Document:

exv10w1

 

Exhibit 10.1

Execution Copy

SEPARATION AGREEMENT AND GENERAL RELEASE

     This Separation Agreement and General Agreement (“Agreement”), dated as of February 9, 2007,
is entered into by and among Eddie Bauer Holdings, Inc. (“Holdings”), a Delaware corporation, and
its operating subsidiary Eddie Bauer, Inc. (“Eddie Bauer”), a Delaware corporation (collectively,
the “Company”), on the one hand, and Fabian Månsson (“Månsson” or the “Executive”), on the other
(each a “Party” and, collectively, the “Parties”).

     WHEREAS, the Company employed Månsson as its President and Chief Executive Officer pursuant to
the terms of that certain Amended and Restated Employment Agreement, dated December 15, 2005 (the
“Employment Agreement”);

     WHEREAS, the Company and Månsson have agreed that Månsson’s employment terminated on February
9, 2007 (the “Termination Date”);

     WHEREAS, the Company and Månsson have agreed that Månsson’s employment shall be deemed to have
been terminated pursuant to the terms of Section 9(b) of the Employment Agreement;

     WHEREAS, the Company and Månsson contemplate that the Company may wish to utilize Månsson’s
services as a consultant to the Company following the Termination Date;

     WHEREAS, the Company and Månsson wish to evidence their agreement as to the provision by the
Company to Månsson of various severance benefits to which Månsson is entitled pursuant to and in
accordance with the terms of Section 9(b) and Sections 9(g) through 9(k) the Employment Agreement,
as applicable (the “Severance Benefits”); and

     WHEREAS, both Månsson and the Company intend this Agreement to evidence the Parties’ agreement
as to any such Consulting Services (as defined herein) as well as the Severance Benefits.

AGREEMENT

     NOW, THEREFORE, in consideration of the covenants and agreements set forth below and in
consideration of other good and valuable considerations the adequacy and receipt of which are
hereby acknowledged, the Parties hereto agree as follows:

     1. Recitals. All recitals are incorporated herein as material provisions of this Agreement.

     2. Compensation and Benefits.

          (a) The Parties hereby acknowledge and agree that Månsson shall be entitled to any and all
Accrued Compensation (as such term is defined in the Employment Agreement) that has or will have
accrued through May 9, 2007, regardless of whether the Parties execute this

 

 

Agreement, provided, however, that Accrued Compensation attributable to unpaid
Base Salary (as such term is defined in the Employment Agreement) shall mean continued payment of
his Base Salary only through the Termination Date. For purposes of clarification, Accrued
Compensation attributable to accrued but unpaid Perquisite Allowance shall mean the prorata portion
of any unpaid Perquisite Allowance installment attributable to the period through May 9, 2007, less
applicable income and employment tax withholding. Accrued Compensation attributable to accrued but
unpaid Planning Allowance shall mean the unpaid reimbursement of expenses incurred in connection
with tax and financial planning and related legal advice incurred through May 9, 2007 (but not in
excess of the amount permitted in Section 6(b) of the Employment Agreement). Accrued Compensation
attributable to accrued but unused vacation shall include both such vacation as has accrued and not
been used as of the Termination Date and any such vacation that would have accrued through May 9,
2007.

          (b) The Parties further acknowledge and agree that, upon the execution, delivery and
effectiveness of this Agreement, the Company shall provide all Severance Benefits provided for in
the Employment Agreement as and when contemplated thereby in light of the parties having agreed to
deem the Executive to have been terminated pursuant to the terms of Section 9(b) thereof,
provided, however, that (i) any and all Severance Benefits to be provided to
Executive for, or as a function of a period of years, shall be increased by three (3) months, and
all pro-rata bonus payments shall be calculated as though the Termination Date had not occurred
until May 9, 2007, all as more fully set forth in Addendum “A” attached hereto and incorporated
herein by reference. For purposes of clarification, the Parties acknowledge that pursuant to
Section 9(k) of the Employment Agreement, Severance Benefits will not be paid before the day that
is six months plus one day after the Termination Date (the “New Payment Date”) as more
fully described in Addendum “A” attached hereto. The aggregate of any payments that otherwise
would have been paid to the Executive during the period between the Termination Date and the New
Payment Date shall be paid to the Executive in a lump sum on such New Payment Date. Thereafter,
any payments that remain outstanding as of the day immediately following the New Payment Date shall
be paid without delay over the time period originally scheduled.

          (c) In addition, notwithstanding anything to the contrary set forth herein, the Parties
further acknowledge and agree that the terms of Section 9(c) of the Employment Agreement shall
survive the termination of Månsson’s employment and that, in the event a Change in Control (as such
term is defined in the Employment Agreement) occurs at any time within six months of May 9, 2007,
the Company shall provide all severance benefits provided for in the Employment Agreement under
such circumstances as and when contemplated thereby, but without duplicating any Severance Benefits
provided or to be provided as set forth in Section 2(b) above, provided, however,
that (i) any and all severance benefits to be provided to Executive for, or as a function of a
period of years, shall be increased by three (3) months, (ii) and all pro-rata bonus payments shall
be calculated as though the Termination Date had not occurred until May 9, 2007, and (iii) any
Severance Benefit provided or to be provided as set forth in Section 2(b) above shall be
accelerated (as may be applicable).

