Document:

EX-10.3

 

Exhibit 10.3

EMPLOYMENT AGREEMENT

(Kenneth T. Stevens)

     THIS AGREEMENT is effective as of January 29, 2007 by and between Tween Brands, Inc.,
a Delaware corporation (the “Company”), and Kenneth T. Stevens (the “Executive”) (hereinafter
collectively referred to as “the parties”).

     WHEREAS, the Executive will serve as a key executive of the Company and possess an intimate
knowledge of the business and affairs of the Company and its policies, procedures, methods and
personnel; and

     WHEREAS, the Company has determined that it is essential and in its best interests to retain
the services of key management personnel and to ensure their continued dedication and efforts; and

     WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Board”) has
determined that it is in the best interest of the Company to secure the services and employment of
the Executive and the Executive is willing to render such services on the terms and conditions set
forth herein.

     NOW, THEREFORE, in consideration of the foregoing and the respective agreements of the parties
contained herein, the parties hereby agree as follows:

     1. TERM. The initial term of employment under this Agreement shall be for the period
commencing on the effective date of this Agreement (the “Commencement Date”) and ending on the
third anniversary of the Commencement Date (the “Initial Term”); provided, however, that upon the
expiration of the first anniversary of the Commencement Date and on the anniversary date of each
year thereafter (the “Renewal Date”), the term of this Agreement shall be automatically extended
for a period of one year, unless either the Company or the Executive shall have given written
notice to the other at least ninety (90) days prior to the Renewal Date that the term of this
Agreement shall not be so extended. Notwithstanding the above, if a Change in Control (as defined
below) of the Company occurs during the term of this Agreement, the term of this Agreement will be
extended for two (2) years from the date of the Change in Control.

     2. EMPLOYMENT.

          (a) POSITION. The Executive shall be employed as the President and Chief Operating Officer of
the Company, or such other position of reasonably comparable or greater status and responsibilities
as may be determined by the Board. The Executive shall perform the duties, undertake the
responsibilities and exercise the authority customarily performed, undertaken and exercised by
persons employed in a similar executive capacity.

          (b) OBLIGATIONS. The Executive agrees (1) to devote the Executive’s best efforts and full
business time and attention to the business and affairs of the Company; (2) to

 

 

exercise the highest
degree of loyalty and care with respect to the affairs of the Company; and (3) not to commit any
willful or intentional act with an objective to harm the Company’s
business or reputation. The foregoing, however, shall not preclude the Executive from serving on
corporate, civic or charitable boards or committees or managing personal investments, so long as
such activities do not interfere with the performance of the Executive’s responsibilities
hereunder.

     3. BASE SALARY. Effective as of January 29, 2007, the Company agrees to pay or cause
to be paid to the Executive a minimum annual Base Salary of $800,000 (hereinafter referred to as
the “Base Salary”). This Base Salary will be subject to annual review and may be increased from
time to time by the Board considering factors such as the Executive’s responsibilities,
compensation of executives in other companies, performance of the Executive and other pertinent
factors. Such Base Salary shall be payable in accordance with the Company’s customary practices
applicable to similarly situated executives of the Company.

     4. EQUITY COMPENSATION. The Company shall grant to the Executive rights to receive
shares of the Company’s common stock and options to acquire shares of the Company’s common stock as
the Board or Compensation Committee of the Board determines.

     5. EMPLOYEE BENEFITS. The Executive shall be entitled to participate in tax-qualified
and nonqualified deferred compensation and retirement plans, group term life insurance plans,
short-term and long-term disability plans, employee benefit plans, practices, and programs
maintained by the Company and made available to similarly situated executives generally, and as may
be in effect from time to time. Further, in lieu of other salary payments, in the event of the
Executive’s Disability, the Executive shall be entitled to the payments specified in Section
11(c)(5) hereof during the Executive’s Disability, even though the Executive’s employment is not
terminated as a result of such Disability.

     6. BONUS AND LONG-TERM INCENTIVES. The Executive shall be entitled to participate in
such Company bonus and long-term incentive compensation programs which include similarly situated
executives of the Company as may exist from time to time (the “Incentive Plans”). The Executive’s
participation in such Incentive Plans, practices and programs shall be on the same general basis
and terms as are applicable to similarly situated executives of the Company, although bonuses,
target levels and criteria may differ among such executives as determined by the Board or
Compensation Committee of the Board.

     7. OFFICE AND FACILITIES. The Executive shall be provided with appropriate offices
and with such secretarial and other support facilities as are commensurate with the Executive’s
status with the Company and adequate for the performance of the Executive’s duties hereunder.

 

 

     8. EXPENSES. Subject to applicable Company policies, the Executive shall be entitled
to receive prompt reimbursement of all expenses reasonably incurred by the Executive in connection
with the performance of the Executive’s duties hereunder or for promoting, pursuing or otherwise
furthering the business or interests of the Company including, without limitation, travel,
automobile, and meal and entertainment expenses.

     9. VACATION. The Executive shall be entitled to four weeks of annual vacation or, if
greater, in accordance with the policies as periodically established by the Board for similarly
situated executives of the Company.

     10. DEFINITIONS, TERMS AND CONDITIONS. The Executive’s employment hereunder is
subject to the following terms and conditions:

          (a) CAUSE. “Cause” means that the Executive:

               (1) was grossly negligent in the performance of Executive’s duties with the Company (other
than a failure resulting from the Executive’s incapacity due to physical or mental illness) causing
material harm to the Company; or

               (2) has pled “guilty” or “no contest” to or has been convicted of an act which is defined as a
felony under federal or state law; or

               (3) engaged in intentional misconduct or fraud which caused, or could reasonably be expected
to cause, material harm to the Company’s business or its reputation; or

               (4) committed a material breach of this Agreement (including a violation of the noncompete and
nondisclosure provisions) which is materially and demonstrably injurious to the Company.

          (b) CHANGE IN CONTROL. “Change in Control” means a Change in Control as defined in the
Executive’s Executive Agreement.

          (c) DISABILITY. “Disability” means “Total Disability” as defined in the Too, Inc. Long-Term
Disability Program (effective October 1, 1999) or any amended or successor plan (the “Disability
Plan”).

          (d) DISABILITY DATE. “Disability Date” means the date the Executive’s Disability began.

          (e) EXECUTIVE AGREEMENT. “Executive Agreement” means the Executive Agreement between the
Company and the Executive dated as of January 29, 2007, as well as any such amended, successor, or
substituted agreement.

          (f) GOOD REASON. “Good Reason” means:

     (1) a significant reduction in the Executive’s position, duties, authority,
responsibilities and reporting requirements as set forth in section 2 hereof;

 

 

     (2) a reduction in or material delay in payment of the Executive’s total cash
compensation, incentives and benefits from those required to be provided
with the provisions of this Agreement;

     (3) the Company, the Board or any person controlling the Company relocates the
Executive to a location in excess of fifty (50) miles from the location where
Executive is currently based;

     (4) the failure of the Company to abide by this Agreement or to obtain a
satisfactory agreement from any successor to the Company to assume and agree to
perform this Agreement, as contemplated in Section 15 of this Agreement; or

     (5) the failure of the Company to obtain the assumption in writing of its
obligations to perform this Agreement by any successor to all or substantially all
of the assets of the Company withing fiftenn (15) days after a merger,
consolidation, sale or similar transaction.

     Nothwithstanding the above, Good Reason shall not include (A) acts not taken in bad
faith which are cured by the Company in all respects not later than thirty (30) days from
the receipt by the Company of a written notice from the Executive identifying in reasonable
detail the act or acts constituting Good Reason (a “Preliminary Notice of Good Reason”) or
(B) acts taken by the Company by reason of the Executive’s physical or mental infirmity
which impairs the Executive’s ability to substantially perform the duties under this
Agreement. A Preliminary Notice of Good Reason shall not, by itself, constitute a Notice of
Termination.

          (g) NOTICE OF TERMINATION. “Notice of Termination” means a written notice indicating the
specific termination provision in this Agreement relied upon and, to the extent applicable, setting
forth in reasonable detail the facts and circumstances claimed to provide a basis for termination
of the employment under the provision so indicated. Except for a termination for Cause or
Disability, any termination of employment by the Company or by the Executive shall be communicated
by a Notice of Termination to the other party thirty (30) days prior to the Termination Date.
However, the Company may elect to pay the Executive thirty (30) days of Base Salary in lieu of
thirty (30) days written notice. If the Company notifies the Executive that it will pay the
Executive in lieu of thirty (30) days written notice, the Company may deny the Executive further
access to the Company’s offices subject to the Executive’s right to recover any personal effects at
an agreed upon time. For purposes of this Agreement, no such purported termination of employment
shall be effective without a Notice of Termination.

