Document:

Exhibit 10.12

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT
AGREEMENT (“Agreement”) dated as of June 20, 2005 between Rafaella Apparel
Group, Inc. (the “Company”) and Chad J. Spooner (the “Executive”)
(together, the “Parties”).

 

WHEREAS, the
Parties wish to establish the terms of Executive’s employment with the Company.

 

Accordingly,
the Parties agree as follows:

 

1.                                       Employment
and Acceptance. The Company’s employment of the Executive, and the
Executive’s acceptance of employment, subject to the terms of this Agreement,
shall only become effective upon the Closing as defined in the Securities
Purchase Agreement by and among RA Cerberus Acquisition, LLC, Rafaella
Sportswear, Inc., Verrazano, Inc., Ronald Frankel and the Company,
dated as of April 15, 2005 (the “Effective Date”). In the event that the
Closing does not occur, this Agreement and the terms and conditions contained
herein shall be null and void.

 

2.                                       Term.
Subject to earlier termination pursuant to Section 5 of this Agreement,
this Agreement and the employment relationship hereunder shall continue from
the Effective Date until the first anniversary of the Effective Date and shall
renew for one (1) year intervals thereafter, unless either party shall
have given notice to the other that it does not wish to extend the Term. As
used in this Agreement, the “Term” shall refer to the period beginning on the
Effective Date and ending on the date the Executive’s employment terminates in
accordance with this Section 2 or Section 5. In the event that the
Executive’s employment with the Company terminates, the Company’s obligation to
continue to pay all base salary, as adjusted, bonus and other benefits then
accrued shall terminate except as may be provided for in Section 5 of
this Agreement.

 

3.                                       Duties
and Title.

 

3.1                                 Title.
The Company shall employ the Executive to render exclusive and full-time
services to the Company and its subsidiaries. The Executive shall serve in the
capacity of Chief Financial Officer of the Company, and shall report solely to
the Chief Executive Officer of the Company (the “CEO”).

 

3.2                                 Duties.
The Executive will have such authority and responsibilities and will perform such
executive duties customarily performed by a chief financial officer of a
company in similar lines of business as the Company and its subsidiaries or as may be
assigned to Executive by the CEO. The Executive will devote all his full
working-time and attention to the performance of such duties and to the
promotion of the business and interests of the Company and its subsidiaries.

 

4.                                       Compensation
and Benefits by the Company. As compensation for all services performed by
the Executive for the Company and its subsidiaries, the Company shall provide
the Executive the following during the Term:

 

 

4.1                                 Base
Salary. The Company will pay to the Executive an annual base salary of
$325,000, payable in accordance with the customary payroll practices of the
Company (“Base Salary”).

 

4.2                                 Bonuses.
The Executive may be eligible to receive an annual bonus (“Bonus”) under a
plan established by the Company in the amount determined by the Board of
Directors of the Company (the “Board”) based on achievement of performance
measures derived from the annual business plan presented by management and
approved by the Board. The Executive’s target bonus shall be $325,000, with the
actual amount of each Bonus being determined by the Board.

 

4.3                                 Participation
in Employee Benefit Plans. The Executive shall be entitled, if and to the
extent eligible, to participate in all of the applicable benefit plans of the
Company, which may be available to other senior executives of the Company,
on the same terms as such other executives. The Company may at any time or
from time to time amend, modify, suspend or terminate any employee benefit
plan, program or arrangement for any reason without Executive’s consent if such
amendment, modification, suspension or termination is consistent with the
amendment, modification, suspension or termination for other employees of the
Company.

 

4.4                                 Vacation.
The Executive shall be entitled to four (4) weeks of paid vacation
annually; provided, however, that the Executive shall not be
entitled to use more than two consecutive weeks of vacation at any time; and provided,
further, that the Executive shall not be entitled to use more than two
consecutive business days as vacation days during each of the first six
calendar months after the Effective Date. Executive shall not be entitled to
payment for unused vacation days upon the termination of his employment except
as set forth in Section 5 below. The carry-over and accrual of vacation
days shall be in accordance with Company policy.

 

4.5                                 Expense
Reimbursement. The Executive shall be entitled to receive reimbursement for
all appropriate business expenses incurred by him in connection with his duties
under this Agreement in accordance with the policies of the Company as in
effect from time to time.

