Document:

Exhibit
10.3

 

CUTTER &BUCK,

701 North 34th Street,
Suite 400

Seattle, WA 98103

1-800-929-9299

 

September 25, 2002

 

 

Mr. Paul Bourgeois

Executive Vice President,
Golf Cutter & Buck, Inc.

Seattle, WA 98103

 

Dear Paul,

 

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
$131,000.  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 $85,000, 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 15,000 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 ill 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

  	
   

  
							

 

17Exhibit
10.4

 

 

701 North 34th
Street, Suite 400

Seattle, WA 98103

1-800-929-9299

 

 

March 24, 2003

 

Frances M. Conley

Cutter & Buck Inc.

Seattle, WA 98103

 

Dear Fran,

 

The Board of Directors
recently authorized a 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  $187,500. 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 at
least through the above date, and to help it get to a new level of
professionalism and profitability.

 

Other terms of the
Retention Incentive Program are set forth in the attached Exhibit A.

 

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 INC.

COMPENSATION COMMITTEE

 

 

/s/ Larry C. Mounger, Chair

 

 

 

EXHIBIT
A

 

 

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.

 

 

2

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