Exhibit
10.38


 


AMENDED AND
RESTATED AGREEMENT 

FOR CHAIRMAN OF BOARD OF DIRECTORS


 


This AMENDED AND RESTATED AGREEMENT FOR CHAIRMAN OF
BOARD OF DIRECTORS (this “Agreement”) is
dated as of May 21, 2010, between Rafaella Apparel Group, Inc. (the “Company”) and John Kourakos, an individual (“Director”) (the Company and Director, together, the “Parties”).


 


WHEREAS, the Parties wish to amend and restate the
terms of Director’s service as Chairman of the Board of Directors of the
Company (the “Board”) set forth in the Agreement
for Chairman of Board of Directors between the Parties, dated as of October 1,
2007 (the “Prior Agreement”); and


 


WHEREAS, the Company desires to amend and restate
the terms of the Prior Agreement and the Director wishes to continue his service
with the Company on the terms and conditions set forth herein.


 


NOW, THEREFORE, in consideration of the premises and
of Director agreeing to serve the Company and intending to be legally bound
hereby, the Parties hereto agree as follows:


 


1.                                       Service as Director. Director hereby agrees to be elected and to serve
as Chairman of
the Board and to assume the following obligations and responsibilities:


 


1.1                                 Director shall provide active strategic and management
leadership and oversight for the Company (as opposed to having responsibilities
for the day-to-day operations of the Company) and shall perform such other
duties and responsibilities as may be reasonably requested by the Board or as
are normally related to the position of Chairman of the Board in accordance
with the Company’s bylaws and applicable law, including those services
described on Exhibit A (the “Services”).
Director hereby agrees to use reasonable efforts to provide the Services.
Director shall not allow any other person or entity to perform any of the
Services for or instead of Director. Director shall, based upon advice from
counsel to the Company, comply with the statutes, rules, regulations and orders
of any governmental or quasi-governmental authority, which are applicable to
the performance of the Services, and the Company’s rules, regulations, and
practices as they may from time-to-time be adopted or modified.


 


1.2                                 Director may be employed by another company, may serve on
other Boards of Directors and may engage in any other business activity
(whether or not pursued for pecuniary advantage), as long as such outside
activities do not violate Director’s obligations under this Agreement or
Director’s fiduciary obligations to the shareholders. The ownership of less
than a five percent (5%) interest in a public Company, by itself, shall not
constitute a violation of this duty. Except as set forth in Exhibit B.
Director represents that he has no outstanding agreement or obligation that is
in conflict with any of the provisions of this Agreement, and Director agrees
to use reasonable efforts to avoid or minimize any such conflict and agrees not
to enter into any agreement or obligation that could create such a conflict,
without the approval of a majority of the Board of Directors, which shall not be
unreasonably withheld, conditioned or delayed. If, at any time, Director is
required to make any material disclosure or take any action that may 


 

















 


conflict
with any of the provisions of this Agreement, Director will promptly notify the
Board of such obligation, prior to making such disclosure or taking such
action.


 


1.3                                 Except as set forth in Section 1.2 and Exhibit B.
Director will not engage in any activity that creates an actual conflict of
interest with the Company, regardless of whether such activity is prohibited by
the Company’s conflict of interest guidelines or this Agreement, and Director
agrees to notify the Board before engaging in any activity that creates a
potential conflict of interest with the Company. Specifically and except as set
forth in Section 1.2 and Exhibit B of this Agreement,
Director shall not engage in any activity that is in direct competition with
the Company or serve in any capacity (including, but not limited to, as an
employee, consultant, advisor or director) in any company or entity that
competes directly with the Company, as reasonably determined by a majority of
the Company’s disinterested board members, without the approval of the Board.


 


2.                                       Term.


 


2.1                                 Subject to earlier termination pursuant to Section 4,
this Agreement shall commence on October 1, 2007 (the “Effective Date”) and continue until the
first (1st) anniversary
of the Effective Date and thereafter as long as Director shall continue to be
elected as Chairman of the Board.


 


2.2                                 Notwithstanding the foregoing, and provided that Director
does not voluntarily resign and is not removed from his position pursuant to Section 4
below, the Company agrees to use its best efforts to reeled Director to the
Board at each Meeting of the Shareholders for an aggregate period of four (4) years
(the “Term”).


