Document:

Exhibit 10.1

 

AMENDED AND RESTATED 

EMPLOYMENT AGREEMENT

 

This Amended and Restated Employment Agreement (this “Agreement”) is made as of August 29,
2005 (“Effective Date”), among Carter’s, Inc.,
a Delaware corporation (“Carter’s”),
The William Carter Company, a Massachusetts corporation (“TWCC” and together
with Carter’s, the “Company”),
and Frederick J. Rowan, II (“Executive”)
and shall replace in its entirety the Amended and Restated Employment Agreement
(the “Prior Agreement”) dated as of October 2,
2003 (the “Effective Date”). Certain
capitalized terms that are used in this Agreement are defined herein where they
first appear or in paragraph 11.

 

The parties agree as follows:

 

1.                                       Employment.  The Company agrees to employ Executive, and
Executive hereby accepts employment with the Company, upon the terms and
conditions set forth in this Agreement for the period beginning on the Effective Date and ending as
provided in paragraph 4 (the “Employment Period”).

 

2.                                       Position and Duties.

 

(a)                                  During
the Employment Period, Executive shall serve as the Chief Executive Officer and
Chairman of the Board of Carter’s and TWCC and shall have the normal duties,
responsibilities and authority of such position(s), subject to any limitations
imposed by the bylaws of Carter’s or TWCC and to the power of the Company’s
Board to expand or limit such duties, responsibilities and authority and to
override actions of the Executive.

 

(b)                                 Executive
shall report to the Company’s Board, and Executive shall devote his best
efforts and his full business time and attention (except for permitted vacation
periods and periods of illness or other incapacity) to the business and affairs
of the Company. Executive shall perform his duties and responsibilities to the
best of his abilities in a diligent, trustworthy, businesslike and efficient
manner.

 

(c)                                  Executive’s
principal office and place of employment shall be at the Company’s facility
located in Atlanta, Georgia, unless a different place is agreed upon by the
Company and the Executive. For all purposes of this Agreement, the Company’s
principal executive offices shall be located wherever Executive has his
principal office and place of employment. This paragraph 2(c) is a
material part of this Agreement.

 

3.                                       Compensation.

 

(a)                                  Base Salary.  Executive’s Base Salary shall be $812,000 per
annum for the Company’s fiscal year 2005. 
The Company’s Board or Committee, as the case may be, may, in its
discretion, increase Executive’s Base Salary at such times and in such amounts
as the Company’s Board or Committee may determine, consistent with the Company’s
philosophy of

 

1

setting total executive
compensation at approximately the 75th percentile of high
performance companies.  At no time shall
Executive’s base salary be decreased. As used in this Agreement, “Base Salary” means Executive’s base
salary as adjusted and in effect from time to time. Executive’s Base Salary
shall be payable by the Company in regular installments in accordance with the
Company’s general payroll practices.

 

(b)                                 Annual Cash Bonus Plan.  Executive shall be a participant in the
Company’s Annual Cash Bonus Plan and be eligible for an annual award
opportunity under such plan at a target award level equal to no less than one
hundred fifty percent (150%) and a maximum award level of three hundred percent
(300%) of Executive’s Base Salary in effect during the calendar year for which
the award is made.

 

(c)                                  Integration Bonuses.  If certain predetermined performance goals
established in writing by the Company’s Board or Committee and set forth in Attachment
A are satisfied as certified by the Company’s Board or Committee, Executive
shall be entitled to receive an integration bonus of (i) $500,000 for the
remainder of the Company’s fiscal year 2005, (ii) $1 million for the
Company’s fiscal year 2006 and (iii) $1 million for the Company’s fiscal
year 2007.  Any such integration bonus
shall be payable in cash within two and one-half (2-1⁄2) months of the close of
the applicable fiscal year.

 

(d)                                 Stock Option Award.  Executive has been granted an option to
purchase 200,000 shares of common stock of Carter’s subject to the Company’s
Amended and Restated 2003 Equity Incentive Plan and to the terms of a stock
option certificate executed by Carter’s.

 

(e)                                  Vacation.  Executive shall be entitled to four (4) weeks
paid vacation annually.

 

(f)                                    Fringe Benefits.  Executive shall receive the fringe benefits
described on Attachment B to this Agreement as well as such other benefits as
are made available to executive level employees of the Company and such
additional benefits, payments or allowances as the Company’s Board or the
Committee may from time to time make available to Executive. Without prejudice
to Executive’s rights under this Agreement, the Company reserves the right (i) to
modify the terms of any benefit plan that is generally made available to
executive level employees of the Company and in which Executive participates so
long as such changes affect all plan participants substantially equally (or
substantially in proportion to their respective interests), and (ii) to
make reasonable changes in benefits established for Executive at the direction
of the Company’s Board or the Committee, so long as the benefits available to
Executive after giving effect to such change are not materially different from
those being provided prior to such change.

 

(g)                                 Business Expenses.  The Company shall reimburse Executive for all
reasonable and necessary expenses incurred by him in connection with the
performance of his duties and responsibilities pursuant to this Agreement which
are consistent with the Company’s policies in effect from time to time with
respect to travel, entertainment and other business expenses, subject to the
Company’s reasonable requirements with respect to reporting and documentation
of such expenses.