3. Månsson Release.

          (a) Conditioned upon the Company’s execution of this Agreement and the promises, covenants and
agreements of the Company contained herein, on behalf of himself, his

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heirs, executors, administrators, representatives and assigns (the “Månsson Releasors”), to
the fullest extent permitted by law, Månsson agrees irrevocably and unconditionally to release,
acquit and forever discharge the Company and its past and present parents, subsidiaries, joint
venturers, partners and affiliated entities; its and their respective past and present divisions,
principals, shareholders, members, officers, directors, employees, trustees, and agents,
individually and in their representative capacity; any and all predecessors, successors and
permitted assigns of any of the foregoing, and any other person claiming through any of them (these
entities and individuals are referred to collectively as the “Company Releasees”) from any and all
claims, complaints, actions, suits, causes of action, grievances, demands, controversies,
allegations, accusations, liabilities, or demands, of any kind or nature as well as all forms of
relief, including all remedies, costs, expenses, losses, liabilities, damages, debts and attorneys’
and other professionals’ fees and related disbursements, whether known or unknown, foreseen or
unforeseen, whether (i) claiming compensation, money damages, equitable or any other type of
relief; (ii) based on any federal, state or municipal statute, law, ordinance or regulation; (iii)
based on common law or public policy; or (iv) sounding in tort or contract, whether oral or
written, express or implied, or any other cause of action, including all matters arising out of or
relating to Månsson’s employment with the Company and the termination thereof (collectively
referred to as “Claims,” and individually as a “Claim”) that Månsson has had, now has, or hereafter
can, shall or may have against any Company Releasee from the beginning of the world through the
Effective Date (as defined below).

          (b) Månsson hereby acknowledges and agrees that such Claims include: (i) Claims under Title
VII of the Civil Rights Act of 1964, Section 1981 of the Civil Rights Act of 1866, the Civil Rights
Act of 1991, the Equal Pay Act, the Age Discrimination in Employment Act of 1967, the Americans
with Disabilities Act of 1989, the Family and Medical Leave Act of 1993, the Employee Retirement
Income Security Act of 1974, Title 49 of the Revised Code of Washington (including the Law Against
Discrimination (RCW 49.60)), Claims arising out of any other federal, state or local laws,
executive orders, rules or regulations prohibiting discrimination in employment, all claims under
related common law, statutes and executive orders at the federal, state or local levels of
government, and Claims under any legal restriction on an employer’s freedom to terminate any of its
employees; (ii) Claims of disputed wages; (iii) Claims of wrongful discharge or breach of any
express or alleged employment contract; and (iv) Claims based on any tort, such as invasion of
privacy, defamation or infliction of emotional distress.

          (c) Nothing contained in this Agreement is intended to waive or release, and the Company
expressly acknowledges Månsson’s continuing rights (i) to the Accrued Compensation; (ii) to the
Severance Benefits as set forth in Addendum “A” attached hereto; (iii) to continued
indemnification, exculpation and advances by the Company for actions taken while serving as an
officer or director thereof or, at the request of the Company, as an officer or director of any
subsidiary or related entity or as a fiduciary of any employee benefit plan of any of these
(including coverage by any D&O or similar insurance policy generally applicable to former officers
or directors of the Company); (iv) to additional severance benefits pursuant to the terms of
Section 2(c) above (as applicable); and (v) to enforce the terms of this Agreement.

     4. Company Release.

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          (a) Conditioned upon Månsson’s execution of this Agreement and the promises, covenants and
agreements of Månsson contained herein, Holdings and Eddie Bauer, each for itself and for its
current and former affiliates, and their respective past and present officers, directors, agents,
and employees, as well as the heirs, executors, administrators, attorneys, insurers and
co-insurers, predecessors, successors, and assigns of any of them (the “Company Releasors”),
jointly and severally do hereby remise, release, acquit and forever discharge Månsson as well as
his heirs, executors, administrators, representatives and assigns (the “Månsson Releasees”), of and
from any and all manner of Claims that any Company Releasor has had, now has, or hereafter can,
shall, or may have against any Månsson Releasee from the beginning of the world through the
Effective Date.

          (b) Nothing contained in this Agreement is intended to waive or release, and Månsson expressly
acknowledge the Company’s right to enforce the terms of this Agreement.