          (h) PRO-RATED BONUS AMOUNT. “Pro-Rated Bonus Amount” means any accrued but unpaid bonus for a
completed bonus period, plus a pro-rated portion of the Executive’s semi-annual bonus calculated as
of the Termination Date. The portion of the semi-annual bonus payment shall be the amount of
semi-annual bonus payable to the Executive with respect to the bonus period in which the
Termination Date occurs, based on the actual financial performance of the Company for such bonus
period, pro-rated by multiplying such amount by a fraction, the numerator of which is the number of
days during the bonus period which occur prior to the Termination Date, and the denominator of
which is one hundred eighty-two and one-half (182-1/2).

          (i) RETIREMENT. “Retirement” means the voluntary resigning of

 

 

employment by the Executive for
the purpose of retiring which resignation occurs after the last day in the month in which the
Executive turns age sixty-five (65).

          (j) TERMINATION DATE. “Termination Date” means in the case of the
Executive’s death, the date of death, or in all other cases, the date specified in the Notice of
Termination; provided, however, that if the Executive’s employment is terminated by the Company due
to Disability, the date specified in the Notice of Termination shall be subject to Section 11(c) of
this Agreement.

     11. TERMINATION OF EMPLOYMENT; COMPENSATION UPON TERMINATION.

          (a) TERMINATION BY COMPANY WITH CAUSE, OR VOLUNTARY TERMINATION BY EXECUTIVE WITHOUT GOOD
REASON. The Company shall be entitled to immediately terminate the Executive’s employment for
Cause after giving a Notice of Termination. Such Notice of Termination shall state in detail the
particular act or acts or failure or failure to act that constitute the grounds on which the
proposed termination for Cause is based. The Executive may voluntarily terminate employment for any
reason after giving a Notice of Termination. If during the term of this Agreement (including any
extensions thereof), the Executive’s employment is terminated by the Company for Cause, or if the
Executive voluntarily terminates employment without Good Reason, subject to the execution by the
Executive and the Company of a mutual release in favor of each of the Parties, the Company’s sole
obligation hereunder shall be to pay or reimburse the Executive (or facilitate a tax qualified
rollover of) the following amounts:

               (1) the Executive’s accrued Base Salary and accrued vacation not paid as of the Termination
Date;

               (2) the Executive’s vested benefits as of the Termination Date pursuant to the Company’s
benefit, retirement, incentive and other plans; and

               (3) any and all monies advanced to or expenses incurred by the Executive pursuant to Section 8
through the Termination Date.

          (b) TERMINATION BY COMPANY WITHOUT CAUSE OR TERMINATION BY EXECUTIVE WITH GOOD REASON. The
Company may terminate the Executive without Cause after giving a Notice of Termination or the
Executive may terminate employment for Good Reason after giving the Company a Notice of
Termination. If the Executive’s employment is terminated by the Company without Cause or by the
Executive for Good Reason, subject to the execution by the Executive and the Company of a mutual
release in favor of each of the Parties, the Company’s sole obligation hereunder shall be to pay,
maintain or reimburse the Executive (or facilitate a tax qualified rollover of) the following
items:

               (1) the Executive’s accrued Base Salary and accrued vacation not paid as of the Termination
Date;

               (2) the Executive’s Pro-Rated Bonus Amount;

               (3) the Executive’s vested benefits as of the Termination Date pursuant to the Company’s
benefit, retirement, incentive and other plans;

 

 

               (4) a lump sum equal to one and one-half (1.5) times the Executive’s Base Salary;

               (5) any and all monies advanced to the Company by the Executive or expenses incurred by the
Executive pursuant to Section 8 through the Termination Date;

               (6) the Company shall maintain in full force and effect for the continued benefit of the
Executive, for an eighteen (18) month period after the Termination Date, all medical coverage,
programs or arrangements in which the Executive was participating immediately prior to the
Termination Date, provided that Executive’s continued participation is possible under the general
terms and provisions of such medical plans and programs. In the event that the Executive’s
participation in any such plan or program is barred, the Company shall arrange to provide the
Executive, on an after-tax basis, with benefits substantially similar to those which the Executive
was otherwise entitle to receive pursuant to this section 11(b)(6);

               (7) the Company shall accelerate the vesting, by twelve (12) additional months, of all
unvested stock options, restricted stock, stock appreciation rights, deferred compensation, and
similar plan benefits and all such benefits shall thereafter be treated as vested benefits pursuant
to the respective benefit plan; provided, however, that notwithstanding the foregoing, the
acceleration of vesting under this provision shall not apply to any stock options, restricted
stock, stock appreciation rights, deferred compensation, and similar plan benefits where such
options, stock, rights, compensation or similar plan benefits were by the terms of grant thereof or
their respective benefit plans subject to one time cliff vesting two or more years from the grant
or issuance thereof; and

               (8) expenses for outplacement services up to a maximum amount of twenty thousand dollars
($20,000).

          (c) TERMINATION UPON DISABILITY. The Company or Executive shall be entitled to terminate the
Executive’s employment after having established the Executive’s Disability and giving a Notice of
Termination which shall indicate the Disability Date. If the Executive’s employment is terminated
by the Company or Executive by reason of the Executive’s Disability, the Company’s sole obligation
hereunder shall be to pay or reimburse the Executive (or facilitate a tax qualified rollover of)
the following amounts:

               (1) the Executive’s accrued Base Salary and accrued vacation not paid as of the Disability
Date;

               (2) the Executive’s Pro-Rated Bonus Amount;

               (3) the Executive’s vested benefits as of the Termination Date pursuant to the Company’s
benefit, retirement, incentive and other plans;

               (4) any and all monies advanced to or expenses incurred by the Executive pursuant to Section 8
through the Disability Date;

               (5) the Company shall continue to pay the Executive one hundred percent (100%) of the Base
Salary for the first twelve (12) months following the Disability Date, eighty percent (80%) of the
Base Salary for the second twelve (12) months following the

 

 

Disability Date, and sixty percent
(60%) of the Base Salary for the third twelve (12) months following the Disability Date; provided,
however, that such Base Salary shall be reduced by the amount of any benefits the Executive
receives by reason of the Executive’s Disability under the Company’s relevant disability plan or
plans;

               (6) if the Executive is disabled beyond thirty-six (36) months from the Disability Date, the
Company shall continue to pay the Executive the lesser of (a) sixty (60%) of Base Salary or (b) the
maximum benefit under the Disability Plan per year, for the period of the
Executive’s Disability, provided, however, that such payments shall be reduced by the amount of any
benefits the Executive receives by reason of the Executive’s Disability under the Company’s
relevant disability plan or plans; and

               (7) during the period the Executive is receiving salary continuation pursuant to this Section
11(c), the Company shall, at its expense, provide to the Executive and the Executive’s
beneficiaries medical and dental benefits substantially similar in the aggregate to those provided
to the Executive immediately prior to the Executive’s Disability.

               Notwithstanding the above, the salary continuation payments will cease at the earlier of (a)
the Disability ceasing to exist or (b) Retirement. Further, at the end of the first twelve (12)
months of the disability salary continuation period, the Executive shall be removed as an active
employee of the Company.

          (d) TERMINATION UPON DEATH. If the Executive’s employment is terminated by reason of the
Executive’s death, the Company’s sole obligation hereunder shall be to pay or reimburse (or
facilitate a tax qualified rollover of) to the Executive’s spouse, estate or designated
beneficiary, as the case may be, the following amounts:

               (1) the Executive’s accrued Base Salary and accrued vacation not paid as of the Termination
Date;

               (2) the Executive’s Pro-Rated Bonus Amount;

               (3) the Executive’s vested benefits as of the Termination Date pursuant to the Company’s
benefit, retirement, incentive and other plans; and

               (4) any and all monies advanced to or expenses incurred by the Executive pursuant to Section 8
through the Termination Date.