 

2

 

4.                                       Term and Termination.

 

(a)                                  The
Employment Period shall extend until the close of the Company’s 2009 fiscal
year; provided that (i) the Employment Period shall terminate prior to
such date upon Executive’s resignation, Retirement or death and (ii) the
Employment Period may be terminated by the Company at any time prior to such
date for Cause, Executive’s Disability or Without Cause.

 

(b)                                 Any
termination of Executive’s employment by the Company pursuant to clause 4(a)(ii) above,
and any termination of Executive’s employment by the Executive pursuant to
paragraph 4(a) (i) above, shall be communicated by written
Termination Notice given to the other party hereto; provided that in the case
of Executive’s death, a Termination Notice shall be deemed to have been given
as of the date of his death; and, provided further that, in the case of a
termination for Cause, there shall also have been delivered to the Executive
the Board of Directors’ resolution to be delivered if and as provided in the
definition of Cause. For purposes of this Agreement, a “Termination
Notice” shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated.

 

(c)                                  “Termination Date” means (i) if
this Agreement is terminated for Disability, thirty (30) days after the
Termination Notice is given (provided that Executive shall not have returned to
the performance of his duties on a full-time basis during such thirty (30)-day
period), (ii) if Executive resigns or takes Retirement, the date specified
in Executive’s Termination Notice (or if no Termination Notice is given, the
date upon which such termination is effective), (iii) if Executive dies,
on the last day of the month next succeeding the month during which Executive’s
death occurs, and (iv) if the Executive’s employment is terminated for any
other reason, the date on which a Termination Notice is given or is otherwise
specified in the Notice.

 

5.                                       Severance Compensation.

 

(a)                                  General.  If Executive resigns or terminates employment
by Retirement, or if his employment is terminated by reason of Death or is
terminated for Cause, the Company will pay Executive his Base Salary in effect
at the time the Termination Notice is given (or deemed given) through the
Termination Date, and the Company shall have no further obligations to
Executive under this Agreement. Without prejudice to any accrued and vested
rights Executive may have under the Supplemental Retirement Agreement, the
Annual Cash Bonus Plan, the Retirement Savings Plan or the Severance Pay Plan
and except as otherwise required by law, all of Executive’s rights to fringe
benefits from the Company will cease as of the Termination Date.

 

(b)                                 Disability.  During any period that Executive fails to
perform his duties as a result of incapacity due to mental illness or physical
illness or injury, he shall continue to receive his full Base Salary and
benefits until the Company terminates his employment for Disability.
Thereafter, he will be entitled to major medical health insurance coverage
under the Company’s employee group health insurance (or substantially similar
health insurance) until the

 

3

 

third anniversary of the Termination Date or until Executive obtains
employment with another employer that makes health insurance available to its
employees, whichever occurs first, and shall be entitled to receive disability
benefits in accordance with the disability income insurance plan or plans
maintained by the Company covering Executive at the Termination Date. Without
prejudice to any accrued and vested rights Executive may have under the
Supplemental Retirement Agreement or the Retirement Savings Plan and except as
otherwise required by law or as provided in this paragraph 5(b), all of Executive’s
rights to fringe benefits from the Company will cease as of the Termination
Date.

 

(c)                                  Without Cause or for Good Reason.  If Executive is involuntarily terminated by
the Company Without Cause or if Executive resigns for Good Reason, (i) Executive
shall be entitled to continue to receive his Base Salary (as in effect on the
Termination Date) for thirty-six (36) months following the Termination Date
(such date, the “End Date”)
so long as Executive has not breached the provisions of paragraphs 6, 7 or 8, (ii) the
Company will maintain in full force and effect, for Executive’s continued
benefit, until the End Date, all life, medical and dental insurance programs in
which Executive was entitled to participate so long as his continued
participation is possible under the general terms and provisions of such
programs (provided that, in the event Executive’s participation in any such
program is barred, the Company will arrange to provide Executive with benefits
substantially similar to those which he was entitled to receive under such
program), (iii) notwithstanding any provision in the Annual Cash Bonus
Plan to the contrary, Executive shall become fully vested and have a
non-forfeitable interest in the benefit which he would have received for the
plan year during which the Termination Date occurs (which determination may
take into account whether Company performance goals established by the plan or
its administrator for such year have been met, but which may not take into
account whether personal performance goals established by the plan or its
administrator for such year have been met) if he were employed by the Company
on the last day of such plan year), and (iv) Executive will be entitled to
service credit under the Supplemental Retirement Agreement through the End
Date.  The amounts payable in respect of
accrued benefits under the Annual Cash Bonus Plan shall be payable at the time
provided for in, and in accordance with the provisions of, the Annual Cash
Bonus Plan.  The amounts payable pursuant
to this paragraph 5(c) in respect of Base Salary may be payable, at
Executive’s discretion (but only to the extent the availability of such
discretion, even if not exercised, would not result in Executive being required
to include in come the amounts otherwise payable in the future under this
paragraph 5(c) in respect of Base Salary), in one lump sum payment within
thirty (30) days following the Termination Date equal to the present value
(determined using a discount rate equal to the “prime” rate of interest charged
by Chase Manhattan Bank plus two percentage points) of the payments otherwise
payable pursuant to this paragraph 5(c). 
This paragraph 5(c) sets forth Executive’s exclusive remedy for a
termination of his employment Without Cause or for Good Reason and Executive
shall have no other right or remedy against the Company in connection
therewith.  Notwithstanding the payment
provisions of this paragraph 5(c) if at the relevant time Executive is a “specified
employee” as that term is used in Section 409A of the Code, the
commencement of payments under this paragraph 5(c) shall be deferred to
the extent, if any, required to comply with the “specified employee” rules of
Section 409A.

