change of Control Agreement

LIZ CLAIBORNE, INC.
EXECUTIVE TERMINATION BENEFITS AGREEMENT


This Executive Termination Benefits Agreement (this "Agreement"), dated as of the 29th day of January, 2004, is by and between LIZ CLAIBORNE, INC., a Delaware corporation (the "Company"), and FRANK S. SOWINSKI (the "Executive").
WHEREAS, the Company's Board of Directors (the "Board") recognizes that the possibility of a change in control of the Company and the uncertainty and questions which it may raise may result in the departure or distraction of the Executive to the detriment of the Company and its stockholders;
WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of the Executive to his/her assigned duties in the face of the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by the possibility, threat or occurrence of a change in control of the Company;
WHEREAS, should the Company be faced with a possible change in control situation, in addition to the Executive's regular duties, he/she may be called upon to assist in the assessment of proposals, advise management and the Board as to whether such proposals would be in the best interests of the Company and its stockholders, and to take such other actions as the Board might determine to be appropriate.
NOW, THEREFORE, to assure the Company that it will have the continued undivided attention and services of the Executive and the availability of his/her advice and counsel notwithstanding the possibility, threat or occurrence of a bid to take over control of the Company, and to induce the Executive to remain in the employ of the Company in such a circumstance, for the benefit of the Company and its


shareholders, and for other good and valuable consideration, the Company and the Executive agree as follows:


1. Term of Agreement.
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(a) Except as otherwise provided in Section 1(b) below, (i) this Agreement shall be effective as of the date hereof and shall continue in effect through December 31, 2006 and (ii) commencing on January 1, 2007 and each January 1 thereafter, this Agreement shall be automatically extended for one additional year unless, not later than June 30th of the preceding year, either party to this Agreement gives notice to the other that this Agreement shall not be extended under this Section 1(a); provided, however, that no such notice by the Company shall be effective, and this Agreement shall be extended for an additional year, if a Change in Control or Potential Change in Control (both as defined in Section 2 below) shall have occurred or occurs at any time prior to the date of such notice or within the 12-month period beginning on the date of such notice.
(b) If a Change in Control shall have occurred at any time during the period in which this Agreement is effective, then notwithstanding any provision hereof to the contrary, this Agreement shall be effective and continue in effect for (i) the remainder of the month in which the Change in Control occurred and (ii) a term of thirty-six (36) months beyond the month in which such Change in Control occurred; provided that if any obligations of the Company hereunder shall not have been fully and finally discharged at the end of such thirty six (36) month period, this Agreement shall remain in effect until such obligations shall have been finally discharged in full. The period commencing on the earlier of a Potential Change in Control (if applicable) or Change in Control and ending with the conclusion of such thirty-sixth month period shall be referred to hereinafter as the "Protected Period."


2. Change in Control and Potential Change in Control.
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(a) For purposes of this Agreement, a "Change in Control" shall be deemed
to have occurred:


(i) if any person as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended from time to time (the "Exchange
Act"), and as used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d) of the Exchange Act (a "Person"),
but excluding the Company, any subsidiary of the Company and any
employee benefit plan sponsored or maintained by the Company or any
subsidiary of the Company (including any


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trustee of such plan acting as trustee), directly or indirectly,
becomes the "beneficial owner" (as defined in Rule 13(d)-3 under the
Exchange Act, as amended from time to time) of Company securities
representing 25% or more of either (i) the then outstanding shares of
the Company's common stock or (ii) the combined voting power of the
Company's then outstanding voting securities entitled to vote
generally in the election of directors; provided, however, that the
following acquisitions shall not constitute a Change in Control: (A)
any acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), or (B) any
acquisition by any corporation or similar entity pursuant to a
reorganization, merger or consolidation if following such
reorganization, merger or consolidation, the conditions described in
sub-clauses (1), (2), and (3) of Section 2(a)(iii) below have been
satisfied; or


(ii) if individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose election, or nomination
for election by the Company's stockholders, was approved by a vote of
at least two-thirds (2/3) of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board; or


(iii) upon consummation of a reorganization, merger or consolidation
of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (1) all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the then outstanding shares of common stock of the
Company and the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election
of directors immediately prior to such Business Combination
beneficially own, directly or indirectly, more than fifty percent
(50%) of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries), (2) no Person (excluding (A) any employee benefit plan
(or related trust) of the Company or such corporation resulting from
such Business Combination and (B) any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation, 25%
or more of, respectively, the then outstanding shares of the common
stock of the Company, or the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares
of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (3) at least a majority of the members
of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement relating to, or of the
action of the Incumbent Board providing for, such Business
Combination; or


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(iv) upon consummation of the sale or other disposition of all or
substantially all of the assets of the Company, unless following such
transaction (1) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the then
outstanding shares of common stock of the Company and the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors immediately
prior to such transaction beneficially own, directly or indirectly,
more than sixty percent (60%) of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the acquiring
corporation (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries), (2) no Person (excluding (A) any employee benefit plan
(or related trust) of the Company or such acquiring corporation and
(B) any Person beneficially owning, immediately prior to such
transaction, 25% or more of, respectively, the then outstanding shares
of the common stock of the Company, or the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares
of common stock of the acquiring corporation or the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, and (3) at
least a majority of the members of the board of directors of the
acquiring corporation were members of the Incumbent Board at the time
of the execution of the initial agreement relating to, or of the
action of the Incumbent Board providing for, such sale or disposition;
or


(v) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.