          (e) RETIREMENT. If the Executive’s employment is terminated as a result of Retirement, the
Company’s sole obligation hereunder shall be to pay or reimburse the Executive (or facilitate a tax
qualified rollover of) the following amounts:

               (1) the Executive’s accrued Base Salary and accrued vacation not paid as of the Termination
Date;

               (2) the Executive’s Pro-Rated Bonus Amount;

               (3) the Executive’s vested benefits as of the Termination Date pursuant to the Company’s
benefit, retirement, incentive and other plans; and

 

 

               (4) any and all monies advanced to or expenses incurred by the Executive pursuant to Section 8
through the Termination Date.

          (f) TERMINATION UPON CHANGE IN CONTROL. In the event of a Change in Control and subsequent
termination of employment without Cause by the Company, or any successor, or with Good Reason by
the Executive, the Executive shall be solely entitled to the benefits described in the Executive
Agreement and shall not be entitled to any benefits under this Agreement.

          (g) RESTRICTED STOCK, STOCK OPTIONS. Except as provided for in
Section 11(b)(7), for purposes of this Agreement, restricted stock and stock options shall vest and
be exercisable according to the terms of the applicable plan.

          (h) NO DUTY TO MITIGATE. The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise and no payment
hereunder shall be offset or reduced by the amount of any compensation or benefits provided to the
Executive in any subsequent employment.

          (i) PAYMENT DATE. Except as otherwise provided, all amounts to be paid by the Company under
this Section 11 shall be paid by the Company within thirty (30) days of the Termination Date.

          (i) EXECUTIVE ADVANCES. Upon the termination of the Executive’s employment pursuant to
Sections 11(a), (b), (c), (d), or (e) hereunder, the Executive agrees that all monies that are
advanced to the Executive prior to such termination shall be repaid to the Company or the Company
shall be entitled to offset such amount against any payments to the Executive as provided for in
this Agreement.

          (j) SECTION 409A COMPLIANCE. The Executive and the Company desire to comply with Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”), in accordance with the transition
rules applicable under IRS Notice 2005-1 and Proposed Regulations issued under Section 409A of the
Code. Therefore, notwithstanding any provision of this Agreement to the contrary, if the Company
determines that Executive is a “specified employee” as defined in Section 409A of the Code or any
guidance promulgated thereunder (“Code Section 409A”), Executive shall not be entitled to any
payments under Sections 11(b) or 11(c) of this Agreement after the Termination Date that otherwise
would cause Executive to incur any additional tax or interest under Code Section 409A, until the
earlier of (i) the date which is six months after the Termination Date, or (ii) the date of
Executive’s death. If any provision of this Agreement (or of any award of compensation, including
equity compensation or benefits) would cause Executive to incur any additional tax or interest
under Code Section 409A, the Company shall, after consulting with Executive and receiving
Executive’s approval (which shall not be unreasonably withheld), reform such provision in such a
manner as shall not cause Executive to incur any such tax or interest.

     12. EXECUTIVE COVENANTS.

          (a) UNAUTHORIZED DISCLOSURE, NONDISPARAGEMENT. The Executive shall not, during the term of
this Agreement and thereafter, make any disparaging comments which may be harmful to the Company’s
reputation or any Unauthorized Disclosure. For purposes of this Agreement, “Unauthorized
Disclosure” shall mean disclosure by the

 

 

Executive without the prior written consent of the Board
to any person other than a person to whom disclosure is reasonably necessary or appropriate in
connection with the performance by the Executive of duties as an executive of the Company or as may
be legally required, of any information relating to the business or prospects of the Company
(including, but not limited to, any confidential information with respect to any of the Company’s
customers, products, methods of distribution, strategies, business and marketing plans and business
policies and practices); provided, however, that such term shall not include the use or disclosure
by the Executive, without consent, of any information known generally to the public (other than as
a result of disclosure by the Executive in violation of this Section 12(a)). This confidentiality
covenant has no temporal, geographical or territorial restriction.

          (b) NON-COMPETITION. During the Non-Competition Period defined
below, the Executive shall not, directly or indirectly, without the prior written consent of the
Company, own, manage, operate, join, control, be employed by, consult with or participate in the
ownership, management, operation or control of, or be connected with (as a stockholder, partner, or
otherwise), any business, individual, partner, firm, corporation, or other entity that competes or
plans to compete, directly or indirectly, with the Company, its products, or any division,
subsidiary or affiliate of the Company; provided, however, that the “beneficial ownership” by the
Executive after termination of employment with the Company, either individually or as a member of a
“group,” as such terms are used in Rule 13d of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended,(the “Exchange Act”), of not more than two percent (2%)
of the voting stock of any publicly held corporation shall not be a violation of Section 12 of this
Agreement.

          The “Non-Competition Period” means the period the Executive is employed by the Company plus
two (2) years from the Termination Date if the Executive’s employment is terminated (i) by the
Company for any reason, (ii) by the Executive for any reason, or (iii) by reason of either the
Company’s or the Executive’s decision not to extend the term of this Agreement as contemplated by
Section 1 hereof. Notwithstanding anything in this Agreement to the contrary, after a Change in
Control, the Non-Competition Period shall terminate upon a termination without Cause by the Company
or by the Executive for Good Reason.

          (c) NON-SOLICITATION. During the No-Raid Period defined below, the Executive shall not,
either directly or indirectly, alone or in conjunction with another party, attempt to recruit or
hire, interfere with or harm, or attempt to interfere with or harm, the relationship of the
Company, its subsidiaries and/or affiliates, with any person who at any time was an employee,
customer or supplier of the Company, its subsidiaries and/or affiliates or otherwise had a business
relationship with the Company, its subsidiaries and/or affiliates.

          The “No-Raid Period” means the period the Executive is employed by the Company plus two (2)
years from the Termination Date if the Executive’s employment is terminated (i) by the Company for
any reason, (ii) by the Executive for any reason, or (iii) by reason of either the Company’s or the
Executive’s decision not to extend the term of this Agreement as contemplated by Section 1 hereof.

          (d) DELIVERY OF DOCUMENTS UPON TERMINATION. The Executive shall deliver to the Company or its
designee at the termination of the Executive’s employment all correspondence, memoranda, notes,
records, drawings, sketches, plans, customer lists, product compositions, and other documents and
all copies thereof, made, composed or received by the Executive, solely or jointly with others,
that are in the Executive’s possession,

 

 

custody, or control at termination and that are related in
any manner to the past, present, or anticipated business of the Company, its subsidiaries and/or
affiliates. In this regard, the Executive hereby grants and conveys to the Company all right,
title and interest in and to, including without limitation, the right to possess, print, copy, and
sell or otherwise dispose of, any reports, records, papers, summaries, photographs, drawings or
other documents, and writings, and copies, abstracts or summaries thereof, that may be prepared by
the Executive or under the Executive’s direction or that may come into the Executive’s possession
in any way during the term of the Executive’s employment, with the Company that relate in any
manner to the past, present or anticipated business of the Company.

          (e) INTELLECTUAL PROPERTY. The Executive shall hold in trust for the benefit of the Company,
and shall disclose promptly and fully to the Company in writing, and hereby assigns, and binds the
Executive’s heirs, executors, and administrators to assign, to the Company any and all inventions,
discoveries, ideas, concepts, improvements, copyrightable
works, and other developments (the “Developments”) conceived, made, discovered or developed by the
Executive, solely or jointly with others, during the term of the Executive’s employment by the
Company, whether during or outside of usual working hours and whether on the Company’s premises or
not, that relate in any manner to the past, present or anticipated business of the Company, its
subsidiaries and/or affiliates. All works of authorship created by the Executive, solely or
jointly with others, shall be considered works made for hire under the Copyright Act of 1976, as
amended, and shall be owned entirely by the Company. Any and all such Developments shall be the
sole and exclusive property of the Company, whether patentable, copyrightable, or neither, and the
Executive shall assist and fully cooperate in every way, at the Company’s expense, in securing,
maintaining, and enforcing, for the benefit of the Company or its designee, patents, copyrights or
other types of proprietary or intellectual property protection for such Developments in any and all
countries. Within one (1) year following the end of the term of this Agreement and without
limiting the generality of the foregoing, any Development of the Executive relating to any subject
matter on which the Executive worked or was informed during the Executive’s employment by the
Company shall be conclusively presumed to have been conceived and made prior to the termination of
the Executive’s employment (unless the Executive clearly proves that such Development was conceived
and made following the termination of the Executive’s employment), and shall accordingly belong and
be assigned to the Company and shall be subject to this Agreement.

