COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2012, the following
were members of the Compensation Committee: Messrs. Horowitz, Ciampi and Rovit. Mr. Ciampi, a Prentice Director, is a partner of Prentice, and a manager and member of an affiliate of Prentice. No member of the Compensation Committee is or
ever has been an officer or employee of the Company or any of its subsidiaries, and no compensation committee interlocks existed during 2012.
Summary Compensation Table
The following table sets forth compensation for the years
shown awarded to, earned by, paid to or accrued for the benefit of the principal executive officer of the Company, the principal financial officer of the Company, the three most highly compensated executive officers of the Company during 2012 other
than the foregoing, who were in each case serving as executive officers on December 31, 2012, and one individual (Mr. Sabin) who would have so qualified had he been serving as an executive officer on December 31, 2012 (collectively, the
named executive officers, or the NEOs).
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Name and Principal Position
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Year
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Salary
($)(1)
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Bonus
($)(2)
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Stock
Awards
($)(3)
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Option
Awards
($)(4)
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Non-Equity
Incentive
Plan
Comp. ($)(5)
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All Other
Comp.
($)(6)
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Total ($)
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Raphael Benaroya (A)(B)
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2012
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1,050,000
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n/a
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n/a
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n/a
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n/a
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n/a
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1,050,000
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Executive Chairman and Acting CEO
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2011
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431,500
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n/a
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25,850
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49,009
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n/a
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n/a
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506,359
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Guy A. Paglinco
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2012
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271,625
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22,650
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45,434
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17,526
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357,235
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VP and CFO (D)
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2011
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269,077
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17,339
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286,416
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2010
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265,000
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50,300
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94,080
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17,339
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426,719
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Kerry Carr (B)(C)
EVP and COO
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2012
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169,231
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339,709
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n/a
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1,663
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510,603
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Marc. S. Goldfarb
Senior Vice President and General Counsel
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2012
2011
2010
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341,537
338,333
333,207
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26,425
60,360
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53,006
117,600
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21,261
21,061
21,061
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442,229
359,394
532,228
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Richard F. Schaub, Jr. (B)
President LaJobi
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2012
2011
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375,000
364,327
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30,000
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22,650
85,000
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45,434
271,000
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12,751
130,660
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455,835
880,987
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David C. Sabin (D)
President Kids Line and CoCaLo
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2012
2011
2010
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328,846
475,000
475,000
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32,075
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53,006
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15,000
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178,470
16,867
41,471
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592,397
491,867
531,471
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35
(A)
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With respect to 2012, the information in the chart does not represent salary paid directly to Mr. Benaroya, but represents fees paid to RB, Inc. pursuant to the
terms of an agreement between the Company and RB, Inc. for the services of Mr. Benaroya as interim Executive Chairman and acting chief executive of the Company (from September 12, 2011 through March 14, 2013). During such period, Mr. Benaroya
was an employee of RB, Inc. and not the Company. On March 14, 2013, Mr. Benaroya became the Companys President and Chief Executive Officer (and remains Chairman of the Board).
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(B)
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Information with respect to Ms. Carr is provided for 2012 only, and for Messrs. Benaroya and Schaub is provided for 2012 and 2011 only, as none of them was a named
executive officer prior thereto.
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(C)
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Ms. Carr became an executive officer of the Company on September 12, 2012. Ms. Carr served as a consultant to the Company prior thereto commencing June
2012, at a monthly salary of $25,000.
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(D)
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Mr. Sabin resigned as President of Kids Line and CoCaLo on September 11, 2012, and in connection therewith, forfeited all stock and option awards granted to
him in 2012. See the first * to the 2012 Outstanding Equity Awards at Fiscal Year End table below for a description of the disposition of all equity grants made to Mr. Sabin as a result of his resignation. Note that Mr.
Paglinco resigned as the Companys CFO effective May 29, 2013, but will remain an employee of the Company for up to an additional nine months.
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(1)
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With respect to Mr. Benaroya during 2011, $131,500 of the total in the salary column in the table above represents amounts paid to him in consideration for his
service as Chairman of the Board (including special committee fees) prior to his appointment as interim Executive Chairman and acting CEO as of September 12, 2011. The remainder of the total in the salary column for 2011, and all amounts in the
salary column in the table above for 2012, represent amounts paid to RB, Inc. pursuant to its agreement with the Company for the provision of Mr. Benaroyas services as interim Executive Chairman and acting CEO (which terminated as of
March 14, 2013). During the term of such engagement, Mr. Benaroya did not receive directors fees, nor did he participate in any bonus program, employee benefit plan or other compensation arrangement with the Company. See
Employment Contracts and Arrangements below.
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With respect to Ms. Carr, includes $75,000 paid to
her in connection with her service as a consultant to the Company from June 2012 until her appointment as Executive Vice President and Chief Operating Officer on September 12, 2012.
Messrs. Paglinco and Goldfarb participated in the 2009 ESPP during 2011 and 2010. In connection therewith: (i) for 2011, each of
Messrs. Paglinco and Goldfarb authorized payroll deductions equal to an aggregate of $21,250, and each purchased an aggregate of 7,899 shares of Common Stock pursuant thereto as of December 30, 2011; and (ii) for 2010, each of Messrs.
Paglinco and Goldfarb authorized payroll deductions equal to an aggregate of $21,250, and each purchased an aggregate of 5,339 shares of Common Stock pursuant thereto as of December 31, 2010. See
Employee Stock Purchase Plan
under the section captioned
Other Elements of Compensation and Related Benefits
in the Compensation Discussion and Analysis for a description of the 2009 ESPP (which has been suspended for the 2012 and 2013 Plan years). Annual
base salaries applicable for 2011 for Messrs. Paglinco, Goldfarb and Schaub were somewhat higher than the amounts shown herein, as base salary increases became effective as of April 1, 2011.
(2)
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Mr. Schaub became the President of Sassy in February 2010, and also became the President of LaJobi in March of 2011 (at which time he became a LaJobi
participant under the Companys IC Program for 2011). In June of 2011, Dean Robinson was appointed as the President of Sassy, and Mr. Schaub became the group head of Sassy during a transition period that ended at the end of 2012, as well
as continuing as President of LaJobi. Although LaJobi participants (including Mr. Schaub) did not qualify for any payment under the corporate component of the IC Program for 2011, as a result of Mr. Schaubs leadership at Sassy (as
President until the appointment of Mr. Robinson and as the group head thereafter), the Committee used its discretion to award Mr. Schaub the amounts set forth in the table in 2011 as a bonus.
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(3)
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Reflects the aggregate grant date fair value of awards for the years shown, computed in accordance with FASB ASC Topic 718, with respect to issuances of RSUs to the
individuals in the table. These amounts reflect the Companys accounting expense and do not necessarily correspond to the actual value that will be realized by the NEOs. Assumptions used in determining the grant date fair values for 2012, 2011
and 2010 can be found in: (i) the Companys Annual Report on Form 10-K for the year ended December 31, 2012 (the 2012 10-K), in footnote 14 to the Notes to Consolidated Financial Statements; (ii) the Companys
Annual Report on Form 10-K for the year ended December 31, 2011 (the 2011 10-K), in footnote 14 to the Notes to Consolidated Financial Statements; and (iii) the Companys Annual Report on Form 10-K for the year ended
December 31, 2010 (the 2010 10-K), in footnote 15 to the Notes to Consolidated Financial Statements, respectively. Further information regarding 2012 awards is included in the 2012 Grants of Plan-Based Awards table
below. For Mr. Sabin in 2012, includes $5,650, representing the incremental fair value as of the modification date of 5,000 RSUs originally granted to him in 2009 (as part of an original grant of 25,000 RSUs), which would have otherwise been
forfeited upon his resignation on September 11, 2012, but were permitted to remain outstanding and vest in accordance with their terms on December 11, 2012 (as partial consideration for a release).
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36
(4)
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Reflects the aggregate grant date fair value of awards for the years shown, computed in accordance with FASB ASC Topic 718, with respect to issuances of options and/or
SARs to the individuals in the table. These amounts reflect the Companys accounting expense and do not necessarily correspond to the actual value that will be realized by the NEOs. Assumptions used in determining the grant date fair values for
2012, 2011 and 2010 can be found in: (i) the 2012 10-K, in footnote 14 to the Notes to Consolidated Financial Statements; (ii) the 2011 10-K, in footnote 14 to the Notes to Consolidated Financial Statements; and (iii) the 2010 10-K,
in footnote 15 to the Notes to Consolidated Financial Statements, respectively. Further information regarding 2012 awards is included in the 2012 Grants of Plan-Based Awards table below.
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(5)
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With respect to 2010, represents amounts earned under the IC Program by Mr. Sabin for such year. No NEOs received awards under the IC Program for 2011 or the ICBP
for 2012, but see footnote (2) above for information regarding a discretionary bonus awarded to Mr. Schaub in 2011.