     5. Bar to Future Lawsuits.

          (a) Månsson hereby (i) covenants and agrees for himself and for each Månsson Releasor that (A)
neither he nor any Månsson Releasor shall make or bring any Claim released under this Agreement,
including by way of third party claim, cross-claim or counterclaim, against any of the Company
Releasees before any court, agency, board, commission or other judicial or administrative forum;
and (B) if involuntarily included in any class or other action relating to any Claim released
hereunder, Månsson or such Månsson Releasor, as applicable, will use its best efforts to withdraw
therefrom; and (ii) expressly stipulates and agrees to the immediate dismissal of any Claim brought
or commenced in contravention of this Agreement. In addition, Månsson represents and warrants that
he has not assigned any Claim released hereunder to any third party. The Company may plead this
Agreement as a complete defense and bar to any Claim brought in contravention hereof and, in the
event any such Claim is brought, Månsson shall indemnify, defend and hold harmless any Company
Releasee against which or whom such barred Claim is brought from and against all Claims arising
therefrom, including the reasonable fees and disbursements of counsel and other professionals and
court costs incurred in connection therewith and in connection with enforcing the terms of this
Paragraph 5(a).

          (b) Holdings and Eddie Bauer hereby jointly and severally (i) covenant and agree on behalf of
the Company as well as the Company Releasors that (A) neither the Company nor any Company Releasor
shall make or bring any Claim released under this Agreement, including by way of third party claim,
cross-claim or counterclaim, against any of the Månsson Releasees before any court, agency, board,
commission or other judicial or administrative forum; and (B) if involuntarily included in any
class or other action relating to any Claim released hereunder, the Company or such Company
Releasor, as applicable, will use its best efforts to withdraw therefrom; and (ii) expressly
stipulate and agree to the immediate dismissal of any Claim brought or commenced in contravention
of this Agreement. In addition, Holdings and Eddie Bauer hereby jointly and severally represent
and warrant that the Company has not assigned any Claim released hereunder to any third party.
Månsson may plead this Agreement as a complete defense and bar to any Claim brought in
contravention hereof and, in the event any such Claim is brought, Holdings and Eddie Bauer jointly
and severally shall indemnify, defend and hold harmless any Månsson Releasee against which or whom
such barred Claim is brought from and against all Claims arising therefrom, including the
reasonable fees and disbursements

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of counsel and other professionals and court costs incurred in connection therewith and in
connection with enforcing the terms of this Paragraph 5(b).

     6. Company Property. Månsson hereby agrees that he will return all property of the Company
that is in his possession or under his control and that he will not retain in any form whatsoever
any copies of any confidential or proprietary information belonging or pertaining to the Company
(as contemplated by Section 10(a) of the Employment Agreement), provided, however,
that Månsson may retain originals or copies of his records of addresses and phone numbers such as
“rolodex” files, calendars, day planners, benefit plan documents and election forms and performance
evaluations.

     7. Survivorship. Each of the Company and Månsson acknowledge and confirm the continued
applicability of all terms and provisions of the Employment Agreement that by their terms or intent
survive the termination of Månsson’s employment, including Sections 9, 10, 11, 12, 13 and 14
thereof.

     8. Remedies. The Parties acknowledge and agree that remedies at law for any breach or
threatened breach by any Party of any of its obligations under this Agreement may be inadequate
and, accordingly, in the event of a material breach or threatened material breach of any of the
provisions of this Agreement, the non-breaching Party (or Parties), in addition to any other
remedies at law or in equity, shall be entitled to injunctive or other equitable relief in order to
enforce the terms of this Agreement or to prevent any such breach or threatened breach without the
need to prove or otherwise establish the inadequacy of available remedies at law for the breach or
threatened breach of any of the terms of this Agreement, and without the need to demonstrate any
special damages or to provide any bond or other security in connection therewith. Each Party
agrees that such Party shall not plead or otherwise defend any claim of breach or threatened breach
of any of the terms of this Agreement on grounds of adequate remedy at law or any element thereof,
in an action by any other Party for injunctive or other equitable relief.

     9. Resignation. Månsson acknowledges and affirms that as of the Termination Date this
Agreement shall constitute a written resignation by him from the position(s) as a Director of the
Company, and as a written resignation from all other officer, director, employee, fiduciary or
other positions with the Company, any affiliate or any employee benefit plan sponsored by the
Company or any affiliate.

     10. Consulting Services. For a period not to exceed thirty (30) days following the
Termination Date, Månsson shall remain available, by telephone or in person, upon reasonable
advance notice, from time to time, and within reason, to consult with the Company about various
aspects of Månsson’s employment with the Company as may be requested by the interim Chief Executive
Officer of the Company (the “Consulting Services”). The Company shall reimburse Månsson for all
reasonable out-of-pocket expenses incurred in connection with such consultation.

     11. No Admission. The Parties each acknowledge and agree that this Agreement is not an
admission or evidence of liability, which is specifically denied, by any of them regarding any
Claim, and shall not be construed or used as such. This Agreement shall not be used in any
proceeding, except one to enforce this Agreement or as a defense by a released party to any

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Claim being released hereunder.