 

4.6                                 Equity
Award. The Executive shall be eligible to participate in the equity
incentive plan established by the Company (the “Equity Incentive Plan”). The Executive
shall receive an initial grant under the Equity Incentive Plan representing
2.0% of the value of the outstanding capital stock of the Company on a
fully-diluted, as converted basis as of the Effective Date, in the form of
restricted stock or stock options as agreed upon by the Executive and the
Company. Such initial grant shall be subject to the terms of the Equity
Incentive Plan and an award agreement between the Company and the Executive.

 

4.7                                 Closing
Bonus. Within thirty (30) days of the Effective Date, the Company shall pay
to the Executive a one-time cash bonus in the amount of ONE HUNDRED THOUSAND
DOLLARS ($100,000).

 

4.8                                 Moving
Expenses. The Company shall reimburse the Executive for documented expenses
incurred in connection with the Executive’s (and the Executive’s family’s)
relocation to a new primary residence in the New York City metropolitan 

 

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area (including New York, New
Jersey and Connecticut) in the full amount actually incurred in connection with
said relocation, including but not limited to, moving and transporting
household furniture, furnishings and goods, transportation of the Executive and
his family for investigative trips and permanent relocation, sales commissions
(buyer’s and seller’s agents) and closing costs for the sale of the existing
residence and the purchase and financing of a new residence, relocation company
fees, temporary furnished housing for Executive and his family for up to ninety
(90) days, and such other expenses as Executive and his family reasonably incur
in connection with said relocation.

 

5.                                       Termination
of Employment.

 

5.1                                 By
the Company for Cause, Due to the Executive’s Election Not to Extend the Term
or Due to the Executive’s resignation, Death or Disability. If (i) the
Company terminates the Executive’s employment with the Company for Cause (as
defined below); (ii) the Executive elects not to extend the Term pursuant
to Section 2; (iii) the Executive’s employment terminates due to his
death; (iv) the Company terminates the Executive’s employment with the
Company due to the Executive’s Disability (as defined below); or (v) the
Executive resigns for any reason, the Executive, or the Executive’s legal
representatives (as appropriate), shall be entitled to receive the following:

 

(a)                                  the Executive’s
accrued but unpaid Base Salary and benefits set forth in Section 4.3, if
any, to the date of termination;

 

(b)                                 the unpaid portion of
the Bonus, if any, relating to the calendar year prior to the calendar year of
the Executive’s death, Disability, resignation or termination by the Company
for Cause or due to the Executive’s election not to extend the Term, payable in
accordance with Section 4.2; and

 

(c)                                  expenses reimbursable
under Section 4.5 incurred but not yet reimbursed to the Executive to the
date of termination.

 

For the purposes of this Agreement, “Disability” means a determination
by the Company in accordance with applicable law that as a result of a physical
or mental injury or illness, the Executive is unable to perform the
essential functions of his job with or without reasonable accommodation for a
period of (i) 90 consecutive days; or (ii) 180 days in any one (1) year
period.

 

For the purposes of this Agreement, “Cause” means, as determined by the
Board (or its designee), with respect to conduct during the Executive’s
employment or service relationship with the Company or its affiliates, whether or not committed during the Term, (i) commission
of a felony by Executive; (ii) acts of dishonesty by Executive resulting
or intending to result in personal gain or enrichment at the expense of the
Company or its subsidiaries; (iii) Executive’s material breach of his
obligations under this Agreement; (iv) conduct by Executive in connection
with his duties hereunder that is fraudulent, unlawful or grossly negligent,
including, but not limited to, acts of discrimination; (v) engaging in
personal conduct by Executive (including but not limited to employee harassment
or discrimination, the use or possession at work of any illegal controlled
substance) which seriously discredits or damages the Company or its
subsidiaries; (vi) continuing inattention to or continuing failure to
adequately perform the duties to be performed by Executive under the terms
of Section 3.2 of this 

 

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Agreement and which results in or contributes to the failure of the
Company to meet or exceed the performance measures from the annual business
plan for the then current year of the Term; or (vii) breach of the
Executive’s covenants set forth in Section 6 below before termination of
employment; provided, that, the Executive shall have fifteen (15) days after
notice from the Company to cure the deficiency leading to the Cause
determination (except with respect to (i) above), if curable. A
termination for “Cause” shall be effective immediately (or on such other date
set forth by the Company).