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(6)
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The perquisites and other personal benefits included within the All Other Compensation for each named executive officer are as follows:
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Income
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Recognized
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from
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Provision of
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Extra
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Annual
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Group Term
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Week
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Contributions
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Car
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Life Insurance
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Vacation
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to 401(k)
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Other
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Total
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Name
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Year
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Allowance(a)
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($)(b)
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($)(c)
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Plans ($)(d)
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($)(e)
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|
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($)
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Raphael Benaroya
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2012
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n/a
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n/a
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n/a
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n/a
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n/a
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n/a
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2011
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n/a
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n/a
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n/a
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n/a
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n/a
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n/a
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Guy A. Paglinco
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2012
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9,600
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426
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n/a
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7,500
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n/a
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17,526
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2011
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9,600
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389
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n/a
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7,350
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n/a
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17,339
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2010
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9,600
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389
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n/a
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7,350
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n/a
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17,339
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Kerry Carr
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2012
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n/a
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48
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n/a
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1,615
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n/a
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1,663
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Marc S. Goldfarb
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2012
2011
2010
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13,200
13,200
13,200
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561
511
511
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n/a
n/a
n/a
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7,500
7,350
7,350
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n/a
n/a
n/a
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21,261
21,061
21,061
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Richard Schaub
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2012
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n/a
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80
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7,212
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5,459
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n/a
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12,751
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2011
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n/a
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80
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7,212
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n/a
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123,368
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130,660
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David C. Sabin
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2012
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n/a
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345
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9,135
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n/a
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168,990
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178,470
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2011
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n/a
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382
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9,135
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7,350
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n/a
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16,867
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2010
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7,308
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419
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18,269
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7,350
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8,125
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41,471
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(a)
|
During a portion of 2010, Mr. Sabin received the benefit of the use of an automobile that had been previously leased by Kids Line (the lease expired during 2010,
and no other automobile benefits were provided to Mr. Sabin thereafter).
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(b)
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Such group term life insurance coverage is generally provided to all employees. Amounts represent the portion of the premium paid for amounts in excess of the limits
for tax purposes.
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(c)
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Each NEO other than Mr. Benaroya is entitled to three weeks of annual paid vacation (as compared to Company policy based on tenure), which in 2012 and 2011
reflected one extra week for each of Messrs. Sabin and Schaub; and in 2010 reflected an extra two weeks for Mr. Sabin. Mr. Benaroya was an employee of RB, Inc. during 2012, and pursuant to his employment agreement with the Company,
commencing March 14, 2013, Mr. Benaroya is entitled to four weeks of annual paid vacation commencing in 2013, reflecting an additional two weeks based on tenure.
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(d)
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Amounts represent the relevant employers match to contributions under the 401(k) Plans on the same basis as provided to all employees. Does not include investment
gains or losses under the 401(k) Plans. Because the contributions to the 401(k) Plans are not fixed, and because it is impossible to calculate future income, it is not currently possible to calculate an individual participants retirement
benefits.
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37
(e)
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With respect to Mr. Sabin in 2012, represents amounts paid in 2012 in connection with the termination of his employment as of September 11, 2012 (consisting
of $144,327 in base salary, $4,663 in reimbursement of COBRA premiums, and $20,000 as reimbursement for certain expenses related to his temporary housing and automobile in Los Angeles, as well as related moving expenses and certain legal expenses).
The Company also agreed that the 5,000 restricted stock units (out of an original grant of 25,000 restricted stock units issued to Mr. Sabin on December 11, 2009) scheduled to vest on December 11, 2012 would not be forfeited by
Mr. Sabin in connection with his departure, and were permitted to vest in accordance with their terms. See 2012 Outstanding Equity Awards at Fiscal Year End table below. Aggregate amounts payable to Mr. Sabin as a result of
such termination are discussed under the caption Actual Terminations in 2012 below. With respect to Mr. Sabin for 2010, consists of a two-month housing reimbursement ($2,197), moving expenses ($5,328) and airfare reimbursement for
four weekends ($600) in connection with his relocation to Los Angeles, all in accordance with the terms of his employment agreement. With respect to Mr. Schaub, reflects reimbursement for temporary housing ($3,864) incurred in 2011 associated
with his required business travel to Kentwood, Michigan and the reimbursement of expenses of $119,504 (including house closing costs of $59,497, moving expenses of $17,364 and tax gross-up amounts of $42,643) incurred in 2011 associated with his
relocation to New Jersey in connection with his appointment as President of LaJobi in March of 2011.
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2012
Grants of Plan-Based Awards
The following table provides information with respect to non-equity incentive plan awards to the NEOs in 2012
as well as equity awards made to the NEOs in 2012.
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Estimated Possible(1) Payouts Under
Non-equity Incentive Plan Awards
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Estimated Future Payouts
Under
Equity Incentive Plan Awards
|
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All Other
Stock
Awards:
Number of
Shares of
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
|
|
|
Exercise or
Base Price
of Option/
SAR
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|
|
Grant Date
Fair Value
of Stock
and Option
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Name
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Plan
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Grant Date
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|
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Threshold
($)
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Target
($)
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Max
($)
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|
Threshold
(#)
|
|
Target
(#)
|
|
Max
(#)
|
|
Stock or
Units (#)
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|
|
Options/
SARs (#)
|
|
|
Awards ($/
Sh)(4)
|
|
|
Awards
($)(5)
|
|
Raphael Benaroya
|
|
ICBP
|
|
|
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Guy Paglinco
|
|
ICBP
|
|
|
|
|
|
|
24,446
|
|
|
|
122,231
|
|
|
|
244,463
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Plan
|
|
|
3/9/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
22,650
|
|
|
|
Current Plan
|
|
|
3/9/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500
|
|
|
|
3.02
|
|
|
|
45,434
|
|
Kerry Carr (2)
|
|
ICBP
|
|
|
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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Inducement
Grant
|
|
|
9/14/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
373,134
|
|
|
|
1.34
|
|
|
|
339,709
|
|
Marc Goldfarb
|
|
ICBP
|
|
|
|
|
|
|
34,154
|
|
|
|
170,769
|
|
|
|
341,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Plan
|
|
|
3/9/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,750
|
|
|
|
|
|
|
|
|
|
|
|
26,425
|
|
|
|
Current Plan
|
|
|
3/9/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,250
|
|
|
|
3.02
|
|
|
|
53,006
|
|
Richard F. Schaub, Jr.
|
|
ICBP
|
|
|
|
|
|
|
37,500
|
|
|
|
187,500
|
|
|
|
375,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Plan
|
|
|
3/9/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
22,650
|
|
|
|
Current Plan
|
|
|
3/9/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500
|
|
|
|
3.02
|
|
|
|
45,434
|
|
David Sabin (3)
|
|
ICBP
|
|
|
|
|
|
|
47,500
|
|
|
|
237,500
|
|
|
|
475,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Plan
|
|
|
3/9/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,750
|
|
|
|
|
|
|
|
|
|
|
|
26,425
|
|
|
|
Current Plan
|
|
|
3/9/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,250
|
|
|
|
3.02
|
|
|
|
53,006
|
|
(1)
|
The numbers in the table represent potential payouts under the ICBP for 2012 with respect to Messrs. Paglinco, Goldfarb, Schaub and Sabin. Neither Mr. Benaroya nor
Ms. Carr were participants in the ICBP in 2012, however, they are each participants thereof in 2013 (Ms. Carrs employment agreement with the Company specifies that for 2013 only, she is to receive a guaranteed $50,000 bonus payment
thereunder). No amounts were actually earned by any participating NEO during 2012 under the ICBP.
|
(2)
|
Ms. Carr was made an inducement grant of stock appreciation rights (outside of the Companys Equity Incentive Plan, as a result of the limited number of
shares remaining available for grant thereunder) in connection with the execution of her employment agreement with the Company as of September 12, 2012.
|
(3)
|
The awards of RSUs and SARs granted to Mr. Sabin on March 9, 2012 and set forth in the table above were forfeited in their entirety by him as a result (and on
the date) of Mr. Sabins resignation from the Company on September 11, 2012.
|
38
(4)
|
All awards set forth under this column represent grants of SARs. The exercise price of the SARs is equal to the closing price of our Common Stock on the NYSE on the
date of grant.
|
(5)
|
Amounts represent the grant date fair value of: (i) the grant of SARs to each of: Mr. Paglinco (22,500), Ms. Carr (373,134), Mr. Goldfarb (26,250),
Mr. Schaub (22,500) and Mr. Sabin (26,250) during 2012; and (ii) the grant of RSUs to each of Messrs. Paglinco (7,500), Goldfarb (8,750), Schaub (7,500), and Sabin (8,750) during 2012, in each case computed in
accordance with FASB ASC Topic 718. All grants (other than the inducement grant of SARs to Ms. Carr) were made under the Current Plan. All grants set forth in the table above vest ratably over a five year period, commencing March 9, 2013
with respect to grants made under the Current Plan, and commencing September 14, 2013 with respect to the SAR grants to Ms. Carr (other than the grants to Mr. Sabin which were forfeited in connection with his resignation from the
Company on September 11, 2012). Assumptions used in determining the grant date fair values of these awards can be found in the 2012 10-K, in footnote 14 to the Notes to Consolidated Financial Statements. Other details with respect to such
grants can be found in the footnotes to the 2012 Outstanding Equity Awards at Fiscal Year End table below. In addition to the grant date fair values of awards issued to NEOs in 2012, as is described in footnote (3) to the Summary
Compensation Table above, 5,000 RSUs originally granted to Mr. Sabin in 2009, which would have otherwise been forfeited upon his resignation on September 11, 2012, were instead permitted to remain outstanding and vest in accordance with
their terms, with an incremental fair value as of the modification date of $5,650.
|
Employment Contracts and Arrangements
Mr. Benaroya (acting CEO from September 12, 2011 until March 14, 2013; President and CEO thereafter)
The Company entered into an agreement with RB, Inc., a Delaware corporation wholly-owned by Mr. Benaroya, effective September 12, 2011, to
provide for the full-time services of Mr. Benaroya as interim Executive Chairman and acting CEO until the earlier of: (i) December 31, 2011; and (ii) the appointment of a new chief executive officer or written notice from the
Company, for an aggregate fee of $300,000. On February 14, 2012, this agreement was modified and extended (by letter agreement), to continue the provision of the full-time services of Mr. Benaroya by RB, Inc. on a month-to-month basis,
effective as of January 1, 2012, for a fee of $100,000 per calendar month during such continuation period. Notwithstanding the stated contractual amount, commencing as of September 2012, RB, Inc. advised the Company to reduce the fee to $75,000
per calendar month. Mr. Benaroya was not paid directors fees, nor did he participate in any bonus program, employee benefit plan or other compensation arrangement with the Company, during the term of his engagement as interim Executive
Chairman.
