Document:

Exhibit 10.1

ASSET
PURCHASE AGREEMENT

 

This Asset Purchase Agreement (“Agreement”) is made as of April 26,
2002, by and between Cutter & Buck (Europe) BV, a Netherlands company based
in Huizen, Netherlands, (“C&B”), and Cutter & Buck Sportswear
(Europe) Limited, an Irish limited company based in County Cork, Ireland
(“Sportswear”).

 

Recitals

 

A.                                   C&B
is a wholly owned subsidiary of Cutter Buck Inc., a Washington corporation
(“Cutter & Buck”).  Cutter &
Buck is the owner of the CUTTER & BUCK trademarks (“Marks”) and the CUTTER
& BUCK trade name (“Name”).  C&B
has been the exclusive distributor of casual wear, sportswear and related items
bearing the Marks in the European Union, Norway and Switzerland (the “Territory”).

 

B.                                     Cutter
& Buck has decided to wind up its direct operating activities in Europe
through C&B effective as of May 1, 2002, and to sell its products in
the Territory through a third party licensee. 
As part of that winding up process, Cutter & Buck will be advancing
funds to C&B to repay its existing operating line and other obligations.

 

C.                                     Contemporaneously
with this Agreement, Cutter & Buck and Sportswear are entering into a
License Agreement (“License Agreement”), pursuant to which Sportswear will
obtain a license to use the Name and will become Cutter & Buck’s sole and
exclusive licensee in the Territory for the products described therein bearing
the Mark (“Products”).

 

D.                                    In
connection with the License Agreement, Sportswear desires to purchase from
C&B the existing inventory products and other fixed assets currently held
by C&B on the terms and conditions of this Agreement.

 

Agreement

 

Therefore, the
parties agree as follows.

 

1.                                       Purchase
and Sale.  Effective as of
May 1, 2002 (“Closing Date”), Sportswear hereby agrees to purchase and
C&B agrees to sell to Sportswear all right, title and interest in and to
C&B’s Inventory, Accounts, FF&E and Trade Fixtures, described below
(collectively, the “Assets”), on the following terms and conditions.

 

2.                                       Inventory.  The “Inventory” will consist of all C&B
Classics, Spring 2002 Fashion and Consignment products as of the Closing Date
as described in this Section 2. 
The total purchase price for the Inventory will be approximately
€1,096,060, in the amounts, subject to the adjustments, and on the terms of this
Section 2.

 

a.                                       CB
Classics.  The purchase price for
“CB Classics” products will be €719,595, based upon 90% of estimated original
landed cost of products having an aggregate

 

 

estimated landed cost of
€799,549, as set forth by SKU in attached Exhibit A (excluding
€23,379 in products shipped directly to Sportswear but paid for by
C&B).  A physical count of CB
Classics may be conducted as of the Closing Date, in accordance with the
procedure set forth in Section 2.d.  The purchase price for the CB Classics inventory will be adjusted
up or down to reflect the difference between the estimated original landed cost
set forth above and the actual landed value determined by the physical count
(extended by the unit prices set forth in attached Exhibit A);
provided that such adjustment will only be made if the actual landed value of
CB Classics inventory differs from the estimated landed cost by more than three
percent (3%).

 

b.                                      Spring
2002 Fashion.  The purchase price
for the “Spring 2002 Fashion” products will be a sum equal to
(i) €150,465, approximately 50% of the estimated original landed value
based upon an average landed cost of €13.59 per unit times an estimated 22,137
units, as set forth in attached Exhibit B, plus (ii) an
additional payment equal to fifteen percent (15%) of all revenues received by
Sportswear from sales of Spring 2002 Fashion products made between the Closing
Date and July 31, 2002.  Sportswear
will track all sales of Spring 2002 Fashion products, and by no later than
August 31, 2002, Sportswear will deliver to C&B a full sales report,
including all revenues received on all sales made between the Closing Date and
July 31, 2002.  The additional
payment described in clause (ii) of this Section will be reflected in an
adjustment to the payment next due under Section 6.f below.

 

c.                                       Consignment.  The purchase price for products on
consignment to third party shops (“Consignment” products) will be €226,000,
based upon an average landed cost of €17.40 per unit times an estimated 13,000
units, subject to adjustment as described below.  The actual number of units will be determined by physical count
as of the Closing Date, in accordance with the procedure set forth in Section 2.d.  C&B will use its best reasonable efforts
to dispose of as much old Consignment inventory as possible prior to the
Closing Date.  The purchase price for
Consignment products will be reduced by an amount equal to 40% of the landed
cost of old Consignment products (generally fashion products from Seasons 11
and earlier, and such other products as the parties may agree) remaining on the
Closing Date.

 

d.                                      Physical
Count.  The purchase prices for the
C&B Classic inventory, Spring 2002 Fashion inventory and the Trade Fixtures
(see  Section 5 below) are based upon estimates as of the date
of this Agreement of available remaining items as of the Closing Date.  C&B shall take a physical count of such
items in its Danzas warehouse, Alphen a/d Rijn, Netherlands (“Holland
Warehouse”) during course of packaging the items for shipment to Sportswear.  The physical count will be compared to and
reconciled with (to the extent possible) the listings maintained by C&B on
its Paragon operating system. 
Sportswear shall participate, at its expense, in the counting of these
items.  If the parties agree upon the
final count, the parties will execute an amendment to this Agreement if any
adjustment to the respective purchase prices is required; if no adjustment is
required, the parties will verify such in writing.  If the parties do not agree upon the final count or any
adjustment to respective purchase prices, the matter will be resolved by
arbitration as provided below.  If for
any reason Sportswear does not to participate in the count, C&B will give
written notice setting forth the final count obtained by C&B and any
adjustment to the purchase prices, which will be binding upon Sportswear.  Any adjustments to the purchase prices based
upon the physical count will be reflected in an adjustment to the payment next
due under Section 6.f below.

 

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3.                                       Accounts
Receivable for Fall 2002 Samples. 
The “Accounts” will consist of C&B’s accounts receivable for product
samples sold to its agents as of the Closing Date, which are listed by agent in
attached Exhibit C.  The
aggregate purchase price for the Accounts will be €29,408, subject to
adjustment as follows.  After the
Closing Date, Sportswear will evaluate whether it wishes to continue using
C&B’s current agents.  If Sportswear
decides not to continue using an agent, C&B will accept return of such
agent’s product samples, and will credit Sportswear for the returned
samples.  Any such credit will be
reflected in an adjustment to the payment next due under Section 6.f
below.

 

4.                                       FF&E.  The “FF&E will consist of the furniture,
fixtures and equipment listed in attached Exhibit D, which are
installed in the field with customers or agents who stock and sell C&B
products.  The aggregate purchase price
for the FF&E will be €78,000.

 

5.                                       Trade
Fixtures.  The “Trade Fixtures” will
consist of the trade fixtures listed in attached Exhibit E, which
are currently stored in the Holland Warehouse. 
The aggregate purchase price for the Trade Fixtures will be
approximately €8,360, subject to adjustment based upon a physical count as of
the Closing Date in accordance with the procedure set forth in Section 2.d
and the unit prices set forth in attached Exhibit E.  Any such adjustment will be reflected in an
adjustment to reflected in an adjustment to the payment next due under Section 6.f
below.

 

6.                                       Payment
Schedule.  In consideration for the
funding provided to C&B by Cutter & Buck, C&B has assigned all
rights to payment under this Agreement to Cutter & Buck.  Accordingly, the total purchase price for
the Assets in the sum of €1,211,828 shall be paid by Sportswear to the order of
Cutter & Buck in Euros at the address set forth in Section 16,
attention Stephen S. Lowber, Chief Financial Officer, subject to adjustments,
as follows:

 

a.                                       €127,800
shall be paid upon execution of this Agreement;

 

b.                                      €114,565
shall be paid on or before July 31, 2002;

 

c.                                       €242,365
shall be paid on or before October 31, 2002;

 

d.                                      €242,365
shall be paid on or before January 31, 2003; and

 

e.                                       €242,365
shall be paid on or before April 30, 2003; and

 

f.                                         The
remaining balance of the Purchase Price (in the nominal amount of €242,368,
subject to adjustments) shall be paid on or before July 31, 2003.

