Exhibit 10.15


 


EXECUTION
COPY


 


CONSULTING
AGREEMENT AND GENERAL RELEASE


 


THIS CONSULTING AGREEMENT (the “Agreement”)
is made as of this 24th day of April, 2006, by and between (the “Company”) and
Glenn S. Palmer (the “Consultant”).


 


WITNESSETH:


 


WHEREAS,  Consultant was employed by the Company
pursuant to the Employment Agreement by and between the Company and the
Consultant dated June 20, 2005 (the “Employment Agreement”);


 


WHEREAS, the
Consultant’s employment with the Company shall terminate as of April 24,
2006;


 


WHEREAS,
following the Consultant’s termination of employment with the Company, the
Company desires to retain the Consultant to provide certain consulting services
to the Company and the Consultant desires to be retained by the Company to
provide such services; provided that such services do not unreasonably
interfere with such new business activities in which the Consultant may engage
(the “New Business Activities”); and


 


WHEREAS, the
parties hereto desire to set forth their respective rights and obligations in
respect of the Consultant’s separation of employment from the Company and
consulting relationship with the Company.


 


NOW, THEREFORE, in
consideration of the covenants and conditions set forth herein, the parties,
intending to be legally bound, agree as follows:


 


1.             Employment Status and Termination.


 


(a)           The Consultant’s employment with the
Company shall terminate as of April 24, 2006 (the “Separation Date”).  Except as set forth herein, the Employment
Agreement and the Term (as defined therein) shall terminate on the Separation
Date.


 


(b)           As of the Separation Date, the
Consultant shall be deemed to resign (1) if a member, from the Board of
Directors of the Company (the “Board”) or of any subsidiary of the Company or
any other board to which he has been appointed by or on behalf of the Company
and (ii) from any position with the Company or any subsidiary of the
Company, including but limited to, as an officer of the Company and any of its
subsidiaries.


 


2.             Severance Benefits.  The Consultant and the Company hereby agree
to the following severance benefits, each of which is subject to the terms and
conditions of this Agreement:


 


(a)           The Company will pay to the
Consultant all amounts accrued but unpaid under the Employment Agreement
through the Separation Date in respect of 


 

















 


salary,
payable on the next payroll date following the Separation Date, (ii) bonus
in respect of fiscal year 2006 equal to $250,000, payable on October 15,
2006 and (iii) any unreimbursed expenses, payable within 10 days of
receipt by the Company of the proper documentation.


 


(b)           Subject to the Consultant’s
execution and nonrevocation of the General Release attached to this Agreement
as Appendix A and made a part hereto, the Company will pay to the Consultant
the following:


 


(1)           Payment for accrued but
unused vacation days payable on the next payroll date following the expiration
of the revocation period set forth in the General Release;


 


(2)           Reimbursement of the
cost of continuation coverage of group health and dental benefits pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1986 for a maximum of
twelve (12) months to the extent that the Consultant elects such continuation
coverage; provided that if the Consultant obtains employment with any new
employer and receives health and dental coverage under the plan of such new
employer during such twelve (12) month period, such reimbursement shall
terminate; and


 


(3)           Payment for legal fees
in connection with the negotiation of the Employment Agreement and this Agreement
in an amount equal to $9,000, payable within 30 days of the date hereof.


 


3.             Consulting Status.


 


(a)           Consulting Term. 
The Consultant will provide the services set forth below during the
period from April 25, 2006 through April 25, 2007 (the “Consulting
Term”).  This Agreement will terminate at
the end of the Consulting Term.


 


(b)           Consulting Services. 
During the Consulting Term, the Consultant will (i) assist, if
requested by the Board, in the transition of the new chief executive officer of
the Company and (ii) provide such services as may be requested by the
Board or Michael Green.  The services
which the Consultant shall be required to provide pursuant to the foregoing
clause (ii) shall be such that they can be provided over the telephone or,
upon reasonable notice, at such times and such places that do not unreasonably
interfere with the New Business Activities.


 


(c)           Consulting Fees and Expenses. 
During the Consulting Term, the Company will pay to the Consultant the
following:


 


(1)           An aggregate of $600,000,
payable weekly in accordance with the customary payroll practices of the
Company (the “Consulting Fees”).


 


(2)           Reimbursement for
documented expenses relating to cellular telephone and Blackberry service not
to exceed $200 per month.