On March 14, 2013, the Company and Mr. Benaroya entered into an employment agreement (the RB Agreement) with
respect to his employment as President and Chief Executive Officer of the Company, for a term of four years, subject to annual extensions unless the Company or Mr. Benaroya provides written notice of termination to the other party at least four
months prior to the end of the then-current term (and subject to earlier termination as provided in the Agreement). The agreement with RB, Inc. was terminated in connection with the execution of the RB Agreement, and the fee payable to RB, Inc. for
the month of termination was prorated to reflect the actual number of days in such month during which such agreement was in effect.
Pursuant
to the RB Agreement, Mr. Benaroya is entitled to an annual base salary of $650,000 (prorated for the period of his service in 2013). The Compensation Committee will consider annual increases in such base salary, which may only be decreased
under specified limited circumstances (a Sanctioned Decrease).
Pursuant to the RB Agreement, Mr. Benaroya is eligible for an
annual performance-based cash incentive compensation opportunity under the ICBP, including for the full 2013 calendar year, with an IC Percentage of 50%. The performance goals applicable to Mr. Benaroya will be established by the Compensation
Committee annually in consultation with Mr. Benaroya, and will not be established at levels that are more stringent than comparable performance goals applicable to other executive officers of the Company for such year. Any amendment to the ICBP
shall not apply to Mr. Benaroya without his consent.
Pursuant to the RB Agreement, on March 15, 2013, the following equity grants
were made to Mr. Benaroya: (i) 200,000 Incentive Stock Options (ISOs) under the Current Plan; (ii) 200,000 inducement nonqualified stock options outside of the Current Plan (NQSOs); and (iii) 600,000 stock
appreciation rights under the Current Plan (Cash SARs). Vested Cash SARs are exercisable solely for cash,
provided
that, upon the approval of the Companys shareholders (which approval will be requested at the Companys
next Annual Meeting of Shareholders), any unexercised Cash SARs will be converted into Nonqualified Stock Options (on a one-for-one basis) under the Current Plan (with no change to the exercise price, deemed date of grant, vesting schedule, or other
terms thereof, and referred to herein as Replacement Options). To the extent shareholder approval for the Replacement Options is not obtained, the Cash SARs will continue in full force and effect.
39
The exercise price per share of each of the ISOs, NQSOs, and Cash SARs is the closing price per share of the
Companys Common Stock on the New York Stock Exchange on the date of grant. The ISOs, NQSOs, Cash SARS (or Replacement Options, if applicable) are referred to herein as the Equity Awards.
Twenty five percent of the ISOs vested on the date of grant, and an additional twenty-five percent will vest on each of the first, second and third
anniversaries of the date of grant. The NQSOs were immediately vested on the date of grant. 15,625 of the Cash SARs (or Replacement Options, as applicable), will vest on the last day of each month during the first consecutive 24 months of the
original term of the RB Agreement (commencing March 31, 2013), and 9,375 of the Cash SARs (or Replacement Options, as applicable), will vest on the last day of each month during the subsequent consecutive 24 months. The Equity Awards generally
expire on the tenth anniversary of the date of grant. The vesting schedule and the period of exercisability of the Equity Awards will be accelerated on the occurrence of specified events as described below.
Mr. Benaroya is entitled to participate in the Companys employee benefit plans and perquisites applicable to senior executives generally and
on a basis no less favorable than those provided to other senior executives. In addition, Mr. Benaroya is entitled to four weeks of annual paid vacation, or such greater amount provided to any other senior executive or pursuant to Company
policy (equivalent to two additional weeks based on tenure), and directors and officers liability insurance coverage during the term of his employment and for six years thereafter, providing coverage equal to at least current levels, or
if greater, the coverage provided to any other present or former senior executive or director of the Company. Mr. Benaroya is also entitled to reimbursement for his legal fees in connection with the RB Agreement up to a maximum of $40,000.
Pursuant to the terms of the RB Agreement, Mr. Benaroya is entitled to purchase from the Company, for a period of 30 open trading window
days following the execution of the Agreement, up to 200,000 shares of the Companys Common Stock (but in no event more than 1% of such Common Stock outstanding at the time of purchase) at fair market value at the time of purchase.
If the employment of Mr. Benaroya is terminated by the Company for Cause or by Mr. Benaroya without Good Reason (each as defined below), he
will be entitled to receive his base salary earned through the date of termination, bonus amounts under the ICBP earned for any prior year and not yet paid, and other vested amounts and benefits, if any, provided under applicable Company programs
and policies in which he participated prior to the date of the RB Agreement (collectively, the Accrued Benefits). In addition, the unvested portion of any Equity Award will be cancelled or immediately forfeited, as applicable. If the
employment of Mr. Benaroya is terminated by the Company for Cause, any unexercised vested portion of any Equity Award will generally remain exercisable for a period of 30 open trading window days following such termination (subject to extension
to the extent the Companys insider trading policy or applicable law prohibits the exercise of the Equity Award or the sale of the underlying shares at the end of such period). If the employment of Mr. Benaroya is terminated by
Mr. Benaroya without Good Reason, the vested portion of any Equity Award will be generally exercisable for a period of 6 months following the termination date, or if later, until the 30th open trading window day following such termination
(subject to extension as described above). Notwithstanding the foregoing, in no event will an Equity Award be exercisable after the expiration of its term.
In the event that the termination of the employment of Mr. Benaroya occurs as a result of the expiration of the RB Agreement at the end of its term, Mr. Benaroya will be entitled to the Accrued
Benefits, as well as the prorated amount of the bonus to which he would otherwise have been entitled under the ICBP had his employment continued through the end of the relevant year, based upon actual achievement of the relevant performance goals
(the Prorated Bonus Amount). In addition, the Equity Awards will remain exercisable for the remainder of their respective terms.
40
If the Company terminates the employment of Mr. Benaroya without Cause or he terminates his employment
for Good Reason, Mr. Benaroya will be entitled to receive the Accrued Benefits, his base salary (without regard to any Sanctioned Decrease) for a period of nine months after the termination date, the Prorated Bonus Amount, the amount of COBRA
premiums for Mr. Benaroya and his family for continued coverage under the Companys medical and dental programs, if any during the nine-month period following the date of termination (the COBRA Amount), and continued coverage
under the Companys life insurance program for a period of nine months following the termination date. In order to receive such benefits (and the accelerated vesting of Equity Awards described below), Mr. Benaroya must execute a release,
substantially in the form of Release attached to the RB Agreement. In addition, in the event of any such termination, the unvested portion of any Equity Award (as well as the unvested portion of any additional equity awards granted to
Mr. Benaroya) will become immediately vested, and shall remain exercisable in accordance with their respective terms,
provided
that if the Company terminates the employment of Mr. Benaroya without Cause prior to the first
anniversary of the commencement date of his employment, Mr. Benaroya will forfeit the last 250,000 of the Cash SARs (or Replacement Options, as applicable) that would have become vested if his employment had not been terminated, provided
however, that no such forfeiture shall occur if a Change of Control (as defined below) occurs prior to the relevant termination date, or if Mr. Benaroya is terminated following discussion leading to a Change of Control or within six months
prior to the consummation of a Change of Control.
If the employment of Mr. Benaroya is terminated by the Company as a result of his
Disability (as defined below), he will be entitled to receive the Accrued Benefits (including payments under the Companys long-term disability insurance plan to the extent provided for therein), the Prorated Bonus Amount, the COBRA Amount, and
continued coverage under the Companys life insurance program for a period of nine months following the termination date. If the employment of Mr. Benaroya is terminated as a result of his death, his estate will be entitled to receive the
Accrued Benefits and the Prorated Bonus Amount. In addition, the death benefit under the Companys life insurance program shall be paid to his designated beneficiary (or his estate in the absence of such designation), and
Mr. Benaroyas family shall be entitled to reimbursement of the COBRA Amount. In the event that the employment of Mr. Benaroya is terminated as a result of his death or Disability, the unvested portion of any Equity Award (as well as
the unvested portion of any additional equity awards granted to Mr. Benaroya) will become immediately vested to the same extent as if Mr. Benaroya had completed an additional two years of service after the date of termination, and shall
remain exercisable for the shorter of one year following the date of termination and the remainder of their term.
