exv10w7



 





Exhibit 10.7




October 4,
2007






The Talbots, Inc.

COO Employment Offer

All subject to Talbots Board and Compensation Committee Review and Approval




	 	 	 
	Element	 	Terms
	Position

	 	Chief Operating Officer, The Talbots, Inc., based in Hingham, MA.
	 
	 	 
	Base Salary

	 	Increase to $725,000 (effective 9/6/2007). First eligibility
for further salary increase will be scheduled for the first
quarter of 2008, and annually thereafter.
	 
	 	 
	Annual Incentive 

     Award Opportunity

	 	No adjustment until overall plan can be evaluated.
	 
	 	 
	Special Inducement

	 	Restricted Stock Award:
	 
	 	 
	 

	 	•     $1 million converted to restricted shares at fair market
value on 10/4/2007 (using the closing stock price as published
in the Wall Street Journal on such date). This grant will be
made on the date of, and subject to, the execution of the
definitive amended employment agreement. Restricted stock will
vest:


	 
	 	 
	 

	 	•     1/2 on 10/4/2008


	 
	 	 
	 

	 	•     1/2 on 10/4/2009


	 
	 	 
	 

	 	This grant is subject to forfeiture only in case of voluntary
quit not for Good Reason or Termination for Cause; the vesting
of this award will accelerate upon Termination without Cause,
Termination for Good Reason, Death or Disability Termination or
a Change in Control (and no repurchase option will be exercised
by the Company in that event).
	 
	 	 
	 

	 	As set forth below, a failure by the Company to renew the
agreement other than for Cause, Normal Retirement, death or
disability would constitute a Termination without Cause.
	 
	 	 
	Benefits

	 	Executive will continue to be eligible to participate in all
benefit plans generally available to Talbots Inc. senior
executives, subject to plan terms and customary eligibility
conditions.
	 
	 	 
	Perquisites

	 	Executive will continue to be provided with all of his existing
perquisites, including current enhanced auto allowance and
reimbursement of financial planning, as may be adjusted by the
Compensation Committee from time to time for similarly situated
senior executives of Talbots Inc. Perquisites will not be
grossed up for taxes.
	 
	 	 
	Termination without 

     Cause or for Good Reason

	 	(1) Through the end of fiscal 2009, separation allowance equal
to 2x base salary plus 2x target bonus, payable over 24-month
severance period.
	 
	 

	 	(2) Beginning with fiscal 2010, separation allowance equal to
1.5x base salary plus 1.5x preceding year’s MIP bonus, payable
in lump sum within 30 days from the employment termination date.
	 
	 	 
	 

	 	(3) Through the end of fiscal 2009, continued participation in






 









 






	 	 	 
	Element	 	Terms
	 

	 	Company medical, dental, long-term disability and life insurance
programs for 24 months or earlier time as eligible for
comparable benefit(s). Beginning with fiscal 2010, continued
participation for 18 months or earlier time as eligible for
comparable benefit(s).
	 
	 	 
	 

	 	(4) The Company’s failure to renew the agreement at the end of
any term (other than for Cause, Normal Retirement, death or
disability) will be considered a Termination without Cause.
	 
	 	 
	 

	 	(5) Executive will also be entitled to (i) any annual incentive
bonus earned but not yet paid for any completed full fiscal year
immediately preceding the employment termination date and (ii)
if termination occurs prior to the end of any fiscal year, a pro
rata bonus for such fiscal year in which the employment
termination date occurs (based on actual days worked by
Executive in such year, divided by 365) determined and paid
based on actual performance achieved for that fiscal year
against the performance goals for that year.
	 
	 	 
	Termination without 

Cause or for Good 

Reason (within 24

months following 

Change in Control)

	 	(1) Lump sum separation allowance equal to 2x base salary plus
2x [target bonus][annual bonus earned for last completed year]*.



     *Note: Executive will before the definitive employment agreement
elect either “target bonus” or such “annual bonus earned for
last completed year”, which will then be included in the
agreement.

	 
	 	 
	 

	 	(2) Benefit continuation for 24 months or earlier time as
eligible for comparable benefit(s).
	 
	 	 
	 

	 	(3) Executive will also be entitled to (i) any annual incentive
bonus earned but not yet paid for any completed full fiscal year
immediately preceding the employment termination date and (ii)
if termination occurs prior to the end of any fiscal year, a pro
rata bonus for such fiscal year in which the employment
termination date occurs (based on actual days worked by
Executive in such year, divided by 365) determined and paid
based on actual performance achieved for that fiscal year
against the performance goals for that year.
	 
	 	 
	 

	 	(4) All then outstanding stock options/SARs, restricted stock
and RSU equity grants (including the special inducement
restricted stock grant) will vest in full upon the occurrence of
a Change-in-Control.
	 
	 	 
	Cause

	 	Conviction or plea for felony; fraudulent conduct; theft,
embezzlement, misappropriation of funds; willful refusal to
materially perform Executive duties; willful misconduct
materially affecting Company’s business or reputation; material
breach of any of Executive’s covenants, representations,
warranties or other obligations; an act or failure to act by
Executive will be deemed “willful” only if done or omitted to be
done by Executive without a good faith reasonable belief that
such act or failure to act was in the best interests of the
Company; 30 day cure right, following written notice from
Company and opportunity to appear with counsel before Board.
	 