 


3.                                       Compensation and Benefits.
 In consideration for the Services, the
Company shall provide Director with the following during the Term:


 


3.1                                 Director’s Fee.
In consideration of the Services, the Company shall pay Director a fee as
follows:


 


(a)                                  from the Effective Date through June 30,
2008, Director shall be paid a fee at the annualized rate of One Hundred Fifty
Thousand Dollars ($150,000) per year, and


 


(b)                                 commencing on July 1, 2008, Director
shall be paid a fee at the annualized rate of Two Hundred Thousand Dollars
($200,000).


 


All amounts paid pursuant to this Section 3.1
shall be paid in accordance with the Company’s regularly established practices
regarding the payment of Directors’ fees, but in no event less frequently than
in quarterly installments and in no event later than March 15 of the
calendar year following the calendar year in which such fees are earned.


 


3.2                                 Participation in Employee Benefit Plans. Director shall be entitled, if and to the extent eligible,
to participate in the Company’s group health plan on the same terms as other
directors and executives of the Company. The Company may at any time or from
time to time amend, modify, suspend or terminate any such plan, program or
arrangement for any reason without Director’s consent if such amendment,
modification, suspension or termination is consistent 


 


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with
the amendment, modification, suspension or termination for executives of the
Company.  Any benefits provided under
this Section 3.2 shall be subject to the following: (i) any
such benefits provided during one calendar year shall not affect the amount of
such benefits provided during a subsequent calendar year; and (ii) such
benefits may not be exchanged or substituted for other forms of compensation to
Director.  This Section 3.2
shall be in effect for the period beginning on the Effective Date and ending on
the date that the Director ceases to be Chairman of the Board.


 


3.3                                 Expense Reimbursement.
Director shall be entitled to receive reimbursement for all appropriate
business expenses incurred by him in connection with his duties under this
Agreement in accordance with the policies of the Company as in effect from time
to time.  Any reimbursements provided
under this Section 3.3 shall be subject to the following: (i) any
such reimbursement provided during one calendar year shall not affect the
amount of such reimbursement provided during a subsequent calendar year; (ii) such
reimbursements may not be exchanged or substituted for other forms of
compensation to director; and (iii) reimbursement payments shall be made
to Director no later than the last day of the calendar year immediately
following the calendar year in which the expense is incurred.  This Section 3.3 shall be in
effect for the period beginning on the Effective Date and ending on the date
that the Director ceases to be Chairman of the Board.


 


3.4                                 Equity Grant.  Director shall be eligible to participate in
the Company’s Equity Incentive Plan (the “Equity
Incentive Plan”).  Director shall
receive an equity grant to be determined by the Board subsequent to the
execution hereof.  The equity award shall
be subject to the terms and conditions of the Equity Incentive Plan and the
Company’s customary documentation with respect thereto.


 


4.                                       Termination.


 


4.1                                 Right to Terminate.
 At any time, Director may be removed as
Chairman, and Director may resign as Chairman or Director, in each instance as
provided in the Company’s Certificate of Incorporation, as amended, bylaws, as
amended, and applicable law. Notwithstanding anything to the contrary contained
in or arising from this Agreement or any statements, policies, or practices of
the Company, neither Director nor the Company shall be required to provide any
advance notice or any reason or cause for termination of Director’s status as
Chairman, except as provided in the Company’s Certificate of Incorporation, as
amended, the Company’s bylaws, as amended, and applicable law.


 


4.2                                 Effect of Termination.
Upon a termination of Director’s status as Chairman under circumstances in
which Director remains a director, this Agreement will terminate, and the
Company and Director will sign a mutually agreed upon superseding Director’s
Agreement. Upon a termination of Director’s status as Chairman under
circumstances in which Director does not continue as a director, this Agreement
will terminate; the Company shall pay to Director all compensation and benefits
to which Director is entitled up through the date of termination, and,
thereafter, all of the Parties’ rights and obligations under this Agreement
shall cease, except for such rights and obligations that expressly survive such
termination. Upon termination of this Agreement, Director shall be deemed to
have resigned from 


 


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all
offices then held with the Company by virtue of his position as Chairman.
Director agrees that following any termination of this Agreement, he shall, at
the Company’s sole cost and expense, cooperate with the Company in the winding
up or transferring to other directors any pending work and shall also cooperate
with the Company (to the extent allowed by law, and at the Company’s expense)
in the defense of any action brought by any third party against the Company
that relates to the Services.