If Mr. Benaroyas
employment is terminated by the Company without Cause or by Mr. Benaroya for Good Reason at any time on or after, or within six months before the occurrence of a Change of Control, Mr. Benaroya will be entitled to the payments and benefits
described above with respect to such terminations. Notwithstanding the foregoing, if a Change of Control occurs and outstanding Equity Awards and/or other Company equity awards issued to Mr. Benaroya are not assumed or converted into comparable
awards with respect to the stock of the acquiring or successor company (or parent thereof), then immediately prior to such Change of Control, each such award, whether or not previously vested, will be converted into the right to receive cash, or at
the election of Mr. Benaroya, consideration in a form that is pari passu with the form of the consideration payable to the Companys shareholders in exchange for their shares (less any applicable exercise price). Any award that is not
assumed or converted (as described above) may be canceled at the time of the Change of Control for no consideration if its per share exercise price is greater than such per share fair market value of the Companys Common Stock.
In the event of the termination of the employment of Mr. Benaroya, he shall be under no obligation to seek other employment or otherwise mitigate
damages, and there shall be no offset against any amounts due him under the RB Agreement on account of any remuneration attributable to any subsequent employment that he may obtain.
The RB Agreement includes a restriction against specified competitive activities during Mr. Benaroyas employment by the Company and for a period of nine months thereafter and a non-solicitation
agreement for a period of nine months following his termination, unless the termination of Mr. Benaroyas employment results from the expiration of the RB Agreement at the end of its term.
The RB Agreement includes a provision that would, under specified circumstances and at Mr. Benaroyas request, reduce the aggregate of amounts
constituting a parachute payment under Section 280G(b)(2) of the Internal Revenue Code to an amount that will equal three times his base amount less $1.00. His employment is at will.
Terms used in the preceding discussion are defined in the RB Agreement as follows:
|
Cause is defined generally to mean (subject to applicable cure periods set forth in the Agreement): (A) willful failure by Mr. Benaroya to perform
his material duties as an employee of the Company; (B) his conviction of, or plea of guilty or nolo contendere to, a felony; (C) his theft or misuse of material Company property; or (D) willful misconduct or an act of moral turpitude
which is materially injurious to the Company, monetarily or otherwise; provided that Cause does not include a finding of liability in pending or future shareholder, derivative or punitive class actions or other civil actions.
|
41
|
Good Reason is defined generally to mean the occurrence of any of the following events without Mr. Benaroyas express written consent (subject to
applicable cure periods set forth in the Agreement): (A) a diminution of his base salary (subject to specified exceptions) or his annual bonus opportunity; (B) a diminution in his position, title, authority, duties, or responsibilities;
(C) a relocation of the Companys headquarters office outside of a 35 mile radius of the current office (other than a relocation to the current offices of LaJobi, Inc.); (D) a material breach of the Agreement by the Company; or
(E) in connection with a Change of Control (defined below), the failure or refusal by the successor or acquiring company (or parent thereof) to expressly assume the obligations of the Company under the Agreement.
|
|
Disability will be deemed to have occurred if Mr. Benaroya is absent from work for at least 135 consecutive days or for 135 days (whether or not
consecutive) in any calendar year by reason of a physical or mental illness or injury.
|
|
Change of Control is defined generally to mean: (a) any one person or group acquires ownership of shares of the Company that, together
with the shares of the Company held by such person or group, constitutes more than 40% of the total fair market value or total voting power of the shares of the Company; (b) any one person or group acquires, or has acquired during the 12-month
period ending on the date of the most recent acquisition by such person or persons, ownership of shares of the Company having 30% or more of the total voting power of the shares of the Company; (c) one-half or more of the members of the
Companys Board are replaced during any 18-month period by directors whose appointment or election is not endorsed by at least 66
2/3
% of the Companys Board prior to the date of such appointment or election (other than a result of an election
contest); or (d) any one person or group acquires, or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons, assets from the Company that have a total gross fair market value equal
to or more than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions (subject to specified exceptions). A Change of Control will be deemed to have occurred upon the
consummation of a merger or consolidation of, or similar type of corporate transaction involving the Company or any subsidiary thereof with any other corporation, other than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) more than 60% of the
combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation.
|
Mr. Paglinco (resigned as CFO as of May 29, 2013)
Mr. Paglinco was hired as Vice
President Corporate Controller of the Company in September 2006. He was promoted to Vice President and Chief Accounting Officer in November 2007, and assumed the additional role of interim Chief Financial Officer as of
January 30, 2009. Effective August 14, 2009, he was promoted to Vice President and Chief Financial Officer of the Company. During 2012, his annual base salary was $271,625, and his IC Percentage under the ICBP was 45%. Equity grants were
in the discretion of the Compensation Committee. See 2012 Grants of Plan Based Awards above for a description of equity grants made to Mr. Paglinco in 2012. His employment was at will. Mr. Paglinco stepped down from his
position as CFO effective May 29, 2013, but will remain an employee of the Company for up to an additional nine months.
Pursuant to his
arrangement with the Company prior to his resignation as CFO, Mr. Paglinco was also entitled to participate generally in all retirement, savings, welfare and other employee benefit plans and arrangements provided to other executive officers of
the Company, and received a monthly car allowance. Mr. Paglinco was also entitled to three weeks annual paid vacation.
Mr. Paglinco was issued a Change in Control Letter, described in detail in the Compensation Discussion and Analysis under the caption Change
in Control Letters.
See footnote 6 of the Summary Compensation Table above for a description of perquisites received by
Mr. Paglinco during the period covered by the table. The terms of equity awarded to Mr. Paglinco are described in the 2012 Outstanding Equity Awards at Fiscal Year End table below.
The terms of the Transition and Release Agreement, dated May 29, 2013, entered into between the Company and Mr. Paglinco in connection with his
resignation as CFO are described in detail in a Current Report on Form 8-K filed by the Company on June 3, 2013.
42
Ms. Carr
Kerry Carr was appointed to the position of Executive Vice President and Chief Operating Officer of the Company pursuant to the terms of an agreement between Ms. Carr and the Company (the Carr
Agreement), effective as of September 12, 2012. Ms. Carrs current annual base salary is $375,000 (effective April 1, 2013). Subsequent base salary increases will be considered annually by the Compensation Committee in its
discretion. Commencing in 2013, Ms. Carr will also be eligible to participate in the ICBP, with an IC Percentage of 50%, provided that for 2013 only, Ms. Carr is guaranteed a minimum bonus payment of $50,000. The performance goals for
Ms. Carr shall be established annually by the Compensation Committee, and she will have an opportunity to consult with the Compensation Committee with respect to such goals.
Pursuant to the Carr Agreement, Ms. Carr was issued an inducement grant of 373,134 SARs (outside of the Current Plan, as a result of the limited number of shares remaining available for grant
thereunder). The SARs may be settled in cash, Common Stock, or a combination of both, in the sole discretion of the Compensation Committee, and are generally exercisable for a period of ten years from the date of grant. The SARs will vest at a rate
of 20% per year commencing on the first anniversary of the date of grant.
Ms. Carr is entitled to participate in the Companys
employee benefit plans and programs applicable to senior executives generally, and to three weeks of annual paid vacation (equivalent to one additional week based on tenure, although Ms. Carr took no vacation time in 2012).
If the employment of Ms. Carr is terminated by the Company for Cause or by Ms. Carr without Good Reason (each as defined in the
Terminations without Cause or for Good Reason table under Potential Payments Upon Termination or Change in Control below), or by reason of her death or disability, she will be entitled to receive her base salary through the
date of termination, accrued vacation and any amounts required under the terms of the Companys employee benefit plans. Subject to the provisions described in the subsequent paragraph, if the Company terminates the employment of Ms. Carr
without Cause or she terminates such employment for Good Reason, Ms. Carr shall also be entitled to receive base salary continuation, and medical and dental coverage, for six months following termination of employment subject to her execution
of a release of claims in a form satisfactory to the Company. Notwithstanding the foregoing, if the employment of Ms. Carr is terminated by the Company without Cause or by Ms. Carr for Good Reason within six months following the
consummation of a Change in Control (as defined below), the foregoing benefits shall be extended by an additional period of six months. In the event of disability or death of Ms. Carr while in the employ of the Company, all unexercised SARs
will be deemed vested and may be exercised for up to one year (or the exercise period, if shorter) after such event. If Ms. Carr retires, vested unexercised SARs may be exercised within one year of such retirement or the remaining term of the
grant, if earlier. If Ms. Carrs employment is terminated for any other reason, any unexercised SARs will be cancelled and deemed terminated immediately, except that if her employment is terminated by the Company for other than Cause, all
unexercised SARs, to the extent vested, may be exercised within 90 days of the date of such event (or the exercise period, if shorter).
On
March 26, 2013, the Carr Agreement was amended (the Amendment). The Amendment specifies that in the event of a Change in Control (as defined below), if any unexercised SARs are not assumed or converted into comparable awards with
respect to the stock of the acquiring or successor company (or parent thereof), then immediately prior to such Change of Control, each such SAR, whether or not previously vested, will be converted into the right to receive cash, or at the election
of Ms. Carr, consideration in a form that is pari passu with the form of the consideration payable to the Companys shareholders in exchange for their shares (less any applicable exercise price). Any award that is not assumed or converted
as described above may be canceled at the time of the Change of Control for no consideration if its per share exercise price is greater than such per share fair market value of the Companys Common Stock. In addition, if Ms. Carrs
employment is terminated by the Company without Cause or by Ms. Carr for Good Reason within nine months following a specified change in control (defined in the Change in Control table under Potential Payments Upon Termination
or Change in Control below), her SARs shall immediately vest, and remain exercisable for the remainder of their term.