 

7.                                       Delivery
Terms.  On the Closing Date, title
to the CB Classics and Spring 2002 Fashion Inventory, and Trade Fixtures will
pass to Sportswear at C&B’s Holland Warehouse, and title to the Consignment
Inventory and FF&E will pass to Sportswear at the then locations of the
Consignment Inventory and FF&E. 
Sportswear will be responsible for any shipment of any Assets to its
warehouse or other destination, at its expense and risk of loss.

 

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8.                                       Books and Records.  Sportswear shall prepare and maintain, in such manner as
will allow its accountants to audit the same in accordance with generally
accepted accounting principles, complete and accurate books of account and
records covering all transactions arising out of or relating to this
Agreement.  Sportswear shall keep all
such books of account, records and documents available after the termination of
this Agreement for at least six (6) years with respect to tax matters and two
(2) years with respect to all other matters. 
C&B shall be given access during business hours (giving due regard
for the impact of a review on Sportswear’s business) to Sportswear’s books and
records relating to the Assets for the purpose of confirming the calculations
required under this Agreement.

 

9.                                       Representations and
Warranties.

 

a.                                       C&B’s Representations
and Warranties.  C&B represents, warrants
and undertakes to Sportswear as follows:

 

i.                                          C&B has all requisite
power and authority to execute and deliver this Agreement, and this Agreement
is valid and binding on C&B in accordance with its terms.

 

ii.                                       Neither the entering into
of this Agreement nor the consummation of the transaction contemplated hereby
will constitute or result in a violation or breach by C&B of any judgment,
order, writ, injunction or decree issued against or imposed upon it, or the
Assets, or will result in a violation of any applicable law, order, rule or
regulation of any governmental authority.

 

iii.                                    C&B is not engaged in or a party to or, to
the knowledge of C&B, threatened with any dispute, action, suit or other
proceedings relating to the Assets. 
C&B has no knowledge of any investigation threatened or contemplated
by any governmental or regulatory authority.

 

iv.                                   C&B
is, and on the Closing Date will be, the sole and exclusive legal and equitable
owner of all right and interest in and has, and on the Closing Date will have,
good and marketable title to the Assets free and clear of the interests and rights
of any other party.  Except for the
Consignment Inventory, which is subject to interests of the consignees, none of
the Assets is, and on the Closing Date none of the Assets will be, subject to
any lease, license, security interest, mortgage, pledge, lien, option, charge,
encumbrance, claim, covenant or restriction of any kind or character.

 

v.                                      The
items constituting the Inventory are, and on the Closing Date will be, of
merchantable quality and fit for their intended purpose, except for such
defects and variations as would pass without objection in the trade.

 

b.                                      Sportswear’s
Representations and Warranties.  Sportswear
represents and warrants to C&B as follows:

 

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i.                                          Sportswear has all
requisite power and authority to execute and deliver this Agreement, and this
Agreement is valid and binding on Sportswear in accordance with its terms.

 

ii.                                       Neither the entering into
of this Agreement nor the consummation of the transaction contemplated hereby
will constitute or result in a violation or breach by Sportswear of any
judgment, order, writ, injunction or decree issued against or imposed upon it,
or will result in a violation of any applicable law, order, rule or regulation
of any governmental authority.

 

10.                                 Conditions Precedent.  C&B’s obligations under this Agreement are conditioned upon
(a) the License Agreement having been executed by Cutter & Buck and
Sportswear, and (b) the Guaranty and Agreement of even date having been
executed by Eurostyle Ltd..  Sportswear’s
obligations under this Agreement are conditioned upon (a) the License
Agreement having been executed by Cutter & Buck and Sportswear, and
(b) the Guaranty and Agreement of even date having been executed by Cutter
& Buck.

 

11.                                 Default and Remedies.

 

a.                                       Default.  Sportswear shall be in default under this Agreement if any of the
following occurs (each an “Event of Default”):

 

i.                                          Sportswear fails to pay or
perform any obligation under this Agreement which is not cured within twenty
(20) calendar days after notice of default from C&B; or

 

ii.                                       Sportswear fails to pay or
perform any material obligation under the License Agreement when due, which is
not cured within any applicable cure period.

 

b.                                      Remedies.  Upon the happening of any one or more Event(s) of Default, the
entire unpaid balance of the Purchase Price, all interest accrued thereon and
all other sums due under this Agreement shall, at the sole option of C&B,
become due and payable without notice or demand.

 

12.                                 Cross Default.  C&B and Sportswear agree that an Event of Default under
either this Agreement or the License Agreement shall constitute a default under
both agreements.  Unless such default is
cured within the applicable cure period (if any), the non-defaulting party
shall have the right, in its sole discretion, to terminate either or both
agreements.

 

13.                                 Indemnity.

 

a.                                       Sportswear’s Indemnity.  Sportswear agrees to indemnify, defend and hold harmless
C&B, Cutter & Buck, and their respective officers, directors,
shareholders, agents, and employees (each an “Indemnified Party”), from and
against any and all obligations, liabilities, claims, demands, suits, actions,
causes of action, damages and expenses (including but not limited to reasonable
attorneys’ fees and costs) (collectively, “Claims”) caused by or arising from
(i) Sportswear’s use, marketing, promotion or sale of the Assets after the
Closing Date;

 

5

 

(ii) material
inaccuracy or incorrectness as of the date hereof or the Closing Date of any
representation or warranty made by Sportswear; (iii) an Event of Default
by Sportswear; or (iv) without prejudice to any of the foregoing
provisions, Claims relating to the business carried on or products supplied by
Sportswear and/or Eurostyle at any time after the Closing Date.  Any claim for indemnification will be made
in accordance with the procedure set forth in Section 13.e.

 

b.                                      C&B’s
Indemnity.  C&B agrees to
indemnify, defend and hold harmless Sportswear and its officers, directors,
shareholders, agents, and employees from and against any and all Claims caused
by or arising from (i) C&B’s manufacture, use, marketing, promotion or
sale of the Assets prior to the Closing Date; (ii)  material inaccuracy or
incorrectness as of the date hereof or the Closing Date of any representation
or warranty made by C&B; (iii) C&B’s default in the performance of
any of its obligations under this Agreement which is not cured within twenty
(20) days after notice from Sportswear; (iv) without prejudice to any of
the foregoing provisions, Claims outstanding at the Closing Date relating to
the business carried on by C&B and/or Cutter and Buck in the Territory
prior to the Closing Date or products supplied by Cutter & Buck and/or
C&B prior to the Closing Date.  Any
claim for indemnification will be made in accordance with the procedure set
forth in Section 13.e.

 

c.                                       Agents.  C&B agrees to indemnify, defend and hold Sportswear
harmless from and against any and all Claims arising from  any agreements or
arrangements between C&B and/or Cutter & Buck and any third party
commercial agent relating to the business carried on by C&B and/or Cutter
& Buck in the Territory prior to the Closing Date; and Sportswear agrees to
indemnify, defend and hold C&B and Cutter & Buck harmless from and
against any and all Claims arising from  any agreements or arrangements between
Sportswear and any third party commercial agent relating to the business
carried on by Sportswear in the Territory after the Closing Date.  Notwithstanding the foregoing, each party
will use its best efforts to minimize or mitigate any such Claim.

 

d.                                      Employees.  C&B shall remain fully liable and
responsible for all obligations and liabilities whatsoever arising in respect
of the period up to and including the Closing Date by virtue of any contracts
of employment, employment relationships, collective agreements or enactments or
statutory provisions relating to employees in force at any time prior to the
Closing Date and C&B shall indemnify and hold Sportswear harmless against
any and all Claims arising in respect thereof. 
C&B also agrees to indemnify, defend and hold harmless Sportswear
from and against any and all Claims that it may suffer or incur to any
employees or former employees of C&B and/or Cutter & Buck or either of
them.  Notwithstanding the foregoing,
Sportswear will use its best efforts to minimize or mitigate any such Claim.

 

e.                                       Indemnification Procedure.  All claims for indemnification will be asserted and
resolved as follows:

 

i.                                          In
the event any Claim in respect of which an indemnified party might seek
indemnity is asserted against or sought to be collected from such indemnified
party, the indemnified party shall deliver a notice (a “Claim Notice”) with
reasonable promptness to the indemnifying party.  The indemnifying party shall notify the indemnified party as soon
as

 

6

 

practicable, but not
longer than ten (10) days after receipt of a Claim Notice (“Notice Period”),
whether the indemnifying party disputes its liability to the indemnified party,
and whether the indemnifying party desires, at its sole cost and expense, to
defend the indemnified party against such Claim.