 

(d)                                 No Impact on Other Arrangements.  Executive’s right to receive payments under
this Agreement shall not decrease the amount of, or otherwise adversely affect,
any other benefits payable to Executive under any plan, agreement or
arrangement relating to

 

4

 

employee benefits provided by the Company (or an Affiliated
Corporation); provided, however, that the amounts payable to Executive under
paragraph 5(c)(i) shall be reduced by the amount of any severance
compensation paid to Executive under the Company’s Severance Pay Plan.

 

(e)                                  No Mitigation.  Executive shall not be required to mitigate
the amount of any payment provided for in this paragraph 5 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this paragraph 5 be reduced by any compensation earned by the
Executive as the result of employment by another employer or by reason of the
Executive’s receipt of or right to receive any retirement or other benefits
after the date of termination of employment or otherwise (except as otherwise
provided in this paragraph 5).

 

6.                                       Confidential Information.  Executive acknowledges that the non-public
information obtained by him while employed by the Company concerning the
business or operations of the Company or any Subsidiary of the Company (“Confidential Information”) is the
exclusive property of the Company or such other Subsidiary. For purposes of
this Agreement, the term “Confidential Information” does not include
information that Executive can demonstrate (a) was in Executive’s
possession prior to his initial employment by the Company, provided that such
information is not known by Executive to be subject to another confidentiality
agreement with, or other obligation of secrecy to, the Company or another
party, (b) is generally available to the public and became generally
available to the public other than as a result of a disclosure in violation of
this Agreement, or (c) became available to Executive on a non-confidential
basis from a third party, provided that such third party is not known by
Executive to be bound by a confidentiality agreement with, or other obligation
of secrecy to, the Company or another party or is otherwise prohibited from
providing such information to Executive by a contractual, legal or fiduciary
obligation. Executive agrees that he will not disclose Confidential Information
to any person (other than employees of the Company or any Subsidiary thereof or
any other person expressly authorized by the Company to receive Confidential
Information) or use for his own account any Confidential Information without
the prior written consent of the Company. Executive shall deliver to the
Company at the termination of the Employment Period, or at any other time the
Board of Carter’s may request in writing, all memoranda, notes, plans, records,
reports, computer tapes and software and other documents and data (and copies
thereof) containing Confidential Information or Work Product which he may then
possess or have under his control.

 

7.                                       Work Product.  Executive agrees that all inventions, innovations,
improvements, developments, methods, designs, analyses, reports and all similar
or related information which relate to the Company’s or any of its Subsidiaries’
actual or anticipated business, research and development or existing or future
products or services and which are conceived, developed or made by Executive
while employed with the Company (“Work Product”)
belong exclusively to the Company or such Subsidiary. Upon the written request
of the Company, Executive will promptly disclose such Work Product to the
Company and perform all actions reasonably requested by the Company (whether
during or after the Employment Period) to establish and confirm such exclusive
ownership.

 

5

 

8.                                       Noncompete; Non-Solicitation.

 

(a)                                  Executive
acknowledges that in the course of his employment with the Company he will
become familiar with the trade secrets and other confidential information of
the Company and its Subsidiaries and that his services will be of special, unique
and extraordinary value to the Company. Therefore, Executive agrees that,
during the Employment Period and for two years thereafter (or one year
thereafter, if Executive’s employment is terminated Without Cause or for Good
Reason) (the “Noncompete Period”), he shall
not directly or indirectly own, manage, control, participate in, consult with,
render services for, or in any manner engage in any business competing with the
businesses of Carter’s and the Company or any of its Subsidiaries which (i) exists
on the date of the termination of Executive’s employment or (ii) is
commenced during the Noncompete Period (but, for purposes of this clause (iii) only
if the Company or such Subsidiary had determined prior to the Termination Date
to enter into such business or had committed substantial resources prior to the
Termination Date to determine the feasibility of entering into such business),
within the continental United States. Nothing herein shall prohibit Executive
from being a passive owner of not more than 2% of the outstanding stock of any
class of a corporation, which is publicly traded so long as Executive has no
active participation in the operations of such corporation.

 

(b)                                 During
the Noncompete Period, Executive shall not directly or indirectly through
another entity (i) induce or attempt to induce any employee of the Company
or any other Subsidiary of the Company to leave the employ of such person, or
in any way interfere with the employee relationship between the Company or any
other Subsidiary of the Company and any employee thereof, (ii) hire any
person who was an employee of the Company or any other Subsidiary of the
Company at any time during the Employment Period (other than individuals who
have not been employed by the Company or any other Subsidiary of the Company
for a period of at least one year prior to employment by Executive directly or
indirectly through another entity), or (iii) induce or attempt to induce
any customer, supplier, licensee or other person having a business relationship
with the Company or any other Subsidiary of the Company to cease doing business
with the Company or such other Subsidiary of the Company or interfere
materially with the relationship between any such customer, supplier, licensee
or other person having a business relationship with the Company or any other
Subsidiary of the Company.