For purposes of
the Carr Agreement, a Change in Control is defined generally as when: (i) any person or group, other than specified existing 5% beneficial owners of the Companys voting securities, becomes the beneficial owner of more than 30% of the
Companys voting power (subject to specified exclusions) (ii) as a result of any proxy solicitation made otherwise than on behalf of the Board, continuing directors cease to be a majority of the Board; (iii) the merger, consolidation,
or other business combination other than one immediately following which current stockholders continue to own at least 60% of the voting power in the Company or other resulting entity (in substantially the same proportion); (iv) the sale of all
or substantially all of the Companys assets, other than one immediately following which the then-existing stockholders are the beneficial owners of at least 60% of the voting power in the purchasing entity (in substantially the same
proportions); or (v) consummation of a recapitalization or similar transaction in which any person or group, other than specified existing 5% beneficial owners, becomes the beneficial owner in excess of 30% of the Companys voting power.
43
The Carr Agreement includes a restriction against specified competitive activities as well as a
non-solicitation provision during Ms. Carrs employment by the Company and for a period of one year thereafter.
Ms. Carrs employment is at will.
See footnote 6 of the Summary Compensation Table above for a description of perquisites received by Ms. Carr during 2012. The terms of equity awarded to Ms. Carr are described in the
2012 Outstanding Equity Awards at Fiscal Year End table below.
Mr. Goldfarb
On September 26, 2005, Marc S. Goldfarb was hired as Vice President, General Counsel and Secretary of the Company at an annual base salary of
$260,000. In accordance with the terms of his current employment arrangement with the Company, Mr. Goldfarb serves as Senior Vice President and General Counsel of the Company (as of May 31, 2006) and during 2012, his annual base salary was
$341,537. Mr. Goldfarb participated in the ICBP in 2012 with an IC Percentage of 50%. Other than stock options awarded to Mr. Goldfarb in connection with the commencement of his employment, equity grants are at the discretion of the
Compensation Committee. See 2012 Grants of Plan Based Awards above for a description of equity grants made to Mr. Goldfarb in 2012. His employment is at will.
Pursuant to his arrangement with the Company, Mr. Goldfarb is also entitled to participate generally in all retirement, savings, welfare and other employee benefit plans and arrangements provided to
other executive officers of the Company, including the Companys Severance Policy (prior to its termination), has been guaranteed a minimum of 8 months of severance, and receives a monthly car allowance. Mr. Goldfarb is also entitled
to three weeks annual paid vacation.
A Change of Control Letter was issued to Mr. Goldfarb, described in detail in the Compensation
Discussion and Analysis under the caption Change in Control Letters.
See footnote 6 of the Summary Compensation Table
above for a description of perquisites received by Mr. Goldfarb during the period covered by the table. The terms of equity awarded to Mr. Goldfarb are described in the 2012 Outstanding Equity Awards at Fiscal Year End table
below.
Mr. Schaub
Mr. Schaub became the President of Sassy in February 2010 pursuant to an employment agreement dated February 19, 2010 and amended as of
November 23, 2010, and also became the President of LaJobi in March of 2011. In June of 2011, Dean Robinson was appointed as the President of Sassy, and Mr. Schaub became group head of Sassy (to whom Mr. Robinson reported) during a
transition period that ended at the end of 2012, as well as continuing as President of LaJobi (his current position). Mr. Schaubs current annual base salary is $375,000, and cannot be lowered below $350,000 without his consent.
Mr. Schaub participated in the ICBP during 2012 with an IC Percentage of 50%.
A grant of SARS and RSUs was made to Mr. Schaub in
connection with the commencement of his employment. In addition, a grant of SARS and RSUs was made to Mr. Schaub on January 3, 2011 in accordance with the terms of the amendment to his employment agreement as of November 23, 2010.
Further equity grants are at the discretion of the Compensation Committee. See 2012 Grants of Plan Based Awards above for a description of equity grants made to Mr. Schaub in 2012.
Mr. Schaub is eligible to participate in all benefit programs made generally available to executives of LaJobi, as the same may be modified from
time to time. In addition, Mr. Schaub was entitled to participate in the Companys Severance Policy prior to its termination.
Pursuant to Mr. Schaubs employment agreement, he was reimbursed for temporary housing and coach class transportation expenses associated with
his required business travel to Kentwood, Michigan until December 31, 2011. In addition, relocation expense reimbursement provisions contained in his employment agreement (applicable to a relocation of Sassy) were applied to his relocation to
New Jersey in connection with his appointment as the President of LaJobi. Mr. Schaub was also reimbursed an additional amount equal to the income taxes payable in connection with the inclusion of such relocation allowance in his ordinary
income.
44
Mr. Schaubs employment agreement contains a confidentiality, non-disparagement, non-compete for
the period of employment and any period thereafter during which Mr. Schaub receives any severance payments, and one year post-employment non-solicitation provision with respect to any person who is to his knowledge then employed or retained by
the Company or any of its subsidiaries.
See footnote 6 of the Summary Compensation Table above for a description of perquisites
received by Mr. Schaub during 2012. The terms of equity awarded to Mr. Schaub are described in the 2012 Outstanding Equity Awards at Fiscal Year End table below. Mr. Schaub is entitled to three weeks annual paid vacation
(equivalent to one additional week based on tenure), and his employment is at will.
Mr. Sabin (resigned as of
September 11, 2012)
Mr. Sabin served as the President of Kids Line (since January 2010) and CoCaLo (since September 2010)
pursuant to an employment agreement dated December 7, 2009. His employment agreement provided for an annual base salary of $475,000 (applicable in 2012). Mr. Sabin participated in the ICBP in 2012 with an Applicable Percentage of 50%. A
grant of SARS and RSUs was made to Mr. Sabin in connection with the commencement of his employment. Further equity grants were at the discretion of the Compensation Committee. See 2012 Grants of Plan Based Awards above for a
description of equity grants made to Mr. Sabin in 2012, all of which were forfeited in connection with his resignation. Mr. Sabins employment was at will.
Mr. Sabin was also eligible to participate in all benefit programs made generally available to executives of Kids Line, as the same were modified from time to time, as well as the Severance Policy
prior to its termination (with a specified minimum severance period up to 12 months). These provisions did not apply to his resignation, however, the terms of which are described below. Mr. Sabin was also entitled to three weeks annual paid
vacation (one week more than he would be entitled to based on tenure).
Mr. Sabins employment agreement contained a
confidentiality, non-disparagement and one-year post-employment non-solicitation provision with respect to any person who is to his knowledge then employed or retained by the Company or any of its subsidiaries.
In connection with his resignation as of September 11, 2012, Mr. Sabin, Kids Line and CoCaLo (the Employer Group) executed a
Separation and Release Agreement, dated September 11, 2012 (the Release), pursuant to which Mr. Sabin received severance payments equal to his then-current base salary, less applicable withholdings, and reimbursement for COBRA
premiums, in each case through December 31, 2012. Such severance was paid in accordance with the Employer Groups normal payroll practices. In addition, Mr. Sabin was paid $20,000 as reimbursement for certain expenses related to his
temporary housing and automobile in Los Angeles, as well as related moving expenses and certain legal expenses. The Company also agreed that the 5,000 restricted stock units (out of an original grant of 25,000 restricted stock units issued to
Mr. Sabin on December 11, 2009) scheduled to vest on December 11, 2012 would not be forfeited by Mr. Sabin in connection with his departure, and would instead vest in accordance with their terms. See footnote (3) to the
Summary Compensation Table above. The Release contains, among other things, a full mutual irrevocable release of claims by the parties, and a reaffirmation by Mr. Sabin of the non-solicitation restrictions and confidentiality provisions in his
employment agreement.
See footnote 6 of the Summary Compensation Table above for a description of perquisites received by
Mr. Sabin during the period covered by the table. The terms of equity awarded to Mr. Sabin in 2012 (and forfeited in connection with his resignation) are described in the 2012 Outstanding Equity Awards at Fiscal Year End table
below, and amounts received by Mr. Sabin as a result of his resignation are described in Actual Terminations During 2012 below.
See the Summary Compensation Table above for information with respect to compensation received by the NEOs under their employment agreements and arrangements during the periods covered by the table.
45
Termination of Employment and Change-In-Control Arrangements
(i)
401(k) Plans
The Company
offers eligible employees the opportunity to participate in a 401(k) Plan based on employees pretax salary deferrals with Company matching contributions. As a result of the Companys historical acquisition strategy, the 401(k) Plans may
differ among the Company and its subsidiaries. Participating employees may elect to contribute from 1% to 80% (but not in excess of the amount permitted by the Code, i.e., $17,000 in 2012, and $22,500 in 2012 for employees age 50 and older who elect
to make catch-up contributions) of their compensation, on a pretax basis, to the relevant 401(k) Plan. Because the 401(k) Plans are qualified defined contribution plans, if certain highly compensated employees contributions exceed the amount
prescribed by the Code, such contributions will be reduced or limited. Employees contributions are invested in one or more of several funds (as selected by each participating employee). During 2012, the Company, LaJobi and Sassy matched a
portion (either one-half of any amount up to 6%, or 100% of any amount up to 3%, of salary contributed) of the compensation deferred by each employee, and Kids Line contributed 3% of eligible salary pursuant to the safe harbor provisions of
Section 401(k) of the Code. Matching contributions are fully vested after four years of employment at the rate of 25% per year of employment (after six years of employment for LaJobi). Under certain circumstances, the 401(k) Plans permit
participants to make withdrawals or receive loans therefrom prior to retirement age. As described above, the Company intends to adopt one unified 401(k) plan for the entire Company during 2013.