 

ii.                                       If
the indemnifying party notifies the indemnified party within the Notice Period
that the indemnifying party desires to defend the indemnified party with
respect to the Claim, then the indemnifying party will have the right to
defend, with counsel reasonably satisfactory to the indemnified party, at the
sole cost and expense of the indemnifying party, such Claim by all appropriate
proceedings, which proceedings must be vigorously and diligently prosecuted by
the indemnifying party to a final conclusion or may be settled at the
discretion of the indemnifying party; provided, however, that the indemnifying
party shall not be permitted to effect any settlement without the written
consent of the indemnified party unless (A) the sole relief provided in
connection with such settlement is monetary damages that are paid in full by
the indemnifying party, (B) such settlement involves no finding or
admission of any wrongdoing, violation or breach by any indemnified party of
any right of any other person or entity, or any laws, contracts or governmental
permits, and (C) such settlement has no effect on any other claims that
may be made against or liabilities of any indemnified party.  After giving the notice referred to in the
first sentence of this clause ii, the indemnifying party will have full
control of such defense and proceedings, including any compromise or settlement
thereof (except as provided in the preceding sentence); provided, however, that
the indemnified party may, at its sole cost and expense, at any time prior to
the indemnifying party’s delivery of the notice referred to in the first sentence
of this clause ii, file any motion, answer or other pleadings or take any
other action that the indemnified party reasonably believes to be necessary or
appropriate to protect its interests; and provided further, that if requested
by the indemnifying party, the indemnified party shall, at the sole cost and
expense of the indemnifying party, provide reasonable cooperation to the
indemnifying party in contesting any Claim that the indemnifying party elects
to contest.  The indemnified party may
participate in, but not control, any defense or settlement of any Claim
controlled by the indemnifying party pursuant to this clause ii and except
as provided in the first sentence of this clause ii and the preceding
sentence, the indemnified party will bear its own costs and expenses with
respect to such participation. 
Notwithstanding the foregoing, the indemnified party may take over the
control of the defense or settlement of a Claim at any time if it irrevocably
waives its right to indemnity with respect to such Claim.

 

iii.                                    If
the indemnifying party fails to notify the indemnified party within the Notice
Period that the indemnifying party desires to defend the Claim pursuant to this
Section or if the indemnifying party gives such notice but fails to prosecute
vigorously and diligently or settle the Claim (in each case in accordance with
clause ii above), then the indemnified party will have the right to
defend, at the sole cost and expense of the indemnifying party, the Claim by
all appropriate proceedings, which proceedings will be prosecuted by the
indemnified party in a reasonable manner and in good faith or will be settled
at the discretion of the indemnified party (with the consent of the
indemnifying party, which consent will not be unreasonably withheld).  Subject to the immediately preceding
sentence, the indemnified party will have full control of such defense and
proceedings, including any compromise or settlement thereof, provided, however,
that if requested by the indemnified party, the indemnifying party

 

7

 

will, at the sole cost
and expense of the indemnifying party, provide reasonable cooperation to the
indemnified party and its counsel in contesting any Claim which the indemnified
party is contesting.  The indemnifying
party may participate in, but not control, any defense or settlement controlled
by the indemnified party pursuant to this clause iii, and the indemnifying
party will bear its own costs and expenses with respect to such participation.

 

f.                                         Limitation on Liability.  Notwithstanding any other provision of this Agreement, to the
fullest extent permitted by applicable law, each party’s liability for
Claims, whether in contract, tort (including negligence) or otherwise, under
this Agreement, the License Agreement, or otherwise, regardless of the cause of
the Claim or the nature of the legal or equitable right claimed to have been
violated, shall not exceed: 
(i) €3,500,000 per Claim for Claims covered by insurance; and
(b) $1,000,000 in the aggregate for Claims not covered by insurance
(excluding any Claims for the Purchase Price payable under this Agreement or
the License Fees payable under the License Agreement).

 

g.                                      Survival.  The provisions of this Section 13 shall
survive the expiration, termination, breach or alleged breach of this
Agreement.

 

14.                                 Default Interest.  If Sportswear fails to pay any amount when due under this
Agreement, such unpaid amount shall thereafter bear interest, until paid in
full, at the rate of one percent (1%) per month, or the maximum rate allowed by
applicable law, whichever is less.

 

15.                                 Expenses.  Each party to this Agreement will bear its
respective expenses, costs and fees incurred in connection with the preparation
and execution of this Agreement and the contemplated transactions, including
all fees and expenses of agents, representatives, counsel, and accountants.

 

16.                                 Notices.  All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt),
or (b) sent by facsimile transmission (with written confirmation of
receipt), or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service or mailed by registered mail (in each
case, return receipt requested), to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):

 

	
  C&B:

  	
   

  	
  Cutter & Buck
  (Europe) BV

  
	
   

  	
   

  	
  c/o Cutter & Buck
  Inc.

  
	
   

  	
   

  	
  Attention:  President

  
	
   

  	
   

  	
  2701 First Avenue,
  Suite 500

  
	
   

  	
   

  	
  Seattle, Washington
  98121

  
	
   

  	
   

  	
  Facsimile:  (206) 448-0589

  

 

8

 

	
  With copy to:

  	
   

  	
  Michael E. Morgan

  
	
   

  	
   

  	
  Lane Powell Spears Lubersky LLP

  
	
   

  	
   

  	
  1420 Fifth Avenue, Suite 4100

  
	
   

  	
   

  	
  Seattle, Washington  98101-2338

  
	
   

  	
   

  	
  Facsimile:  (206) 223-7107

  
	
   

  	
   

  	
   

  
	
  Sportswear:

  	
   

  	
  Cutter &
  Buck Sportswear (Europe) Limited

  
	
   

  	
   

  	
  Attention:  Alan Dwyer

  
	
   

  	
   

  	
  Fitz’s Boreen, Mallow
  Road

  
	
   

  	
   

  	
  Cork, Ireland

  
	
   

  	
   

  	
  Facsimile:  353-21-4211166

  
	
   

  	
   

  	
   

  
	
  With copy to:

  	
   

  	
  John Dwyer

  
	
   

  	
   

  	
  Ronan Daly Jermyn

  
	
   

  	
   

  	
  12 South Mall

  
	
   

  	
   

  	
  Cork, Ireland

  
	
   

  	
   

  	
  Facsimile:  353-21-4802790

  

 

17.                                 Confidentiality.  The parties understand and agree that all
financial information and other information provided by either party to the
other is proprietary and confidential information.  Each party agrees to keep all such information in strict
confidence and not to disclose it to any third party without the prior written
consent of the other party.  Each party
further agrees that all information and materials which result from obligations
performed hereunder shall be and remain the property of the disclosing party
and, upon termination of this Agreement or earlier request, shall be delivered
to the disclosing party.

 

18.                                 Further Cooperation.  C&B and Sportswear further agree they will execute such other
documents and take such other actions as may be necessary or desirable to
complete the transfer of the Assets, and to satisfy the obligations described in
this Agreement, and that this Agreement and the transactions and undertakings
contemplated by this Agreement may and will be carried out and consummated in
the most expeditious and convenient manner.

 

19.                                 Assignment.  Subject to the balance of this
Section, this Agreement binds and inures to the benefit of the parties, their
successors and assigns.  Sportswear may
not assign or delegate any right or duty under this Agreement (voluntarily,
involuntarily, by operation of law, by transfer of control or otherwise)
without C&B’s prior written consent. 
Sportswear agrees that C&B may assign to Cutter & Buck its
rights under this Agreement (including without limitation its right to receive
payment of the Purchase Price), and Cutter & Buck may further assign such
rights to any subsidiary or affiliate entity, at any time without further
consent from Sportswear.

 

20.                                 Governing Law.  This Agreement shall be governed and construed in accordance with
the laws of the State of Washington without giving effect to any choice or
conflict of law provision or rule (whether of the State of Washington or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Washington.