 

5.2                                 By
the Company Without Cause. If during the Term the Company terminates
Executive’s employment without Cause (which may be done at any time
without prior notice and which shall not include the termination of the
Executive’s employment due to the Company’s election not to extend the Term),
the Executive shall receive the incremental severance payments set forth in
this Section 5.2 (in addition to the payments upon termination specified
in Section 5.1) upon execution without revocation of a valid release
agreement in a form reasonably acceptable to the Company and the
following:

 

(a)                                  payment
for accrued unused vacation days, payable in accordance with Company policy;

 

(b)                                 continued
Base Salary for twelve (12) months after the date of termination, payable on
the last business day of the month;

 

(c)                                  a
prorated bonus equal to the Bonus earned as of the date of termination based on
the achievement of performance measures derived from the annual business plan
for the year of termination as measured on the date of termination, payable in
a lump sum within thirty (30) days of the date of termination; and

 

(d)                                 reimbursement
of the cost of continuation coverage of group health coverage pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1986 for a maximum of twelve (12) months to the
extent Executive elects such continuation coverage and is eligible and subject to
the terms of the plan and the law.

 

The Company shall have no obligation to provide the benefits set forth
above in the event that Executive breaches the provisions of Section 6.

 

5.3                                 Due
to the Company’s Election Not to Extend the Term.

 

(a)                                  If
during the first year of the Term the Executive’s employment terminates due to
the Company’s election not to extend the Term, the Executive shall receive the
incremental severance payments set forth in this Section 5.3(a) (in
addition to the payments upon termination specified in Section 5.1) upon
execution without revocation of a valid release agreement in a form reasonably
acceptable to the Company and the following:

 

(i)                                     payment for
accrued unused vacation days, payable in accordance with Company policy;

 

(ii)                                  continued Base Salary
for twelve (12) months after the date of termination, payable on the last
business day of the month;

 

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(iii)                               a prorated bonus equal
to the Bonus earned as of the date of termination based on the achievement of
performance measures derived from the annual business plan for the year of
termination as measured on the date of termination, payable in a lump sum
within thirty (30) days of the date of termination; and

 

(iv)                              reimbursement of the cost
of continuation coverage of group health coverage pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1986 for a maximum of twelve (12) months to the
extent Executive elects such continuation coverage and is eligible and subject
to the terms of the plan and the law.

 

(b)                                 If
during the Term and after the first anniversary of the Effective Date, the
Executive’s employment terminates due to the Company’s election not to extend
the Term, the Executive shall receive the incremental severance payments set
forth in this Section 5.3 (b) (in addition to the payments upon
termination specified in Section 5.1) upon execution without revocation of
a valid release agreement in a form reasonably acceptable to the Company
and the following:

 

(i)                                     continued Base
Salary for twelve (12) months after the date of termination, payable on the
last business day of the month; and

 

(ii)                                  reimbursement of the
cost of continuation coverage of group health coverage pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1986 for a maximum of twelve (12) months to the extent Executive
elects such continuation coverage and is eligible and subject to the terms of
the plan and the law.

 

The Company
shall have no obligation to provide the benefits set forth above in the event
that Executive breaches the provisions of Section 6.

 

5.4                                 Removal
from any Boards and Position. If the Executive’s employment is terminated
for any reason under this Agreement, he shall be deemed to resign (i) if a
member, from the Board or board of directors of any subsidiary of the Company
or any other board to which he has been appointed or nominated by or on behalf
of the Company and (ii) from any position with the Company or any
subsidiary of the Company, including, but not limited to, as an officer of the
Company and any of its subsidiaries.

 

5.5                                 Nondisparagement.
The Executive agrees that he will not at any time (whether during or after the
Term) publish or communicate to any person or entity any Disparaging (as
defined below) remarks, comments or statements concerning the Company, Cerberus
Capital Management, L.P., their parents, subsidiaries and affiliates, and their
respective present and former members, partners, directors, officers,
shareholders, employees, agents, attorneys, successors and assigns. “Disparaging”
remarks, comments or statements are those that impugn the character, honesty,
integrity or morality or business acumen or abilities in connection with any
aspect of the operation of business of the individual or entity being disparaged.