(ii)
Change in Control Letters
. See the description of change in control letters issued to each of Messrs. Paglinco and Goldfarb in the
Compensation Discussion and Analysis under the caption Change in Control Letters.
(iii)
Severance Policy
In February 2003, the Compensation Committee adopted a severance policy (as amended, the Severance Policy), applicable in general
to employees who were domestic vice presidents or above and who were designated by the Committee as eligible participants in the plan. The Severance Policy is described in the Compensation Discussion and Analysis above, under the caption Post
Termination Benefits. As a result of the Companys recent financial performance, continued challenging economic conditions, and in order to emphasize our pay-for-performance philosophy discussed in Compensation Philosophy and
Overview in the CD&A above, however, this policy was terminated effective as of April 26, 2012.
Equity Incentive Plan
The Board adopted the Equity Incentive Plan (the Current Plan) on June 3, 2008, and the Current Plan was approved by the
Companys shareholders as of July 10, 2008. The Current Plan is a successor to the 2004 Plan (defined below), which terminated as of the date of such approval (although outstanding awards thereunder continue to be covered thereby). As is
described below, the Current Plan contains provisions which accelerate the vesting schedule and shorten the period of exercisability of outstanding awards in the event that a grantees employment is terminated under specified conditions, and
permit adjustments to outstanding awards in the event of specified corporate transactions. The following is a summary of such provisions, as well as other material features of the Current Plan. Awards may be made under the Current Plan through
July 10, 2013 (although outstanding awards thereunder will continue to be covered thereby).
Awards
The Current Plan provides for awards in any one or a combination of: (a) Stock Options, (b) Stock
Appreciation Rights, (c) Restricted Stock, (d) Stock Units, (e) Non-Restricted Stock, and/or (f) Dividend Equivalent Rights. Any award under the Current Plan may, as determined by the committee administering the Current Plan (the
Plan Committee) in its sole discretion, constitute a Performance-Based Award (an award that qualifies for the performance-based compensation exemption of Section 162(m) of the Internal Revenue Code of 1986, as amended).
Stock Options
. Stock Options are options to purchase the Common Stock of the Company, that are either: Incentive
Stock Options (stock options which comply with Section 422 of the Internal Revenue Code of 1986, as amended), or nonqualified stock options (stock options which are not Incentive Stock Options).
46
Stock Appreciation Rights
. A Stock Appreciation Right is a right to receive a payment
in cash, Common Stock or a combination thereof, as determined by the Plan Committee, in an amount or value equal to the excess of: (i) the Fair Market Value (as defined below), or other specified valuation (which may not exceed Fair Market
Value), of a specified number of shares of Common Stock on the date the right is exercised, over (ii) the Fair Market Value or other specified amount (which may not be less than Fair Market Value) of such shares of Common Stock on the date the
right is granted; provided, however, that if a Stock Appreciation Right is granted in tandem with or in substitution for a Stock Option, the designated Fair Market Value for purposes of the foregoing clause (ii) shall be the Fair Market Value
on the date such Stock Option was granted. For purposes of the Current Plan, the Fair Market Value of a share of Common Stock is, on the date of determination: (i) if the Common Stock is then listed on either the New York Stock
Exchange or another national securities exchange, the last sale price of a share of Common Stock reflected on the consolidated tape at the close of the New York Stock Exchange or such other exchange on such date, or if there has been no sale on such
day, on the first preceding date on which a sale of Common Stock so occurred; (ii) if the Common Stock is not then listed on any such exchange, but is quoted on an over-the-counter market system then in use (OTC System), the last
sale price of a share of Common Stock at the close on such OTC System on such date, or if there has been no sale on such day on such OTC System, then the average of the bid and asked prices for a share of Common Stock on the OTC System at the end of
such day (provided, that if the Common Stock is then listed on: (A) more than one exchange, (B) more than one OTC system, or (C) at least one exchange and one OTC System, the principal market for such securities, as determined by the
Committee in good faith, shall be used); and (iii) if the Common Stock is not then listed on a national securities exchange or an OTC System, the amount determined by the Committee (or in accordance with procedures approved by the Committee) in
good faith.
Restricted Stock
. Restricted Stock is Common Stock that is subject to restrictions, including risks of
forfeiture, determined by the Plan Committee in its sole discretion. A holder of restricted stock has all rights of a shareholder with respect to such stock, including the right to vote and to receive dividends thereon, except as otherwise provided
in the award agreement relating to such award.
Stock Units
. A Stock Unit is a notional account representing a
participants conditional right to receive at a future date one (1) share of Common Stock or its equivalent in value. Stock Units may be settled in the sole discretion of the Plan Committee: (i) by the distribution of shares of Common
Stock equal to the participants Stock Units, (ii) by a lump sum payment of an amount in cash equal to the Fair Market Value of the shares of Common Stock which would otherwise be distributed to the participant, or (iii) by a
combination of cash and Common Stock.
Non-Restricted Stock
. Non-Restricted Stock is Common Stock that is not
Restricted Stock.
Dividend Equivalent Rights
. A Dividend Equivalent Right is the right of a participant to receive the
equivalent value (either in cash or Common Stock) of all or any specified portion of any regular cash dividends that would have been paid on a specified number of shares of Common Stock if such number of shares of Common Stock had been delivered to
such participant pursuant to an award. Dividend Equivalent Rights may be settled in cash, shares of Common Stock, or a combination thereof, in a single installment or multiple installments, as determined by the Committee in its sole discretion.
Reserved Shares
A total of 1,500,000 shares of Common Stock have been reserved that may be subject to, delivered in connection with, and/or available for awards under the Current Plan, which consists of (i) the
number of shares of Common Stock that remain available for issuance under the 2004 Plan (655,969 shares), plus (ii) an additional 844,031 shares, and which shall consist of authorized but unissued shares of Common Stock or shares of Common
Stock held in treasury. In connection with the grant of a stock option or other award (other than a full value award, as defined in the Current Plan), the number of shares of Common Stock available for issuance under the Current Plan shall be
reduced by the number of shares in respect of which such option or other-than full-value award is granted or denominated. If full value awards are granted, each full value award shall reduce the total number of shares available for issuance under
the Current Plan by 1.45 shares of Common Stock for each share of Common Stock in respect of which such full value award is granted. In the event all or a portion of an award is forfeited, terminated or cancelled, expires, is settled for cash, or
otherwise does not result in the issuance of all or a portion of the shares of Common Stock subject to the award in connection with the exercise or settlement of such award (Unissued Shares), such Unissued Shares will in each case again
be available for awards under the Current Plan, provided that to the extent any such expired, canceled, forfeited or otherwise terminated award (or portion thereof) was a full value award, the number of shares of Common Stock that may again be the
subject of options or other awards granted under the Current Plan shall increase by 1.45 shares of Common Stock for each share of Common Stock in respect of which such full value award was granted. The preceding sentence shall apply to any awards
outstanding on the effective date of the Current Plan under the 2004 Plan, up to a maximum of an additional 1,750,000 shares. In connection with the acquisition of any business by the Company or any of its subsidiaries, any then-outstanding options
or other similar rights or other equity awards pertaining to such business may be assumed or replaced by awards under the Current Plan upon such terms and conditions as the Plan Committee determines in its sole discretion, and to the extent any
shares of Common Stock are to be delivered as or in connection with awards under the Current Plan in replacement for any such grants, awards, options or rights of another business, such shares shall, to the extent permitted by applicable law and
stock exchange rules, be in addition to those available under the Current Plan.
47
Participants
Participants are officers (including directors), non-employee (outside) directors, employees and specified consultants of the Company
or any of its subsidiaries selected by the Plan Committee in its sole discretion to receive an award under the Current Plan. Currently, approximately 310 employees (including seven executive officers), all outside directors (currently 5 individuals)
and an indeterminate number of consultants are eligible to participate in the Current Plan. Incentive Stock Options may not be awarded to participants who are not employees of the Company.
Administration of the Plan
The Plan Committee is currently the Compensation Committee, except regarding awards to outside directors, with respect to whom the Board acts as the Plan Committee. The Plan Committee, subject to the
limitations set forth in the Current Plan, shall have absolute discretion and authority: (i) to make and administer grants under the Current Plan (including to determine the form, amount and other terms and conditions of awards granted, and to
waive, amend or modify conditions initially established for grants, including to accelerate vesting and to extend or limit the exercisability of grants, except as specifically restricted by the Current Plan), (ii) to determine when and to which
individuals awards will be granted, (iii) to determine whether, to what extent and under what circumstances awards may be settled, paid or exercised in cash, Common Stock or other property, or canceled, forfeited or suspended, (iv) to
determine the terms and provisions of any award agreement and any amendment of such award agreement, and (v) to establish, amend, waive and/or rescind any rules and regulations as it deems necessary for the proper administration of the Current
Plan, including to make such determinations and interpretations and to take such actions in connection with the Current Plan and any awards granted thereunder as it deems necessary or advisable to carry out its purposes.
Limitations on Grants
Grants under the Current Plan can be made to any eligible individual at the discretion of the Plan Committee at any time. All grants of Stock Options are subject to a 350,000 shares per participant per
plan year limit. In the case of Incentive Stock Options, the aggregate fair market value (as of the date of grant) of all shares of Common Stock underlying any grant of Incentive Stock Options, however made, that become exercisable by a participant
during any calendar year may not exceed $100,000 (options granted in excess of this amount shall not be treated as Incentive Stock Options). Grants of Incentive Stock Options are subject to other restrictions set forth in the Current Plan.