 

(c)                                  If,
at the time of enforcement of this paragraph 8, a court shall hold that the
duration, scope or area restrictions stated herein are unreasonable under
circumstances then existing, the parties agree that the maximum duration, scope
or area reasonable under such circumstances shall be substituted for the stated
duration, scope or area and that the court shall be allowed to revise the
restrictions contained herein to cover the maximum period, scope and area
permitted by law.

 

(d)                                 In
the event of the breach or a threatened breach by Executive of any of the
provisions of this paragraph 8, the Company, in addition and supplementary to
other rights and remedies existing in its favor, may apply to any court of law
or equity of competent jurisdiction for specific performance or injunctive or
other relief in order to enforce or prevent any violations of the provisions
hereof (without posting a bond or other security).

 

6

 

9.                                       Incapacity.  Without prejudice to Executive’s rights under
this Agreement, if at any time during the term of this Agreement Executive is
absent from his duties with the Company for thirty (30) consecutive days as a
result of incapacity due to mental illness or physical illness or injury, the
Company’s Board of Directors may appoint an interim Chairman of the Board and
Chief Executive Officer or assume extended management responsibilities for the
duration of Executive’s absence. Unless Executive’s employment has been
terminated previously under this Agreement, Executive shall be permitted to
resume performance of his duties and responsibilities under this Agreement upon
regaining the capacity to do so.

 

10.                                 Executive Representations.  Executive hereby represents and warrants to
the Company that (a) the execution, delivery and performance of this
Agreement by Executive does not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (b) Executive
is not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity with which this Agreement
would conflict or constitute a breach thereof and (c) upon the execution
and delivery of this Agreement by Executive and the Company, this Agreement
shall be the valid and binding obligation of Executive, enforceable against
Executive in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
the enforceability of contractual obligations and creditor’s rights generally
and to federal and state constitutional proscriptions and by the application of
equitable principles by courts of competent jurisdiction, sitting at law or in
equity.

 

11.                                 Certain Defined Terms.  As used in this Agreement, the following
terms shall have the meanings set forth below:

 

“Affiliated Corporation”
means any corporation that is a member of the “affiliated group” (as defined in
Section 1504 of the Code) of which the Company is a member.

 

“Anniversary Date”
means any or a specific anniversary of the Effective Date, as the context
requires.

 

“Annual Cash Bonus Plan”
means the Company’s Amended and Restated Annual Incentive Plan, as amended from
time to time.

 

“Board”
means the Board of Directors of Carter’s or the Board of Directors of TWCC as
in existence from time to time as further identified in this Agreement.

 

“Cause”
means (a) conviction of Executive for a felony, or the entry by Executive
of a plea of guilty or nolo contendere to a felony, (b) a willful and
material breach by Executive of paragraph 6, 7 or 8 of this Agreement, (c) the
commission of an act of fraud involving dishonesty for personal gain which is
materially injurious to the Company, (d) the willful and continued refusal
by Executive to substantially perform his duties with the Company (other than
any such refusal resulting from his incapacity due to mental illness or
physical illness or injury), after a demand for substantial performance is
delivered to Executive by the Company’s Board of Directors, where such demand
specifically identifies the manner in which the Company’s Board of Directors
believes that Executive has refused to substantially perform his duties and the

 

7

 

passage of a reasonable period of time for Executive
to comply with such demand or (e) the willful engaging by Executive in
gross misconduct materially and demonstrably injurious to the Company or its
Subsidiaries. For purposes of this paragraph, no act or failure to act on
Executive’s part shall be considered “willful” unless done, or omitted to be
done, by Executive not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company or its Subsidiaries.
Notwithstanding the foregoing, with respect to termination for Cause arising
out of conduct described in clause (b), (c), (d) or (e) above, the
Executive may not be terminated for Cause unless there shall have been
delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire Board of
Directors of the Company, at a meeting of such board called and held for that
purpose (after reasonable notice to Executive and an opportunity for Executive,
together with his counsel or other advisors, to be heard at such meeting),
finding that in the good faith opinion of the board Executive had engaged in
conduct described above in clause (b), (c), (d), or (e) of the first
sentence of this paragraph and specifying the particulars thereof in detail.
Such a finding by the Board of Directors of the Company is a prerequisite to a
termination for Cause pursuant to clauses (b), (c), (d) or (e) above;
provided, however, that such a finding may be challenged, by appropriate
judicial process, on the merits (i.e., that Cause did not exist) or on the
basis that the board’s finding was not made in good faith (provided that proof
that Cause for termination existed shall be a complete defense to any showing
that the board’s finding was not made in good faith).

 

“Code” means
the Internal Revenue Code of 1986, as amended.

 

“Committee”
means the Compensation Committee of the Company’s Board of Directors.

 

“Cost of Living Amount”
means an amount calculated by multiplying the Base Salary then in effect by a
fraction, (a) the numerator of which shall be the amount (not less than
zero) by which the latest Cost of Living Index available as of the time of
determination exceeds the Cost of Living Index for the same period during the
immediately preceding year, and (b) the denominator of which shall be the
latest Cost of Living Index for the same period during the immediately
preceding year.