 

6.                                       Restrictions
and Obligations of the Executive.

 

6.1                                 Confidentiality.
(a)  During the course of the Executive’s service relationship with the
Company and its affiliates (prior to and during the Term), the Executive has
had and will have access to certain trade
secrets and confidential information 

 

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relating to the Company and its
subsidiaries (the “Protected Parties”) which is not readily available from
sources outside the Company. The confidential and proprietary information and,
in any material respect, trade secrets of the Protected Parties are among their
most valuable assets, including but not limited to, their customer, supplier
and vendor lists, databases, competitive strategies, computer programs,
frameworks, or models, their marketing programs, their sales, financial,
marketing, training and technical information, their product development (and
proprietary product data) and any other information, whether communicated
orally, electronically, in writing or in other tangible forms concerning how
the Protected Parties create, develop, acquire or maintain their products and
marketing plans, target their potential customers and operate their retail and
other businesses. The Protected Parties invested, and continue to invest,
considerable amounts of time and money in their process, technology, know-how,
obtaining and developing the goodwill of their customers, their other external
relationships, their data systems and data bases, and all the information
described above (hereinafter collectively referred to as “Confidential
Information”), and any misappropriation or unauthorized disclosure of
Confidential Information in any form would irreparably harm the Protected
Parties. The Executive acknowledges that such Confidential Information
constitutes valuable, highly confidential, special and unique property of the
Protected Parties. The Executive shall hold in a fiduciary capacity for the
benefit of the Protected Parties all Confidential Information relating to the
Protected Parties and their businesses, which shall have been obtained by the
Executive during the Executive’s employment by the Company or its subsidiaries
and which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement). Except
as required by law or an order of a court or governmental agency with
jurisdiction, the Executive shall not, during the period the Executive is
employed by the Company or its subsidiaries or at any time thereafter, disclose
any Confidential Information, directly or indirectly, to any person or entity
for any reason or purpose whatsoever, nor shall the Executive use it in any
way, except in the course of the Executive’s employment with, and for the
benefit of, the Protected Parties or to enforce any rights or defend any claims
hereunder or under any other agreement to which the Executive is a party,
provided that such disclosure is relevant to the enforcement of such rights or
defense of such claims and is only disclosed in the formal proceedings related
thereto. The Executive shall take all reasonable steps to safeguard the
Confidential Information and to protect it against disclosure, misuse,
espionage, loss and theft. The Executive understands and agrees that the
Executive shall acquire no rights to any such Confidential Information.

 

(b)                                 All
files, records, documents, drawings, specifications, data, computer programs,
evaluation mechanisms and analytics and similar items relating thereto or to
the Business (for the purposes of this Agreement, “Business” shall be as
defined in Section 6.3 hereof), as well as all customer lists, specific
customer information, compilations of product research and marketing techniques
of the Company and its subsidiaries, whether prepared by the Executive or
otherwise coming into the Executive’s possession, shall remain the exclusive
property of the Company and its subsidiaries, and the Executive shall not
remove any such items from the premises of the Company and its subsidiaries,
except in furtherance of the Executive’s duties under any employment agreement.

 

(c)                                  It
is understood that while employed by the Company or its subsidiaries, the
Executive will promptly disclose to it, and assign to it the Executive’s
interest in any invention, improvement or discovery made or conceived by the
Executive, either alone or jointly with others, which arises out of the
Executive’s employment. At the Company’s request 

 

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and expense, the Executive will assist the Company and its subsidiaries
during the period of the Executive’s employment by the Company or its
subsidiaries and thereafter in connection with any controversy or legal
proceeding relating to such invention, improvement or discovery and in
obtaining domestic and foreign patent or other protection covering the same.

 

(d)                                 As
requested by the Company and at the Company’s expense, from time to time and
upon the termination of the Executive’s employment with the Company for any
reason, the Executive will promptly deliver to the Company and its subsidiaries
all copies and embodiments, in whatever form, of all Confidential Information
in the Executive’s possession or within his control (including, but not limited
to, memoranda, records, notes, plans, photographs, manuals, notebooks,
documentation, program listings, flow charts, magnetic media, disks, diskettes,
tapes and all other materials containing any Confidential Information)
irrespective of the location or form of such material. If requested by the
Company, the Executive will provide the Company with written confirmation that
all such materials have been delivered to the Company as provided herein.

