Exhibit 10.18


EMPLOYMENT
AGREEMENT


EMPLOYMENT
AGREEMENT (“Agreement”) dated as of June 23, 2006 between Rafaella Apparel
Group, Inc. (the “Company”) and Rosemary Mancino (the “Employee”) (together,
the “Parties”).


WHEREAS,
the Parties wish to establish the terms of Employee’s employment with the
Company.


Accordingly,
the Parties agree as follows:


1.             Term.  This
Agreement and the employment relationship hereunder shall commence on August
14, 2006 (the “Effective Date”) and continue from the Effective Date until the
Employee’s employment terminates in accordance with Section 4 of the
Agreement.  As used in this Agreement,
the “Term” shall refer to the period beginning on the Effective Date and ending
on the date the Employee’s employment terminates in accordance with Section 4
of the Agreement.  In the event that the
Employee’s employment with the Company terminates, the Company’s obligation to
continue to pay all base salary, as adjusted, bonus and other benefits then accrued
shall terminate except as may be provided for in Section 5 of this Agreement.


2.             Duties and Title.


2.1     Title.  The Company shall employ the Employee to
render exclusive and full-time services to the Company and its
subsidiaries.  The Employee shall serve
in the capacity of President of Sales & Planning of the Company and shall
report to the Chief Executive Officer of the Company (the “CEO”).


2.2     Duties.  The Employee will have such authority and
responsibilities and will perform such duties customarily performed by a
president of sales & planning of a company in similar lines of business as
the Company and its subsidiaries or as may be assigned to the Employee by the
CEO in accordance with this paragraph. 
The Employee’s responsibilities will include involvement with and
direction and planning of sales and merchandising activities.  The Employee will devote all her full
working-time and attention to the performance of such duties and to the
promotion of the business and interests of the Company and its subsidiaries.


3.             Compensation and Benefits by the Company.  As compensation for all services performed by
the Employee for the Company and its subsidiaries, the Company shall provide
the Employee the following during the Term:


3.1     Base Salary.  The Company will pay to the Employee an
annual base salary of $400,000, payable in accordance with the customary
payroll practices of the Company (“Base Salary”).


3.2     Bonus.  The Employee will be eligible to receive an
annual bonus (“Bonus”), based on the Employee’s performance and at the
discretion of the Employee’s manager. 
The Employee’s target Bonus shall be 50% of Base Salary.  There shall be no cap on the amount of the
Bonus.  The Bonus will be paid on
September 30th of the Company’s fiscal year following the Company’s fiscal year
in which the services required for payment have been performed.  The Bonus will be pro rated for any partial
year of employment.


 

















 


3.3     Participation in Employee Benefit Plans.  The Employee shall be entitled, if and to the
extent eligible, to participate in all of the applicable benefit plans of the
Company, which may be available to other senior management employees of the
Company, on the same terms as such other senior management employees.  The Company may at any time or from time to
time amend, modify, suspend or terminate any employee benefit plan, program or
arrangement for any reason without the Employee’s consent.


3.4     Vacation.  The Employee shall be entitled to four (4)
weeks of paid vacation annually. 
Vacation days may not be carried over from one year to the next.


3.5     Expense Reimbursement.  The Employee shall be entitled to receive
reimbursement for all appropriate business expenses incurred by her in
connection with her duties under this Agreement in accordance with the policies
of the Company as in effect from time to time.


3.6     Equity Grant.  The Employee shall be eligible to participate
in the Company’s Equity Incentive Plan (the “Equity Incentive Plan”).  The Employee shall receive an initial grant
under the Equity Incentive Plan representing 1.0% of the value of the
outstanding capital stock of the Company on a fully-diluted, as converted basis
as of the Effective Date.  The equity
award shall be subject to the terms and conditions of the Equity Incentive Plan
and an award agreement between the Company and the Employee.


4.             Termination of Employment.


4.1     The Employee’s employment shall terminate
immediately upon her death.


4.2     The Employee’s employment shall terminate
upon the Employee’s “Disability.”  For
the purposes of this Agreement, “Disability” means a determination by the
Company in accordance with applicable law that as a result of a physical or
mental injury or illness, the Employee is unable to perform the essential
functions of her job with or without reasonable accommodation for a period of
(i) 90 consecutive days; or (ii) 180 days in any one (1) year period.


4.3     By the Company.  The Company may terminate the Employee’s
employment at any time during the Term with or without “Cause,” upon written
notice by the Company to the Employee, and the Employee’s employment will
terminate on the date specified in such written notice.