          (f) REMEDIES. The Executive agrees that any breach of the terms of this Section 12 would
result in irreparable injury and damage to the Company for which the Company would have no adequate
remedy at law; the Executive therefore also agrees that in the event of said breach or any threat
of breach, the Company shall be entitled to an immediate injunction and restraining order to
prevent such breach and/or threatened breach and/or continued breach by the Executive and/or any
and all persons and/or entities acting for and/or with the Executive, without having to prove
damages, and to all costs and expenses, including reasonable attorneys’ fees and costs, in addition
to any other remedies to which the Company may be entitled under this Agreement, at law or in
equity. The terms of this paragraph shall not prevent the Company from pursuing any other
available remedies for any breach or threatened breach hereof, including but not limited to the
recovery of damages from the Executive. The Executive and the Company further agree that the
provisions of the covenants not to compete and solicit are reasonable and that the Company would
not have entered into this Agreement but for the inclusion of such covenants herein. Should a
court determine, however, that any provision of the covenants is unreasonable, either in period of
time, geographical area, or otherwise, the parties hereto agree that the covenant should be
interpreted and enforced to the maximum extent which such court or arbitrator deems reasonable.

 

 

          The provisions of this Section 12 shall survive any termination of this Agreement, and the
existence of any claim or cause of action by the Executive against the Company, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants and agreements of this Section 12; provided, however, that this paragraph shall not,
in and of itself, preclude the Executive from defending against the enforceability of the covenants
and agreements of this Section 12.

     13. LIMITATION OF PAYMENTS.

          (a) GROSS-UP PAYMENT. In the event it shall be determined that any payment or distribution of
any type to or for the benefit of the Executive, by the Company, any of its affiliates, any person
who acquires ownership or effective control of the Company or ownership of a substantial portion of
the Company’s assets within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the “Code”), and the regulations thereunder
or any affiliate of such person, whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise (the “Total Payments”), would be subject to the excise
tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise
tax (such excise tax, together with any such interest and penalties, are collectively referred to
as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a
“Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Total Payments (not including any Gross-Up Payment).

          (b) All determinations as to whether any of the Total Payments are “parachute payments”
(within the meaning of Section 280G of the Code), whether a Gross-Up Payment is required, the
amount of such Gross-Up Payment and any amounts relevant to the last sentence of Subsection 13(a),
shall be made by an independent accounting firm selected by the Company from among the largest five
accounting firms in the United States (the “Accounting Firm”). The Accounting Firm shall provide
its determination (the “Determination”), together with detailed supporting calculations regarding
the amount of any Gross-Up Payment and any other relevant matter, both to the Company and the
Executive within thirty (30) days of the Termination Date, if applicable, or such earlier time as
is requested by the Company or the Executive (if the Executive reasonably believes that any of the
Total Payments may be subject to the Excise Tax). Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that the Company should have made Gross-Up Payments (“Underpayment”), or that
Gross-Up Payments will have been made by the Company which should not have been made
(“Overpayments”). In either such event, the Accounting Firm shall determine the amount of the
Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such
Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. In the
case of an Overpayment, the Executive shall, at the direction and expense of the Company, take such
steps as are reasonably necessary (including the filing of returns and claims for refund), follow
reasonable instructions from, and procedures established by, the Company, and otherwise reasonably
cooperate with the Company to correct such Overpayment.

 

 

     14. EXECUTIVE REPRESENTATION. The Executive expressly represents and warrants to the
Company that the Executive is not a party to any contract or agreement and is not otherwise
obligated in any way, and is not subject to any rules or regulations, whether governmentally
imposed or otherwise, which will or may restrict in any way the Executive’s ability to fully
perform the Executive’s duties and responsibilities under this Agreement.

     15. SUCCESSORS AND ASSIGNS.

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

          (b) Neither this Agreement nor any right or interest hereunder shall be assignable or
transferable by the Executive, the Executive’s beneficiaries or legal representatives, except by
will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and
be enforceable by the Executive’s legal personal representative.

     16. ARBITRATION. Except with respect to the remedies set forth in Section 12(f), as
the method for resolving any dispute arising out of this Agreement, the Executive, in the
Executive’s sole discretion, may select binding arbitration in accordance with this Section.
Except as provided otherwise in this Section, arbitration pursuant to this Section shall be
governed by the Commercial Arbitration Rules of the American Arbitration Association. If the
Executive wishes to arbitrate an issue under this Section 16, the Executive shall deliver written
notice to the Company, including a description of the issue to be arbitrated. Within fifteen (15)
days after the Executive demands arbitration, the Company and the Executive shall each appoint an
arbitrator. Within fifteen (15) additional days, these two arbitrators shall appoint the third
arbitrator by mutual agreement; if they fail to agree within this fifteen (15) day period, then the
third arbitrator shall be selected promptly pursuant to the rules of the American Arbitration
Association for Commercial Arbitration. The arbitration panel shall hold a hearing in Columbus,
Ohio, within ninety (90) days after the appointment of the third arbitrator. The fees and expenses
of the arbitrators, and any American Arbitration Association fees, shall be paid by the Company.
Both the Company and the Executive may be represented by counsel and may present testimony and
other evidence at the hearing. Within ninety (90) days after commencement of the hearing, the
arbitration panel will issue a written decision; the majority vote of two of the three arbitrators
shall control. The majority decision of the arbitrators shall be binding on the parties, and the
parties may not pursue other available legal remedies if the parties are not satisfied with the
majority decision of the arbitrator. The Executive shall be entitled to seek specific performance
of the Executive’s rights under this Agreement during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

     17. NOTICE. For the purposes of this Agreement, notices and all other communications
provided for in the Agreement (including the Notice of Termination) shall be in writing and shall
be deemed to have been duly given when personally delivered or sent by registered or certified
mail, return receipt requested, postage prepaid, or upon receipt if overnight
delivery service or
facsimile is used, addressed as follows:

 

 

     TO THE EXECUTIVE:

Kenneth T. Stevens

7309 Lambton Park Road

New Albany, OH 43054

     TO THE COMPANY:

Tween Brands, Inc.

8323 Walton Parkway

New Albany, Ohio 43054

Attn: Executive Vice President-Human Resources

     18. SETTLEMENT OF CLAIMS. Except as otherwise provided, the Company’s obligation to
make the payments provided for in this Agreement and otherwise to perform its obligations hereunder
shall not be affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company may have against the Executive
or others.

     19. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing and signed by the
Executive and the Company. No waiver by either party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement.

     20. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Ohio without giving effect to conflict of law principles
thereof. The parties hereby consent to the exclusive jurisdiction of the state courts of the
State of Ohio and venue in Franklin County, Ohio.

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

     22. ENTIRE AGREEMENT. This Agreement and the offer letter executed by the Company and
Executive on or about January 8, 2007 constitute the entire agreement between the parties hereto
with respect to the subject matter hereof and supersede all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto with respect to the
subject matter hereof.

 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duty authorized
officer and the Executive has executed this Agreement as of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	TWEEN BRANDS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Michael Rayden
 

Michael Rayden
	 	 
	 

	 	Title:
	 	Chairman and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	EXECUTIVE	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Kenneth T. Stevens	 	 
	 	 	 	 	 
	 	 	Kenneth T. StevensEX-10.4

 

Exhibit 10.4

EXECUTIVE AGREEMENT

(Kenneth T. Stevens)

     This is an Agreement between Tween Brands, Inc., a Delaware corporation (the
“Corporation”), with its principal office located at 8323 Walton Parkway, New Albany, Ohio 43054,
and Kenneth T. Stevens (the “Executive”), effective as of January 29, 2007.

Recitals:

     The Corporation considers the establishment and maintenance of a sound and vital management to
be part of its overall corporate strategy and essential in protecting and enhancing the interests
of the Corporation and its shareholders. As part of this corporate strategy, the Corporation
wishes to act to retain its well-qualified executive officers notwithstanding any actual or
threatened change in control of the Corporation.

     The Executive is a key executive officer of the Corporation and the Executive’s services,
experience and knowledge of the affairs of the Corporation, and reputation and contacts in the
industry are extremely valuable to the Corporation. The Executive’s continued dedication,
availability, advice, and counsel to the Corporation are deemed important to the Corporation, its
Board of Directors (the “Board”), and its shareholders. It is, therefore, in the best interests of
the Corporation to secure the continued services of the Executive notwithstanding any actual or
threatened change in control of the Corporation. Accordingly, the Board has approved this
Agreement with the Executive and authorized its execution and delivery on behalf of the
Corporation.