 

9

 

21.                                 Dispute Resolution.  The parties agree that it is in their mutual interest to
settle any dispute between themselves by the most efficient means available to
them.  To this end, either party may
demand arbitration of a dispute by notice to the other party. Arbitration shall
be the exclusive remedy, shall be binding and shall not be subject to appeal
under any circumstances.  Within thirty
(30) days of receipt of such notice, the receiving party shall complete and
submit to the Seattle Office of Judicial Arbitration & Mediation Services,
Inc. (“J.A.M.S.”), on behalf of both parties, the Submission Agreement then
used by J.A.M.S. setting forth the agreement of the parties as to the rules and
procedures to be followed at the arbitration hearing.  Should the parties fail to agree on the content of the Submission
Agreement, the arbitration shall nonetheless proceed under the direction of a
single arbitrator designated by the Seattle Office of J.A.M.S. and according to
the rules for binding arbitration then followed b the Seattle Office of
J.A.M.S.  In the arbitral award, the
arbitrator shall award special damages to a party if the other party has, in
the judgment of the arbitrator, protracted resolution of the dispute.  The prevailing party (as determined by the
arbitrator) shall be entitled to recovery of its reasonable costs and
attorneys’ fees from the other party. 
Otherwise, the parties shall divide the costs of the arbitration
equally.  The arbitration award may be
entered as a final judgment and enforced in any court having jurisdiction.  C&B and Sportswear specifically waive
any rights they might otherwise have to contest entry and enforcement of the
arbitration award in any jurisdictions selected by the prevailing party.

 

22.                                 Attorneys’ Fees and Costs.  In the event of any
dispute arising out of or relating to this Agreement, whether suit or other
proceeding is commenced or not, and whether in mediation, arbitration, at
trial, on appeal, in administrative proceedings or in bankruptcy (including
without limitation any adversary proceeding or contested matter in any
bankruptcy case), the prevailing party shall be entitled to recover its costs
and expenses incurred, including reasonable attorneys’ fees.  If there
is a lawsuit, Sportswear agrees to submit to the jurisdiction of the Superior
Court of Washington for King County.

 

23.                                 Severability.  If any portion of this Agreement shall be
held invalid or inoperative, then, so far as is reasonable and possible, the
remainder of this Agreement shall be considered valid and operative, and effect
shall be given to the intent manifested by the portion held invalid or
inoperative.

 

24.                                 Entire Agreement. 
This Agreement, including the attached Exhibits, constitutes the entire
agreement of the parties with respect to the subject matter hereof, and
supersedes all previous agreements by and between the parties as well as all
prior proposals, oral or written, and all prior negotiations, conversations or
discussions between the parties related to this Agreement.  Each of the parties acknowledges that it has
not been induced to enter into this Agreement by any representations or
statements, oral or written, not expressly contained herein.

 

25.                                 Execution
in Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute the same document, whether or not all parties execute
each counterpart.

 

10

 

26.                                 Delivery by Facsimile.  The
parties agree that counterparts of this Agreement may be executed and delivered
by facsimile, followed by personal or other delivery of original signed
counterparts.

 

27.                                 General.  Each party is an independent
contractor.  Neither party is an agent
of the other, and neither party has any right to bind or obligate the
other.  This Agreement may not be
amended or modified except in writing signed by authorized officers of C&B
and Sportswear.  If any provision of
this Agreement is held invalid, all other provisions shall remain in full force
and effect.  The headings used in this
Agreement are for convenience only, and do not affect, limit or control the
meaning, effect or application of any provision of this Agreement.  No consent or waiver (express or implied) by
any party to or of any breach or nonperformance will be deemed to be a consent
or waiver to or of any other breach or nonperformance of the same or any other
obligation under this Agreement.  This
Agreement may be executed in counterparts.

 

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.

 

EXECUTED as of the date first written above.

 

	
  CUTTER & BUCK (EUROPE) BV

  	
   

  	
  CUTTER & BUCK SPORTSWEAR (EUROPE) LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
  Its

  	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Its

  	
   

  
							

 

11Exhibit
10.2

 

CUTTER & BUCK,

701 North 34th Street,
Suite 400

Seattle, WA 98103

1-800-929-9299

 

September 25, 2002

 

 

Mr. Jim McGehee

Executive Vice President
Specialty & Corporate SBUs

Cutter & Buck,
Inc.

Seattle, WA 98103

 

Dear Jim,

 

Because the Company is
experiencing a turbulent situation, the Board of Directors recently authorized
a special Retention Incentive Program for a few employees who are key to the
Company’s future success.

 

You are certainly among
those key people, and I am pleased to tell you that you have been granted the
following:

 

Retention
Incentive

 

If you are employed by
the Company on March 20, 2004, the Company will grant you a bonus of
$218,000.  This payment will be paid as
soon after March 20, 2004 as practicable; or if the Company consummates a
merger, consolidation, sale of all or substantially all of the Company’s assets
or liquidation, before then, 50% will be due upon consummation of the
transaction, and 50% six months thereafter.

 

The purpose of this
retention incentive payment is to entice you to stay with Cutter &
Buck in spite of the turbulence, and to help it get to a new level of
professionalism and profitability.

 

Severance
Payment

 

Alternatively, if the
Company terminates your employment between now and March 20, 2004 for any
reason other than for cause, you will be paid a severance benefit in an amount
of $120,000, contingent upon your execution at that time of a Severance
Agreement in substantially the form of Exhibit A.  As you can see, that Agreement generally
provides that you will release the Company from any and all claims arising from
your employment or its termination through the date of the Agreement, and will
agree not to solicit other employees, not to disparage the Company, to keep
Company information confidential, and that the severance payment is in lieu of
any other severance arrangement obligation. 
The severance benefit will be paid in a single lump sum after the
effective date of your release.  You
will not receive this benefit if you resign or if you are terminated for
“cause” as defined in the attached Exhibit B.  The purpose, of this severance arrangement
is to enable you to concentrate on your work with us, rather than worrying
about your job security.

 

 

Stock
Option

 

You were granted an
option to purchase 20,000 shares of Company Common Stock as of
September 20, 2002 at $3.31 per share, the closing price per share of
Company Common Stock on that date as reported by Nasdaq.  These options will fully vest on the earlier
of (i) March 20, 2004, or (ii) upon the consummation of a
merger, consolidation, sale of all or substantially all of the Company’s
assets, or liquidation by the Company.

 

The purpose of this grant
is to enable you to share in the results of the difficult work the Company is
doing to recover and to position itself for the future.  Or, if the Company consummates a merger,
consolidation, sale of substantially all assets or liquidation, to give you an
incentive to align your interests directly with those of our shareholders.

 

You will receive the
paperwork on the stock options shortly. 
Other terms of the Retention Incentive Program are set forth in the
attached Exhibit C.

 

I hope this award enables
you to do your best work during this period, without worrying about the
future.  We need you and want you to be
at your best; that’s why you were chosen for this Program.

 

Because only a few people are eligible to participate in
this Program, it is important that you do not discuss it.  If you have questions or want discussion,
please talk with Joni or Fran.

 

Change
in Control Agreement

 

In addition to the
Retention Incentive Program, our Board of Directors has amended your Change in
Control Agreements and Confidentiality and Non-Competition Agreements,
generally, (i) to decrease the effective control thresholds that would
trigger a change in control from 50% to 25%, (ii) to add the occurrence of
certain other events (i.e. sale of substantially all of the Company’s assets
and change in a majority of the Company’s Board of Directors) that would trigger
a change in control, (iii) to increase the protection period following a
change in control from one year to eighteen months, and (iv) to increase
your severance payment from 100% of annual base salary to 150% of annual base
salary (and correspondingly, to extend the obligations set forth in your
Confidentiality and Noncompetition Agreement). 
In addition to these changes, we have also amended the definition of
“Disability” and “Cause” to conform with applicable law.  Attached as Exhibit D is a copy
of your amended Change in Control Agreement (including your amended
Confidentiality and Non-Competition Agreement) marked with all the
revisions.  Please let Joni or Fran know
if you have any questions or concerns.

 

In any undertaking,
success depends on the vision, the will, the efforts, and the integrity of key
people.  You and your work really
matter, and I thank you and appreciate your contribution.