 


5.                                       Restrictions and Obligations of Director.


 


5.1                                 Confidentiality.


 


(a)                                  During the Term, Director will have
access to certain trade secrets and confidential information relating to the
Company and its subsidiaries (the “Protected
Parties”) which is not readily available from sources outside the
Company.  The confidential and
proprietary information and, in any material respect, trade secrets of the
Protected Parties are among their most valuable assets, including but not
limited to, their customer, supplier and vendor lists, databases, competitive
strategies, computer programs, frameworks, or models, their marketing programs,
their sales, financial, marketing, training and technical information, their
product development (and proprietary product data) and any other information,
whether communicated orally, electronically, in writing or in other tangible
forms concerning how the Protected Parties create, develop, acquire or maintain
their products and marketing plans, target their potential customers and
operate their retail and other businesses. The Protected Parties invested, and
continue to invest, considerable amounts of time and money in their process,
technology, know-how, obtaining and developing the goodwill of their customers,
their other external relationships, their data systems and data bases, and all
the information described above (hereinafter collectively referred to as “Confidential Information”), and any
misappropriation or unauthorized disclosure of Confidential Information in any
form, would irreparably harm the Protected Parties.


 


(b)                                 Director acknowledges that such
Confidential Information constitutes valuable, highly confidential, special and
unique property of the Protected Parties. Director shall hold in a fiduciary
capacity for the benefit of the Protected Parties all Confidential Information
obtained by Director during the Term of this Agreement. Except as required by
law, an order of a court or governmental agency with jurisdiction, or a subpoena
or other lawful process, Director shall not, during the Term or at any time
thereafter, disclose any Confidential Information, directly or indirectly, to
any person or entity for any reason or purpose whatsoever, nor shall Director
use it in any way, except in the course of providing the Services or to enforce
any rights or defend any claims hereunder or under any other agreement to which
Director is a party, provided that such disclosure is relevant to the
enforcement of such rights or defense of such claims and is only disclosed in
the formal proceedings related thereto. Director shall take reasonable steps to
safeguard the Confidential Information and to protect it against disclosure,
misuse, corporate espionage, loss and theft. Director understands and agrees
that Director shall acquire no rights to any such Confidential Information.


 


(c)                                  All files, records, documents, drawings,
specifications, data, computer programs, evaluation mechanisms and analytics
and similar items relating thereto 


 


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or to the Company’s business, as well as all customer
lists, specific customer information, compilations of product research and
marketing techniques of the Company and its subsidiaries, whether prepared by
Director or otherwise coming into Director’s possession, shall remain the
exclusive property of the Company and its subsidiaries, and Director shall not
remove any such items from the premises of the Company and its subsidiaries,
except in furtherance of Director’s duties under this Agreement.


 


(d)                                 As requested by the Company and at the
Company’s expense, from time to time and upon the termination of this
Agreement, Director will promptly deliver to the Company all copies and
embodiments, in whatever form, of all Confidential Information in Director’s
possession or within his control (including, but not limited to, memoranda,
records, notes, plans, photographs, manuals, notebooks, documentation, program
listings, flow charts, magnetic media, disks, diskettes, tapes and all other
materials containing any Confidential Information) irrespective of the location
or form of such material. If requested by the Company, Director will provide
the Company with written confirmation that all such materials have been
delivered to the Company as provided herein.


 


5.2                                 Director will not at any time (whether during or after the
Term) publish or communicate to any person or entity any Disparaging Remarks
(as defined below) concerning the Company or Cerberus Capital Management, L.P.,
or their parents, subsidiaries and affiliates, and their respective present
members, partners, directors, officers, shareholders, successors and assigns
(including any person who held any such position during the Term). “Disparaging Remarks” are remarks, comments
or statements that impugn the character, honesty, integrity or morality or
business acumen or abilities in connection with any aspect of the operation of
business of the individual or entity being disparaged.