     12. Revocation. Månsson hereby acknowledges that he has had at least twenty-one (21) days
from receipt of this Agreement to consider the provisions of this Agreement during which he could
consult with counsel concerning its terms. Månsson acknowledges that if he executes this Agreement
prior to the expiration of the twenty-one (21) days, his execution is completely voluntary and done
with the knowledge that he is waiving his entitlement to this review period. Månsson and the
Company agree that any changes to this Agreement negotiated by the parties which may be made after
the Agreement is initially provided to Månsson shall not restart the running of the twenty-one (21)
day period. Månsson further understands that for seven (7) days after he signs this Agreement and
returns it to the Company he shall have the right to change his mind and revoke this Agreement by
sending or otherwise giving written notice of revocation to the parties designated in the notice
provision in Section 21 hereof. Finally, Månsson acknowledges that, to properly revoke within
these seven (7) days, the Company must receive his written notice to revoke by the end of the
seventh (7th) day. If he does not revoke this Agreement by the end of the seventh
(7th) day, such seventh (7th) day shall be the “Effective Date.”

     13. Counsel. Each Party acknowledges and represents that such Party has read this Agreement
in its entirety, and such Party understands all of its terms and ramifications. Each Party
acknowledges and represents that such Party has been advised by the other Party to consult with an
attorney with respect to this proposed Agreement, and that such Party has had a reasonable
opportunity to do so. Each Party further acknowledges and represents that such Party has not been
subject to coercion in any manner in connection with such Party’s execution of this Agreement, and
that such Party’s execution hereof is voluntary and with full knowledge and understanding of its
terms and ramifications.

     14. Additional Documents. The Parties agree to cooperate fully and execute any and all
supplementary documents and to take all additional actions which may be necessary or appropriate to
give full force and effect to the basic terms and intent of this Agreement.

     15. Successors and Assigns.

          (a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its
successors and assigns, and the Company shall require any successor or assign expressly to assume
and agree to perform this Agreement in the same manner and to the same extent that the Company
would be required to perform it if no such succession or assignment had taken place. The term “the
Company” as used herein shall include any such successors and assigns. The term “successors and
assigns” as used herein shall mean a corporation or other entity acquiring or otherwise succeeding
to, directly or indirectly, all or substantially all the assets and business of the Company
(including this Agreement) whether by operation of law or otherwise.

          (b) The obligations of Månsson hereunder are personal in nature and may not be assigned by
Månsson. However, this Agreement shall inure to the benefit of and be enforceable by Månsson’s
personal or legal representatives, executors, administrators, successors, heirs, distributes,
devisees and legatees. If Månsson dies and any amount(s) are owed to him pursuant to this
Agreement, all such amounts, unless otherwise provided herein,

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shall be paid to Månsson’s beneficiary in accordance with the terms of this Agreement. If
Månsson has not named a beneficiary, then such amounts shall be paid to Månsson’s devisee, legatee,
or other designee, or if there is no such designee, to Månsson’s estate.

     16. Dispute Resolution. Except as otherwise provided by law, disputes and controversies
arising under or in connection with this Agreement shall be settled in accordance with the
provisions respecting the resolution of disputes as set forth on Exhibit B attached to the
Employment Agreement, which such provisions are incorporated herein by reference.

     17. Fees and Expenses. The Company shall pay the legal fees reasonably incurred by Månsson in
connection with the negotiation and execution of this Agreement or any agreement ancillary hereto,
payable upon submission of the billing statement or paid receipt for such services rendered by
Månsson’s counsel.

     18. Tax Withholding. The Company may withhold from any compensation or benefits payable under
this Agreement all federal, state, city or other taxes the withholding of which may be required
pursuant to any law or governmental regulation or ruling, as well as any other deductions regularly
taken in the ordinary course (e.g., employee-paid insurance premiums).

     19. Beneficiaries. Månsson may designate one or more persons or entities as the primary or
contingent beneficiaries of any amounts to be received under this Agreement. Such designation must
be in the form of a signed writing acceptable to the Board of Directors of the Company or the
Board’s designee. Månsson may make or change such designation(s) at any time.

     20. Notice. Any notice and all other communications required or permitted hereunder shall be
in writing and shall be deemed to have been duly given when personally delivered or sent by
registered or certified mail, return receipt requested, postage prepaid, or upon receipt if
overnight delivery service is used, addressed as follows:

          To Månsson:

Fabian Månsson

6215 102nd Place, N.E.

Kirkland, WA 98033

Phone: (425) 443-2369

          With a copy (not itself constituting notice) to:

Williams & Connolly LLP

725 12th Street, N.W.

Washington, DC 20005

Attn: Deneen C. Howell

Phone: (202) 434-5000

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          To the Company:

William Thomas End

Chair of the Board of Directors

Eddie Bauer Holdings, Inc.

15010 NE 36th Street

Redmond, WA 98052

Phone: (425) 755-6544

          With a copy (not itself constituting notice) to:

Akin Gump Strauss Hauer & Feld LLP

The Robert S. Strauss Building

1333 New Hampshire Avenue, N.W.

Washington, DC 20036

Attn: J. Steven Patterson

Phone: (202) 887-4000

Delivery shall be deemed to occur on the earlier of actual receipt or tender and rejection by the
intended recipient. Any Party may change its address by notice to the other Parties consistent with
this Paragraph.