 

CUTTER & BUCK

 

 

	
  /s/  Frances M. Conley

  	
   

  
	
  Chief Executive Officer

  

 

2

 

EXHIBIT
A

 

SEVERANCE
AGREEMENT (INCLUDING RELEASE)

 

The employment of
[Employee name] (“[   ]”) with Cutter & Buck Inc. (“Cutter
& Buck”) has ended.  This Severance
Agreement (“Agreement”) acknowledges [    ]’s election to accept
a separation payment from Cutter & Buck in an amount equal to
[$         ], less all lawful
deductions.  In consideration of the
separation payment, [      ] and Cutter &
Buck desire to settle and resolve all possible disputes between them arising
out of [    ‘s] employment and to memorialize their
agreement regarding certain post-termination obligations assumed by
[           ].  It is, therefore, agreed as follows:

 

1.                                       Confidentiality
of Agreement; Agreement Not Admission. 
[         ] agrees to keep
this  Agreement  confidential and not to disclose any
information contained in this Agreement, including the existence or substance
of the separation payment, except to [     ]’s personal attorney and tax or financial advisor.  [     ] agrees to
inform each individual to whom disclosure is made under this paragraph of the
confidentiality provisions in this Agreement. 
This Agreement is not an admission by Cutter & Buck that it (or any
of its employees) has violated any law or failed to fulfill any duty to
[         ].

 

2.                                       Termination
of Employment.  Cutter & Buck and
[         ] agree that all aspects
of [         ]’s employment ceased
effective [Date  ]. 
[         ] represents that
he has not knowingly participated in any wrongdoing, misrepresentation, or
breach of any duty to Cutter & Buck or to any shareholder, investor,
customer, vendor, employee or governmental regulator.

 

3.                                       Separation
Payment.  In consideration of
[         ]’s release and
performance as set forth below, Cutter & Buck agrees to pay
[         ] separation pay equal
to
[               ],
subject to all lawful deductions. 
[         ] acknowledges that
s/he received all wages, benefits or other compensation due to him/her from
Cutter & Buck and that this separation payment is in excess of any wages,
benefits or other compensation due to him/her from Cutter & Buck.

 

4.                                       Release. 
[         ] accepts Cutter
& Buck’s undertakings in this Agreement as full settlement of any and all
claims, known or unknown, arising out of or related to [         ]’s
employment with Cutter & Buck, including but not limited to any claims of
lost wages, lost benefits, discrimination, retaliation, or wrongful
discharge.  These claims are examples,
not a complete list, of the released claims, as it is the parties’ intent that
[         ] release any and all
claims, of whatever kind or nature, in exchange for the severance arrangements
set forth in Paragraph 3 above. 
[         ] realizes this
constitutes a full and final settlement of any and all such claims, and except
for obligations arising under this Agreement,
[         ] hereby also releases
Cutter & Buck and its subsidiaries and affiliates (together with their
respective officers, directors, employees, attorneys, accountants, agents,
successors, assigns, and anyone else against whom
[         ] could assert a claim
based on his/her employment with Cutter & Buck from and against any
liability to [         ] (or to
anyone else [         ] has power
to bind in this settlement) arising out of or in connection with the foregoing
claims or matters.

 

5.                                       ADEA
Release. 
[         ] acknowledges
that s/he is knowingly and voluntarily waiving and releasing any rights that he
may have under the Age Discrimination in Employment Act (“ADEA”). 
[         ] also
acknowledges that the consideration given for this Agreement is in addition to
anything of value to which
[         ] was already
entitled. 
[         ] further acknowledges
that s/he has been advised by this writing, as required by the ADEA, that (a)
this Agreement does not apply to any rights or claims that may arise after the
execution date of this Agreement; (b)
[         ] should consult with an
attorney prior to executing this Agreement; (c)
[         ] has
[               
] (   ) days to consider this Agreement (although
[         ] may choose to
voluntarily execute this Agreement earlier and to waive such period of
consideration); (d) [         ]
has seven (7) days following the execution of this Agreement to revoke the
Agreement; and (e) this Agreement will not be effective until the date upon
which the revocation period has expired, which will be the eighth day after
this Agreement is executed by
[         ] (“Effective
Date”).  Nothing in this Agreement
prevents or precludes [         ]
from challenging or seeking a determination in good faith of the validity of
this waiver under the ADEA, nor does it impose any condition precedent,
penalties or costs for doing so, unless specifically authorized by federal law.

 

3

 

6.                                       Return
of Company Property. 
[         ] represents that
on or before his/her last day of work, s/he has returned to Cutter & Buck
all property and equipment furnished to or prepared by
[         ] in the course of or
incident to his/her employment by Cutter & Buck, including, without
limitation, all books, manuals, records, reports, notes, contracts, lists, and
other documents or materials, or copies thereof (including computer files), the
master key, company credit card, computer equipment, agreements, and all other
proprietary information belonging, or relating to the business of Cutter &
Buck or any affiliate. 
[         ]’s obligation
under this Agreement precludes him/her from keeping any copies of Cutter &
Buck’s property or documents without Cutter & Buck’s express written
permission for each such item of which s/he wishes to retain a copy.

 

7.                                       Other
Performances Required of
[         ]. 
[         ] warrants and
represents that s/he has not previously and will not in the future disclose or
use confidential information related to Cutter & Buck’s customers,
personnel, designs, pricing, marketing plans, budgets, strategies, financial or
other proprietary information that is not otherwise available to the general
public, including but not limited to information covered under the Uniform
Trade Secrets Act, RCW 19.108 et seq., and that s/he will at all times continue
to keep all such information confidential. 
[         ] agrees to make
himself reasonably available for, and cooperate with, Cutter & Buck in
connection with transitioning his/her prior job duties and providing
information in connection with his prior job duties.  [         ] further
agrees that he will not disparage Cutter & Buck, its officers, board
members, directors, employees, customers or agents in any way now or in the
future. 
[         ] further agrees
that for a period of twelve (12) months following the Effective Date of this
Agreement, he will not, directly or indirectly, for himself or any other person
or entity:  (i) induce or attempt to
induce any employee, consultant, independent sales representative or
independent contractor of Cutter & Buck to leave the employ of or terminate
his, her or its contract with Cutter & Buck; (ii) in any way interfere with
the relationship between Cutter & Buck and any employee, consultant,
independent sales representative or independent contractor of Cutter &
Buck; (iii) call on, reveal the name of, or otherwise solicit, accept business
from or attempt to entice away from Cutter & Buck any actual or identified
potential customer of Cutter & Buck, nor will s/he assist others in doing
any prohibited act identified above.

 

8.                                     Agreement
to Repay.  These obligations of
confidentiality, transition cooperation, nondisparagement, and nonsolicitation
are material parts of the consideration and inducement to Cutter & Buck to
provide the Separation Payment set forth herein.  [         ]
understands and acknowledges that the provisions in this Paragraph 8 are
necessary and reasonable to protect Cutter & Buck in the conduct of its business
and that compliance with this Paragraph will not prevent him/her from pursuing
his/her livelihood.  However, should any
court find that any provision of this Paragraph is unreasonable, invalid or
unenforceable, whether in period of time or otherwise, then in that event the
parties hereby agree that this Paragraph shall be interpreted and enforced to
the maximum extent which the court deems reasonable.  If [      ] breaches any provision
of this Agreement or if any of [     ]’s
representations in the Agreement is false,
[         ] further understands
and agrees to repay the Separation Payment and to pay Cutter & Buck’s
reasonable attorney fees, costs and damages that result from
[     ]’s breach.

 

9.                                       General.  This Agreement (i) contains the entire understanding
of the parties with respect to the subject matter covered; (ii) supersedes all
prior or contemporaneous understandings; (iii) may only be amended in a written
instrument signed by both parties; (iv) is binding on and inures to the benefit
of the heirs, successors and assigns of each party; and (v) shall be governed
by the laws of the State of Washington, except to the extent superseded by
federal law, including the Employee Retirement Income Security Act of 1974.  Each party warrants that he, she or it is
the true party in interest, and fully authorized to execute this Agreement.

 

10.                                 Knowing
and Voluntary Waiver. 
[         ] acknowledges
that s/he has been advised to consult with an attorney, and has had the
opportunity to do so, before signing this Agreement, which
[         ] has been given a
reasonable period of time to consider.

 

11.                                 Payment
of Separation Payment.  The separation
payment promised in paragraph 3 will be paid to
[         ] in a single check on
the eighth day after [         ]’s
execution of this Agreement.