 


2

















 


(3)           Reimbursement for
business meal expenses, provided such business meal expenses are approved in
advance by George Kollitides and properly documented.


 


(4)           Reimbursement for
automobile expenses in the amount of $1,500 per month.


 


(d)           Computer. 
During and after the Consulting Term, the Consultant will retain the use
of the computer that he used during the period of his employment with the
Company (the “Computer”).


 


(e)           Benefits. 
All salary and benefits under the Employment Agreement shall cease as of
the Separation Date.


 


(f)            Independent Contractor. 
During the Consulting Term, the Consultant will be and will be deemed
for all purposes to be an independent contractor of the Company.  The Consultant acknowledges that this
Agreement is not an employment contract. 
Consequently, the Consulting Fees set forth in Section 3(c) of
this Agreement will not be deemed to be wages, and therefore, will not be
subject to any withholdings or deductions. 
Nothing contained herein will be construed to create a relationship of
employment between the Company and the Consultant.  The Consultant will not be entitled to any
employee benefits of the Company or any of its affiliates or subsidiaries.


 


4.             Equity Grant.  The Company will grant to the Consultant an
option to purchase 111,111 shares of the Company’s common stock at an exercise
price of $5.33 per share under the Company’s Equity Incentive Plan (the “Option”).  The Option will vest on April 25, 2007,
provided that (a) there has not been a Termination for Cause (as defined
below) prior to such date and (b) if the Consultant’s relationship with
the Company terminates for any reason other than a Termination for Cause, the
Consultant continues to cooperate fully with the Company and make himself
reasonably available to the Company to respond to reasonable requests by the
Company through the end of the Consulting Term. 
The Option will be evidenced in a written agreement by and between the
Company and the Consultant (the “Stock Option Agreement”).


 


5.             Termination for Cause.  Prior to the end of the Consulting Term, the
Company may terminate this Agreement and the consulting services of the
Consultant provided hereunder for “cause” only if (i) the Consultant,
after receipt from the Company of three days’ notice of the Company’s intent to
terminate this Agreement and the Consultant’s services provided hereunder for
cause, continues to fail to respond by telephone or otherwise to a request for
assistance, even if, such failure is due to the Consultant’s death or due to
his physical or mental illness or injury (“Disability”); or (ii) breaches
the provisions of Sections 5.5 or 6 (other than subsection 6.1(c), which
the parties agree is no longer binding) of the Employment Agreement (a “Termination
for Cause”).  Such Termination for Cause
shall be effective immediately upon written notice to the Consultant by the
Company.  In the event of a Termination
for Cause, the Consultant will be entitled only to such Consulting Fees as will
have accrued as of the 


 


3

















 


date of such
termination and the Company will have no further obligation to the
Consultant.  Upon a Termination for
Cause, any unexercised portion of the Option shall be forfeited as of the date
of such Termination for Cause.


 


6.             Termination Other Than For Cause.  In the event that the consulting services of
the Consultant terminate prior to the end of the Consulting Term for any reason
other than (i) a Termination for Cause, or (ii) a voluntary resignation
by the Consultant in writing for any reason (a “Voluntary Resignation”), the
Consultant will continue to receive the remaining Consulting Fees, payable in
accordance with Section 3(c), until the expiration of the Consulting Term,
subject to Section 7 of this Agreement. 
Upon a termination other than a Termination for Cause or a Voluntary
Resignation prior to the end of the Consulting Term, the Option shall vest as
provided in Section 4 (and set forth in the Stock Option Agreement) and
remain exercisable until the Option expires on its terms as set forth in the
Equity Incentive Plan and the Stock Option Agreement.


 


7.             Mitigation.  If at any time during the first six (6) months
of the Consulting Term, the Consultant’s relationship with the Company terminates,
the Company’s obligations, if any, to the Consultant which arise upon such
termination of the Consultant’s relationship pursuant to Section 6, shall
not be subject to mitigation or offset by the Consultant.  If the Consultant’s relationship with the
Company terminates at any time during the second six (6) months of the
Consulting Term, (a) the Consultant shall not be required to mitigate the
amount of any payment provided for pursuant to Section 6 of this Agreement
by seeking other employment, and (b) if the Consultant thereafter provides
services for pay to anyone other than the Company or any of its subsidiaries
from the date the Consultant’s relationship with the Company hereunder is
terminated until the end of the period during which the Consultant is receiving
payments pursuant to Section 6, the amounts paid to the Consultant during
such period shall be offset (or if paid to the Consultant, refunded to the
Company by the Consultant) by the amounts of salary, bonus or other cash or
kind compensation earned by, paid or granted to the Consultant during such
period as a result of the Consultant’s performing such service (regardless of
when such earned amounts are actually paid to the Consultant).