 

6.2                                 Non-Solicitation
or Hire. During the Term and for a period of twelve (12) months following
the termination of the Executive’s employment for any reason, the Executive
shall not directly or indirectly solicit or attempt to solicit or induce,
directly or indirectly, (a) any party who is a customer of the Company or
its subsidiaries, or who was a customer of the Company or its subsidiaries at
any time during the twelve (12) month period immediately prior to the date the
Executive’s employment terminates, for the purpose of marketing, selling or
providing to any such party any services or products offered by or available
from the Company or its subsidiaries (provided that if the Executive intends to
solicit any such party for any other purpose, he shall notify the Company of
such intention and receive prior written approval from the Company), (b) any
supplier to the Company or any subsidiary to terminate, reduce or alter
negatively its relationship with the Company or any subsidiary or in any manner
interfere with any agreement or contract between the Company or any subsidiary
and such supplier or (c) any employee of the Company or any of its
subsidiaries or any person who was an employee of the Company or any of its
subsidiaries during the twelve (12) month period immediately prior to the date
the Executive’s employment terminates to terminate such employee’s employment
relationship with the Protected Parties in order, in either case, to enter into
a similar relationship with the Executive, or any other person or any entity in
competition with the Business of the Company or any of its subsidiaries.

 

6.3                                 Non-Competition.
During the Term and for a period of twelve (12) months following the
termination of Executive’s employment by the Company (for any reason), the
Executive shall not, whether individually, as a director, manager, member,
stockholder, partner, owner, employee, consultant or agent of any business, or
in any other capacity, other than on behalf of the Company or a subsidiary,
organize, establish, own, operate, manage, control, engage in, participate in,
invest in, permit his name to be used by, act as a consultant or advisor to,
render services for (alone or in association with any person, firm, corporation
or business organization), or otherwise assist any person or entity that
engages in or owns, invests in, operates, manages or controls any venture or
enterprise which engages or proposes to engage in any business conducted by the
Company or any of its subsidiaries on the date of the Executive’s termination
of employment or within one (1) year of the Executive’s termination of
employment in the geographic locations where the Company and its subsidiaries
engage or propose to engage in such business (the “Business”). Notwithstanding
the foregoing, nothing in this Agreement shall prevent the Executive from
owning for passive investment 

 

7

 

purposes not intended to
circumvent this Agreement, less than five percent (5%) of the publicly traded
common equity securities of any company engaged in the Business (so long as the
Executive has no power to manage, operate, advise, consult with or control the
competing enterprise and no power, alone or in conjunction with other
affiliated parties, to select a director, manager, general partner, or similar
governing official of the competing enterprise other than in connection with
the normal and customary voting powers afforded the Executive in connection
with any permissible equity ownership).

 

6.4                                 Property.
The Executive acknowledges that all originals and copies of materials, records
and documents generated by him or coming into his possession during his
employment by the Company or its subsidiaries are the sole property of the
Company and its subsidiaries (“Company Property”). During the Term, and at all
times thereafter, the Executive shall not remove, or cause to be removed, from
the premises of the Company or its subsidiaries, copies of any record, file,
memorandum, document, computer related information or equipment, or any other
item relating to the business of the Company or its subsidiaries, except in
furtherance of his duties under the Agreement. When the Executive’s employment
with the Company terminates, or upon request of the Company at any time, the
Executive shall promptly deliver to the Company all copies of Company Property
in his possession or control.

 

7.                                       Remedies;
Specific Performance. The Parties acknowledge and agree that the Executive’s
breach or threatened breach of any of the restrictions set forth in Section 6
will result in irreparable and continuing damage to the Protected Parties for
which there may be no adequate remedy at law and that the Protected
Parties shall be entitled to equitable relief, including specific performance
and injunctive relief as remedies for any such breach or threatened or
attempted breach. The Executive hereby consents to the grant of an injunction
(temporary or otherwise) against the Executive or the entry of any other court
order against the Executive prohibiting and enjoining him from violating, or
directing him to comply with any provision of Section 6. The Executive
also agrees that such remedies shall be in addition to any and all remedies,
including damages, available to the Protected Parties against him for such
breaches or threatened or attempted breaches. In addition, without limiting the
Protected Parties’ remedies for any breach of any restriction on the Executive
set forth in Section 6, except as required by law, the Executive shall not
be entitled to any payments set forth in Section 5.2 hereof if the
Executive has breached the covenants applicable to the Executive contained in Section 6,
the Executive will immediately return to the Protected Parties any such
payments previously received under Section 5.2 upon such a breach, and, in
the event of such breach, the Protected Parties will have no obligation to pay
any of the amounts that remain payable by the Company under Section 5.2.