For the purposes of this Agreement, “Cause” means (i) commission of a
felony by the Employee; (ii) acts of
dishonesty by the Employee resulting
or intending to result in personal gain or enrichment at the expense of the
Company or its subsidiaries; (iii) the Employee’s material breach of her
obligations under this Agreement; (iv) conduct by the Employee in connection
with her duties hereunder that is fraudulent, unlawful or grossly negligent,
including, but not limited to, acts of discrimination; (v) engaging in personal
conduct by the Employee (including but not limited to employee harassment or
discrimination, the use or possession at work of any illegal controlled
substance) which seriously discredits or damages the Company or its
subsidiaries; (vi) contravention of specific lawful direction from the CEO as
it relates to the 


 


 


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employee’s
capacity as President of Sales & Planning or continuing inattention to or
continuing failure to adequately perform the duties to be performed by the
Employee under the terms of Section 2.2 of this Agreement; or (vii) breach of
the Employee’s covenants set forth in Section 6 below before termination of
employment; provided, that, the Employee shall have fifteen (15) days after
notice from the Company to cure the deficiency leading to the Cause
determination (except with respect to (i) above), if curable.  A termination for “Cause” shall be effective immediately
(or on such other date set forth by the Company).


4.4     By the Employee.  The Employee may terminate her employment
with the Company at any time during the Term for any reason, upon thirty (30)
days written notice by the Employee to the Company.


5.             Severance Payment.


5.1     By the Company for Cause or Due to Death
or Disability.  If: (i) the
Employee’s employment terminates due to her death; (ii) the Company terminates
the Employee’s employment with the Company for Cause; or (iii) the Company
terminates the Employee’s employment with the Company due to the Employee’s
Disability, then the Employee or the Employee’s legal representatives (as
appropriate), shall be entitled to receive the following:


(a)           the Employee’s accrued but unpaid Base Salary, if any, to
the date of termination, payable within thirty (30) days after the termination
of the Employee’s employment;


(b)           the unpaid portion of the Bonus, if any, relating to the
fiscal year prior to the fiscal year of the Employee’s death, Disability, or termination
by the Company for Cause, payable in accordance with Section 3.2; and


(c)           expenses reimbursable under Section 3.5 incurred but not
yet reimbursed to the Employee to the date of termination, payable within
thirty (30) days after the termination of the Employee’s employment; and


(d)           any rights the Employee may have under the Company’s
benefit plans and the Consolidated Omnibus Budget Reconciliation Act.


5.2     By the Company Without Cause.  If during the Term the Company terminates
Employee’s employment without Cause (which may be done at any time without
prior notice), then, in addition to the payments upon termination specified in
Section 5.1, the Employee shall receive, upon execution without revocation of a
valid release agreement substantially in the form attached hereto as Exhibit A,
continued payment of Base Salary for a period of six months following the date
of termination.


5.3     By the Employee for Any Reason.  If the Employee terminates her employment for
any reason, then the Employee shall be entitled to receive the payments
specified in Section 5.1.  In addition,
the Company in its sole discretion may elect, by written notice to the Employee
given no later than twenty (20) days after receipt of the notice provided by
the Employee to the Company pursuant to Section 4.4, to pay to the Employee the
severance 


 


 


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benefit set forth in Section
5.2 in exchange for the Employee’s (i) agreement to be subject to and legally
bound by the covenants set forth in Section 6.2 and Section 6.3 and (ii)
execution without revocation of a valid release agreement substantially in the
form attached hereto as Exhibit A.


6.             Restrictions and Obligations of the Employee.


6.1     Confidentiality.  (a) 
During the course of the Employee’s service relationship with the
Company and its affiliates, the Employee 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.  The Employee
acknowledges that such Confidential Information constitutes valuable, highly
confidential, special and unique property of the Protected Parties.  The Employee shall hold in a fiduciary
capacity for the benefit of the Protected Parties all Confidential Information
relating to the Protected Parties and their businesses, which shall have been
obtained by the Employee during the Employee’s employment by the Company or its
subsidiaries and which shall not be or become public knowledge (other than by
acts by the Employee or representatives of the Employee in violation of this
Agreement).  Except as required by law or
an order of a court or governmental agency with jurisdiction, the Employee
shall not, during the period the Employee is employed by the Company or its
subsidiaries 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 the Employee use it in any way, except in the course of
the Employee’s employment with, and for the benefit of, the Protected Parties
or to enforce any rights or defend any claims hereunder or under any other
agreement to which the Employee 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.  The Employee shall take all reasonable steps
to safeguard the Confidential Information and to protect it against disclosure,
misuse, espionage, loss and theft.  The
Employee understands and agrees that the Employee shall acquire no rights to
any such Confidential Information.


