Exhibit 10.1


 


EMPLOYMENT AGREEMENT


 


THIS Employment Agreement is entered into as of this 9th
day of March 2006 (the “Commencement Date”), by and between Ernest R.
Johnson, (“Johnson”) and Cutter & Buck Inc., a Washington corporation
(“Cutter & Buck”).


 


WHEREAS, Johnson is currently employed by Cutter &
Buck as its Chief Financial Officer and Senior Vice President; and


 


WHEREAS, Cutter & Buck now wishes to employ
Johnson as its Chief Executive Officer, and Johnson desires to accept Cutter &
Buck’s employment in that capacity;


 


NOW, THEREFORE, in consideration of the mutual
agreements set forth below, the parties agree as follows:


 


1.                                       Employment
Duties. Cutter & Buck hereby employs Johnson and Johnson hereby
accepts employment on the terms and conditions set forth by this Agreement. Johnson
shall serve as Chief Executive Officer. In that capacity, subject to the
direction and control of the Cutter & Buck’s Board of Directors (the “Board”),
Johnson shall exercise general supervision and control over Cutter &
Buck’s property, business and affairs. Johnson shall devote his full-time
efforts to Cutter & Buck and shall not undertake self-employment, nor
shall he perform any services or undertake employment for any other
employer except as may be approved in advance by the Board. Johnson
further agrees to participate in no other activities during his employment that
may conflict with the best interest of Cutter & Buck.


 


2.                                       Compensation.


 


a.                                       Base
Compensation. Cutter & Buck agrees to pay Johnson a base salary of
Four Hundred Thousand Dollars ($400,000) per annum, less all lawful and
applicable withholdings and deductions, payable on a basis conforming to the
established payroll practices of Cutter & Buck.


 


b.                                      Incentive
Compensation in Addition to Base Salary. In addition to the basic
compensation set forth above, Johnson shall be entitled to receive such
performance-based incentive compensation as shall be determined by the
Compensation Committee of the Board.


 


3.                                       Term.
This Agreement shall continue through July 31, 2007, subject to earlier
termination in accordance with its provisions. Upon its expiration, unless
earlier terminated in accordance with its provisions, this Agreement, shall be
renewed automatically upon the same terms and conditions for successive periods
of one year, commencing August 1, unless otherwise negotiated and agreed
upon by the parties. The successive one year renewals shall also be subject to
the earlier termination provisions of this Agreement.


 


4.                                       Retirement
Plans. Subject to the satisfaction of eligibility requirements, Johnson
shall participate in Cutter & Buck’s qualified pension, profit-sharing
or other deferred


 

















 


compensation plan or combination thereof, if any as offered or amended
at Cutter & Buck’s discretion.


 


5.                                       Time
Off. Johnson shall receive time off for holidays in accordance with Cutter &
Buck’s policies. Subject to Cutter & Buck’s policies regarding limits
on accrual and payout, Johnson shall be entitled to sixteen (16) days of paid
time off per year, accruable at the rate of 4.92 hours per pay period.


 


6.                                       Reimbursable
Expenses. Johnson shall be entitled to reimbursement for all reasonable and
necessary expenses including cell phone charges incurred by Johnson and
approved by Cutter & Buck in connection with Cutter & Buck’s
business, including (i) the cost of up to two season tickets for any two
Seattle-based professional sports franchises; (ii) entertainment and
promotional expenses; and (iii) other direct expenses approved by Cutter & Buck.
All such reimbursements shall be paid monthly, provided Johnson has furnished
to Cutter & Buck such supporting documentation as Cutter &
Buck may reasonably require.


 


7.                                       Insurance.
Johnson shall receive similar medical, dental, group disability and life
insurance coverage provided to all other employees of Cutter & Buck
and upon the same terms and conditions.