Acceleration of Vesting/Exercise Period
Stock Options
. Each Stock Option will be subject to such terms and conditions, including vesting, as the Plan Committee may
determine from time to time in its discretion, provided that no Stock Option shall be exercisable later than 10 years from the date of grant (5 years in the case of an Incentive Stock Options granted to a Ten-Percent Stockholder (as
defined in the Current Plan)). Notwithstanding the foregoing, unless otherwise provided in the award agreement relating to such award, each Stock Option shall vest and become exercisable ratably over five years (20% per year), commencing on the
first anniversary of the date of grant, and shall continue to be exercisable for a period of 10 years from the date of grant.
48
Unless otherwise provided in the award agreement governing such Stock Options (other than with respect to
awards of Stock Options to outside directors, which is discussed in the following sentence), (i) upon Disability (as defined in the Current Plan) or death, all unvested options vest, and all unexercised options may be exercised for up to one
year or the remaining term of the Stock Option, if earlier; and (ii) if a participants employment is terminated for any other reason, all unexercised Stock Options are cancelled as of the termination date; provided however, if a
participants employment is terminated for reasons other than Cause (as defined in the Current Plan), vested unexercised Stock Options may be exercised within 90 days of termination, or the remaining term of the Stock Option, if earlier,
and if a participant retires (as defined in the Companys 401(k) plan), vested unexercised Stock Options may be exercised within 1 year of such retirement, or the remaining term of the Stock Option, if earlier. With respect to awards of
Stock Options to outside directors, unless otherwise provided in the award agreement governing such Stock Options, in the event of the death or Disability (as defined in the Current Plan) of a participant while serving as a member of the Board, all
unexercised options vest, and may be exercised for up to one year or the remaining term of the Stock Option, if earlier; if a participant ceases to serve as a member of the Board for any other reason, vested options shall be exercisable for a period
of 90 days following termination, or the remaining term of the Stock Option, if earlier.
Stock Appreciation Rights
.
Each SAR will be subject to such terms and conditions, including vesting, as the Plan Committee determines in its sole discretion. Provisions with respect to SARs granted in tandem with Stock Options are set forth in the Current Plan.
Restricted Stock Awards
. Awards of Restricted Stock may be subject to such restrictions, terms and conditions as the Plan
Committee determines in its sole discretion. Notwithstanding the foregoing, unless otherwise provided in the award agreement relating to the award of Restricted Stock, such awards will vest ratably over five years (20% per year), beginning on the
first anniversary of the date of grant, and upon vesting, shall not be subject to any further restrictions. The Plan Committee may, in its sole discretion, accelerate the time at which any or all restrictions will lapse or remove any or all of such
restrictions. Unless otherwise provided in an agreement governing the award, upon a participants termination of employment for any reason (not including an authorized leave of absence) all non-vested restricted stock is forfeited, except in
the event of Disability (as defined in the Current Plan) or death, in which case all restrictions lapse as of the date of the relevant event.
Stock Units
. Stock Units may be subject to such terms and conditions including, but not limited to, vesting, acceleration of vesting and forfeiture as the Plan Committee determines in its sole
discretion.
Dividend Equivalent Rights
. Dividend Equivalent Rights may be granted in tandem with another award or as a
separate award. The terms and conditions applicable to each Dividend Equivalent Right, including vesting, risks of forfeiture and other restrictions, will be determined by the Plan Committee in its sole discretion.
Performance Based Awards
Any awards granted under the Current Plan may be granted in a manner such that the awards qualify for the performance-based compensation exemption of Section 162(m) of the Code. As determined by the
Plan Committee in its sole discretion, either the granting or vesting of such Performance-Based Awards shall be based on achievement of performance objectives determined in accordance with one or more performance criteria specified in the Current
Plan that apply to an individual participant, one or more business units or the Company as a whole. With respect to any Performance-Based Awards, the Plan Committee may, in its sole discretion, within the time prescribed by Section 162(m) of
the Code, adjust or modify the calculation of performance goals in order to prevent the dilution or enlargement of the rights of any participant with respect to such Performance-Based Award: (a) in the event of, or in anticipation of, any
unusual or extraordinary corporate item, transaction, event or development, (b) in recognition of, or in anticipation of, any other unusual or nonrecurring event affecting the Company or the financial statements of the Company, or (c) in
response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions. Notwithstanding the foregoing, after establishment of a performance goal, the Plan Committee shall not revise such
performance goal or increase the amount of compensation payable thereunder (as determined in accordance with Section 162(m) of the Code) upon the attainment of such performance goal; provided that the Plan Committee may reduce or eliminate the
number of shares of Common Stock or cash granted, vested or payable upon the attainment of such performance goal.
Exercise Price
Each Stock Option granted under the Current Plan will have a per-share exercise price as the Plan Committee determines on the date of grant, but not less than 100% of the Fair Market Value of a share of
Common Stock on the Date of Grant (or 110% of Fair Market Value in the case of a Ten Percent Stockholder).
49
Adjustments
In the event of changes in the outstanding Common Stock or in the capital structure of the Company as a result of events specified in the
Current Plan, awards granted under the Current Plan and any award agreements, the maximum number of shares of Common Stock deliverable under the Current Plan, and/or the maximum number of shares of Common Stock with respect to which Stock Options
may be granted to or measured with respect to any one person under the Current Plan shall be subject to adjustment or substitution, as determined by the Plan Committee in its sole discretion, including, without limitation, accelerating the vesting,
settlement and/or exercise period pertaining to any award thereunder.
Outstanding awards and award agreements, and the
maximum number of shares of Common Stock with respect to which Stock Options may be granted to or measured with respect to any one person during any period, shall be subject to adjustment or substitution, as determined by the Plan Committee in its
sole discretion, including, without limitation, accelerating the vesting, settlement and/or exercise period pertaining to any award hereunder, in the event of any change in applicable laws or any change in circumstances resulting in any substantial
dilution or enlargement of the rights granted to, or available for, participants, or which otherwise warrants equitable adjustment in the sole discretion of the Plan Committee because it interferes with the intended operation of the Current Plan.
In connection with a Business Combination (as defined in the Current Plan), the Plan Committee, in its sole discretion, may
provide for: (i) the continuation of the Current Plan and/or the assumption of the awards granted thereunder by a successor corporation (or a parent or subsidiary thereof), (ii) the substitution for such awards of new awards covering the
stock of a successor corporation (or a parent or subsidiary thereof), with appropriate adjustments as to the number and kind of shares and exercise prices, (iii) upon 10 days advance notice from the Plan Committee to the affected
participants, the acceleration of the vesting, settlement and/or exercise period pertaining to any award hereunder, or (iv) upon 10 days advance notice from the Plan Committee to the affected participants, (x) the cancellation
of any outstanding awards that are then exercisable or vested and the payment to the holders thereof, in cash or stock, or any combination thereof, of the value of such awards based upon the price per share of stock received or to be received by
other shareholders of the Company in connection with the Business Combination, and (y) the cancellation of any awards that are not then exercisable or vested. In the event of any continuation, assumption or substitution contemplated by the
foregoing clauses, the Current Plan and/or such awards shall continue in the manner and under the terms so provided.
Transferability
Each award granted under the Current Plan (other than Non-Restricted Stock Awards and Restricted Stock Awards with respect to which all restrictions have lapsed) shall not be transferable otherwise than
by will or the laws of descent and distribution, and shall be exercisable, during a participants lifetime, only by such participant. Notwithstanding the foregoing, the Plan Committee in its sole discretion may permit the transferability of an
award (other than an Incentive Stock Option) by a participant to a member of such participants immediate family or trusts for the benefit of such persons, or partnerships, corporations, limited liability companies or other entities owned
solely by such persons, including trusts for such persons, subject to any restriction included in the grant of the award.
Additional Limitations.
The grant of any award under the Current Plan may also be subject to such other provisions as the Plan Committee in its sole discretion determines appropriate, including, without limitation, provisions
for the forfeiture of, or restrictions on resale or other disposition of, Common Stock acquired under any form of award, provisions for the acceleration of exercisability or vesting of awards (subject to the provisions of the Current Plan),
provisions to comply with federal and state securities laws, or conditions as to the participants employment in addition to those specifically provided for under the Current Plan. Participants may be required to comply with any timing or other
restrictions with respect to the payment, settlement or exercise of an award, including a window-period limitation, as may be imposed in the sole discretion of the Plan Committee.
50
Amendment, Termination and Duration of the Plan
The Plan Committee may at any time: (i) amend, modify, terminate or suspend the Current Plan, and (ii) alter or amend any or all
award agreements to the extent permitted by the Current Plan and applicable law. Amendments of the Current Plan are subject to the approval of the shareholders of the Company only as required by applicable law, regulation or stock exchange
requirement. The Current Plan shall remain in effect until all stock subject to it is distributed or all awards have expired or lapsed, whichever is latest to occur, or the Current Plan is earlier terminated by the Plan Committee. No awards may be
granted under the Current Plan after July 10, 2013.
For a more complete description of the Current Plan, see the Companys Proxy
Statement for its 2008 Annual Meeting of Shareholders. For a description of the Companys new 2013 Equity Incentive Plan, which is subject to shareholder approval as described in this Proxy Statement, see Proposal 5.