(b)                 All files, records, documents,
drawings, specifications, data, computer programs, evaluation mechanisms and analytics
and similar items relating thereto or to the Business (for the purposes of this
Agreement, “Business” shall be as defined in Section 6.3 hereof), 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 the Employee or otherwise coming into the Employee’s possession,
shall remain the exclusive 


 


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property
of the Company and its subsidiaries, and the Employee shall not remove any such
items from the premises of the Company and its subsidiaries, except in
furtherance of the Employee’s duties under any employment agreement.


(c)                 It is understood that while
employed by the Company or its subsidiaries, the Employee will promptly
disclose to it, and assign to it the Employee’s interest in any invention,
improvement or discovery made or conceived by the Employee, either alone or
jointly with others, which arises out of the Employee’s employment.  At the Company’s request and expense, the
Employee will assist the Company and its subsidiaries during the period of the
Employee’s employment by the Company or its subsidiaries and thereafter in
connection with any controversy or legal proceeding relating to such invention,
improvement or discovery and in obtaining domestic and foreign patent or other
protection covering the same.


(d)                 As requested by the Company and
at the Company’s expense, from time to time and upon the termination of the
Employee’s employment with the Company for any reason, the Employee will
promptly deliver to the Company and its subsidiaries all copies and
embodiments, in whatever form, of all Confidential Information in the
Employee’s possession or within her 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, the Employee
will provide the Company with written confirmation that all such materials have
been delivered to the Company as provided herein.


6.2     Non-Solicitation.  During the Term and for the six-month period
during which the Employee is receiving severance benefits from the Company
pursuant to Section 5.2 or Section 5.3 of the Agreement, the Employee shall not
directly or indirectly solicit or attempt to solicit or induce, directly or indirectly,
(a) any party who is a customer of
the Company or its subsidiaries, or who was a customer of the Company or its
subsidiaries at any time during the twelve (12) month period immediately prior
to the date the Employee’s employment terminates, for the purpose of marketing,
selling or providing to any such party any services or products offered by or
available from the Company or its subsidiaries, (b) any supplier to the Company
or any subsidiary to terminate, reduce or alter negatively its relationship
with the Company or any subsidiary or in any manner interfere with any
agreement or contract between the Company or any subsidiary and such supplier
or (c) any employee of the Company or any of its subsidiaries or any person who
was an employee of the Company or any of its subsidiaries during the twelve
(12) month period immediately prior to the date the Employee’s employment
terminates to terminate such employee’s employment relationship with the
Protected Parties in order, in either case, to enter into a similar
relationship with the Employee, or any other person or any entity in
competition with the Business of the Company or any of its subsidiaries.


6.3     Non-Competition.  During the Term and for the six-month period
during which the Employee is receiving severance benefits from the Company
pursuant to Section 5.2 or Section 5.3 of the Agreement, the Employee shall
not, whether individually, as a director, manager, member, stockholder,
partner, owner, employee, consultant or agent of any business, or in any other
capacity, other than on behalf of the Company or a subsidiary, organize,
establish, own, operate, manage, control, engage in, participate in, invest in,
permit her name to 


 


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be used by, act as a
consultant or advisor to, render services for (alone or in association with any
person, firm, corporation or business organization), or otherwise assist any
person or entity that engages in or owns, invests in, operates, manages or
controls any venture or enterprise which engages or proposes to engage in the
women’s career and casual separates clothing business in the geographic
locations where the Company and its subsidiaries engage or propose to engage in
such business (the “Business”). 
Notwithstanding the foregoing, nothing in this Agreement shall prevent
the Employee from owning for passive investment purposes not intended to
circumvent this Agreement, less than five percent (5%) of the publicly traded
common equity securities of any company engaged in the Business (so long as the
Employee has no power to manage, operate, advise, consult with or control the
competing enterprise and no power, alone or in conjunction with other
affiliated parties, to select a director, manager, general partner, or similar
governing official of the competing enterprise other than in connection with
the normal and customary voting powers afforded the Employee in connection with
any permissible equity ownership).