 


6.                                       Liability Insurance.
The Company shall continue to maintain an insurance policy or policies
providing directors’ and officers’ liability insurance in an amount and on
terms at least as favorable as those in effect on the date hereof or that may
be obtained by the Company hereafter. Director shall be covered by such policy
or policies, in accordance with its or their terms, to the maximum extent of
the coverage available for any other director of the Company.


 


7.                                       Indemnification.


 


(a)                                  The Company agrees, to the extent
permitted by applicable law and its organizational documents, to indemnify,
defend and hold harmless Director from and against any and all losses, suits,
actions, causes of action, judgments, damages, liabilities, penalties, fines,
costs or claims of any kind or nature (“Indemnified
Claim”), including reasonable legal fees and related costs incurred
by Director in connection with the preparation for or defense of any
Indemnified Claim, whether or not resulting in any liability, to which Director
may become subject (including without limitation as a witness) or liable or
which may be incurred by or assessed against Director, relating to or arising
out of his engagement by the Company or the Services to be performed pursuant to
this Agreement, provided that the Company shall only defend, but not indemnify
or hold Director harmless, from and against an Indemnified Claim in the event
there is a final, non-appealable, determination that Director’s liability with
respect to such Indemnified Claim resulted from Director’s willful misconduct
or gross negligence.


 


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(b)                                 At Director’s request, the Company shall
advance to Director the cost of all reasonable legal fees and related costs
incurred by Director arising out of or relating to any Indemnified Claim,
provided as a condition to any such advance the Company may require that
Director agree to repay the funds advanced to the extent it is determined by a final,
non-appealable judgment of a court of competent jurisdiction that Director is
not entitled to indemnification for such reasonable legal fees and related
costs.


 


(c)                                  Notwithstanding the foregoing, Director’s
attorneys’ hourly billing rates shall not be deemed unreasonable as long as
such rates are consistent with the hourly billing rates of the Company’s other
outside counsel.


 


(d)                                 The Company’s obligations under this Section 7
shall be in addition to any other right, remedy or indemnification which
Director may have or be entitled to at common law or otherwise. The provisions
of this Section 7 shall survive the termination of this Agreement
for any reason.


 


8.                                       Other Provisions.


 


8.1                                 Notices.
Any notice or other communication required or which may be given hereunder
shall be in writing and shall be delivered personally, sent by facsimile transmission
or sent by certified, registered or express mail, postage prepaid or overnight
mail and shall be deemed given when so delivered personally, or sent by
facsimile transmission or, if mailed, four (4) days after the date of
mailing or one (1) day after overnight mail, as follows:


 


(a)                                  If the Company, to:


 


Rafaella Apparel Group, Inc. 

1411 Broadway 

New York, New York 10018 

Attention:  Secretary 

Telephone:  (212) 403-0300 

Fax:  (212) 764-9275


 


With copies to:


 


Milbank, Tweed, Hadley & McCloy LLP

One Chase Manhattan Plaza

New York, NY 10005

Attention:  Roland Hlawaty

Telephone:  (212) 530-5735

Fax:  (212) 822-5735


 


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and


 


Cerberus Capital Management, L.P.

299 Park Avenue

New York, NY 10171

Attention:  George Kollitides

Fax:  (212)284-7916


 


(b)                                 If Director, to Director’s home address
reflected in the Company’s records,


 


With a copy to:


 


Ken Gardner

Gardner Weiss and Rosenblum LLP

100 Park Avenue, 18th floor

New York, New York 10017

Telephone:  (212) 907-0600

Fax:  (212) 907-0610


 


8.2                                 Section 409A.
It is intended that all payments hereunder shall comply with Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and other
guidance issued thereunder (in aggregate, “Section 409A”)
so as not to subject Director to payment of interest or any additional tax
under Section 409A. In furtherance thereof, the parties agree to the
following:


 


(a)                                  If payment or provision of any amount or
benefit hereunder that is subject to Section 409A at the time specified
herein would subject such amount or benefit to any additional tax under Section 409A,
the payment or provision of such amount or benefit shall be postponed to the
earliest commencement date on which the payment or provision of such amount or
benefit could be made without incurring such additional tax.