 


8.                                       Termination   Notwithstanding
the Term of this Agreement or any renewals, this Agreement may be
terminated by either party as set forth below:


 


a.                                       Termination
Without Cause. Cutter & Buck may terminate Johnson’s
employment hereunder without Cause upon written notice to Johnson. In the event
of termination of Johnson by Cutter & Buck without Cause, and
contingent upon Johnson’s execution of a release of all claims against Cutter &
Buck and its officers, directors, employees and agents, Cutter & Buck
shall pay Johnson as a separation payment a sum equal to twelve
(12) months of his base compensation as of the date of his termination,
less all appropriate deductions (the “Separation Benefit”). Such sum shall be
payable in twelve (12) equal monthly installments. Notwithstanding the
foregoing, in the event that Johnson is terminated without cause under
circumstances that would give rise to a right to a Severance Payment under the
provisions of the Amended and Restated Change in Control Agreement executed
contemporaneously with this Agreement (the “Change in Control Agreement”),
Johnson’s right to receive a Separation Benefit under this Agreement, will be
subject to the provisions of the Change in Control Agreement. Under no
circumstances will Johnson be entitled to receive both a Separation Benefit
under this Agreement and a Severance Payment under the Change in Control
Agreement that would exceed the amount to which he would be entitled under the
Change in Control Agreement.


 


b.                                      Termination
for Cause. Cutter & Buck may terminate Johnson’s employment
hereunder for “Cause” as that term is defined below:


 


(i)                                     Johnson’s
failure to perform substantially his responsibilities under this
Agreement, after demand for substantial performance has been given by Cutter &
Buck that specifically identifies how Johnson has not substantially performed
his responsibilities,


 


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(ii)                                  Johnson’s
conviction of any felony or of a misdemeanor involving fraud, dishonesty or
moral turpitude or the entry against him of any civil judgment arising from
allegations of fraud, dishonesty or moral turpitude, or any violation of law
which has a material adverse effect on Cutter & Buck,


 


(iii)                               Johnson’s breach of this
Agreement that results in financial or reputational detriment to Cutter &
Buck,


 


(iv)                              Johnson’s
misconduct in the performance of his duties under the Agreement that results in
financial or reputational detriment to Cutter & Buck,


 


(v)                                 Johnson’s
breach of Cutter & Buck’s Code of Ethics or Insider Trading Policy, as
now in effect or as modified in the future,


 


(vi)                              Johnson’s
theft or embezzlement from Cutter & Buck, or


 


(vii)                           Johnson’s attempt to
obstruct or failure to cooperate with any investigation authorized by Cutter &
Buck or any governmental or self-regulatory entity.


 


In the event of termination “for Cause,” all obligations of Cutter &
Buck to pay compensation under this Agreement will immediately cease and
Johnson shall be entitled to no further compensation of any kind with the
exception of base compensation accrued to the date of termination.


 


c.                                       Resignation
without Good Reason. Should Johnson wish to terminate his employment with
Cutter & Buck without Good Reason (as defined below) during the term
of this Agreement, Johnson shall give sixty (60) days prior written notice
to Cutter & Buck specifying the date on which such resignation is to
become effective. In the event of a resignation without Good Reason, Cutter &
Buck shall have no further obligations to pay compensation to Johnson under
this Agreement other than to pay Johnson his base compensation through the date
of resignation. At Cutter & Buck’s sole option, it may elect to
end Johnson’s service at a date earlier than specified in Johnson’s written
notice and pay his compensation through the end of a sixty (60) day notice
period.


 


d.                                      Resignation
with Good Reason. Johnson may terminate his employment hereunder for “Good
Reason” as that term is defined below:


 


(i)                                     The
material diminution of Johnson’s position, duties, responsibilities or status
with Cutter & Buck,


 


(ii)                                  Cutter &
Buck’s assignment of Johnson on a substantially full-time basis to work at a
location where the distance between the new location and Johnson’s principal
residence is at least 30 miles greater than the distance between the former
location and such residence,


 


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(iii)                               Any reduction in Johnson’s
base salary, or a material reduction in benefits payable to Johnson or the
failure of Cutter & Buck to pay Johnson any earned salary, bonus or
benefits except with Johnson’s prior written consent,


 


(iv)                              Cutter &
Buck’s failure to obtain an assumption of the obligations incumbent upon Cutter &
Buck under this Agreement by any successor to Cutter & Buck,


 


(v)                                 The
exclusion or limitation of Johnson from participating in some form of
variable compensation plan which provides Johnson the opportunity to achieve a
level of total compensation consistent with Johnson’s potential compensation
under this Agreement, or


 


(vi)                              Any
demand by any director of the Company that Johnson take any action or refrain
from taking any action where such action or inaction, as the case may be,
would violate any law, rule, regulation or other governmental pronouncement,
court order, decree or judgment, or breach any agreement or fiduciary duty.