 

8.                                       Indemnification.
The Company agrees, to the extent permitted by applicable law and its
organizational documents, to indemnify, defend and hold harmless the Executive
from and against any and all losses, suits, actions, causes of action,
judgments, damages, liabilities, penalties, fines, costs or claims of any kind
or nature (“Indemnified Claim”), including reasonable legal fees and related
costs incurred by Executive in connection with the preparation for or defense
of any Indemnified Claim, whether or not resulting in any liability, to which
Executive may become subject or liable or which may be incurred by or
assessed against Executive, relating to or arising out of his employment by the
Company or the services to be performed pursuant to this Agreement, provided
that the Company shall only defend, but not indemnify or hold Executive
harmless, from and against an Indemnified Claim in the event there is a final,
non-appealable, determination that Executive’s liability with respect to such 

 

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Indemnified Claim resulted from
Executive’s willful misconduct or gross negligence. The Company’s obligations
under this section shall be in addition to any other right, remedy or
indemnification which Executive may have or be entitled to at common law
or otherwise.

 

9.                                       Other
Provisions.

 

9.1                                 Notices.
Any notice or other communication required or which may be given hereunder
shall be in writing and shall be delivered personally, telegraphed, telexed,
sent by facsimile transmission or sent by certified, registered or express
mail, postage prepaid or overnight mail and shall be deemed given when so
delivered personally, telegraphed, telexed, or sent by facsimile transmission
or, if mailed, four (4) days after the date of mailing or one (1) day
after overnight mail, as follows:

 

(a)               If the Company, to:

 

Rafaella Apparel Group, Inc.

1411 Broadway

New York, New York  10018

Attention:  Secretary

Telephone: 
(212) 403-0300

Fax  (212) 764-9275

 

With copies to:

 

Schulte Roth & Zabel LLP

919 Third Avenue

New York, NY  10022

Attention:  David E. Rosewater, Esq.

Telephone:  (212) 756-2000

Fax:  (212) 593-5955

 

and

 

Cerberus Capital Management, L.P.

299 Park Avenue

New York, New York  10171

Attention:  George Kollitides

Telephone:  (212) 891-2100

Fax: 
(212) 284-7916

 

(b)              If the Executive, to
the Executive’s home address reflected in the Company’s records.

 

9.2                                 Entire
Agreement. This Agreement contains the entire agreement between the Parties
with respect to the subject matter hereof and supersedes all prior agreements,
written or oral, with respect thereto.

 

9.3                                 Representations
and Warranties by Executive. The Executive represents and warrants that he
is not a party to or subject to any restrictive covenants, legal 

 

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restrictions or other
agreements in favor of any entity or person which would in any way preclude,
inhibit, impair or limit the Executive’s ability to perform his
obligations under this Agreement, including, but not limited to,
non-competition agreements, non-solicitation agreements or confidentiality
agreements.

 

9.4                                 Waiver
and Amendments. This Agreement may be amended, modified, superseded,
canceled, renewed or extended, and the terms and conditions hereof may be
waived, only by a written instrument signed by the Parties or, in the case of a
waiver, by the party waiving compliance. No delay on the part of any party
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any right, power or privilege
hereunder, nor any single or partial exercise of any right, power or privilege
hereunder, preclude any other or further exercise thereof or the exercise of
any other right, power or privilege hereunder.

 

9.5                                 Governing
Law, Dispute Resolution and Venue.

 

(a)                                  This
Agreement shall be governed and construed in accordance with the laws of the
State of New York applicable to agreements made and not to be performed
entirely within such state, without regard to conflicts of laws principles.

 

(b)                                 The parties agree
irrevocably to submit to the exclusive jurisdiction of the federal courts or,
if no federal jurisdiction exists, the state courts, located in the City of New
York, Borough of Manhattan, for the purposes of any suit, action or other
proceeding brought by any party arising out of any breach of any of the
provisions of this Agreement and hereby waive, and agree not to assert by way
of motion, as a defense or otherwise, in any such suit, action, or proceeding,
any claim that it is not personally subject to the jurisdiction of the
above-named courts, that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is
improper, or that the provisions of this Agreement may not be enforced in
or by such courts. In addition, the parties agree to the waiver of a jury
trial.

