Saucony Moves to Tie Up Senior Management

Saucony Inc. filed papers on Tuesday indicating the company last week entered into retention agreements with several officers as incentives to work through any possible change in ownership of the company. The agreements cover Michael Umana, COO/EVP/CFO; Michael Jeppesen, SVP, Manufacturing and Product Development; Sam Ward, SVP, Operations and Technology; Brian Enge, VP/GM of the Hind Apparel Division; and Roger Deschenes, VP, Controller, and Chief Accounting Officer.

The retention agreements all generally provide that (1) if the officer remains continuously employed full-time by Saucony and Saucony completes a change in control on or prior to December 31, 2005 (or June 30, 2005, for Mr. Deschenes) Saucony will pay the officer an initial retention bonus and (2) if the officer remains continuously employed full-time by Saucony during the period ending six months after Saucony completes the change in control, or the officer's employment at Saucony is terminated during that period by Saucony without cause or by the officer for good reason, Saucony will pay the officer an additional retention bonus. The amounts of the retention bonuses provided for in the retention agreements are as follows:

     Name                  Initial Retention Bonus    Additional Retention Bonus

     —-                  ———————–    ————————–

Michael Umana                   $150,000                       $150,000

Michael Jeppesen                 106,818                        106,818

Samuel S. Ward                    92,500                         92,500

Brian Enge                        88,275                         88,275

Roger P. Deschenes                73,192                         73,192

The retention agreements for Messrs. Umana, Jeppesen, Ward and Enge further provide that if the officer remains continuously employed full-time by Saucony and Saucony completes a change in control on or prior to December 31, 2005 all options to purchase Saucony's capital stock granted to the officer (which do not by their terms otherwise automatically vest upon the occurrence of the change in control) will automatically vest as to 50% of the unvested shares subject to such options.

In addition, on September 9, 2004, Mr. Umana entered into a separate agreement with Saucony. This agreement provides that Mr. Umana will receive a $300,000 severance payment if his employment at Saucony is terminated (1) by Saucony without cause or (2) after a change in control of Saucony by Mr. Umana for good reason. This severance benefit is in place of, and supersedes, the benefit to which Mr. Umana would otherwise be entitled under Saucony's executive severance benefit plan. This agreement also provides that Mr. Umana will be eligible for a bonus of up to $300,000 for Saucony's 2004 fiscal year, with 75% of the bonus, or $225,000, to be earned if Saucony's earnings per share for its 2004 fiscal year meet or exceed a specified target. The remaining 25% of the potential bonus, or up to $75,000, will be payable by Saucony in the sole discretion of the compensation committee of Saucony's board of directors.