 

“Cost of Living Index”
means the Consumer Price Index for All Urban Consumers, Atlanta, Georgia (1967-100)
prepared by the Bureau of Labor Statistics of the United States Department of
Labor for the relevant period; provided that if the index shall cease to be
published, the parties shall use as the index, the most comparable index
published by the United States Government.

 

“Disability”
means the Executive shall have been absent from his duties with the Company for
26 consecutive weeks as a result of incapacity due to mental illness or
physical illness or injury, and he shall not have returned to the full-time
performance of his duties within 30 days after written notice of termination of
this Agreement is given by the Company’s Board of Directors.

 

“End Date”
is defined in paragraph 5(c).

 

8

 

“Good Reason”
means, unless Executive shall have consented in writing thereto, any of the
following:

 

(a)                                  except
as provided in paragraph 9, a material reduction in Executive’s title, duties,
responsibilities or status, in each case, as Chairman of the Company’s Board of
Directors;

 

(b)                                 the
assignment to Executive of a material amount of additional duties that is
significantly inconsistent with Executive’s duties, responsibilities or status
as Chairman of the Company’s Board of Directors and Chief Executive Officer;

 

(c)                                  the
imposition on Executive of business travel obligations substantially greater
than his business travel obligations during the year prior to the Effective
Date; or

 

(d)                                 any
material breach of this Agreement on the part of the Company;

 

provided, however, that the Company’s replacement of
Executive as Chief Executive Officer shall not be deemed to give rise to “Good
Reason” under this Agreement, and provided, further, however,
that Executive shall not have the right to terminate his employment for “Good
Reason” unless he shall have given thirty (30) days prior written notice to the
Board of Directors of the Company in which Executive sets forth in reasonable
detail the circumstances that Executive believes constitute “Good Reason”
pursuant to the preceding clauses (a) through (d) and the Company
shall not have remedied the matter within said thirty (30) day period; and
provided, further, however that the fact that the Company does or does not so
remedy said matter shall not be deemed an admission by the Company that such
circumstances constitute “Good Reason”.

 

“Person”
means an individual, a partnership, a joint venture, a corporation, an
association, a joint stock company, a limited liability company, a trust, an
unincorporated organization or a government or any department or agency or
political subdivision thereof.

 

“Retirement”
means termination of Executive’s employment in accordance with the Company’s
normal retirement policy generally applicable to its salaried employees (or, at
Executive’s election, at any time) or in accordance with any other retirement
arrangement established with the Executive’s consent with respect to the
Executive.

 

“Retirement Savings Plan”
means the Company’s Defined Contribution 40l(k) savings plan in effect as of
the Effective Date as the same is amended from time to time.

 

“Severance Pay Plan”
means the Company’s Severance Pay Plan for Exempt Employees, in effect as of
the Effective Date, as the same is amended from time to time, or any successor
or replacement plan implemented by the Company.

 

“Subsidiary”
means with respect to any corporation, another corporation of which the securities
having a majority of the voting power in electing directors are, at the time of
determination, owned by the first corporation, directly or through one or more
Subsidiaries.

 

“Supplemental Retirement
Agreement” means the Supplemental Executive Retirement Agreement
between the Executive and the Company as amended though the date hereof.

 

9

 

“Termination Date”
is defined in paragraph 4(c).

 

“Termination Notice”
is defined in paragraph 4(b).

 

“Without Cause”
means an involuntary termination of Executive’s employment other than for Cause
and other than by reason of Executive’s death or Disability.

 

12.                                 Survival.  Paragraphs 6, 7 and 8 shall survive and
continue in full force in accordance with their terms notwithstanding any
termination of the Employment Period.

 

13.                                 Expenses.  The Company shall pay all of Executive’s
expenses (including reasonable attorneys’ fees and expenses) paid by Executive
in connection with the negotiation and preparation of this Agreement and all
related documents. In the event Executive prevails in any arbitration or
litigation arising out of his termination of employment or his seeking to
obtain or enforce any right or benefit provided by this Agreement or by any
other plan or arrangement maintained by the Company under which he is or may be
entitled to receive benefits, the Company shall pay all reasonable legal fees
and related expenses (including the costs of experts, evidence and counsel and
other such expenses included in connection with any litigation or appeal)
incurred by Executive in such an arbitration or litigation. To the extent any
of the foregoing expense reimbursement generates taxable income to Executive,
Executive will be paid an additional amount to defray tax liability resulting
from such expense reimbursement (and such additional payment). The Company
further agrees to pay prejudgment interest on any money judgment against the
Company obtained by Executive in any arbitration or litigation against it to
enforce such rights calculated at the Prime Rate as reported in the Wall Street
Journal in effect from time to time from the date it is determined that
payment(s) to him should have been made under this Agreement.

 

14.                                 Notices.  Any notice provided for in this Agreement
shall be in writing and shall be either personally delivered, or mailed by
first class mail, return receipt requested, to the recipient at the address
below indicated:

 

Notices
to Executive:

 

Frederick
J. Rowan, II

4280
Olde Mill Lane

Atlanta,
GA 30342

 

Notices
to Carter’s or the Company:

 

c/o
The William Carter Company

1170
Peachtree Street, Suite 900

Atlanta,
Georgia 30309

Attn:                    Michael D. Casey

Executive Vice President and

Chief Financial Officer

 

10

 

or such other address or to the attention of such
other person as the recipient party shall have specified by prior written
notice to the sending party. Any notice under this Agreement will be deemed to
have been given when so delivered or on the second business day after being
deposited for delivery with the United States Postal Service.