 


8.             Nondisparagement.


 


(a)           The Consultant hereby acknowledges
that he remains subject to Section 5.5 of the Employment Agreement.


 


(b)           The Company agrees to use reasonable
best efforts to ensure that representatives of the Company who are authorized
to discuss the Consultant’s performance while at the Company do not disparage,
make negative statements about or act in any manner that is intended to or does
damage to the Consultant’s personal or business reputation; provided that in
all events the Company shall direct its officers and directors


 


(c)           that they shall not disparage, make
negative statements about or act in an manner that is intended to or does
damage the Consultant’s personal or business reputation.


 


4

















 


9.             Property.


 


(a)           Unless otherwise agreed to by the
Consultant and the Company, the Consultant agrees that prior to or on the
Separation Date, he will deliver to the Company all copies of Company Property
(as defined in the Employment Agreement) in his possession or under his
control.


 


(b)           Any Company Property that remains in
the possession of the Consultant following the Separation Date pursuant to Section 8(a) and
all Company Property, coming into his possession in the course of his services
under this Agreement will be the sole property of the Company or any of its
subsidiaries or affiliates, as applicable. 
At the end of the Consulting Term, or upon the termination of the
Consultant’s consulting services hereunder or upon the request of the Company,
if earlier, the Consultant will return all Company Property in his possession
or under his control as of such date.


 


10.           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:


 


Schulte Roth & Zabel LLP

919 Third Avenue

New York, NY  10022

Attention:  David E. Rosewater, Esq.

Telephone:  (212) 756-2000

Fax:  (212) 593-5955


 


and


 


Cerberus Capital Management, L.P.

299 Park Avenue

New York, New York  10171

Attention:  George Kollitides


Telephone: 
(212) 891-2100


Fax: 
(212) 284-7916


 


5

















 


(b)           If to the Consultant, to the
Consultant’s home address reflected in the Company’s records, with a copy to


 


Eaton &
Van Winkle


3 Park Avenue


New York,
NY  10016


Attention:  Vincent J. McGill, Esq.


Telephone:  (212) 779-9910


Fax:  (212) 779-9928


 


Either party may
change the address provided above by delivering written notice of such change
of address to the other party.


 


11.           General.


 


(a)           This Agreement contains the entire
agreement and understanding of the parties with respect to the subject matter
hereof, and supersedes all prior agreements and understandings, if any, with
respect hereto and cannot be modified, amended, waived or terminated, in whole
or in part, except in a writing signed by both parties; provided, however, that
the provisions of Sections 5.5, 6 (other than subsection 6.1(c)), 7, 8 and
9 of the Employment Agreement shall survive to the extent necessary to give
effect to the provisions thereof.


 


(b)           The covenants, agreements,
representations and warranties contained in or made pursuant to this Agreement
shall survive this Agreement.


 


(c)           This Agreement will inure to the
benefit of and be binding on the successors of the Company.  None of the parties may assign this Agreement
without the written consent of the other party.


 


(d)           The headings used in this Agreement
are solely for the convenience of reference and shall not be given any effect
in the construction or interpretation of this Agreement.  This Agreement shall be construed without regard
to any presumption of any other rule requiring construction against the
party causing this Agreement to be drafted.


 


(e)           The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof,
in such jurisdiction and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or provision of this
Agreement in any other jurisdiction.


 


6

















 


(f)            This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.


 


12.           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.


 


IN WITNESS WHEREOF, the parties
hereto have executed the Agreement as of the day and year first above written.


 


	
   

  	
  RAFAELLA
  APPAREL GROUP, INC.

  
	
   

  	
   

  
	
   

  	
  /s/ George
  Kollitides

  	
   

  
	
   

  	
  Name: George
  Kollitides

  
	
   

  	
  Title:
  Authorized Person

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CONSULTANT

  
	
   

  	
   

  
	
   

  	
  /s/ Glenn S.
  Palmer

  	
   

  



 


7