	 	 
	Good Reason

	 	Without Executive’s written consent, reduction in base salary or
current target annual cash bonus opportunity (or its equivalent
as reasonably determined by the Compensation Committee); a
material reduction of Executive’s duties, other than during any
period of illness or incapacity, such that Executive no longer
has the title of, or serves or functions as, chief operating
officer of The Talbots, Inc. (provided that it is understood
that a Change-in-Control or going private event or






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	Element	 	Terms
	 

	 	realignments in direct marketing functions will not constitute Good Reason);
35-mile change of principal executive office; failure to obtain
assumption of employment agreement obligations by a successor
company no later than date of merger; or material breach of
employment obligations by the Company; 30 day cure right
following written notice from Executive; termination of
employment by Executive for Good Reason must occur within 120
days of occurrence of event.
	 
	 	 
	Change in Control

	 	Defined in the 2003 Executive Stock Based Incentive Plan and
means, generally (i) any person or persons (other than the
Company or Aeon or its affiliates) acquires more than 25 percent
of the Company’s outstanding voting shares and no other person
or persons owns a greater percentage of the voting shares, or
(ii) individuals who presently make up the Board or who become
members of the Board with the approval of the existing Board
cease to be at least a majority of the Board.
	 
	 	 
	Normal Retirement

	 	Either Executive or Company may terminate employment on or after
normal retirement age (65); Executive will be entitled to all
retirement benefits. Executive will also be entitled to (i) any
annual incentive bonus earned but not yet paid for any completed
full fiscal year immediately preceding the employment
termination date and (ii) if termination occurs prior to the end
of any fiscal year, a pro rata bonus for such fiscal year in
which the employment termination date occurs (based on actual
days worked by Executive in such year, divided by 365)
determined and paid based on actual performance achieved for
that fiscal year against the performance goals for that year.
	 
	 	 
	Voluntary Termination

	 	Executive will provide not less than 60 days prior written
notice to the Company on any voluntary termination (not in
limitation of Company’s other rights).
	 
	 	 
	On Any Employment
Termination

	 	Full release by Executive. Agreed severance is Executive’s
exclusive remedy.
	 
	 	 
	Taxes

	 	All payments under the employment agreement will be subject to
rules under IRC Section 409A. If any payment is withheld from
the Executive for Section 409A compliance purposes, such payment
will be distributed to the Executive following the expiration of
the applicable period, with a payment of interest thereon
credited at a rate of prime plus 1% (with such prime rate to be
determined as of the actual payment date); provided, however,
that any payment of interest will be made only if and to the
extent such payment is consistent with Section 409A and any
regulations and other guidance issued thereunder.
	 
	 	 
	 

	 	Any payment which would constitute a “parachute payment” to be
grossed-up, provided modified cutback if exceeds parachute level
by the lesser of (i) 10% or (ii) $250,000.
	 
	 	 
	Other Board Position

	 	With the consent of the Board, Executive may serve on the board
of a public or for profit private company.
	 
	 	 
	Expense Reimbursement

	 	Executive will be reimbursed for
advisor fees in connection with negotiating these revised employment arrangements up to $20,000.






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	Element	 	Terms
	Term of Agreement

	 	Initial term through last day of fiscal 2009, with one-year
automatic renewals unless 6 months’ notice given by either
party; all subject to earlier termination in accordance with
terms of agreement and with stated termination benefits to be
Executive’s exclusive remedy.
	 
	 	 
	Restrictive

Covenants

 (including
claw-back)

	 	(1) For 18 months following any cessation or termination of
employment: non-solicitation/non-hire of Company personnel; will
not cause or encourage vendors to cease or reduce business with
Company; and will not materially disparage the Company.
	 
	 	 
	 

	 	(2) Existing non-compete from Executive’s current agreement
(Section 12) will be eliminated. For one year following any
employment termination, Executive will not work in any capacity
(including in any consulting capacity) for Ann Taylor, Chico’s
FAS, Coldwater Creek, Gap Inc., Liz Claiborne, Ralph Lauren or
Sundance (or any of their affiliated brands, subsidiaries or
successors).
	 
	 	 
	 

	 	(3) Executive will not disclose or use Company confidential
information and will not use or disclose to the Company any
confidential information of any prior employer or third party.
	 
	 	 
	 

	 	(4) In addition to all other rights and remedies of the Company
under this Agreement or otherwise, upon breach of the
non-competition or non-solicitation restrictive covenants,
Company will terminate any severance payment and benefits and
will have the right to recover any severance payment and
benefits previously paid.






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This term sheet is intended to create, and effective upon its execution by the parties will create,
a binding agreement between the undersigned as to the terms set forth above. The Company will
commence preparation of the definitive amended and restated employment agreement necessary to
incorporate the terms of this term sheet and such other terms consistent with these terms as are
customarily found in employment agreements such as this, and the parties will at all times act in
good faith to complete such definitive agreement as promptly as reasonably practicable. This term
sheet supersedes all prior oral and written agreements and understandings between the parties on
this subject matter, and to the extent that the terms of this term sheet conflict with the terms of
that certain employment agreement dated November 3, 2004 (the “Original Agreement”), by and between
the Company and Executive, as amended by Amendment No. 1 to the Original Agreement dated May 3,
2006, by and between the Company and Executive, the terms of this term sheet shall control. This
term sheet may not be modified except by a writing signed by both parties and this term sheet will
be superseded by the definitive agreement entered into between the parties.




The Talbots, Inc.




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ John Fiske, III
	 	 
	 	 	 	/s/ Philip H. Kowalczyk	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Name:

	 	John Fiske, III
	 	 	 	Name:
	 	Philip H. Kowalczyk	 	 	 	 	 	 
	Title:

	 	SVP/ Human Resources
	 	 	 	Date:
	 	October 4, 2007	 	 	 	 	 	 
	Date:

	 	October 4, 2007	 	 	 	 	 	 	 	 	 	 	 	 







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