 

15.                                 Severability.  Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in
any jurisdiction, such invalidity, illegality or unenforceability will not
affect any other provision or any other jurisdiction, but this Agreement will
be reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

 

16.                                 Complete Agreement.  This Agreement and those documents expressly
referred to herein embody the complete agreement and understanding among the
parties and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way, including without limitation
the Prior Agreement.

 

17.                                 Counterparts.  This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.

 

18.                                 Successors and Assigns.  This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive, Carter’s, the Company and
their respective heirs, successors and assigns, except that no party may assign
his or its rights or delegate his or its obligations hereunder without the
prior written consent of the other parties to this Agreement with the exception
of a business transaction in which the Company merges with another entity or
disposes of all or substantially all of its assets.

 

19.                                 Choice of Law.  This Agreement will be governed by and
construed in accordance with the domestic law of, The Commonwealth of
Massachusetts without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of New York.

 

20.                                 Amendment and Waiver.  The provisions of this Agreement may be
amended or waived only with the prior written consent of Carter’s, the Company
and Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.

 

21.                                 Code Section 409A.  The parties recognize that certain provisions
of this Agreement may be affected by Code section 409A and they,
therefore, agree to negotiate in good faith to amend the Agreement with respect
to any changes necessary or advisable to comply with section 409A.

 

11

 

IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first written above.

 

	
   

  	
  CARTER’S, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael D. Casey

  	
   

  
	
   

  	
   

  	
  Name: Michael D. Casey

  
	
   

  	
   

  	
  Title: Executive Vice President and

  
	
   

  	
   

  	
   Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE WILLIAM CARTER COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael D. Casey

  	
   

  
	
   

  	
   

  	
  Name: Michael D. Casey

  
	
   

  	
   

  	
  Title: Executive Vice President and

  
	
   

  	
   

  	
   Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FREDERICK J. ROWAN, II

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Frederick J. Rowan, II

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Frederick
  J. Rowan, II

  
	
   

  	
   

  	
  Title: Chairman
  of the Board of Directors

  
	
   

  	
   

  	
   and Chief Executive Officer

  

 

12Exhibit 10.16

 

MATHSTAR,
INC.

 

NON-STATUTORY
STOCK OPTION AGREEMENT

 

	
  OPTIONEE:

  	
                       

  
	
   

  	
   

  
	
  GRANT DATE:

  	
                       ,
  2005

  
	
   

  	
   

  
	
  NUMBER OF OPTION SHARES:

  	
                  
  Shares

  
	
   

  	
   

  
	
  EXERCISE PRICE PER SHARE:

  	
  $                     per
  Share

  
	
   

  	
   

  
	
  EXPIRATION DATE:

  	
                       ,
  2015

  

 

THIS
AGREEMENT is made as of the Grant Date set forth above by and
between MathStar, Inc., a Minnesota corporation (the “Company”), and the
Optionee named above, who provides services to the Company or an Affiliate of
the Company as an employee, consultant, independent contractor, or other
service provider (the “Optionee”).

 

The Company desires, by
affording the Optionee an opportunity to purchase shares of its Common Stock,
par value $.01 per share (the “Common Stock”), as hereinafter provided, to
carry out the purpose of the MathStar, Inc.                                                                  
Plan (the “Plan”).

 

NOW,
THEREFORE, in consideration of the mutual covenants
hereinafter set forth, and for other good and valuable consideration, the
parties hereby agree as follows:

 

1.                                      Grant
of Option.  The Company hereby grants
to the Optionee the right and option (the “Option”) to purchase all or any part
of the aggregate number of shares of Common Stock set forth above (the “Option
Shares”) (such number being subject to adjustment as provided in Section 9
hereof) on the terms and subject to the conditions set forth in this
Agreement.  This Option is not intended
to be an “incentive stock option” within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”).

 

2.                                      Purchase
Price.  The per share purchase price
of the Option Shares shall be the Exercise Price Per Share set forth above
(such Exercise Price Per Share being subject to adjustment as provided in Section 9
hereof).

 

3.                                      Term
and Exercise of Option.

 

(a)                                              The
term of this Option shall commence on the Grant Date set forth above and shall
continue until the Expiration Date set forth above, unless earlier terminated as
provided herein.

 

 

(b)                                             This
Option will become exercisable as follows: 
                                                                          ,
subject to the provisions of Sections 6 and 7.

 

(c)                                              To
exercise this Option, the Optionee shall give written notice to the Company, to
the attention of its President or other designated agent, in substantially the
form attached hereto as Exhibit A, and the Optionee shall deliver
payment in full for the Option Shares with respect to which this Option is then
being exercised, as provided in Section 4(a) below.

 

(d)                                             Neither
the Optionee nor the Optionee’s legal representatives, legatees or
distributees, as the case may be, will be, or will be deemed to be, a holder of
any Option Shares for any purpose unless and until certificates for such Option
Shares are issued to the Optionee or the Optionee’s legal representatives,
legatees or distributees under the terms of the Plan.