 

9.6                                 Assignability
by the Company and the Executive. This Agreement, and the rights and
obligations hereunder, may not be assigned by the Company or the Executive
without written consent signed by the other party; provided that the Company may assign
the Agreement to any successor that continues the business of the Company.

 

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

 

9.8                                 Headings.
The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning of terms contained herein.

 

9.9                                 Severability.
If any term, provision, covenant or restriction of this Agreement, or any part thereof,
is held by a court of competent jurisdiction of any foreign, federal, state,
county or local government or any other governmental, regulatory or
administrative agency or authority to be invalid, void, unenforceable or
against public policy for any reason, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected or impaired or invalidated. 

 

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The Executive acknowledges that
the restrictive covenants contained in Section 6 are a condition of this
Agreement and are reasonable and valid in temporal scope and in all other
respects.

 

9.10                           Judicial
Modification. If any court determines that any of the covenants in Section 6,
or any part of any of them, is invalid or unenforceable, the remainder of
such covenants and parts thereof shall not thereby be affected and shall be
given full effect, without regard to the invalid portion. If any court
determines that any of such covenants, or any part thereof, is invalid or
unenforceable because of the geographic or temporal scope of such provision,
such court shall reduce such scope to the minimum extent necessary to make such
covenants valid and enforceable.

 

9.11                           Tax
Withholding. The Company or other payor is authorized to withhold from any
benefit provided or payment due hereunder, the amount of withholding taxes due
any federal, state or local authority in respect of such benefit or payment and
to take such other action as may be necessary in the opinion of the Board
to satisfy all obligations for the payment of such withholding taxes.

 

9.12                           Legal
and Professional Fees. The Company shall reimburse the Executive up to
Three Thousand Dollars ($3,000.00) for legal and professional fees actually
incurred in the preparation, review and negotiations of this Agreement.

 

11

 

IN WITNESS
WHEREOF, the Parties hereto, intending to be legally bound hereby, have
executed this Agreement as of the day and year first above mentioned.

 

	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Chad J. Spooner

  	
   

  
	
   

  	
  Name: Chad J. Spooner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RAFAELLA APPAREL GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn S. Palmer

  	
   

  
	
   

  	
   

  	
  Name: Glenn S. Palmer

  
	
   

  	
   

  	
  Title:   Chief Executive Officer

  
				

 

12Exhibit
10.13

 

AMENDMENT
TO EMPLOYMENT AGREEMENT

BETWEEN RAFAELLA APPAREL GROUP, INC. AND CHAD J. SPOONER

 

This amendment dated as of July 11, 2006
(the “Amendment”) amends that certain Employment Agreement by and between
Rafaella Apparel Group, Inc. (the “Company”) and Chad J. Spooner (the “Executive”)
dated as of June 20, 2005 (the “Employment Agreement”), effective as of July 1,
2006.

 

For good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledge, the Company and the Executive
agree as follows:

 

1.             Section 4.1 of
the Employment Agreement is amended to replace the figure “$325,000” with the
figure “$400,000.”

 

2.             Section 4.2 of
the Employment Agreement is amended by deleting the last sentence of such Section 4.2
and replacing it with the following sentence:

 

“Beginning with the fiscal year that begins July 1,
2006, the Executive’s target bonus shall be seventy-five percent (75%) of his
Base Salary, with the actual amount of each Bonus being determined by the
Board.”

 

3.             Except as set forth
in this Amendment, all provisions of the Employment Agreement are reaffirmed
and will remain in full force and effect.

 

IN WITNESS WHEREOF, the Company and the
Executive, intending to be legally bound hereby, have executed this Agreement as
of the day and year first above mentioned.

 

	
  RAFAELLA APPAREL GROUP INC.

  	
  EXECUTIVE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Christa Michalaros

  	
   

  	
  /s/ Chad J. Spooner

  	
   

  
	
  Name:

  	
  Christa Michalaros

  	
  Chad J. Spooner

  	
   

  
	
  Title:

  	
  Chief Executive Officer

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