G of the Internal
Revenue Code of 1986, as amended, then the Company will not pay the Gross-Up
Payment, and the payments due under this Agreement shall be reduced so that the
Parachute Payments would not result in the imposition of an excise tax under
Section 4999.  The amount of any payment under this Section 7.16 shall be
computed by a certified public accounting firm mutually and reasonably
acceptable to the Executive and the Company, the computation expenses of which
shall be paid by the Company.  “Parachute Payment” shall mean any payment deemed
to constitute a “parachute payment” as defined in Section 280G

 

7.17                           Section 409A of the Internal Revenue Code.

 

(a)                                  Anything in this Agreement to the contrary
notwithstanding, if (A) on the date of termination of Executive’s employment
with the Company or a Subsidiary, any of the Company’s stock is publicly traded
on an established securities market or otherwise (within the meaning of
Section 409A(a)(2)(B)(i) of the Internal Revenue Code, as amended (the “Code”))
and (B) as a result of such termination, the Executive would receive any payment
that, absent the application of this Section 7.17, would be subject to interest
and additional tax imposed pursuant to Section 409A(a) of the Code as a result
of the application of Section 409A(a)(2)(B)(i) of the Code, then no such payment
shall be payable prior to the date that is the earliest of (1) 6 months after
the Executive’s termination date, (2) the Executive’s death or (3) such other
date as will cause such payment not to be subject to such interest and
additional tax.

 

(b)                                 It is the intention of the parties that
payments or benefits payable under this Agreement not be subject to the
additional tax imposed pursuant to Section 409A of the Code (“409A”).  To the
extent such potential payments or benefits could become subject to such Section,
the parties shall cooperate to amend this Agreement with the goal of giving the
Executive the economic benefits described herein in a manner that does not
result in such tax being imposed.

 

(c)                                  Except as otherwise provided under this
Agreement, all reimbursements to the Executive shall be paid as promptly as
practical and in any event not later than the last day of the calendar year in
which the expenses are incurred, and the amount of the expenses eligible for
reimbursement during any calendar year will not affect the amount of expenses
eligible for reimbursement in any other calendar year.  With respect to payments
under this Agreement, for purposes of 409A, each severance payment and COBRA
continuation reimbursement payment will be considered one of a series of
separate payments, and the Executive’s termination date will be treated as the
Executive’s separation from service as defined under 409A.

 

(d)                                 Amounts payable under this Agreement
following the Executive’s termination of employment, other than those expressly
payable on a deferred or installment basis, will be paid as promptly as
practical after such a termination of employment and, in any event, within 2 ½
months after the end of the year in which employment terminates.

 

11

--------------------------------------------------------------------------------

 

7.18                           Certain Definitions.  For purposes of this
Agreement:

 

(a)                                  an “affiliate” of any person means another
person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such first person,
and includes subsidiaries.

 

(b)                                 A “business day” means the period from 9:00
am to 5:00 pm on any weekday that is not a banking holiday in New York City, New
York.

 

(c)                                  A “person” means an individual,
corporation, limited liability company, partnership, association, trust or any
other entity or organization, including any court, administrative agency or
commission or other governmental authority.

 

(d)                                 A “subsidiary” of any person means another
person, an amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a majority of its
board of directors or other governing body (or, if there are no such voting
interests or no board of directors or other governing body, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.

 

IN WITNESS WHEREOF, the parties hereto have signed their names as of the day and
year first above written.

 

 

COLDWATER CREEK INC.

 

 

 

 

By:

  /s/ Daniel Griesemer

 

Name:

Daniel Griesemer

 

Title:

President and Chief Executive Officer

 

 

 

 

 

 

 

  /s/ Georgia Shonk-Simmons

 

GEORGIA SHONK-SIMMONS

 

12

--------------------------------------------------------------------------------