     21. Amendment; Waiver. No provision of this Agreement (including each other agreement,
program or policy incorporated herein by reference) may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing and signed by Månsson and the
Company. No waiver by any Party hereto at any time of any breach by any other Party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by such other Party
shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.

     22. Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Washington, including its statutes of limitation (or
United States federal law, to the extent applicable), including its statutes of limitation, without
regard to any principles of conflicts of law or choice of law rules (whether of the State of
Washington or any other jurisdiction) that would result in the application of the substantive or
procedural rules or law of any other jurisdiction.

     23. Severability. The provisions of this Agreement shall be deemed severable, and the
invalidity or unenforceability of any provision shall not affect the validity or enforceability of
the other provisions hereof.

     24. Entire Agreement. This Agreement (together with each other agreement, program or policy
incorporated herein by reference) constitutes the complete understanding between the Parties with
respect to the subject matter hereof and supersedes all prior agreements, negotiations and
discussions between the Parties with respect thereto (including the Employment Agreement, except to
the extent expressly incorporated herein by reference), and no statement, representation, warranty
or covenant has been made by any Party with respect thereto except as expressly set forth in this
Agreement.

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     25. Counterparts. This Agreement may be executed in two or more counterparts (including via
facsimile) each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

     26. Construction. No provision of this Agreement shall be interpreted or construed against
any party because that party or its legal representative drafted that provision. The captions and
headings of the Sections of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement. Unless the context of this Agreement clearly requires
otherwise: (a) references to the plural include the singular, the singular the plural, and the
part the whole, (b) references to one gender include all genders, (c) “or” has the inclusive
meaning frequently identified with the phrase “and/or,” (d) “including” has the inclusive meaning
frequently identified with the phrase “including but not limited to” or “including without
limitation,” (e) references to “hereunder,” “herein” or “hereof” relate to this Agreement as a
whole, and (f) the terms “dollars” and “$” refer to United States dollars. Section, subsection,
exhibit and schedule references are to this Agreement as originally executed unless otherwise
specified. Any reference herein to any statute, rule, regulation or agreement, including this
Agreement, shall be deemed to include such statute, rule, regulation or agreement as it may be
modified, varied, amended or supplemented from time to time. Any reference herein to any person
shall be deemed to include the heirs, personal representatives, successors and permitted assigns of
such person.

     27. Company Representation. The Company represents and warrants that it has obtained or will
obtain any approvals that are necessary for the Company to enter into and implement this Agreement.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

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     IN WITNESS WHEREOF, the Parties hereto have entered into this Separation Agreement and
General Release on the date first above written.

	 	 	 	 	 
	 	THE COMPANY:

EDDIE BAUER HOLDINGS, INC.

 	 
	 	By:  	/s/
William T. End 	 
	 	 	Name:  	William T. End 	 
	 	 	Its:        Chairman of the Board 	 
	 
	 	EDDIE BAUER, INC.

 	 
	 	By:  	/s/
Stacey Ragsdale 	 
	 	 	Name:  	Stacey Ragsdale 	 
	 	 	Its:        Divisional Vice President,
Human Resources 	 
	 
	 	MÅNSSON:	 
	 	 	 
	 	/s/
Fabian Månsson 	 
	 	Fabian Månsson	 

 

 

Addendum “A”

     This Addendum “A” is appended to and incorporated within that certain Separation Agreement and
General Release (the “Agreement”) dated as of February 9, 2007, entered into by and among Eddie
Bauer Holdings, Inc. (“Holdings”), a Delaware corporation, and its operating subsidiary Eddie
Bauer, Inc. (“Eddie Bauer”), a Delaware corporation (collectively, the “Company”), on the one hand,
and Fabian Månsson (“Månsson” or the “Executive”), on the other (each a “Party” and, collectively,
the “Parties”). All initially capitalized terms included in this Addendum “A” not otherwise
defined herein shall have the same respective meanings as in the Agreement.

          (a) Upon the full execution, delivery and effectiveness of this Agreement, the Company shall
provide to Månsson the following Accrued Compensation to the extent it has not already paid such
amounts:

               (i) Accrued Base Salary. Executive hereby acknowledges that on February 23, 2007, the Company
paid Executive an amount equal to $18,846.15 (representing accrued and unpaid Base Salary through
the Termination Date), less applicable income and employment tax withholding, in satisfaction of
the obligation to pay accrued but unpaid Base Salary through the Termination Date.