 

4.                                      Limitations on Exercise
of Option.

 

(a)                                  The
exercise of this Option will be contingent upon receipt from the Optionee (or
the purchaser acting under Section 7 below) of the full Exercise Price of
such Option Shares.  Payment of the
Exercise Price shall be made in cash or by a certified or cashier’s check.  However, in its sole discretion, the Company
may accept shares of Common Stock of the Company that have been owned by the
Optionee for at least six (6) months, or shares issuable upon the exercise
of this Option, having an aggregate Fair Market Value on the date of exercise
which is not less than the total Exercise Price, or a combination of cash and
such shares of Common Stock, in payment of the Exercise Price.  No Option Shares will be issued until full
payment therefor has been made and the Optionee has executed any and all
agreements that the Company may require the Optionee to execute.

 

(b)                                 The
issuance of Option Shares upon the exercise of this Option shall be subject to
all applicable laws, rules, and regulations. 
If, in the opinion of the Board of Directors of the Company or a Committee
of the Board of Directors, (i) the listing, registration, or qualification
of the Option Shares upon any securities exchange or under any state or federal
law, (ii) the consent or approval of any regulatory body, or (iii) an
agreement of the Optionee with respect to the disposition of the Option Shares,
is necessary or desirable as a condition to the issuance or sale of the Option
Shares, this Option shall not be exercised and/or Option Shares shall not be
sold unless and until such listing, registration, qualification, consent,
approval or agreement is effected or obtained in form satisfactory to the Board
of Directors or the Committee.

 

5.                                      Nontransferability
of Option.  This Option shall not be
transferable by the Optionee other than by will or the laws of descent and
distribution, and during the lifetime of the Optionee, this Option shall be
exercisable only by the Optionee.

 

6.                                      Termination
of Employment or Other Services.  Upon
termination of the

 

2

 

Optionee’s employment or
other relationship with the Company or with an Affiliate other than as a result
of the death of the Optionee, the Optionee shall have until the earlier of
thirty (30) days after such termination or the Expiration Date to exercise any
portion of the Option that is vested on such termination date, but any portion
of the Option that is not vested on such termination date shall automatically
terminate and be immediately forfeited, and neither the Optionee nor the
Optionee’s heirs, personal representatives, successors or assigns shall have
any rights with respect to any such unvested portion of the Option.

 

7.                                      Death
of Optionee.  If the Optionee dies
while employed by or otherwise providing services to the Company or an
Affiliate, this Option may be exercised to the same extent that the Optionee
would have been entitled to exercise it at the date of death and may be
exercised within a period of one (1) year after the date of death, but in
no case later than the Expiration Date set forth above.  In such event, this Option shall be
exercisable only by the executors or administrators of the Optionee or by the
person or persons to whom the Optionee’s rights under the Option shall pass by
the Optionee’s will or the laws of descent and distribution.  Any portion of an Option that is not
exercisable at the time of an Optionee’s death shall automatically terminate.

 

8.                                      No
Right to Continue to Provide Services. 
This Option will not confer upon the Optionee any right to continue
providing services to the Company or an Affiliate of the Company as an
employee, consultant, independent contractor, or other service provider, nor
will it interfere in any way with the Company’s right or the Affiliate’s right
to terminate the Optionee’s employment or other services at any time.

 

9.                                      Adjustments.  In the event of any change in the outstanding
shares of Common Stock by reason of any stock dividend, stock split, reverse
stock split, reclassification, combination, exchange of shares, or other
similar recapitalization of the Company, there shall be an appropriate and
proportionate adjustment to the number of Option Shares and the per share
Exercise Price Per Share hereunder so that the Optionee then shall receive for
the aggregate Exercise Price paid by the Optionee upon exercise of this Option
the number of shares the Optionee would have received if this Option had been
exercised before such recapitalization event occurred.  No adjustment shall be made under this Section 9
upon the issuance by the Company of any warrants, rights, or options to acquire
additional Common Stock or of securities convertible into Common Stock unless
such warrants, rights, options or convertible securities are issued to all
shareholders of the Company on a proportionate basis.

 

10.                               Effect
of Certain Transactions. Notwithstanding any provision in this Option to
the contrary, at the time of the occurrence of any of the events described in
Sections 10(a) through (d) below, the Option shall automatically
become 100% vested and exercisable and converted into an Option to acquire the
kind and amount of shares of stock or other securities or property that the
Optionee would have owned or have been entitled to receive immediately after
the occurrence of the event, had the Option been exercised in full immediately
before the effective date of such event; provided, however, that the vesting schedule of
the Option shall remain unchanged, and, in any such case, appropriate
adjustment shall be made in the application of the provisions of this Option
with respect to the rights and interests thereafter of the Optionee, to the end
that the provisions set forth in this Option shall thereafter correspondingly
be made

 

3

 

applicable, as nearly as
may reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Option:

 

(a)                                  The
sale, lease, exchange or other transfer, directly or indirectly, of all or
substantially all of the assets of the Company (in one transaction or in a
series of related transactions) to a person or entity that is not controlled by
the Company,

 

(b)                                 The
approval by the Company’s shareholders of any plan or proposal for the
liquidation or dissolution of the Company;

 