6.4     Property.  The Employee acknowledges that all originals
and copies of materials, records and documents generated by her or coming into
her possession during her employment by the Company or its subsidiaries are the
sole property of the Company and its subsidiaries (“Company Property”).  During the Term, and at all times thereafter,
the Employee shall not remove, or cause to be removed, from the premises of the
Company or its subsidiaries, copies of any record, file, memorandum, document,
computer related information or equipment, or any other item relating to the business
of the Company or its subsidiaries, except in furtherance of her duties under
the Agreement.  When the Employee’s
employment with the Company terminates, or upon request of the Company at any
time, the Employee shall promptly deliver to the Company all copies of Company
Property in her possession or control.


7.             Nondisparagement. 
The Employee agrees that she will not at any time (whether during or
after the Term) publish or communicate to any person or entity any Disparaging
(as defined below) remarks, comments or statements concerning the Company,
Cerberus Capital Management, L.P., their parents, subsidiaries and affiliates,
and their respective present and former members, partners, directors, officers,
shareholders, employees, agents, attorneys, successors and assigns.  “Disparaging” remarks, comments or statements
are those 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.


8.             Remedies; Specific Performance.  The Parties acknowledge and agree that the
Employee’s breach or threatened breach of any of the restrictions set forth in
Section 6 will result in irreparable and continuing damage to the Protected Parties
for which there may be no adequate remedy at law and that the Protected Parties
shall be entitled to equitable relief, including specific performance and
injunctive relief as remedies for any such breach or threatened or attempted
breach.  The Employee hereby consents to
the grant of an injunction (temporary or otherwise) against the Employee or the
entry of any other court order against the Employee prohibiting and enjoining
her from violating, or directing her to comply with any provision of Section 6.  The Employee also agrees that such remedies
shall be in addition to any and all remedies, including damages, available to
the Protected Parties against her for such breaches or threatened or attempted
breaches.  In addition, without limiting
the Protected Parties’ remedies for any breach of any restriction on the
Employee set forth in Section 6, except as required by law, the Employee shall
not be entitled to any payments set forth in Section 5.2 


 


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hereof if the Employee has breached the covenants
applicable to the Employee contained in Section 6, the Employee will
immediately return to the Protected Parties any such payments previously
received under Section 5.2 upon such a breach, and, in the event of such
breach, the Protected Parties will have no obligation to pay any of the amounts
that remain payable by the Company under Section 5.2.


9.             Other Provisions.


9.1           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


 


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


9.2           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.


9.3           Representations and Warranties by Employee.  The Employee represents and warrants that she
is not a party to or subject to any restrictive covenants, legal restrictions
or other agreements in favor of any entity or person which would in any way
preclude, inhibit, impair or limit the Employee’s ability to perform her
obligations under this Agreement, including, but not limited to,
non-competition agreements, non-solicitation agreements or confidentiality agreements.


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


 


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9.5           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 conflicts of laws 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 any breach of
any of the provisions 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.


9.6           Assignability by the Company and the Employee.  This Agreement, and the rights and
obligations hereunder, may not be assigned by the Company or the Employee
without written consent signed by the other party; provided that the Company
may assign the Agreement to any successor that continues the business of the
Company.


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


9.8           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.


9.9           Severability. 
If any term, provision, covenant or restriction 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, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected or impaired or invalidated.  The
Employee acknowledges that the restrictive covenants contained in Section 6 are
a condition of this Agreement and are reasonable and valid in temporal scope
and in all other respects.


9.10         Judicial Modification.  If any court determines that any of the
covenants in Section 6, or any part of any of them, is invalid or
unenforceable, the remainder of such covenants and parts thereof shall not
thereby be affected and shall be given full effect, without regard to the
invalid portion.  If any court determines
that any of such covenants, or any part thereof, is invalid or unenforceable
because of the geographic or temporal scope of such provision, such court shall
reduce such scope to the minimum extent necessary to make such covenants valid
and enforceable.


9.11         Tax Withholding. 
The Company or other payor is authorized to withhold from any benefit
provided or payment due hereunder, the amount of withholding taxes 


 


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due any federal, state or local authority in respect
of such benefit or payment and to take such other action as may be necessary in
the reasonable opinion of the Board to satisfy all obligations for the payment
of such withholding taxes.


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


	
   

  	
  EMPLOYEE

  
	
   

  	
   

  	
   

  
	
   

  	
   /s/ Rosemary Mancino

  
	
   

  	
  Name: Rosemary Mancino

  
	
   

  	
  RAFAELLA APPAREL GROUP,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Christa Michalaros

  
	
   

  	
   

  	
  Name: Christa Michalaros

  
	
   

  	
   

  	
  Title: Chief Executive
  Officer

  



 


 


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