               (ii) Perquisite Allowance. Executive hereby acknowledges that on February 23, 2007, the
Company paid Executive an amount equal to $5,230.77 (representing a pro-rata portion of unpaid
Perquisite Allowance attributable to the period through May 9, 2007), less applicable income and
employment tax withholding;

               (iii) Planning Allowance. Executive hereby acknowledges that on or about February 23, 2007,
the Company paid Executive an amount equal to $4,288, representing the reimbursement of expenses
incurred in connection with unpaid tax and financial planning and related legal advice incurred
through the Termination Date. The Company shall reimburse any additional such tax and financial
planning and related legal advice expenses incurred by the Executive through and including May 9,
2007 up to an amount not to exceed $5,712, promptly after appropriate documentation therefor is
submitted to the Company;

               (iv) Accrued and Unused Vacation. Executive hereby acknowledges that on February 23, 2007,
the Company paid Executive an amount equal to $116,023.15, less applicable income and employment
tax withholding, representing accrued and unused vacation through the Termination Date as well as
vacation that would have accrued through May 9, 2007;

               (v) Deferred Amounts. Executive hereby acknowledges that there are no amounts previously
deferred by Executive or owed by Company;

               (vi) Other Compensation. Executive hereby acknowledges that, except as otherwise provided
herein, there are no additional compensation amounts that have been earned, accrued or are owing as
of the Termination Date or that would have been earned, would have accrued or would be owing as of
May 9, 2007, under the terms of any Company plan, program, or arrangement;

 

 

               (vii) Expense Reimbursement. Executive hereby acknowledges that on or about February 23,
2007, the Company paid Executive an amount equal to $173.09, representing the unpaid reimbursement
of home security expenses incurred or to be incurred by the Executive through May 9, 2007 that are
subject to reimbursement in accordance with the terms of Section 6(c) of the Employment Agreement,
including tax gross-up payment, plus $307, representing the unpaid portion of table storage
expenses that otherwise would have been paid by the Company through May 9, 2007 in accordance with
the terms of Section 6(c) of the Employment Agreement, including tax gross-up payment. Executive
shall assume responsibility for payment of any continuing storage expenses after the termination
date. The Company shall reimburse any additional expenses described in Section 7(b) of the
Employment Agreement to the extent incurred by the Executive on or before February 9, 2007,
provided appropriate documentation therefor is submitted to the Company on or before March 9, 2007.

               (viii) Additional Benefits and Entitlements. Executive hereby acknowledges that, except as
otherwise provided herein, there are no additional or other benefits or entitlements to which
Executive is entitled as of the Termination Date or to which he would be entitled as of May 9,
2007, under the terms of any Company plan, program, or arrangement;

          (b) Upon the full execution, delivery and effectiveness of this Agreement, or on such later
date as specifically set forth herein, the Company shall provide to Månsson the following Severance
Benefits:

               (i) Additional Base Salary. The Company shall continue to pay the Executive for a period of
two (2) years and three (3) months following the Termination Date his Base Salary (as such term is
defined in the Employment Agreement) as in effect immediately prior to the Termination Date,
aggregating $2,205,000, such payments to be made in accordance with the Company’s customary
practices applicable to its executive officers generally, provided, however, that the first such
payment shall be made on August 10, 2007 (the New Payment Date) and shall equal $490,000 (the
amount that otherwise would have been paid to the Executive during the period between the
Termination Date and the New Payment Date). Thereafter, the balance shall be paid without delay
over the time period originally scheduled in accordance with the Company’s regular payroll
practices.

               (ii) Life Insurance Premiums. Subject to Executive’s cooperation in the completion of any
required application and medical underwriting, including insurance company medical examinations or
questionnaires, the Company shall continue to pay the life insurance premiums on an individual
policy of term life insurance in the face amount of $5,000,000 provided for in Section 7(a) of the
Employment Agreement for a period of two (2) years and three (3) months following the Termination
Date;

               (iii) Employee Welfare Benefits. The Company shall continue to provide Executive and his
dependents with medical, hospitalization, prescription drug, dental and vision benefits in
accordance with the terms of Section 9(h) of the Employment Agreement for a period of two years and
three months following the Termination Date, subject to earlier termination in accordance with the
mitigation provisions in Section 9(h) of the Employment Agreement. Company will make reasonable
good faith efforts to arrange for an extension of the period of such coverages to the extent such
coverage exceeds the group health continuation coverage requirements under COBRA. However, in the
event that the Company is unable to

2

 

extend such coverage under the Company’s Welfare Benefits Plan for the full period provided
herein, Company shall pay for the cost of providing an individual policy or policies that provide
no less favorable coverage than the coverage levels provided under the Company’s Welfare Benefits
Plan for any remaining period provided herein. Executive agrees to pay a portion of such Welfare
Benefits costs equal to the portion of the applicable premiums that he would have paid for himself
and for his dependents if he continued to be an active employee of the Company;

               (iv) Supplemental Benefits Coverages. Executive hereby acknowledges that he has been informed
by the Company that he has thirty days from the termination date to notify the applicable carriers
of his intent to convert his coverage under the following supplemental coverages: dependent life
insurance through Minnesota Life, cancer and accident insurance benefits through American Family
Life Assurance Company of Columbus (AFLAC) and group legal services insurance through Hyatt Legal
Services. Executive hereby acknowledges that he will bear the full cost of such supplemental
benefits and that he is responsible for contacting the specified providers directly, completing any
conversion paperwork required by them, and arranging for direct billing to Executive.