 


In the event of a resignation by Johnson for Good Reason, and
contingent upon Johnson’s execution of a release of all claims against Cutter &
Buck and its officers, directors, employees and agents, Cutter & Buck
shall pay Johnson a sum equal to twelve (12) months of his base
compensation as of the date of his resignation, less all appropriate deductions
(the “Separation Benefit”). Such sum shall be payable in twelve (12) equal
monthly installments. Notwithstanding the foregoing, in the event that Johnson
resigns for good reason under circumstances that would give rise to a right to
a Severance Payment under the provisions of the Change Control Agreement
executed contemporaneously with this Agreement, Johnson’s right to receive a
Separation Benefit under this Agreement, will be subject to the provisions of
the Change in Control Agreement. Under no circumstances will Johnson be
entitled to receive both a Separation Benefit under this Agreement and a
Severance Payment under the Change in Control Agreement that would exceed the
amount to which he would be entitled under the Change in Control Agreement.


 


e.                                       Death.
This Agreement, Johnson’s employment hereunder, and Cutter & Buck’s
obligations hereunder shall terminate forthwith upon the death of Johnson and
Cutter & Buck shall have no further obligation to pay compensation to
Johnson or Johnson’s estate, successors or beneficiaries under this Agreement other
than to pay Johnson’s base salary through the date of death.


 


f.                                         Disability.
If Johnson shall fail or be unable to perform this services required under
this Agreement, with or without reasonable accommodation, because of any
physical or mental disability, and such failure or inability shall continue for
three consecutive months or for a total of ninety (90) days during any
consecutive twelve (12) month period, Cutter & Buck shall have
the right to terminate this Agreement thirty days after delivering written
notice of such termination to Johnson; provided, however, that Johnson shall
continue to receive his base compensation to the date of termination.


 


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9.                                       Trade
Secrets and Confidential Information.


 


a.                                       Johnson
agrees that both during and after the Term of the Agreement he will keep
confidential and not disclose or use confidential information relating to
Cutter & Buck’s customers, personnel, designs, pricing, sourcing,
manufacturing and distribution policies, methods of doing business, sales
volume information, business prospects or plans, or any other proprietary
information which is not otherwise available to the general public, including,
but not limited to, information covered under the Uniform Trade Secrets
Act, RCW 19.108 et. seq., except in furtherance of the interests of Cutter &
Buck.


 


b.                                      Johnson
acknowledges that Cutter & Buck’s business and future success depend
upon the preservation of the trade secrets and other confidential information
of Cutter & Buck, its subsidiaries, and their suppliers and customers
(the “Secrets”). The Secrets may include, without limitation, existing and
to-be-developed or acquired product designs, new product plans or ideas, market
surveys, the identities of past, present or potential customers, business and
financial information, pricing methods or data, terms of contracts with present
or past customers, proposals or bids, marketing plans, personnel information,
procedural and technical manuals and practices, servicing routines, and parts
and supplier lists proprietary to Cutter & Buck, its subsidiaries or
their customers or suppliers, and any other sorts of items or information of
Cutter & Buck or its subsidiaries or their customers or suppliers
which are not generally known to the public at large. Johnson agrees to protect
and to preserve as confidential during and after the Term all of the Secrets at
any time known to Johnson or in his possession or control (whether wholly or
partially developed by Johnson or provided to Johnson, and whether embodied in
any tangible medium or merely remembered).


 


c.                                       Johnson
shall neither use nor allow any other person to use any of the Secrets in any
way, except for the benefit of Cutter & Buck. All material containing
or disclosing any portion of the Secrets shall be and remain the property of
Cutter & Buck, and shall be returned to Cutter & Buck upon
the termination of Johnson’s employment or at the earlier request of the Board
of Directors. At such time, Johnson shall also assemble all materials in his
possession or control that contain any of the Secrets, and promptly deliver
such items to Cutter & Buck.