 

4

 

PLEASE READ
CAREFULLY.  THIS IS A VOLUNTARY
AGREEMENT THAT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

 

 

	
  Date:

  	
   

  	
   

  	
  [                           ]

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Cutter & Buck Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Frances M. Conley

  
	
   

  	
   

  	
   

  	
  Title:  Chief Executive Officer

  

 

5

 

EXHIBIT
B

 

DEFINITION
OF “CAUSE”

 

Each of the following
shall constitute “Cause” for termination, resulting in ineligibility for any
severance benefit:

 

(1)                                  any
violation by a participant in the program of any material obligation under the
Severance Agreement;

 

(2)                                  conviction
for commitment of a felony, or any crime involving dishonesty or moral
turpitude;

 

(3)                                  any
violation of law which has a material adverse effect on the Company;

 

(4)                                  habitual
abuse of alcohol or a controlled substance under circumstances that adversely
affect the participant’s performance of his or her duties in any way;

 

(5)                                  theft
or embezzlement from the Company;

 

(6)                                  repeated
unexcused absence from work;

 

(7)                                  Disability
of participant, which shall mean any physical, mental or other health condition
which renders the participant unable to perform the essential functions of his
or her position with or without reasonable accommodation;

 

(8)                                  Death
of participant; and

 

(9)                                  repeated
failure or refusal by participant to carry out the reasonable directives,
orders or resolutions of the Company’s Board of Directors or any supervisor,
manager, director, or officer to whom he or she reports.

 

6

 

EXHIBIT
C

 

GENERAL
TERMS OF RETENTION INCENTIVE PROGRAM

 

1.                                       The
Compensation Committee of the Board of Directors of the Company (the
“Committee”) shall administer the Retention Incentive Program and adopt rules
and regulations to implement the Retention Incentive Program. Decisions of the
Committee shall be final and binding on all parties who have an interest in the
Retention Incentive Program.  The
Committee may at any time amend the Retention Incentive Program, provided that
such action shall not adversely affect the participants in the Retention
Incentive Program.

 

2.                                       No
eligible employee shall earn any portion of a cash payment under the Retention
Incentive Program unless and until the specific date set forth in this
Program.  If an eligible employee ceases
to be employed by either the Company or one or more of its subsidiaries for any
reason on or before the date when the cash payment is due, then he or she shall
not earn or receive any cash payment under the Retention Incentive Program.

 

3.                                       No
cash payment under the Retention Incentive Program shall actually be funded,
set aside or otherwise segregated prior to payment.  The obligation to pay the cash payment under the Retention
Incentive Program shall at all times be an unfunded and unsecured obligation of
the Company.  Retention Incentive
Program participants shall have the status of general creditors and shall look
solely to the general assets of the Company for the payment of their cash
payments.

 

4.                                       No
Retention Incentive Program participant shall have the right to alienate,
pledge or encumber his or her interest in the Retention Incentive Program, and
such interest shall not (to the extent permitted by law) be subject in any way
to the claims of the employee’s creditors or to attachment, execution or other
process of law.

 

5.                                       No
action of the Company in establishing the Retention Incentive Program, no
action taken under the Retention Incentive Program by the Committee and no
provision of the Retention Incentive Program itself shall be construed to grant
any person the right to remain in the employ of the Company or its subsidiaries
for any period of specific duration. 
Rather, each employee will be employed “at will,” which means that
either such employee or the Company may terminate the employment relationship
at any time and for any reason, with or without cause.

 

6.                                       This
Retention Incentive Program document is the full and complete agreement between
the eligible employees and the Company on the terms described herein.

 

7

 

EXHIBIT
D

 

CHANGE IN CONTROL
AGREEMENT

FOR

 

(As amended September 18,
2002)

 

This Agreement is
entered into this 9th day of September, 2002, by and between Cutter &
Buck Inc.  (the “Company”) and
                                      
(“Executive”).  Executive is an at-will
employee of the Company.  The parties
wish to provide Executive with severance benefits if Executive’s employment is
terminated in connection with a change in control of the Company.  The Company is willing to provide such
benefits if Executive enters into the Company’s form of Confidentiality and
Non-Competition Agreement for executive officers.

 

NOW, THEREFORE, in
consideration of the foregoing recitals and the covenants and conditions
contained herein, the parties hereby agree as follows:

 

1.                                       CHANGE
IN CONTROL.

 

(a)                                  If,
within the period commencing 90 days prior to the date of occurrence (the
“Event Date”) of a Control Event and ending on the first anniversary of the
Event Date (the “Window”), the Company terminates Executive’s employment (other
than for Cause) or Executive resigns for Good Reason, the Company shall pay to
Executive the Severance Payment in immediately available funds.  If the termination occurs prior to the
Control Event, the Severance Payment is due on the twentieth business day
following the Event Date; if the termination occurs on or subsequent to the
Event Date, the Severance Payment is due on the twentieth business day
following the date of termination (the “Termination Date”).

 

(b)                                 The
Severance Payment shall be equal to 100% [150% if one of the top eight
executives] of Executive’s annual base salary as of the Termination Date.  If the Termination Date occurs during the
Window but prior to the Control Event, the Severance Payment shall be reduced
by the sum of any severance payments previously received by Executive from the
Company (but not below zero).

 

(c)                                  Each
of the following shall constitute a “Control Event”:

 

(1)                                  the
acquisition of Common Stock of the Company (the “Common Stock”) by any “Person”
(as such term is defined in the Rights Agreement dated as of November 20,
1998 between the Company and Mellon Investor Services LLC (the “Rights Plan”),
together with all Affiliates and Associates (as such terms are defined in the
Rights Plan) of such Person, such that such Person becomes, after the date of
this Agreement, the Beneficial Owner (as defined in the Rights Plan) of a
majority of the shares of Common Stock then outstanding, but shall not include
the Company, any subsidiary of the Company, any employee benefit plan of the
Company or of any subsidiary of the Company or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any
such employee benefit plan; or

 

8

 

(2)                                  the
approval by the shareholders (or, if later, approval by the shareholders of any
Person) of any merger, consolidation, reorganization or other transaction
providing for the conversion or exchange of more than fifty percent (50%) of
the outstanding shares of Common Stock into securities of any Person, or cash,
or property, or a combination of any of the foregoing.

 

(d)                                 Each
of the following shall constitute “Good Reason”, provided that it occurs during
the Window:

 

(1)                                  the
material diminution of Executive’s position, duties, responsibilities or status
with the Company or its successor, as compared with the position, duties,
responsibilities or status of Executive with the Company immediately prior to
the Event Date, except in connection with the termination of Executive for
Cause;

 

(2)                                  the
Company’s assignment of Executive on a substantially full-time basis to work at
a location where the distance between the new location and Executive’s
principal residence is at least 20 miles greater than the distance between the
former location and such residence; provided, however, that this paragraph
shall not apply to travel in the furtherance of the Company’s business to an
extent substantially consistent with Executive’s business travel obligations as
of the date hereof;

 

(3)                                  the
Company’s failure to obtain an assumption of the obligations of the Company to
perform this Agreement by any successor to the Company;

 

(4)                                  any
reduction in Executive’s base salary, or a material reduction in benefits
payable to Executive or failure of the Company to pay Executive any earned
salary, bonus or benefits except with the prior written consent of Executive;

 

(5)                                  the
exclusion or limitation of Executive from participating in some form of
variable compensation plan which provides the Executive the opportunity to
achieve a level of total compensation (base salary plus variable compensation)
consistent with what the Executive had the opportunity to earn at the Event
Date; or

 

(6)                                  any
demand by any director or officer of the Company that Executive take any action
or refrain from taking any action where such action or inaction, as the case
may be, would violate any law, rule, regulation or other governmental
pronouncement, court order, decree or judgment, or breach any agreement or
fiduciary duty.

 

(e)                                  Each
of the following shall constitute “Cause”:

 

(1)                                  any
violation by Executive of any material obligation under this Agreement or the attached
Confidentiality and Non-Disclosure Agreement;

 

(2)                                  conviction
for commitment of a felony;

 

9

 

(3)                                  any
violation of law which has a material adverse effect on the Company;

 

(4)                                  habitual
abuse of alcohol or a controlled substance;

 

(5)                                  theft
or embezzlement from the Company;

 

(6)                                  repeated
unexcused absence from work for reasons unrelated to short-term illnesses;

 

(7)                                  Disability
of Executive (as defined below); and

 

(8)                                  repeated
failure or refusal by Executive to carry out the reasonable directives, orders
or resolutions of the Company’s Board of Directors or any officer to whom he
reports.

 

(f)                                    “Disability”
shall mean any physical, mental or other health condition which substantially
impairs Executive’s ability to perform his assigned duties for 90 days or more
in any 180 day period or that can be expected to result in death.  Any disagreement as to whether Executive is
disabled shall be resolved by a physician selected by the Company after an
examination of Executive.  Executive
hereby consents to such physical examination and to the examination of all
medical records of Executive necessary, in the judgment of the examining
physician, to make the determination of disability.