               (v) Short-Term and Long-Term Disability Coverages. Executive hereby acknowledges and agrees
that Company is unable to provide Short-Term Disability insurance coverage and Long-Term Disability
insurance coverage under the terms of the Company sponsored plans. In lieu of and in complete
satisfaction of the Company’s obligations to provide such coverages in accordance with the terms of
Section 9(h) of the Employment Agreement, for a period of two (2) years and three (3) months
following the Termination Date the parties agree as follows:

                    (A) Company shall provide Short-Term Disability benefits equivalent to the terms of the
benefit provided under the Company’s Short-Term Disability benefits insurance coverage. Short-Term
Disability benefits, subject to applicable reductions for other income or disability benefits,
shall be provided on a self-insured basis in the event Executive becomes disabled within the
meaning of the Company’s Short-Term Disability Plan;

                    (B) Subject to Executive’s cooperation in the completion of any required application and
medical underwriting, including insurance company medical examinations or questionnaires, the
Company will obtain and the Company shall continue to pay the insurance premiums on an individual
policy of long-term disability insurance with the following terms:

	 	•	 	The LTD insurance benefit will start 90 days after Executive becomes disabled;
	 
	 	•	 	The maximum monthly benefit payable will be $25,000.00 per month;
	 
	 	•	 	The maximum disability benefit payment period will not be in excess of one year.

                    (C) A lump sum cash payment of $13,500, payable on August 10, 2007.

3

 

Employee acknowledges and agrees that the benefits payable under the individual policy described in
Section (b)(v)(B) of this Addendum A do not provide the same benefit payment duration as benefits
provided under the Company’s Long-Term Disability insurance coverage under the Company sponsored
plan and that the lump sum cash payment provided in Section (b)(v)(C) of this Addendum A represents
additional consideration for such differences.

               (iv) Accelerated Vesting; Exercise Period. Notwithstanding anything to the contrary contained
herein or in any plan, program, practice or arrangement, any unvested Equity Awards or other LTI
Awards (each as such term is defined in the Employment Agreement) granted pursuant to the terms of
Section 4 of the Employment Agreement or otherwise shall immediately vest as of the Termination
Date, with any stock options granted in connection with any such LTI Award remaining exercisable
for the remainder of the original option term without regard to the termination of the Executive’s
employment. Upon payment to the Company of required withholding taxes in the amount of
$345,664.23, Executive shall receive 133,334 shares of Common Stock attributable to the settlement
of the Restricted Stock Units vesting as of February 9, 2006;

               (v) Bonus Payments. Executive shall be entitled to payment of the following bonus amounts in
satisfaction of the payment of the Pro-Rata Bonus, Termination Year Bonus and Additional Bonus
Compensation provided in Section 9(b) of the Employment Agreement:

                    (A) For the 2007 bonus year, an amount equal to Nine Hundred Eighty Thousand Dollars
($980,000.00), less applicable income and employment tax withholding. The 2007 bonus shall be paid
to Executive on March 3, 2008, but not before August 10, 2007 (the New Payment Date) and not later
than March 15, 2008.

                    (B) For the 2008 bonus year, an amount equal to Nine Hundred Eighty Thousand Dollars
($980,000.00), less applicable income and employment tax withholding. The 2008 bonus shall be paid
to Executive on March 2, 2009, but not later than March 15, 2009.

                    (C) For the 2009 bonus year, a prorated bonus amount equal to Three Hundred Forty-Six Thousand
Three Hundred Fifty-Six Dollars and Ten Cents ($346,356.10), which represents the product of Nine
Hundred Eighty Thousand Dollars ($980,000.00) multiplied by the fraction 129/365, less applicable
income and employment tax withholding. The 2009 bonus shall be paid to Executive on March 1, 2010,
but not later than March 15, 2010.

               (vi) Outplacement Services. The Company shall provide for the Executive outplacement services
at the expense of the Company, up to an amount not to exceed thirty-five thousand dollars
($35,000), through a professional person or entity of the Executive’s choice, subject to the
approval of the Company, which approval shall not be unreasonably withheld, conditioned or delayed,
at a level commensurate with the Executive’s position, for a period of up to one (1) year
commencing on or before May 9, 2008, but in no event extending beyond the date on which the
Executive commences other full-time employment;

4

 

               (vii) Relocation Expenses. Upon presentation of invoices, the Company shall reimburse the
Executive for (i) reasonable costs associated with the packing, moving and unpacking of household
goods and furnishings to a new permanent residence in Sweden; (ii) broker’s fees and commissions
payable on the sale of the Executive’s then current principal residence in the United States up to
an amount equal to six percent (6%) of the selling price of such residence; and (iii) up to three
percent (3%) of the closing costs associated with the purchase of the Executive’s new permanent
residence in Sweden; provided that such costs or fees are incurred within one (1)
year following May 9, 2007. The Company shall gross up the compensation to be paid by the Company
pursuant to this subclause (vii) to offset all income taxes incurred by Executive as a result of
such reimbursed costs and expenses, including such gross-up payment;

               (viii) Defined Benefit Plans. The Executive acknowledges and agrees that no additional
amounts are due or owing by Company with respect to any defined benefit plans described in Section
9(b)(xi) of the Employment Agreement;

               (ix) Defined Contribution Plans. The Executive acknowledges and agrees that he did not
participate in the VIP Plan and no additional amounts are due or owing by Company with respect to
any defined contribution plans described in Section 9(b)(xii) of the Employment Agreement; and

               (x) Deferred Income Plans. The Executive acknowledges and agrees that he did not participate
in the Eddie Bauer Holdings, Inc. Nonqualified Deferred Compensation Plan and no additional amounts
are due or owing by Company with respect to any deferred income plans described in Section
9(b)(xiii) of the Employment Agreement;

5exv10w2

 

Exhibit 10.2

Eddie Bauer Holdings, Inc.