Agreement:

     1. Term of Agreement. This Agreement will begin on the date entered above and will
irrevocably continue in effect for a three-year period through January 28, 2010. On the first
anniversary of the date entered above, and on the anniversary date of each year thereafter (a
“Renewal Date”), the term of this Agreement will be extended automatically for a period of one (1)
year unless, not later than thirty (30) days prior to such Renewal Date, the Corporation gives
written notice to the Executive that it has elected not to extend this Agreement, in which
situation this Agreement shall terminate at the end of the three-year term then in progress.
Notwithstanding the above, if a “Change in Control” (as defined herein) of the Corporation occurs
during the term of this Agreement, the term of this Agreement will be for twenty-four (24) months
beyond the end of the month in which any such Change in Control occurs.

     2. Definitions. The following defined terms shall have the meanings set forth below, for
purposes of this Agreement:

     (a) Annual Award. “Annual Award” means the cash payment paid or payable to the
Executive with respect to a fiscal year under the Corporation’s Incentive Compensation
Performance Plan.

 

 

     (b) Base Annual Salary. “Base Annual Salary” means the greater of (1) the highest
annual rate of base salary in effect for the Executive during the twelve (12) month period
immediately prior to a Change in Control, or (2) the annual rate of base salary in
effect at the time a Notice of Termination is given (or on the date employment is
terminated if no Notice of Termination is required).

     (c) Cause. “Cause” means any of the following:

(1) The Executive shall have (a) been convicted of a felony, or (b)
committed an act of intentional gross misconduct, fraud, or gross
negligence in connection with the Executive’s duties or in the course of the
Executive’s employment with the Corporation or any Subsidiary, and the Board
shall have determined that such act is materially harmful to the
Corporation; or

(2) The Executive shall have materially breached Section 12 of the
Executive’s Employment Agreement with the Corporation.

          For purposes of this Agreement, no act or failure to act on the part of the Executive
shall be deemed “intentional” if it was due primarily to an error in judgment or negligence,
but shall be deemed “intentional” only if done or omitted to be done by the Executive not in
good faith and without reasonable belief that the Executive’s action or omission was in the
best interest of the Corporation. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for “Cause” under this Agreement unless and until 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 (3/4) of the Board at a meeting called and held for
such purposes, after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive’s counsel (if the Executive chooses to have counsel
present at such meeting), to be heard before the Board, finding that, in the good faith
opinion of the Board, the Executive had committed an act constituting “Cause” as defined in
this Agreement and specifying the particulars of the act constituting “Cause” in detail.
Nothing in this Agreement will limit the right of the Executive or the Executive’s
beneficiaries to contest the validity or propriety of any such determination.

     (d) Change in Control. “Change in Control” means the occurrence of any of the
following:

     (1) Any “Person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) is or becomes the
“Beneficial Owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing twenty-five percent (25%)
or more of the combined voting power of the Corporation’s then outstanding
securities (a “25% Shareholder”) provided however, that the term 25% Shareholder
shall not include any Person if such Person would not otherwise be a 25% Shareholder
but for a reduction in the number of outstanding voting shares resulting from a
stock repurchase program or other similar plan of the Corporation or from a
self-tender offer of the Corporation, which plan or tender offer commenced on or
after the date hereof provided, however, that the term “25% Shareholder” shall
include such Person from and after the first date

 

 

upon which (A) such Person, since
the date of the commencement of such plan or tender offer, shall have acquired
Beneficial Ownership of, in the aggregate, a number of voting shares of the
Corporation equal to one percent (1%) or more of the voting shares of the
Corporation then outstanding, and (B) such Person, together with all affiliates and
associates of such Person, shall Beneficially Own
twenty-five percent (25%) or more of the voting shares of the Corporation then
outstanding. In calculating the percentage of the outstanding voting shares that
are Beneficially Owned by a Person for purposes of this subsection (d)(1), voting
            shares that are Beneficially Owned by such Person shall be deemed outstanding, and
voting shares that are not Beneficially Owned by such Person and that are subject to
issuance upon the exercise or conversion of outstanding conversion rights, exchange
rights, rights, warrants or options shall not be deemed outstanding.
Notwithstanding the foregoing, if the Board of Directors of the Corporation
determines in good faith that a Person that would otherwise be a 25% Shareholder
pursuant to the foregoing provisions of this subsection (dX1) has become such
inadvertently, and such Person (a) promptly notifies the Board of Directors of such
status and (b) as promptly as practicable thereafter, either divests of a sufficient
number of voting shares so that such Person would no longer be a 25% Shareholder, or
causes any other circumstance, such as the existence of an agreement respecting
voting shares, to be eliminated such that such Person would no longer be a 25%
Shareholder as defined pursuant to this subsection (d)(1), then such Person shall
not be deemed to be a 25% Shareholder for any purposes of this Agreement. Any
determination made by the Board of Directors of the Corporation as to whether any
Person is or is not a 25% Shareholder shall be conclusive and binding; or

     (2) A change in composition of the Board of Directors of the Corporation
occurring any time during a consecutive two-year period as a result of which fewer
than a majority of the Board of Directors are Continuing Directors (for purposes of
this section, the term “Continuing Director” means a director who was either (A)
first elected or appointed as a Director prior to the date of this Agreement; or (B)
subsequently elected or appointed as a director if such director was nominated or
appointed by at least a majority of the then Continuing Directors); or

     (3) Any of the following occurs:

     (A) a merger or consolidation of the Corporation, other than a merger
or consolidation in which the voting securities of the Corporation
immediately prior to the merger or consolidation continue to represent
(either by remaining outstanding or being converted into securities of the
surviving entity) sixty percent (60%) or more of the combined voting power
of the Corporation or surviving entity immediately after the merger or
consolidation with another entity;

     (B) a sale, exchange, or other disposition (in a single transaction or
a series of related transactions) of all or substantially all of the assets
of the Corporation which shall include, without limitation, the sale of
assets aggregating more than fifty percent (50%) of the assets of the
Corporation on a consolidated basis;

 

 

     (C) a liquidation or dissolution of the Corporation;

     (D) a reorganization, reverse stock split, or recapitalization of the
Corporation which would result in any of the foregoing; or

     (E) a transaction or series of related transactions having, directly or
indirectly, the same effect as any of the foregoing.

     (e) Change Year. “Change Year” means the fiscal year in which a Change in Control
occurs.

     (f) Disability. “Disability” means “Total Disability” as defined in the Too, Inc.
Long-Term Disability Program (effective October 1, 1999), or any amended or successor plan.

     (g) Employee Benefits. “Employee Benefits” means the perquisites, benefits, and
service credit for benefits as provided under any and all employee retirement income and
welfare benefit policies, plans, programs, or arrangements in which the Executive is
entitled to participate, including without limitation any stock option, stock purchase,
stock appreciation, savings, pension, supplemental executive retirement, or other retirement
income or welfare benefit, deferred compensation, incentive compensation, group or other
life, health, medical/hospital, or other insurance (whether funded by actual insurance or
self-insured by the Corporation), disability, salary continuation, expense reimbursement,
and other employee benefit policies, plans, programs, or arrangements that may now exist or
any equivalent successor policies, plans, programs, or arrangements that may be adopted
hereafter, providing perquisites, benefits, and service credit for benefits at least as
great in a monetary equivalent as are payable thereunder prior to a Change in Control.

     (h) Employment Agreement. “Employment Agreement” means an executed employment
agreement between the Corporation and the Executive.