 

(g)                                 Notwithstanding
any other provision of this Agreement to the contrary, in the event that any
severance or other payment, benefit or right payable or accruing to Executive
hereunder or under any of the Company’s benefit plans (the “Benefit Plans”)
would constitute a “parachute payment” as defined in Section 280G(b)(2) of
the Internal Revenue Code of 1986, as amended (the “Code”), then the total
amount of severance and other payments or benefits payable to Executive
hereunder and under the Benefit Plans which is deemed to constitute a
“parachute payment” shall not exceed and shall, if necessary, be reduced to an
amount (the “Revised Severance Payment”) equal to 2.99 times Executive’s “base
amount” as defined in Code Section 280G(b)(3).  In the event of a disagreement between the Company and Executive
as to whether the provisions of Code Section 280G are applicable or the
amount of the Revised Severance Payment, such determination shall be made by
the Company’s independent public accountants or, if such firm is unable or
unwilling to render such a determination, then by a law firm mutually
acceptable to Executive and the Company. 
All costs relating to such determination shall be borne by the
Company.  The Company and the Executive
shall cooperate in good faith to make the determination required by this
Section 1(g) by mutual agreement not later than the later of:  (i) the fifth day preceding the date
that the Severance Payment is or would be due or (ii) the earlier of
(x) the tenth day following the expiration of any period of accelerated
vesting of options to purchase the Company’s Common Stock provided by
Section 5(n) of the Benefit Plan or (y) the tenth day following the
date of exercise by Executive of his or her last remaining option which was
exercisable solely due to the application of Section 5(n) of the Benefit
Plan.  Pending the final calculation of
the Severance Payment or Revised Severance Payment, the Company shall pay the
amounts described under subsection (b) above at the time and in the manner
provided herein; provided that, pending such determination, such payments

 

10

 

shall be reduced by such
amounts as the Company estimates in good faith to be necessary to satisfy its
tax (including excise tax) withholding obligations and effect the reduction in
the amount of the Severance Payment, as contemplated by this
subsection 1(g).  The aggregate
amount of any compensation actually paid or provided to Executive under the
terms of this Agreement and in excess of the Revised Severance Payment shall be
deemed, to the extent of such excess, a loan to Executive payable upon demand
and bearing interest at the rate of 8% per annum.

 

2.                                       CONFIDENTIALLY
AND NON-COMPETITION AGREEMENT.  In
consideration of the obligations undertaken by the Company pursuant to this
Agreement, contemporaneously with the execution of this Agreement, Executive
and the Company shall enter into the form of Confidentiality and
Non-Competition Agreement attached hereto as EXHIBIT A and each agreement
shall be effective only if both agreements have been executed.

 

3.                                       TERM
OF AGREEMENT.  The Company’s obligations
under Section 1 of this Agreement shall expire with respect to Control
Events occurring on or after the first anniversary of the date of this
Agreement unless the term hereof is extended by the Board of Directors of the
Company by a majority vote of those members of the Board who are not parties to
this or a similar agreement.

 

4.                                       AT
WILL EMPLOYMENT.  Unless and to the
extent otherwise agreed by the Company and Executive in a separate written
employment agreement, Executive’s employment shall be “at will”, with either
party permitted to terminate the employment at any time, with or without
cause.  No term of any employment agreement
between the Company and Executive shall be construed to conflict with, lessen
or expand the obligations of the parties under this Agreement.

 

5.                                       NOTICES.  All notices and other communications called
for or required by this Agreement shall be in writing and shall be addressed to
the parties at their respective addresses stated below or to such other address
as a party may subsequently specify by written notice and shall be deemed to
have been received (i) upon delivery in person, (ii) five days after
mailing it by U.S.  certified or
registered mail, return receipt requested and postage prepaid, or
(iii) two days after depositing it with a commercial overnight carrier
which provides written verification of delivery:

 

 

	
  To the Company:

  	
  701 N. 34th Street,
  Suite 400

  
	
   

  	
  Seattle, Washington
  98103

  
	
   

  	
  Attention:  Chief Executive Officer

  
	
   

  	
   

  
	
  To Executive:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

6.                                       WITHHOLDING.  Except as described in subsection 1(g)
of this Agreement, all payments due to and all benefits to be provided to
Executive hereunder shall be subject to reduction for any applicable
withholding taxes, including excise taxes.

 

11

 

7.                                       ASSIGNMENT.  Executive’s rights and duties hereunder are
personal to Executive and are not assignable to others, but Executive’s
obligations hereunder will bind his heirs, successors, and assigns.  The Company may assign its rights under this
Agreement in connection with any merger or consolidation of the Company or any
sale of all or any portion of the Company’s assets (including, without
limitation, any division or product line), provided that any such successor or
assignee expressly assumes in writing the Company’s obligations hereunder.

 

8.                                       NO
DUTY TO MITIGATE.  Executive shall not
be required to mitigate the amount of any payment made or benefit provided
hereunder.  The Company may offset any
payment due hereunder by the amount of damages to the Company resulting from
any breach of this Agreement by Executive.

 

9.                                       GENERAL.  This Agreement constitutes the exclusive
agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements or understandings of the parties.  No waiver of or forbearance to enforce any
right or provision hereof shall be binding unless in writing and signed by the
party to be bound, and no such waiver or forbearance in any instance shall
apply to any other instance or to any other right or provision.  This Agreement will be governed by the local
laws of the State of Washington without regard to its conflicts of laws rules
to the contrary.  The parties hereby
consent to the exclusive jurisdiction and venue of the state and federal courts
sitting in King County, Washington for all matters and actions arising under
this Agreement.  The prevailing party
shall be entitled to reasonable attorneys’ fees and costs incurred in
connection with such litigation.  No
term hereof shall be construed to limit or supersede any other right or remedy
of the Company under applicable law with respect to the protection of trade
secrets or otherwise.  If any provision of
this Agreement is held to be invalid or unenforceable to any extent in any
context, it shall nevertheless be enforced to the fullest extent allowed by law
in that and other contexts, and the validity and force of the remainder of this
Agreement shall not be affected thereby.

 

IN WITNESS
WHEREOF, the parties have caused this Agreement to be signed as of the date
first above written.

 

	
  CUTTER & BUCK
  INC.

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
  Frances M. Conley

  	
  Printed Name:

  	
   

  	
   

  
	
  Its:

  	
  Chief Executive Officer

  	
   

  
							

 

12

 

Exhibit A

 

CONFIDENTIALITY AND
NON-COMPETITION AGREEMENT

FOR

 

 

This Agreement is
entered into this        day of
                    ,
2002, by and between Cutter & Buck Inc. (the “Company”) and
                                
(“Executive”).  Executive is an at-will
employee of the Company.  In
consideration of entering into an agreement to provide Executive with severance
benefits if Executive’s employment is terminated in connection with a change in
control in the Company, Executive promises, on the terms set forth herein, at
all times to protect the Company’s proprietary information and to not compete
with the Company following termination of Executive’s employment in connection
with a change in control.

 

NOW, THEREFORE, in
consideration of the foregoing recitals and the covenants and conditions
contained herein, the parties hereby agree as follows:

 

1.                                       Non-competition
and Non-solicitation.

 

(a)                                  Executive
agrees that during the term of Executive’s employment with the Company and,
subject to receipt of the Severance Payment (as defined below) by the
Executive, until the first anniversary of the Termination Date (as defined
below), Executive will not in any capacity directly or indirectly engage in, assist
others to engage in or own a material interest in any business or activity that
is, or is preparing to be, in competition with the Company with respect to any
product or service sold or service provided by the Company up to the time of
termination of employment in any geographical area in which at the time of
termination of employment such product or service is sold or is actively
engaged in.  For the purposes of this
Agreement, the terms “Severance Payment” and “Termination Date” shall have the
meanings assigned to them in the Change in Control Agreement (as defined in
Section 6 below).

 

(b)                               Executive
further agrees that during the period stated above, he/she will not directly or
indirectly call on, reveal the name of, or otherwise solicit, accept business
from or attempt to entice away from the Company any actual or identified
potential customer of the Company, nor will he/she assist others in doing
so.  Executive further agrees that
he/she will not, during the period stated above, encourage or solicit any other
employee or consultant of the Company to leave such employment for any reason,
nor will he/she assist others to do so.