15010 NE 36th Street

Redmond, Washington 98052

Tel. (425) 755-6100

February 9, 2007

Mr. Howard Gross

c/o Board of Directors

Eddie Bauer Holdings, Inc.

15010 NE 36th Street

Redmond, WA 98052

Dear Howard:

     Eddie Bauer Holdings, Inc. (the “Company”) is pleased to offer you a position as Interim Chief
Executive Officer of the Company and its operating subsidiary, Eddie Bauer, Inc., effective
February 9, 2007. Your position as Interim Chief Executive Officer will be in addition to your
position as a Member of the Board of Directors of the Company. However, you will relinquish your
current position as Chair of the Governance Committee. It is anticipated that the interim
employment period described herein (the “Interim Employment Period”) will continue until such time
as the Company is able to hire a permanent CEO. During the Interim Employment Period you will not
receive Director’s fees. Subject to any continued employment transition period that the parties
may mutually agree upon, your employment as interim CEO will terminate when a permanent CEO is
hired by the Company. After the Interim Employment Period you will continue to serve as a Member
of the Board of Directors of the Company and will be entitled to Director’s fees.

     When executed by you in the space provided below, this letter will constitute an agreement
between you and the Company.

     Except as specified herein, the compensation package for this position includes a monthly
salary of $85,000 per month, payable in advance each month. For February 2007, you will receive
$42,500. In the event that your employment as Interim Chief Executive Officer continues beyond
August 9, 2007, you will receive an additional $12,500 for the month of August and the monthly
salary will be raised to $110,000 beginning September 2007. In addition to the monthly salary, the
Company will provide reasonable housing, or a housing allowance, to enable you to work at the
Company’s corporate headquarters in the Seattle, Washington metropolitan area during Monday through
Thursday of each week during the Interim Employment Period. Please work with Stacey Ragsdale on
the procurement of the housing. If there are any questions regarding the housing, please refer
them to Steve Watson.

     The Company will reimburse you for the weekly cost of round trip first class airfare between
Seattle and your principal business location in Aspen, Colorado. It is

 

 

Eddie Bauer Holdings, Inc.

Mr. Gross

February 9, 2007

Page 2

anticipated that you will return to Aspen each Thursday evening and will be available to work from that location. The
Company also will provide prompt reimbursement of all expenses reasonably incurred in connection
with the performance of your duties hereunder in accordance with the policies established by the
Board and upon receipt of appropriate documentation substantiating such expenses and their business
purpose.

     The term of this agreement shall be for the Interim Employment Period commencing on your start
date. Your employment may be terminated at any time by you or by the Company with or without cause
for any reason or for no reason.

     Any other agreement regarding your employment or any other matter between you and the Company
must be in writing and signed by the Chair of the Company’s Board of Directors, and approved by the
Compensation Committee of the Board of Directors.

     You will not be eligible to participate in the Company benefit plans.

     As a condition of your employment with the Company, you will be subject to all the Company’s
standard personnel policies and procedures, including agreements, policies and procedures relating
to trade secrets, confidential and proprietary information.

     It is a pleasure to make you this offer. If you are in agreement with the terms of this
offer, please sign and return a copy of this letter to us.

Sincerely,

EDDIE BAUER HOLDINGS, INC.

	 	 	 	 	 
	By:

	 	/s/ William
Thomas End  

William
Thomas End, Chair of the Board of Directors
	 	  

I accept the above offer on the stated terms and conditions:

	 	 	 	 	 	 	 	 	 
	Signed:

	 	/s/ Howard Gross	 	Date:
	 	February 9, 2007	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Howard Gross	 	 	 	 	 	 

 

 

Eddie Bauer Holdings, Inc.

Mr. Gross

February 9, 2007

Page 2

I hereby represent, warrant and agree that I am free to accept this employment offer. I represent,
warrant and agree that I am not bound by any restriction or covenant from any prior employer or
other obligation that would interfere with my ability to perform the job duties of Interim Chief
Executive Officer at the Company. I also represent, warrant and agree that I have returned all
documents to my prior employers, and that I will not utilize any trade secrets or proprietary
information of my prior employers in connection with my employment by the Company.

	 	 	 	 	 	 	 	 	 
	Signed:

	 	/s/ Howard Gross	 	Date:
	 	February 9, 2007	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Howard Gross

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