     (i) Good Reason. “Good Reason” means the occurrence of any one or more of the
following:

     (1) The assignment to the Executive after a Change in Control of the
Corporation of duties which are a significant reduction in the duties, authority,
responsibilities, and status of the Executive’s position at any time during the
twelve (12) month period prior to such Change in Control;

     (2) A reduction by the Corporation in the Executive’s Base Annual Salary in
effect immediately prior to a Change in Control of the Corporation, or the failure
to grant salary increases and bonus payments on a basis comparable to those granted
to other executives of the Corporation, or a reduction of the Executive’s most
recent highest incentive bonus potential prior to such Change in Control under the
Corporation’s Incentive Compensation Performance Plan, Long-Term Incentive
Compensation Performance Plan, or similar plans;

     (3) A demand by the Corporation that the Executive relocate to a location in
excess of fifty (50) miles from the location where the Executive is currently based,
or in the event of any such relocation with the Executive’s

 

 

express written consent,
the failure of the Corporation or a Subsidiary to pay (or reimburse the Executive
for) all reasonable moving expenses incurred by the Executive relating to a change
of principal residence in connection with such relocation and to indemnify the
Executive against any loss in the sale of the Executive’s principal residence in
connection with any such change of residence, all to the effect that the Executive
shall incur no loss on an after tax basis;

     (4) The failure of the Corporation to abide by this Agreement or to obtain a
satisfactory agreement from any successor to the Corporation to assume
and agree to perform this Agreement, as contemplated in Section 14 of this
Agreement;

     (5) The failure of the Corporation to provide the Executive with substantially
the same Employee Benefits that were provided to him immediately prior to the Change
in Control, or with a package of Employee Benefits that, though one or more of such
benefits may vary from those in effect immediately prior to such Change in Control,
is substantially comparable in all material respects to such Employee Benefits taken
as a whole; or

     (6) Any significant reduction in the Executive’s compensation or benefits or
adverse change in the Executive’s location or duties, if such significant reduction
or adverse change occurs at any time after the commencement of any discussion with a
third party relating to a possible Change in Control of the Corporation involving
such third party, if such reduction or adverse change is in contemplation of such
possible Change in Control and such Change in Control is actually consummated within
twelve (12) months after the date of such significant reduction or adverse change.

          The existence of Good Reason shall not be affected by the Executive’s incapacity due to
physical or mental illness. The Executive’s continued employment shall not constitute a
waiver of the Executive’s rights with respect to any circumstance constituting Good Reason
under this Agreement. The Executive’s determination of Good Reason shall be conclusive and
binding upon the parties to this Agreement provided such determination has been made in good
faith.

     (j) Highest Incentive Compensation. “Highest Incentive Compensation” means the greater
of the Executive’s Potential Annual Award for the Executive’s Incentive Group for (a) the
Termination Year or (b) the average of the actual Annual Awards for the three years prior to
the Termination Year.

     (k) Incentive Compensation Performance Plan. “Incentive Compensation Performance Plan”
means the Corporation’s 1999 Incentive Compensation Performance Plan in effect as of the
effective date of this Agreement, as well as any amended, successor or similar plan or
plans.

     (l) Incentive Group. “Incentive Group” means the group or category, if any, into which
an Executive is placed pursuant to the Corporation’s Incentive Compensation Performance
Plan.

     (m) Long-Term Incentive Compensation Performance Plans “Long-Term Incentive
Compensation Performance Plans” means the Corporation’s 2005 Stock Option

 

 

and Performance
Incentive Plan in effect as of the effective date of this Agreement, as well as any amended,
similar or successor, plan or plans.

     (n) Notice of Termination. “Notice of Termination” means a written notice indicating
the specific termination provision in this Agreement relied upon and setting forth in
reasonable detail the facts and circumstances claimed to provide a basis for termination of
the employment under the provision so indicated.

     (o) Potential Annual Award. “Potential Annual Award” means the Annual Award the
Executive could receive according to his or her Incentive Group pursuant to the
Corporation’s Incentive Compensation Performance Plan assuming that (1) the
Corporation met the par target (100%) criteria for the Corporation’s Incentive
Compensation Performance Plan for a particular fiscal period or year (whether or not such
target performance criteria was or could be met); (2) there are no adjustments for business
unit or individual performance; and (3) the Executive’s Base Annual Salary is used to
determine the Potential Annual Award.

     (p) Pro-Rated Bonus Amount. “Pro-Rated Bonus Amount” means any accrued but unpaid
bonus for a completed bonus period, plus a pro-rated portion of the greater of (i) the
average of the Executive’s semi-annual bonus for the previous two similar seasons or (ii)
the Executive’s par target (100%) criteria semi-annual bonus for the current semi-annual
season calculated as of the Change in Control date. In the case of a semi-annual bonus, the
portion shall be the amount of semi-annual bonus paid or payable to the Executive with
respect to the bonus period in which the Change in Control occurs, assuming the greater of
criteria (i) or (ii) applied, pro-rated by multiplying such amount by a fraction, the
numerator of which is the number of days during the bonus period in which the Change in
Control occurs prior to the occurrence of the Change in Control, and the denominator of
which shall be one hundred eighty-two and one-half (182-1/2).

     (q) Performance Criteria. “Performance Criteria” means the performance-based criteria
as referenced in the Corporation’s Incentive Compensation Performance Plan.

     (r) Severance Benefits. “Severance Benefits” means the benefits described in Section 4
of this Agreement, as adjusted by the applicable provisions of Section 5 of this Agreement.

     (s) Subsidiary. “Subsidiary” means any corporation or other entity, a majority of the
voting control of which is directly or indirectly owned or controlled at the time by the
Corporation.

     (t) Termination Year. “Termination Year” means the year of termination of the
Executive.

     3. Eligibility for Severance Benefits. The Corporation or its successor shall pay or provide
to the Executive the Severance Benefits if the Executive’s employment is terminated during the term
of this Agreement, either:

     (a) by the Corporation (1) at any time six (6) months prior to a Change in Control if
such termination was in contemplation of such Change in Control and was

 

 

done to avoid the
effects of this Agreement or, (2) within twenty-four (24) months after a Change in Control
of the Corporation, unless in either (1) or (2) the termination is on account of the
Executive’s death or Disability or for Cause, provided that, in the case of a termination on
account of the Executive’s Disability or for Cause, the Corporation shall give Notice of
Termination to the Executive with respect thereto;

     (b) by the Executive for Good Reason at any time within twenty-four (24) months after a
Change in Control of the Corporation provided that the Executive shall give Notice of
Termination to the Corporation with respect thereto; or

     (c) by the Executive for any reason at any time within thirty (30) days after the first
anniversary of a Change in Control of the Corporation provided that the Executive shall give
Notice of Termination to the Corporation with respect thereto.

     4. Severance Benefits. The Executive, if eligible under Section 3, shall receive the
following Severance Benefits, adjusted by the applicable provisions of Section 5 (in addition to
accrued compensation, bonuses, and vested benefits and stock options):

     (a) Base Annual Salary. A lump sum cash payment equal to the sum of (1) any accrued
base salary and vacation time payable as of the Executive’s termination of employment
(either by reason of an Employment Agreement or otherwise); and (2) the Executive’s Base
Annual Salary multiplied by three (3).

     (b) Annual Incentive Compensation. A lump sum cash payment equal to the sum of (1) the
Pro-Rated Bonus Amount; and (2) the Executive’s Highest Incentive Compensation multiplied by
three (3).

     (c) Long-Term Incentive Compensation. Such compensation as shall be payable according
to the terms of the Corporation’s Long-Term Incentive Compensation Performance Plans.

     (d) Insurance Benefits. For a three (3) year period after the date the Executive’s
employment is terminated, the Corporation will arrange to provide to the Executive, at the
Corporation’s expense:

     (1) Health Care. Health care coverage comparable to that in effect for
the Executive immediately prior to the termination (or, if more favorable to the
Executive, that furnished generally to salaried employees of the Corporation),
including, but not limited to, hospital, surgical, medical, dental, prescription,
and dependent coverage. Upon the expiration of the health care benefits required to
be provided pursuant to this subsection 4(d), the Executive shall be entitled to the
continuation of such benefits under the provisions of the Consolidated Omnibus
Budget Reconciliation Act. Health care benefits otherwise receivable by the
Executive pursuant to this subsection 4(d) shall be reduced to the extent comparable
benefits are actually received by the Executive from a subsequent employer during
the three-year period following the date the employment is terminated and any such
benefits actually received by the Executive shall be reported by the Executive to
the Corporation.

     (2) Life Insurance. Life insurance coverage (including any
supplemental coverage, purchase opportunity, and double indemnity for

 

 

accidental
death that was available to the Executive) equal (including policy terms) to that in
effect at the time Notice of Termination is given (or on the date the employment is
terminated if no Notice of Termination is required) or, if more favorable to the
Executive, equal to that in effect at the date the Change in Control occurs.

     In the event the Executive’s participation in any such plan or program is not
permitted, or is taxable to the Executive, the Corporation will directly provide, at no
after-tax cost to the Executive, the benefits to which the Executive would be entitled under
such plans and programs. The Corporation may elect to pay such benefits in a lump sum.