 

(c)                                Executive
acknowledges that the covenants in this Section 1 are necessary and
reasonable to protect the Company in the conduct of its business and that
compliance with such covenants will not prevent him/her from pursuing his/her
livelihood.  However, should any court
find that any provision of such covenants is unreasonable, invalid or
unenforceable, whether in period of time, geographical area, or otherwise, then
in that event the parties hereby

 

13

 

agree that such covenants
shall be interpreted and enforced to the maximum extent which the court deems
reasonable.

 

2.                                     Trade
Secrets and Confidential Information.

 

(a)                                Executive
acknowledges that the Company’s business and future success depend upon the
preservation of the trade secrets and other confidential information of the
Company and its suppliers and customers (the “Secrets”).  The Secrets may include, without limitation,
existing and to-be-developed or acquired product designs, new product plans or
ideas, market surveys, the identities of past, present or potential customers,
business and financial information, pricing methods or data, terms of contracts
with present or past customers, proposals or bids, marketing plans, personnel
information, procedural and technical manuals and practices, servicing
routines, and parts and supplier lists proprietary to the Company or its
customers or suppliers, and any other sorts of items or information of the
Company or its customers or suppliers which are not generally known to the
public at large.  Executive agrees to
protect and to preserve as confidential during and after the term of his
employment all of the Secrets at any time known to Executive or in his/her
possession or control (whether wholly or partially developed by Executive or
provided to Executive, and whether embodied in a tangible medium or merely
remembered).

 

(b)                               Executive
shall mark all items containing any of the Secrets with prominent
confidentiality notices acceptable to the Company.  Executive shall neither use nor allow any other person to use any
of the Secrets in any way, except for the benefit of the Company and as
directed by Executive’s supervisor.  All
material containing or disclosing any portion of the Secrets shall be and
remain the property of the Company, shall not be removed from the Company’s
premises without specific consent from an officer of the Company, and shall be
returned to the Company upon the termination of Executive’s employment or the
earlier request of Executive’s supervisor. 
At such time, Executive shall also assemble all materials in his
possession or control which contain any of the Secrets, and promptly deliver
such items to the Company.

 

3.                                     Intellectual
Properties.

 

(a)                                All
ownership, copyright, patent, trade secrecy and other rights in all works,
designs, inventions, ideas, manuals, improvements, discoveries, processes,
customer lists or other properties (the “Intellectual Properties”) made or
conceived by Executive during the term of his/her employment by the Company
shall be the rights and property solely of the Company, whether developed
independently by Executive or jointly with others, and whether or not developed
or conceived during regular working hours or at the Company’s facilities, and
whether or not the Company uses, registers, or markets the same.

 

(b)                                 In
accordance with the Company’s policy and Washington law, this Agreement (other
than Subsection 3(c)) does not apply to, and Executive has no obligation
to assign to the Company, any invention for which no Company trade secrets and
no equipment, supplies, services, or facilities of the Company were used and
which was developed entirely on Executive’s own time, unless: (i) the invention
relates directly to the business of the Company, (ii) the invention relates to
actual or demonstrably anticipated research or development work of

 

14

 

the Company, or (iii) the
invention results from any work performed by Executive for the Company.

 

(c)                                If
and to the extent that Executive makes use, in the course of his employment, of
any items or Intellectual Properties previously developed by Executive or
developed by Executive outside of the scope of this Agreement, Executive hereby
grants the Company a nonexclusive, royalty-free, perpetual, irrevocable,
worldwide license (with right to sublicense) to make, use, sell, copy,
distribute, modify, and otherwise to practice and exploit any and all such
items and Intellectual Properties.

 

(d)                               Executive
will assist the Company as reasonably requested during and after the term of
his employment to further evidence and perfect, and to enforce, the Company’s
rights in and ownership of the Intellectual Properties covered hereby,
including without limitation, the execution of additional instruments of
conveyance and assisting the Company with applications for patents or copyright
or other registrations.

 

4.                                     Authority
and Non-Infringement.  Executive
warrants that any and all items, technology, and Intellectual Properties of any
nature developed or provided by Executive under this Agreement and in any way
for or related to the Company will be original to Executive and will not, as
provided to the Company or when used and exploited by the Company and its
contractors and customers and its and their successors and assigns, infringe in
any respect on the rights or property of Executive or any third party.  Executive will not, without the prior
written approval of the Company, use any equipment, supplies, facilities, or
proprietary information of any other party. 
Executive warrants that Executive is fully authorized to enter into
employment with the Company and to perform under this Agreement, without
conflicting with any of Executive’s other commitments, agreements,
understandings or duties, whether to prior employers or otherwise.  Executive will indemnify the Company for all
losses, claims, and expenses (including reasonable attorneys’ fees) arising
from any breach of by him/her of this Agreement.

 

5.                                   Remedies.  The harm to the Company from any breach of
Executive’s obligations under this Agreement may be wholly or partially
irreparable, and Executive agrees that such obligations may be enforced by
injunctive relief and other appropriate remedies, as well as by damages.  If any bond from the Company is required in
connection with such enforcement, the parties agree that a reasonable value of
such bond shall be $5,000.  Any amounts
received by Executive or by any other through Executive in breach of this
Agreement shall be held in constructive trust for the benefit of the Company.

 

6.                                       Executive
Agreement.  In consideration of the
obligations undertaken by Executive pursuant to this Agreement,
contemporaneously with the execution of this Agreement, Executive and the
Company are entering into a Change in Control Agreement (the “Change in Control
Agreement”), and each agreement shall be effective only if both agreements have
been executed.

 

7.                                   At Will Employment.  Unless and to the extent otherwise agreed by
the Company and Executive in a separate written employment agreement,
Executive’s employment shall be “at will”, with either party permitted to
terminate the employment at any time, with or without

 

15

 

cause.  No term of any employment agreement between
the Company and Executive shall be construed to conflict with or lessen
Executive’s obligations under this Agreement.

 

8.                                   Notices.  All notices and other communications called
for or required by this Agreement shall be in writing and shall be addressed to
the parties at their respective addresses stated below or to such other address
as a party may subsequently specify by written notice and shall be deemed to
have been received (i) upon delivery in person, (ii) five days after mailing it
by U.S. certified or registered mail, return receipt requested and postage
prepaid, or (iii) two days after depositing it with a commercial overnight
carrier which provides written verification of delivery:

 

	
  To the Company:

  	
  701 N. 34th Street,
  Suite 400

  
	
   

  	
  Seattle,
  Washington  98103

  
	
   

  	
  Attention: Chief
  Executive Officer

  
	
   

  	
   

  
	
  To Executive:

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

9.                                   Assignment.  Executive’s rights and duties hereunder are
personal to Executive and are not assignable to others, but Executive’s
obligations hereunder will bind his/her heirs, successors, and assigns.  The Company may assign its rights under this
Agreement in connection with any merger or consolidation of the Company or any
sale of all or any portion of the Company’s assets (including, without
limitation, any division or product line), provided that any such successor or
assignee expressly assumes in writing the Company’s obligations under the
Executive Agreement.

 

10.                             General.  This Agreement constitutes the exclusive
agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements or understandings of the parties.  No waiver of or forbearance to enforce any
right or provision hereof shall be binding unless in writing and signed by the
party to be bound, and no such waiver or forbearance in any instance shall
apply to any other instance or to any other right or provision.  This Agreement will be governed by the local
laws of the State of Washington without regard to its conflicts of laws rules
to the contrary.  The parties hereby
consent to the exclusive jurisdiction and venue of the state and federal courts
residing in King County, Washington for all matters and actions arising under
this Agreement.  The prevailing party
shall be entitled to reasonable attorneys’ fees and costs incurred in
connection with such litigation.  No
term hereof shall be construed to limit or supersede any other right or remedy
of the Company under applicable law with respect to the protection of trade
secrets or otherwise.  If any provision
of this Agreement is held to be invalid or unenforceable to any extent in any
context, it shall nevertheless be enforced to the fullest extent allowed by law
in that and other contexts, and the validity and force of the remainder of this
Agreement shall not be affected thereby.

 

16

 

IN WITNESS
WHEREOF, the parties have caused this Agreement to be signed as of the date
first above written.

 

	
  CUTTER & BUCK INC.

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Signature:

  	
   

  
	
   

  	
  Frances M. Conley

  	
  Printed Name:

  	
   

  
	
  Its:

  	
  Chief Executive Officer

  	
   

  
						

 

17

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