 


10.                                 Intellectual
Properties.


 


a.                                       All
ownership, copyright, patent, trade secrecy and other rights in all works,
designs, inventions, ideas, manuals, improvements, discoveries, processes,
customer lists or other properties (the “Intellectual Properties”) made or
conceived by Johnson during the Term and in connection with Johnson’s
employment with Cutter & Buck shall be the right and property solely
of Cutter & Buck, whether developed independently by Johnson or
jointly with others, and whether or not developed or conceived during regular
working hours or at Cutter & Buck’s facilities, and whether or not
Cutter & Buck uses, registers, or markets the same.


 


b.                                      If
and to the extent that Johnson makes use, in the course of his employment, of
any items or Intellectual Properties previously developed by Johnson or
developed by Johnson outside the scope of this Agreement, Johnson hereby grants
Cutter &


 


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Buck a nonexclusive, royalty-free, perpetual, irrevocable, worldwide
license (with right to sublicense) to make, use, sell, copy, distribute,
modify, and otherwise to practice and exploit any and all such items and
Intellectual Properties.


 


c.                                       In
accordance with Cutter & Buck’s policy and Washington law, this section does
not apply to, and Johnson has no obligation to assign to Cutter &
Buck, any invention for which no Cutter & Buck trade secrets and no
equipment, supplies or facilities of Cutter & Buck were used and which
was developed entirely on Johnson’s own time, unless (i) the invention
relates directly to the business of Cutter & Buck; (ii) the
invention relates to actual or demonstrably anticipated research or development
work of Cutter & Buck; or (iii) the invention results from any
work performed by Johnson for Cutter & Buck.


 


d.                                      Johnson
will assist Cutter & Buck as reasonably requested during and after the
term of his employment to further evidence and perfect, and to enforce, Cutter &
Buck’s rights in and ownership of the Intellectual Properties covered hereby,
including without limitation, the execution of additional instruments of
conveyance and assisting Cutter & Buck with applications for patents
or copyright or other registrations.


 


11.                                 Authority
and Non-Infringement. Johnson warrants that to the best of his knowledge
any and all items, technology and Intellectual Properties of any nature
developed or provided by him under this Agreement and in any way for or related
to Cutter & Buck will be original to Johnson and will not, as provided
to Cutter & Buck or when used and exploited by Cutter & Buck
and its contractors and customers and its and their successors and assigns,
infringe in any respect on the rights or property of any third party. Johnson
will not, without prior authorization by the Board, use any equipment,
supplies, facilities or proprietary information of any other party. Johnson
warrants that he is fully authorized to enter into employment with Cutter &
Buck and to perform under this Agreement, without conflicting with any
other commitments, understandings, agreements or duties, whether to prior
employers or otherwise. Johnson agrees to indemnify Cutter & Buck for
all losses, claims and expenses (including reasonable attorneys’ fees) arising
from claims brought against Cutter & Buck as a result of any breach by
Johnson of this section.


 


12.                                 Noncompetition,
Nonsolicitation and Non-Hire.


 


a.                                       Subject
to the provisions of Section 12.d., below, Johnson agrees that, both
during the term and for a period of twelve (12) months following the
termination of Johnson’s employment with Cutter & Buck, Johnson will
not in any capacity, directly or indirectly, engage or invest in, own, manage,
operate, finance, control or participate in the ownership, management,
operation, financing or control of, be employed by, associated with, or in any
manner connected with, lend his name or any similar name to, lend his credit
to, render services or advice to, or assist others to engage in or own a
material interest in any business or activity that is, or is preparing to be,
in competition with Cutter & Buck, its subsidiaries or licensees with
respect to any product or any service sold or provided by Cutter &
Buck directly or through a subsidiary or a licensee of the Cutter &
Buck brand in any geographical area in which such product or service is sold or
is actively engaged in. Notwithstanding any other provision of this section,
however, Johnson shall be permitted to maintain an equity ownership


 


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interest in a competing business if that business is subject to
reporting obligations under the Securities Exchange Act of 1934 and Johnson’s
ownership interest does not exceed two percent (2%) of that entity’s
outstanding equity securities.