 


(b)                                 In addition, to the extent that any
regulations or other guidance issued under Section 409A (after application
of the previous provisions of this Section 8.2 would result in
Director’s being subject to the payment of interest or any additional tax under
Section 409A, the parties agree, to the extent reasonably possible, to
amend this Agreement in order to avoid the imposition of any such interest or
additional tax under Section 409A, which amendment shall have the minimum
economic effect necessary and be reasonably determined in good faith by the
Company and Director.


 


8.3                                 Entire Agreement.
This Agreement contains the entire agreement between the Parties with respect
to the subject matter hereof and supersedes all prior agreements, written or oral,
with respect thereto, including, but not limited to the Prior Agreement. To the
extent that any provision of this Agreement conflicts with any current or
future policy or procedure of the Company, the provisions of this Agreement
shall prevail.


 


8.4                                 Waiver and Amendments.
This Agreement may be amended, modified, superseded, canceled, renewed or
extended, and the terms and conditions hereof may be waived, 


 


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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 right, power or privilege hereunder, nor
any single or partial exercise of any right, power or privilege hereunder,
preclude any other or further exercise thereof or the exercise of any other right,
power or privilege hereunder.


 


8.5                                 Governing Law. Dispute Resolution and Venue.


 


(a)                                  This Agreement shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and not to be performed entirely within such state, without
regard to conflict of law principles.


 


(b)                                 The parties agree irrevocably to submit
to the exclusive jurisdiction of the federal courts or, if no federal
jurisdiction exists, the state courts, located in the City of New York, Borough
of Manhattan, for the purposes of any suit, action or other proceeding brought
by any party arising out of this Agreement and hereby waive, and agree not to
assert by way of motion, as a defense or otherwise, in any such suit, action, or
proceeding, any claim that it is not personally subject to the jurisdiction of
the above-named courts, that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is
improper, or that the provisions of this Agreement may not be enforced in or by
such courts. In addition, the parties agree to the waiver of a jury trial.


 


8.6                                 Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed
an original but both of which shall constitute one and the same instrument.


 


8.7                                 Headings.
The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning of terms contained herein.


 


8.8                                 Severabilitv.
If any term or provision of this Agreement, or any part thereof, is held by a
court of competent jurisdiction of any foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority to be invalid, void, unenforceable or against public policy for any
reason, the remainder of the terms and provisions of this Agreement shall
remain in full force and effect and shall in no way be affected or impaired or
invalidated.


 


[Signatures
on following page]


 


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IN WITNESS WHEREOF, the Parties hereto, intending to
be legally bound hereby, have executed this Amended and Restated Agreement as
of the day and year first above mentioned.


 


 


	
   

  	
  DIRECTOR

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:
  John Kourakos

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RAFAELLA
  APPAREL GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:
  Christa Michalaros

  
	
   

  	
   

  	
  Title: Chief Executive
  Officer

  



 

















 


EXHIBIT
A


 


DESCRIPTION
OF SERVICES


 


The Services shall include, but shall not be limited
to, the following:


 


1.                                       Strategic Planning. Leading and
overseeing the development, implementation and assessment of the Company’s
strategic plan and annual budgets and forecasts.


 


2.                                       Management Development. Participating
in annual and other periodic management assessments; providing executive
coaching to management; and promoting professional development of management.


 


3.                                       Business Reviews. Overseeing
the preparation of annual, quarterly and monthly operational business reviews
and leading the presentation thereof to the Board of Directors.


 


4.                                       Meetings of the Board. Chairing
meetings of the Board, of which the Company intends to have (A) one
in-person Board meeting per quarter, (b) one telephonic Board meeting per
month in which there is no in-person Board meeting, and (c) such
additional number of Board meetings as are otherwise required by the business
and affairs of the Company.


 


5.                                       Promoting Business. Using
reasonable efforts to promote the business of the Company.


 


6.                                       Act as a Fiduciary. Representing
the stockholders and the interests of the Company as a fiduciary.


 


7.                                       Participation. Participating
as a full voting member of the Company’s Board of Directors in setting overall
objectives, approving plans and programs of operation, formulating general
policies, offering advice and counsel, serving on Board Committees and reviewing
management performance.


 

















 


EXHIBIT
B


 


AUTHORIZED
ACTIVITIES




None.