(c)                                  Any
person or entity becomes the “beneficial owner” (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (“Exchange Act”)),
directly or indirectly, of more than fifty percent (50%) of the combined voting
power of the outstanding securities of the Company ordinarily having the right
to vote at elections of directors who were not beneficial owners of at least
fifty percent (50%) of such combined voting power as of the date the Company’s
Board of Directors adopted the Plan; and

 

(d)                                 A
merger or consolidation to which the Company is a party if the shareholders of
the Company immediately prior to the effective date of such merger or
consolidation have, solely on account of ownership of securities of the Company
at such time, “beneficial ownership” (as defined in Rule 13d-3 under the
Exchange Act) immediately following the effective date of such merger or
consolidation of securities of the surviving company representing less than
fifty percent (50%) of the combined voting power of the surviving corporation’s
then outstanding securities ordinarily having the right to vote at elections of
directors.

 

Notwithstanding any
provision in the Plan or this Option Agreement to the contrary, the Board of
Directors or the Committee shall not have the power or right, either before or
after the occurrence of an event described in subparagraphs (a) through (d) above,
to rescind, modify or amend the provisions of this Section 10 without the
consent of the Optionee.

 

11.                               Limitation
on Payments and Benefits. 
Notwithstanding anything in this Agreement to the contrary, if any of
the payments or benefits to be made or provided in connection with this
Agreement, together with any other payments, benefits or awards which you have
the right to receive from the Company, or any corporation which is a member of
an “affiliated group” (as defined in Section 1504(a) of the Code
without regard to Section 1504(b) of the Code) of which the Company
is a member (“Affiliate”), constitute an “excess parachute payment” (as defined
in Section 280G(b) of the Code), such payments, benefits or awards to
be made or provided in connection with this Agreement, or any other agreement
between you and the Company or its Affiliates, may be reduced, eliminated,
modified or waived to the extent necessary to prevent all, or any portion, of
such payments, benefits or awards from becoming “excess parachute payments” and
therefore subject to the excise tax imposed under Section 4999 of the
Code.  The Optionee will have the sole
right and discretion to determine whether the payments, benefits or awards to
be made or provided in connection with this Agreement, or any other agreement
between the Optionee and the Company, should be reduced, whether or not such
other agreement with the Company or an

 

4

 

Affiliate expressly
addresses the potential application of Section 280G or Section 4999
of the Code (including, without limitation, that “payments” under such
agreement be reduced).  The Optionee will
also have the right to designate the particular payments, benefits or awards
that are to be reduced, eliminated, modified or waived; provided that no such
adjustment will be made if it results in additional expense to the Company in
excess of expenses the Company would have experienced if no adjustment had been
made.  The determination as to whether
any such decrease in the payments or benefits is necessary must be made in good
faith by legal counsel or a certified public accountant selected by you and
reasonably acceptable to the Company, and such determination will be conclusive
and binding upon you and the Company. 
The Company will pay or reimburse you on demand for the reasonable fees,
costs and expenses of the counsel or accountant selected to make the
determinations under this Section 11.

 

12.                               Interpretation.  The interpretation and construction of any
provision of the Plan and this Option shall be made by the Board of Directors
or the Committee and shall be final, conclusive and binding on the Optionee and
all other persons.

 

13.                               Definitions;
Plan Governs.  Any capitalized term
used herein that is not expressly defined herein shall have the meaning
ascribed to it in the Plan.  This Option
is in all respects subject to and governed by all of the provisions of the Plan.

 

IN
WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its corporate name by its duly authorized officer, and the Optionee
has executed this Agreement as of the Grant Date set forth above.

 

	
  COMPANY:

  	
  MathStar, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Douglas M. Pihl

  
	
   

  	
   

  	
  Its President and Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
  OPTIONEE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SSN:

  	
            -       -           

  	
   

  
						

 

5

 

EXHIBIT A

NOTICE OF EXERCISE
OF

STOCK OPTION

 

TO:

 

FROM:

 

DATE:

 

RE:                                                                              Exercise
of Stock Option

 

I hereby exercise my
option to purchase
            shares
of Common Stock at $           
per share (total exercise price of $                       ).  This notice is given in accordance with the
terms of my Non-Statutory Stock Option Agreement (“Agreement”) dated                             .  The option price and vested amount is in
accordance with Sections 2 and 3 of the Agreement.

 

Check one:

 

o                                    Enclosed is cash,
or a cashier’s or certified check payable to MathStar, Inc. for the total
exercise price of the shares being purchased.

 

o                                    Attached is a
certificate(s) for                        shares
of common stock duly endorsed in blank and surrendered for the exercise price
of the shares being purchased.*

 

o                                    I want to exercise
my option by surrendering a sufficient number of shares of Common Stock
issuable upon exercise of such option to pay the exercise price.*

 

*The use of each of these
alternatives is subject to the approval of MathStar, Inc.

 

Please prepare the stock
certificate in the following name(s):

 

	
  Sincerely,

  
	
   

  
	
   

  	
   

  
	
  (Signature)

  
	
   

  
	
   

  	
   

  
	
  (Print or Type Name)

  
	
   

  
	
  Letter and
  consideration

  
	
  received on

  	
   

  	
   

  
	
  (effective date of
  exercise)

  
				

 

6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}]]