     (e) Retirement and Nonqualified Plan Benefits. The Executive will be entitled to all
benefits provided under (1) the Corporation’s Alternative Savings Plan and the Corporation’s
Supplemental Retirement and Deferred Compensation Plan, as well as any amended, similar or
successor plans and (2) the Corporation’s tax-qualified plans and
nonqualified plans, as well as any amended, similar, or successor plans. All qualified
and nonqualified plan benefits or deferred compensation agreements or accounts shall become
immediately vested with respect to such plan benefits as of a Change in Control.

     (f) Stock Options. If upon the date of termination of the Executive’s employment, the
Executive holds any options with respect to stock of Corporation, all such options will
immediately become exercisable upon such date and will be exercisable for one hundred eighty
(180) days thereafter. To the extent such acceleration of exercise of such options is not
permissible under the terms of any plan pursuant to which the options were granted, the
Corporation will pay to Executive, in a lump sum, within one hundred eighty (180) days after
termination of employment, an amount in cash equal to the excess, if any, of the aggregate
fair market value of all stock of the Corporation subject to such options, determined on the
date of termination of employment, over the aggregate option price of such stock, and the
Executive will surrender all such options unexercised.

     (g) Outplacement. The Corporation shall pay or reimburse the Executive all fees for
outplacement services and related travel costs up to a maximum of twenty thousand dollars
($20,000).

     (h) Code Section 409A Compliance. Notwithstanding any provision of this Agreement to
the contrary, if the Company determines that Executive is a “specified employee” as defined
in Section 409A of the Code or any guidance promulgated thereunder (“Code Section 409A”),
Executive shall not be entitled to any payments under Section 4 of this Agreement that
otherwise would cause Executive to incur any additional tax or interest under Code Section
409A, until the earlier of (i) the date which is six months after the date that Executive’s
employment with the Company is terminated or (ii) the date of Executive’s death. If any
provision of this Agreement (or of any award of compensation, including equity compensation
or benefits) would cause Executive to incur any additional tax or interest under Code
Section 409A, the Company shall, after consulting with Executive and receiving Executive’s
approval (which shall not be unreasonably withheld), reform such provision in such a manner
as shall not cause Executive to incur any such tax or interest.

 

 

     In computing and determining Severance Benefits under subsections 4(a), (b), (c), (d), (e),
(f), and (g), above, a decrease in the Executive’s salary, incentive bonus potential, or insurance
benefits shall be disregarded if such decrease occurs within six (6) months before a Change in
Control, is in contemplation of such Change in Control, and is taken to avoid the effect of this
Agreement should such action be taken after such Change in Control. In such event, the salary,
incentive bonus potential, and/or insurance benefits used to determine Severance Benefits shall be
that in effect immediately before the decrease that is disregarded pursuant to this Section 4.

     Except as otherwise provided, the Severance Benefits provided in subsections 4(a), (b), (c),
(e), (f), and (g) above shall be paid not later than forty-five (45) business days following the
date the Executive’s employment terminates.

     5. Tax Gross-Up. If any Severance Benefit or other benefit paid or provided under Section 4,
or the acceleration of stock option vesting, or the payment or distribution of any Employee
Benefits or similar benefits are subject to excise tax pursuant to Section 4999 of the Internal
Revenue Code of 1986, as amended (or any similar federal or state excise tax), the Corporation
shall pay to the Executive such additional compensation as is necessary (after taking
into account all federal, state, and local income taxes payable by the Executive as a result
of the receipt of such additional compensation) to place the Executive in the same after-tax
position the Executive would have been in had no such excise tax (or any interest or penalties
thereon) been paid or incurred with respect to any of such amounts (the “Tax Gross-Up”). The
Corporation shall pay such additional compensation at the time when the Corporation withholds such
excise tax from any payments to the Executive. The calculation of the Tax Gross-Up shall be
approved by the Corporation’s independent certified public accounting firm engaged by the
Corporation immediately prior to the Change in Control and the calculation shall be provided to the
Executive in writing. The Executive shall then be given fifteen (15) days, or such longer period
as the Executive reasonably requests, to accept or reject the calculation of the Tax Gross-Up. If
the Executive rejects the Tax Gross-Up calculation and the parties are thereafter unable to agree
within an additional forty-five (45) days, the arbitration provisions of Section 10 shall control.
The Corporation shall reimburse the Executive for all reasonable legal and accounting fees incurred
with respect to the calculation of the Tax Gross-Up and any disputes related thereto.

          For purposes of determining the amount of the Tax Gross-Up, the Executive shall be deemed to
pay federal income taxes at the highest marginal rate of federal income taxation in the calendar
year in which the Tax Gross-Up is to be made and state and local income taxes at the highest
marginal rates of taxation in the state and locality of the Executive’s residence on the date of
termination.

          If the excise tax is subsequently determined to be less than the amount taken into account
hereunder at the time of termination of employment, the Executive shall repay to the Corporation at
the time the reduction in excise tax is finally determined, the portion of the Tax Gross-Up
attributable to such reduction. Notwithstanding the Executive’s acceptance or rejection of the Tax
Gross-Up calculation, if the excise tax is determined to exceed the amount taken into account
hereunder at the time of termination of employment, the Corporation shall make an additional Tax
Gross-Up payment to the Executive in respect of such excess at the time the amount of such excess
is finally determined.

     6. Withholding of Taxes. The Corporation may withhold from any amounts payable under this
Agreement all federal, state, city, or other taxes as required by law.

 

 

     7. Acknowledgement; No Duty to Mitigate. The Corporation hereby acknowledges that it will be
difficult and may be impossible for the Executive to find reasonably comparable employment, or to
measure the amount of damages which the Executive may suffer as a result of termination of
employment hereunder. Accordingly, the payment of the Severance Benefits by the Corporation to the
Executive in accordance with the terms of this Agreement is hereby acknowledged by the Corporation
to be reasonable and will be liquidated damages, and the Executive will not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other employment or otherwise,
nor will any profits, income, earnings, or other benefits from any source whatsoever create any
mitigation, offset, reduction, or any other obligation on the part of the Executive hereunder or
otherwise, except for a reduction in health insurance coverage as provided in subsection 4(d)(1).
The Corporation shall not be entitled to set off or counterclaim against amounts payable hereunder
with respect to any claim, debt, or obligation of the Executive.

     8. Enforcement Costs; Interest. The Corporation is aware that, upon the occurrence of a
Change in Control, the Board or a stockholder of the Corporation may then cause or attempt to cause
the Corporation to refuse to comply with its obligations under this Agreement, or may cause or
attempt to cause the Corporation to institute, or may institute, litigation, arbitration, or other
legal action seeking to have this Agreement declared
unenforceable, or may take, or attempt to take, other action to deny the Executive the
benefits intended under this Agreement. In these circumstances, the purpose of this Agreement
could be frustrated. It is the intent of the Corporation that the Executive not be required to
incur the expenses associated with the enforcement of the Executive’s rights under this Agreement
by litigation, arbitration, or other legal action nor be bound to negotiate any settlement of the
Executive’s rights hereunder under threat of incurring such expenses because the cost and expense
thereof would substantially detract from the benefits intended to be extended to the Executive
under this Agreement. Accordingly, if following a Change in Control it should appear to the
Executive that the Corporation has failed to comply with any of its obligations under this
Agreement, including the proper calculation of the Tax Gross-Up, or in the event that the
Corporation or any other person takes any action to declare this Agreement void or unenforceable,
or institute any litigation or other legal action designed to deny, diminish, or to recover from
the Executive, the benefits intended to be provided to the Executive hereunder, the Corporation
irrevocably authorizes the Executive from time to time to retain counsel (legal and accounting) of
the Executive’s choice at the expense of the Corporation as provided in this Section 8 to represent
the Executive in connection with the calculation of the Tax Gross-Up, or the initiation or defense
of any litigation or other legal action, whether by or against the Corporation or any director,
officer, stockholder, or other person affiliated with the Corporation. Notwithstanding any
existing or prior attorney-client relationship between the Corporation and such counsel, the
Corporation irrevocably consents to the Executive entering into an attorney-client relationship
with such counsel, and in that connection the Corporation and the Executive agree that a
confidential relationship shall exist between the Executive and such counsel. The reasonable fees
and expenses of counsel selected from time to time by the Executive as provided in this Section
shall be paid or reimbursed to the Executive by the Corporation on a regular, periodic basis upon
presentation by the Executive of a statement or statements prepared by such counsel in accordance
with its customary practices. In any action involving this Agreement, the Executive shall be
entitled to prejudgment interest on any amounts found to be due him from the date such amounts
would have been payable to the Executive pursuant to this Agreement at an annual rate of interest
equal to the prime commercial rate in effect at Citibank or its successor in effect from time to
time during the prejudgment period plus 4 percent.