(b) For purposes of this Agreement, a "Potential Change in Control" shall be deemed to have occurred if (i) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (ii) any Person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; or (iii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred; provided that the Board shall not be precluded from adopting a resolution to the effect that for purposes of this Agreement, it is the good faith opinion of the Board that a Potential Change in Control has been abandoned and that a Potential Change in Control no longer exists.
(c) For purposes of Sections 3 through 9 of this Agreement, the term "Company" shall include Liz Claiborne, Inc. and any successor thereto, whether by merger, reorganization, consolidation, and acquisition of substantially all of its assets or any other means.


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3. Covered Termination.
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(a) In the event that Executive's employment is terminated during the Protected Period either (i) by the Company without Cause (as defined in Section 3(c) below) or (ii) by the Executive for Good Reason (as defined in Section 3(b) below) (each, a "Covered Termination"), the Company will provide the Executive with the payments and benefits set forth in Section 4 below.
(b) For purposes of this Agreement, "Good Reason" shall mean the occurrence of one or more of the following events (regardless of whether any other reason, other than Cause as provided below, for such termination exists or has occurred, including without limitation other employment):


(i) failure to elect or reelect or otherwise maintain Executive in the
offices or positions, or substantially equivalent offices or
positions, of or with the Company, which Executive held immediately
prior to the Change of Control;


(ii) a significant adverse change in the nature or scope of the
authorities, powers, functions, duties or responsibilities attached to
the position with the Company which the Executive held immediately
prior to the Change in Control;


(iii) a reduction by the Company, without the Executive's prior
consent, in either (1) the Executive's annual base salary immediately
prior to the Change in Control or (2) the Executive's target bonus
opportunity (expressed as a percentage of Executive's annual base
salary) immediately prior to the Change in Control;


(iv) the Company's requiring the Executive, without the Executive's
prior consent, to be based more than fifty (50) miles from the
Company's offices at which the Executive is based immediately prior to
the Change in Control (excluding for this purpose required travel on
the Company's business to an extent substantially consistent with the
Executive's business travel obligations immediately prior to the
Change in Control), or, in the event the Executive consents to any
such relocation of his/her offices, the failure by the Company to
provide the Executive with all of the benefits of the Company's
relocation policy as in effect immediately prior to the Change in
Control;


(v) the failure by the Company, without the Executive's prior consent,
to pay to the Executive any portion of the Executive's current
compensation (for purposes of this clause (v), "current compensation"
shall mean the Executive's annual base salary as in effect on the date
hereof or as the same may be increased from time to time, plus the
bonuses awarded to Executive pursuant to the Company's cash incentive
bonus plan), or to pay to the Executive any portion of any installment
of deferred compensation under any deferred compensation program of
the Company within twenty (20) days after request for payment by the
Executive after such deferred compensation is due;


(vi) the failure by the Company to continue in effect any then ongoing
compensation or benefit plan in which the Executive participates
immediately prior to the Change in Control and which is significant to
the Executive's total compensation opportunity on either an annual or
long-term basis, including, but not limited to, the Company's 2000
Stock


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Incentive Plan, any other long-term incentive plan of the Company, or
any substitute plan for any of the foregoing adopted prior to the
Change in Control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
such plan, or the failure by the Company to continue the Executive's
participation therein on a basis not significantly less favorable to
Executive, in terms of the amount of the compensation opportunities so
provided, to those provided to Executive immediately prior to the
Change in Control, it being agreed, without limiting the foregoing,
for the avoidance of doubt, that the Company shall be deemed to have
failed to continue the Executive's participation in such plans on a
basis not significantly less favorable to Executive in the event that
Executive's target long-term incentive compensation opportunity
(expressed as a percentage of Executive's base salary) subsequent to
the Change of Control shall not equal or exceed his/her long-term
incentive compensation opportunity (expressed as a percentage of
Executive's base salary) as in effect immediately prior to the Change
in Control;


(vii) the failure by the Company to continue to provide the Executive
with benefits comparable in the aggregate to those enjoyed by the
Executive under the Company's retirement, life insurance, medical,
dental, health, accident and disability plans in which the Executive
was participating immediately prior to the Change in Control;


(viii) the failure of the ...