 


b.                                      Subject
to the provisions of Section 12.d., below, Johnson further agrees that
both during the Term of this Agreement and for a period of twelve (12) months
following the termination of Johnson’s employment with Cutter & Buck,
Johnson will not:  (i) directly or
indirectly solicit or accept business from any actual or identified potential
customer of Cutter & Buck or its subsidiaries which might reasonably
be foreseen to decrease such customer’s likelihood to transact future business
with Cutter & Buck in a volume consistent with its historical
practices or reasonably anticipated future volume; or (ii) attempt to
entice away from Cutter & Buck or its subsidiaries any actual or
identified potential customer of Cutter & Buck or its subsidiaries,
nor will Johnson assist others in doing so. Johnson further agrees that during
the Term of this Agreement and for a period of twelve (12) months following
termination of his employment with Cutter & Buck, he will not induce
or attempt to induce any customer, supplier, licensee, shareholder, investor,
or business relation of Cutter & Buck to sever or diminish its
relationship with Cutter & Buck, or refrain from doing business with
Cutter & Buck, its subsidiaries, or its licensees or in any way
interfere with the relationship between Cutter & Buck and any
customer, supplier, licensee, shareholder, investor or business relation of
Cutter & Buck.


 


c.                                       Subject
to the provisions of Section 12.d., below, Johnson further agrees that
both during the Term of this Agreement and for a period of twelve (12) months
following the termination of his employment with Cutter & Buck, he
will not, directly or indirectly, for himself or any other person or entity; (i) induce
or attempt to induce any employee, consultant, independent sales representative
or independent contractor of Cutter & Buck to leave the employ of or
terminate his, her or its contract with Cutter & Buck; (ii) in
any way interfere with the relationship between Cutter & Buck and any
employee, consultant, independent sales representative or independent
contractor of Cutter & Buck; or (iii) employ, or otherwise engage
as an employee, consultant, independent sales representative or independent
contractor, or otherwise, any individual serving as an employee, consultant,
independent sales representative or independent contractor of Cutter &
Buck or its subsidiaries on the date this Agreement is executed.


 


d.                                      In
the event that Johnson receives a Severance Payment under the Change in Control
Agreement, then the restrictions set forth in Sections 12.a., 12.b., and 12.c.,
above, shall be extended to require Johnson to comply with those Sections for a
period of twenty-four (24) months from the termination of his employment.


 


e.                                       Nothing
in this Agreement prohibits Johnson from providing truthful testimony to
governmental, regulatory or self regulatory authorities.


 


f.                                         Johnson
acknowledges that the covenants contained in this section are necessary
and reasonable to protect Cutter & Buck in the conduct of its business
and that compliance with such covenants will not prevent him from pursuing his
livelihood. However, should any court find that any provision of such covenants
is unreasonable, invalid or unenforceable, whether in period of time,
geographical area or otherwise, then in that event the


 


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parties hereby agree that such covenants shall be interpreted and
enforced to the maximum extent which the court deems reasonable.


 


13.                                 Remedies.
Johnson acknowledges that any breach by him of the provisions of
Sections 9, 10, 11 or 12 may be wholly or partly irreparable and
not fully compensable by damages. Johnson hereby agrees that such obligations may be
enforced by injunctive relief and other appropriate remedies, as well as by
damages. The remedies available to Cutter & Buck for violations of
Sections 9, 10, 11 and 12 are cumulative and not alternative.


 


14.                                 Amendment;
Waivers. This Agreement may be amended only by a written instrument
signed by both parties. No breach of any agreement, warranty or representation
shall be deemed waived unless expressly waived in writing and signed by the
party who might assert such breach. No failure or delay by either party in
exercising any right under this Agreement shall operate as a waiver of such
right nor shall any single or partial exercise of any right preclude any other
or further exercise of such right or the exercise of any other right.