 

 

     9. Indemnification. From and after the earliest to occur of a Change in Control or
termination of employment, the Corporation shall (a) for a period of five (5) years after such
occurrence, provide the Executive (including the Executive’s heirs, executors, and administrators)
with coverage under a standard directors’ and officers’ liability insurance policy at the
Corporation’s expense, and (b) indemnify and hold harmless the Executive, to the fullest extent
permitted or authorized by the law of the State of Delaware as it may from time to time be amended,
if the Executive is (whether before or after the Change in Control) made or threatened to be made a
party to any threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that the Executive is or was a
director, officer, or employee of the Corporation or any Subsidiary, or is or was serving at the
request of the Corporation or any Subsidiary as a director, trustee, officer, or employee of a
corporation, partnership, joint venture, trust, or other enterprise. The indemnification provided
by this Section 9 shall not be deemed exclusive of any other rights to which the Executive may be
entitled under the charter or bylaws of the Corporation or of any Subsidiary, or any agreement,
vote of shareholders or disinterested directors, or otherwise, both as to action in the Executive’s
official capacity and as to action in another capacity while holding such office, and shall
continue as to the Executive after the Executive has ceased to be a director, trustee, officer, or
employee and shall inure to the benefit of the heirs, executors, and administrators of the
Executive.

     10. Arbitration. As the method for resolving any dispute arising out of this Agreement, the
Executive, in the Executive’s sole discretion, may select binding arbitration in accordance with
this Section. Except as provided otherwise in this Section, arbitration pursuant to this Section
shall be governed by the Commercial Arbitration Rules of the American Arbitration Association. The
Executive shall deliver written notice to the Corporation, including a description of the issue to
be arbitrated. Within fifteen (15) days after the Executive demands arbitration, the Corporation
and the Executive shall each appoint an arbitrator. Within fifteen (15) additional days, these two
arbitrators shall appoint the third arbitrator by mutual agreement; if they fail to agree within
this fifteen (15) day period, then the third arbitrator shall be selected promptly pursuant to the
rules of the American Arbitration Association for Commercial Arbitration. The arbitration panel
shall hold a hearing in Columbus, Ohio, within ninety (90) days after the appointment of the third
arbitrator. The fees and expenses of the arbitrators, and any American Arbitration Association
fees, shall be paid by the Corporation. Both the Corporation and the Executive may be represented
by counsel and may present testimony and other evidence at the hearing. Within ninety (90) days
after commencement of the hearing, the arbitration panel will issue a written decision; the
majority vote of two of the three arbitrators shall control. The majority decision of the
arbitrators shall be binding on the parties, and the parties may not pursue other available legal
remedies if the parties are not satisfied with the majority decision of the arbitrator. The
Executive shall be entitled to seek specific performance of the Executive’s rights under this
Agreement during the pendency of any dispute or controversy arising under or in connection with
this Agreement.

     11. Employment Rights. This Agreement sets forth the Severance Benefits payable to the
Executive in the event the Executive’s employment with the Corporation is terminated under certain
conditions specified in Section 3. This Agreement is not an employment contract nor shall it
confer upon the Executive any right to continue in the employ of the Corporation or its
Subsidiaries and shall not in any way affect the right of the Corporation or its Subsidiaries to
dismiss or otherwise terminate the Executive’s employment at any time with or without cause subject
to provisions contained in Employment Agreements and other agreements between the Corporation and
the Executive.

 

 

     12. Arrangements Not Exclusive. The specific benefit arrangements referred to in this
Agreement are not intended to exclude the Executive from participation in or from other benefits
available to executive personnel generally or to preclude the Executive’s right to other
compensation or benefits as may be authorized by the Board at any time. The provisions of this
Agreement and any payments provided for hereunder shall not reduce any amounts otherwise payable,
or in any way diminish the Executive’s existing rights, or rights which would accrue solely as the
result of the passage of time under any compensation plan, benefit plan, incentive plan, stock
option plan, employment agreement, or other contract, plan, or arrangement except as may be
specified in such contract, plan, or arrangement. Notwithstanding anything to the contrary in this
Section 12, the Severance Benefits provided in Section 4 are in lieu of any benefits to which the
Executive would be entitled following the termination of the Executive’s employment pursuant to any
employment agreement or other plan or agreement pursuant to the Corporation’s transition pay or any
successor to such plan.

     13. Termination. Except for termination of employment described in Section 3(a), this
Agreement shall terminate if the employment of the Executive with the Corporation shall terminate
prior to a Change in Control.

     14. Successors; Binding Agreements. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. The Executive’s rights and
benefits under this Agreement may not be assigned, except that if the Executive dies while any
amount would still be payable to the Executive hereunder if the Executive had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement, to the beneficiaries designated by the Executive to receive benefits under this
Agreement in a writing on file with the Corporation at the time of the Executive’s death or, if
there is no such beneficiary, to the Executive’s estate. The Corporation will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Corporation (or of any division or
Subsidiary thereof employing the Executive) to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Corporation would be required to perform it if
no such succession had taken place. Failure of the Corporation to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Corporation in the same amount and on the same
terms to which the Executive would be entitled hereunder if the Executive terminated employment for
Good Reason following a Change in Control.

     15. No Vested Interest. Neither the Executive nor the Executive’s beneficiaries shall have
any right, title, or interest in any benefit under this Agreement prior to the occurrence of the
right to the payment of such benefit.

     16. Notice. For the purpose of this Agreement, notices and all other communications provided
for in this Agreement shall be in writing and shall be deemed to have been duly given when
delivered personally or mailed by United States registered mail, return receipt requested, postage
prepaid, addressed to the such addresses as each party may designate from time to time to the other
party in writing in the manner provided herein. Unless designated otherwise notices should be
addressed as follows:

 

 

     TO THE EXECUTIVE

Kenneth T. Stevens

7309 Lambton Park Road

New Albany, OH 43054

     TO THE CORPORATION

Tween Brands, Inc.

8323 Walton Parkway

New Albany, Ohio 43054

Attention: Senior Vice President-Human Resources

If the parties by mutual agreement supply each other with telecopier numbers for the purposes of
providing notice by facsimile, such notice shall also be proper notice under this Agreement.
Notice sent by certified or registered mail shall be effective two (2) days after deposit by
delivery to the U.S. Post Office.

     17. Savings Clause. If any payments otherwise payable to the Executive under this Agreement
are prohibited or limited by any statute or regulation in effect at the time the payments would
otherwise be payable:

     (a) Corporation will use its best efforts to obtain the consent of the appropriate
governmental agency to the payment by Corporation to the Executive of the maximum amount
that is permitted; and

     (b) the Executive will be entitled to elect to have apply, and therefore to receive
benefits directly under, either (i) this Agreement or (ii) any generally applicable
Corporation severance, separation pay, and/or salary continuation plan that may be in effect
at the time of the Executive’s termination.

Following any such election, the Executive will be entitled to receive benefits under this
agreement or plan elected only if and to the extent the agreement or plan is applicable and subject
to its specific terms.

     18. Amendment; Waiver. This Agreement may not be amended or modified and no provision may be
waived unless such amendment, modification, or waiver is agreed to in writing and signed by the
Executive and the Corporation.

     19. Validity. The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement, which shall remain
in full force and effect.

     20. Prior Executive Agreements. This Agreement supersedes any and all prior executive
agreements or similar agreements between the Corporation (or any predecessor of the Corporation)
and the Executive and no payments or benefits of any kind shall be made under, on account of, or by
reference to the prior executive agreements.

     21. Counterparts. This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original but all of which together shall constitute one and the same instrument.

 

 

     22. Governing Law; Jurisdiction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Ohio, without giving effect to conflict of law
principles thereof. The parties hereby consent to the exclusive jurisdiction of the state courts
of the State of Ohio and venue in Franklin County, Ohio.

     In witness whereof, the parties have signed this Agreement as of the day and year
written above.

	 	 	 	 	 	 	 
	 	 	Corporation:	 	 
	 
	 	 	 	 	 	 
	 	 	TWEEN BRANDS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael W. Rayden
 

	 	 
	 

	 	 	 	Michael Rayden	 	 
	 

	 	Its:
	 	Chairman and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Executive:	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Kenneth T. Stevens	 	 
	 	 	 	 	 
	 	 	Kenneth T. Stevens

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