Cto Employment Agreement

Exhibit 10.21


December 18, 1998


Mr. Lee Goldenberg 63 Brush Hill Road Kinnelon, New Jersey 07405


Dear Lee:


On behalf of The Donna Karan Company (the "Company"), a New York general partnership, I am pleased to confirm your employment with the Company on the terms set forth in this letter agreement. If you agree with the following terms, please sign a copy of this letter agreement and return it to me upon our receipt of which it will become a binding contract.


1. Duties. You (the "Executive") shall be employed as Executive Vice President - Worldwide Operations of the Company or in a substantially equivalent-level position. You shall perform such duties and services commensurate with your position, including assisting in the day-to-day business operations of the Company and its Affiliates (as hereinafter defined), and such other duties and services commensurate with your position as are from time to time assigned to you by the Chief Executive Officer of the Company or such other senior officers or executives as the Chief Executive Officer may designate. Executive shall devote Executive's full working time and efforts to the Company's business and to the performance of Executive's duties under this Agreement. Executive shall be available to travel as the needs of the business require, which travel shall be in accordance with the Company's travel policy applicable to similarly situated employees of the Company and its Affiliates. As used herein, "Affiliates" shall mean all companies or entities which the Company directly or indirectly controls, is controlled by, or is under common control with.


2. Term. The Company agrees to employ Executive and Executive agrees to serve, on the terms and conditions of this Agreement, for a period commencing as of the date hereof and ending on December 31, 2000, unless earlier terminated pursuant to the terms hereof (the "Initial Employment Term"). The Initial Employment Term shall be extended for successive one-year terms (each, an "Additional Employment Term") unless the Company or the Executive gives written notice of non-extension at least 90 days prior to the end of the Initial Employment Term or the then Additional Employment Term, unless earlier terminated pursuant to the terms hereof. Additionally, Executive shall have the right to terminate Executive's employment at any time upon 60 days' prior


written notice to the Chief Executive Officer of the Company. During the term Executive is employed hereunder, the Initial Employment Term and the Additional Employment Terms, if applicable, collectively shall be referred to as the "Employment Term."


3. Compensation.


(a) Base Salary. For Executive's services under this Agreement, the Company shall pay Executive a minimum annual base salary of $350,000 payable in accordance with the Company's customary payroll practices from time to time in effect. The Company will review Executive's compensation annually and may, in its sole discretion, increase Executive's base salary.


(b) Annual Cash Bonuses.


i. During the Employment Term, Executive shall be entitled to a cash bonus (the "Bonus") with a target of between 50% and 100% of Executive's annual base salary, in accordance with the terms and provisions of the Company's then existing executive bonus plan (the "Bonus Plan"). The Bonus shall be determined annually at the same time bonuses are determined for similarly situated employees of the Company, in accordance with the Bonus Plan, and shall be payable at the same time and in the same manner as bonuses are paid to other similarly situated employees of the Company.


ii. For fiscal 1998, fifty percent (50%) of the Bonus shall be based on the corporate performance of Donna Karan International Inc. ("DKI"), and fifty percent (50%) of the Bonus shall be based upon the divisional performance of the division for which Executive is then responsible. A copy of the 1998 Executive Bonus Program previously has been furnished to you.


iii. During the Employment Term, the targets and performance goals, including but not limited to the extent to which they will be based on corporate performance, divisional performance, or other criteria, shall be established annually by the Company in accordance with the Bonus Plan.


(c) Stock Options. Commencing in 1998 and for each fiscal year during the term hereof, Executive will be eligible to receive annual grants of options, in accordance with the Company's then current annual option grant program. A copy of the 1998 Option Grant Program previously has been furnished to you.


(d) Deferred Compensation Program. Commencing in 1998 and for each fiscal year during the term hereof, Executive also shall be eligible to participate in a deferred compensation program in accordance with the Company's then current deferred compensation program. A copy of the 1998 Wealth Accumulation Program previously has been furnished to you.


(e) Participation in Benefit Plans and other Benefits. Executive also shall be entitled to (i) participate in all other Executive benefit plans generally available to similarly situated employees of the Company, subject to Executive's eligibility therefor, (ii) a car allowance of $1,200 per month, and (iii) four weeks of paid vacation per annum.


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(f) Successor Executive Compensation Programs. The Company hereby reserves the right from time to time to amend, alter, or rescind the executive bonus, annual option, and deferred compensation programs and plans referred to in Sections 3(b), 3(c), and 3(d); provided, however, that the Company agrees that during the term of employment hereunder Executive shall be entitled to participate in executive compensation programs of a similar type, subject to the approval of such programs and plans by the applicable compensation committee of the Board of Directors and legal limitations.


4. Severance Payments.


(a) Severance Payments. The Company may terminate Executive's employment at any time with or without Cause (as defined below). If during the Employment Term, Executive's employment with the Company is terminated by the Company without Cause (which right the Company shall have at any time during the Employment Term) and other than as a result of death, notice of non-extension of Employment Term or as provided in Section 5 of this Agreement, upon Executive's execution and effectiveness of a general release of claims which is acceptable in form and substance to the Company, the Company shall pay to Executive an amount equal to Executive's then current annual base salary (the "Severance Amount"). The Severance Amount shall be paid in equal installments over a 12-month period in accordance with the Company's customary payroll practices (but not as an employee). Executive agrees to accept the Severance Amount, as may be reduced below, in full settlement of all claims against the Company and its Affiliates and their respective officers, directors, executives and employees. The Severance Amount payable to Executive under this Section 4(a) shall be reduced by any compensation actually received, whether or not during the period, by Executive as a result of Executive's employment or retention by another employer as an employee or in a consulting capacity for services rendered during the period. Executive shall advise the Company promptly of any such employment and/or consulting fees received by Executive and rebate any amount due to the Company. No Severance Amount shall be payable by reason of termination due to the death or disability of the Executive, termination for Cause, or non-extension of the Employment Term in accordance with Section 2 of this Agreement.


(b) Termination of Severance Payments. Notwithstanding Section 4(a) above, if Executive violates the provisions of Section 6 of this Agreement after Executive's termination of employment by the Company, Executive shall have no further right to the payment of any Severance Amount payable thereafter under this ...