 


15.                                 Assignment
Prohibited. Johnson may not assign any of his rights nor delegate any
of his duties hereunder. Cutter & Buck may assign this Agreement
and delegate its duties hereunder in connection with any merger, consolidation,
or sale of assets, or to any of its affiliates at any time owned by, or under
common ownership with, Cutter & Buck, provided that any such successor
or assignee expressly assumes in writing Cutter & Buck’s obligations
hereunder .


 


16.                                 Governing
Law. This Agreement, including all matters of construction, validity and
performance, shall be governed by, and construed and enforced in accordance
with, the laws of the State of Washington without regard to its choice of law
provisions.


 


17.                                 Arbitration.
Except for Cutter & Buck’s right to seek injunctive and other relief
in any court of competent jurisdiction for alleged violations of Paragraphs 9,
10, 11 and 12 of this Agreement, all disputes and controversies of every kind
between the parties hereto arising out of or in connection with this Agreement
and their employment relationship shall be submitted to binding arbitration. The
arbitrator shall be appointed by an arbitration service agreed upon by the
parties, or if the parties cannot agree upon an arbitration service, by the
Judicial Dispute Resolution of Seattle, Washington. The arbitration shall take
place in King County, Washington. The determination made by the arbitrator
shall be final and binding upon the parties hereto, subject only to the right
to appeal such decision to the Superior Court on any basis authorized by the
Federal Arbitration Act.


 


18.                                 Notices.
All notices and other communications called for or required by this Agreement
shall be in writing to the parties at their respective addresses stated below,
or to such other address as a party may subsequently specify and shall be
deemed to have been received (i) upon delivery in person, (ii) upon
the passage of seventy-two hours following post by the first class registered
or certified mail, return receipt requested, with postage prepaid, (iii) upon
passage of twenty-four hours following post by overnight receipted courier
service, or (iv) upon transmittal by confirmed telex or facsimile provide
that if sent by facsimile a copy of such notice


 


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shall be concurrently sent by U.S. certified mail, return receipt
requested and postage prepaid, with an indication that the original was sent
facsimile and the date of its transmittal.


 


19.                                 Savings
Clause. If any provision of this Agreement, is held to be invalid or unenforceable
to any extent in any context, it shall nevertheless be enforced to the fullest
extent allowed by law in that and other contexts, and the validity and force of
the remainder of this Agreement shall not be affected thereby.


 


20.                                 Counterparts.
This Agreement may be signed in several counterparts, each of which shall
be an original, but all of which together shall constitute the same instrument.


 


21.                                 Complete
Agreement. This Agreement comprises the entire agreement between the
parties. It supersedes and merges within it all prior agreements, discussions
or understandings between the parties, whether written or oral, express or
implied. In interpreting and construing this Agreement, the fact that any
particular party may have drafted this Agreement or any provision hereof
shall not be given any weight or relevance.


 


22.                                 Costs
and Expenses of Enforcement. If any legal action or arbitration is brought
to interpret or enforce any term or provision of this Agreement, then, subject
to applicable law, the prevailing party shall, in addition to any other relief
to which such party may be entitled, be awarded against the nonprevailing
party, his or its attorney’s fees and costs reasonably and actually incurred.


 


By his signature below, Johnson acknowledges that he has
read and understood this Agreement, that its terms have been fully and fairly
negotiated between himself and Cutter & Buck, that he has had the
opportunity to seek independent legal advice and has obtained such independent
legal advice about the terms and conditions of this Agreement as he sees fit,
and that he signs it and accepts its terms, covenants and restrictions
voluntarily.


 


Executed by the parties as of the date first written
above.


 


	
  CUTTER & BUCK INC.

  	
   

  	
  ERNEST R. JOHNSON

  
	
   

  	
   

  	
   

  
	
  /s/ Douglas G. Southern

  	
   

  	
  /s/ ERNEST R. JOHNSON

  
	
  By Douglas G. Southern

  	
   

  	
   

  
	
  Its Chairman

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Notice Address:

  	
   

  	
  Notice Address:

  
	
   

  	
   

  	
   

  
	
  701 North 34th Street, Suite 400

  Seattle, WA 98103

  Attn: Chairman

  	
   

  	
  c/o Cutter & Buck Inc.

  701 North 34th Street, Suite 400

  Seattle, WA 98103

  



 


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