2004 Stock Option, Restricted and Non-Restricted Stock Plan (the 2004 Plan)
The 2004 Plan provided for awards of options to officers, directors and key employees designated by the Compensation Committee to purchase Common Stock of the Company (including options designated as
incentive stock options under Section 422 of the Code, and options not so designated), restricted stock and non-restricted stock (outside directors may be awarded options only). Awards could no longer be granted under the 2004 Plan after
July 10, 2008, the date the Current Plan became effective.
Acceleration of Vesting/Exercise Period
Subject to the following, options and restricted stock generally vest ratably over five years, commencing on the first anniversary of the date of grant
and are generally exercisable for a period of ten years from the date of grant. With respect to awards of options (other than awards to outside directors, which is discussed below), upon retirement (as defined in the Companys 401(k) plan),
Disability (as defined in the 2004 Plan) or death (either while employed or within the year after retirement), all unexercised options vest, and may be exercised for up to one year (unless provided otherwise in an option agreement evidencing the
award) or the term of the unexpired option, if earlier; unless otherwise provided in an option agreement, (i) if a participants employment is terminated for reasons other than Cause (as defined in the 2004 Plan), vested unexercised
options may be exercised within either: (a) 30 days of termination (for grants issued prior to August 2007); or (b) 90 days of termination (for grants issued subsequent to August 2007), or the term of the unexpired option, if
earlier, and (ii) if a participants employment is terminated for any other reason, all options are cancelled as of the termination date.
With respect to awards of options to outside directors, in the event of the death or Disability (as defined in the 2004 Plan) of a participant while serving as a member of the Board, all unexercised
options vest, and may be exercised for up to one year (unless provided otherwise in an agreement evidencing the award) or the term of the unexpired option, if earlier; if a participant ceases to serve as a member of the Board for any other reason,
vested options shall be exercisable for a period of 30 days following termination (unless otherwise provided in an agreement evidencing the award).
With respect to awards of restricted stock, unless otherwise provided in an agreement governing the award, all non-vested restricted stock is forfeited (at the time of termination) if the participant has
not remained in the continuous employment of the Company for the period during which the restrictions are applicable, generally five years from the date of grant, except in the event of retirement, Disability (as defined in the 2004 Plan) or death,
in which case all restrictions lapse as of the date of the relevant event.
Adjustments
In the event of any change in the outstanding Common Stock as a result of events specified in the 2004 Plan, the Committee may adjust the aggregate number
of shares of Common Stock available for awards under the 2004 Plan, the exercise price of any options granted under the 2004 Plan, and any or all other matters deemed appropriate by the Committee, including, without limitation, accelerating the
vesting and/or exercise period pertaining to any award thereunder.
For a more complete description of the 2004 Plan, see the Companys
Proxy Statement for its 2003 Annual Meeting of Shareholders.
51
2012 Outstanding Equity Awards at Fiscal Year End
The following table sets forth information with respect to outstanding equity awards for the NEOs other than Mr. Sabin* as of December 31, 2012
(however, the table does not include the equity grants made to Mr. Benaroya in connection with the commencement of his employment as President and CEO). See
Grants Under the 2004 Plan
and
Grants Under the
Current Plan
following the footnotes to this table for a description of general terms applicable to equity granted to NEOs by the Company as described in this table under the 2004 Plan and the Current Plan, respectively.
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Option Awards
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Stock Awards
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Name
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Number of
Securities
Underlying
Unexercised
Options/
SARs (#)
Exercisable
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Number of
Securities
Underlying
Unexercised
Options/
SARs (#)
Unexercisable
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Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
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Option/SAR
Exercise
Price ($)
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|
|
Option/SAR
Expiration
Date
|
|
|
Number of
Shares or
Units of Stock
that have not
Vested (#)
|
|
|
Market
Value of
Shares or
Units of
Stock
that
have not
Vested ($)
(9)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights that
have not
Vested (#)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of Unearned
Shares, Units
or Other
Rights that
have not
Vested (#)
|
Raphael Benaroya
|
|
|
15,000
|
(1)
|
|
|
|
|
|
|
|
|
13.06
|
|
|
|
5/4/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
(2)
|
|
|
|
|
|
|
|
|
15.05
|
|
|
|
11/1/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
(3)
|
|
|
|
|
|
|
|
|
16.77
|
|
|
|
12/27/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
(4)
|
|
|
3,000
|
(4)
|
|
|
|
|
7.28
|
|
|
|
7/10/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
(5)
|
|
|
6,000
|
(5)
|
|
|
|
|
6.63
|
|
|
|
9/22/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
(6)
|
|
|
9,000
|
(6)
|
|
|
|
|
8.17
|
|
|
|
7/15/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,850
|
(7)
|
|
|
11,400
|
(7)
|
|
|
|
|
5.17
|
|
|
|
7/19/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
(8)
|
|
|
6,200
|
|
|
|
|
|
Guy Paglinco**
|
|
|
10,000
|
(10)
|
|
|
|
|
|
|
|
|
14.90
|
|
|
|
8/10/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,120
|
(11)
|
|
|
2,780
|
(11)
|
|
|
|
|
6.43
|
|
|
|
10/6/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
(12)
|
|
|
4,000
|
(12)
|
|
|
|
|
5.34
|
|
|
|
8/14/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,200
|
(13)
|
|
|
16,800
|
(13)
|
|
|
|
|
5.03
|
|
|
|
3/08/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500
|
(14)
|
|
|
|
|
3.02
|
|
|
|
3/09/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
380
|
(15)
|
|
|
589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
(16)
|
|
|
3,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
(17)
|
|
|
9,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
(18)
|
|
|
11,625
|
|
|
|
|
|
Kerry Carr
|
|
|
|
|
|
|
373,134
|
(19)
|
|
|
|
|
1.34
|
|
|
|
9/14/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc Goldfarb**
|
|
|
20,000
|
(20)
|
|
|
|
|
|
|
|
|
11.52
|
|
|
|
12/26/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,700
|
(21)
|
|
|
|
|
|
|
|
|
16.77
|
|
|
|
12/27/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
(22)
|
|
|
20,000
|
(22)
|
|
|
|
|
1.53
|
|
|
|
2/24/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
(23)
|
|
|
21,000
|
(23)
|
|
|
|
|
5.03
|
|
|
|
3/08/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,250
|
(24)
|
|
|
|
|
3.02
|
|
|
|
3/09/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,200
|
(25)
|
|
|
11,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,750
|
(26)
|
|
|
13,563
|
|
|
|
|
|
Richard Schaub
|
|
|
12,000
|
(27)
|
|
|
18,000
|
(27)
|
|
|
|
|
4.79
|
|
|
|
2/24/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
(28)
|
|
|
|
|
8.50
|
|
|
|
1/3/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500
|
(29)
|
|
|
|
|
3.02
|
|
|
|
3/09/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
(30)
|
|
|
9,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
(31)
|
|
|
15,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
(32)
|
|
|
11,625
|
|
|
|
|
|
*
|
As a result of the resignation of Mr. Sabin from the Company as of September 11, 2012: (i) the 8,750 unvested RSUs and 26,250 unvested SARS granted to
Mr. Sabin on March 9, 2012 were forfeited and cancelled; and (ii) with respect to the original grant of 150,000 SARs to Mr. Sabin on December 11, 2009 in connection with the commencement of his employment, 50,000 of such
vested SARs had been previously exercised, another 50,000 of such vested SARS expired on December 11, 2012, and the remaining unvested 50,000 SARs were forfeited and cancelled. With respect to the original grant of 25,000 RSUs to Mr. Sabin
on December 11, 2009 in connection with the commencement of his employment: (i) 10,000 of such RSUs had previously vested and been settled; (ii) 10,000 of such unvested RSUs were forfeited upon such resignation; and (iii) in
connection with the execution of his Release (described above), the 5,000 remaining unvested RSUs scheduled to vest on December 11, 2012 were not forfeited by Mr. Sabin in connection with his resignation, and were permitted to vest and be
settled on such date in accordance with their terms. See 2012 Option Exercises and Stock Vested table below. As of December 31, 2012, Mr. Sabin had no outstanding SARs (exercisable or unexercisable) and no unvested RSUs (no
other types of equity were awarded to him by the Company).
|
52
**
|
In accordance with the Change in Control Letters issued to each of Messrs. Paglinco and Goldfarb (see Change in Control Letters in the Compensation
Discussion and Analysis above), effective April 26, 2012, if the relevant executives employment is terminated without cause or for good reason within the 365-day period following the consummation of a change in control (each as defined in
the Compensation Discussion and Analysis above under the caption Post-Termination Benefits Change in Control Letters), any unvested equity granted to such executive officer by the Company (or substituted by the Company upon such
change in control) that remains outstanding immediately prior to such termination will become immediately vested or non-forfeitable, and in the case of stock options, stock appreciation rights and similar grants, will remain exercisable for the
period set forth in the applicable award agreement. These provisions are currently applicable to each award to Messrs. Paglinco and Goldfarb set forth in the table above. Note also that the treatment of Mr. Paglincos outstanding equity awards
as a result of his resignation as CFO as of May 29, 2013 is described in the Current Report on Form 8-K filed by the Company on June 3, 2013.
|
(1)
|
Represents an annual grant to non-employee members of the Board, including Mr. Benaroya, consisting of 15,000 options issued on May 4, 2005 under the 2004
Plan. All such options vested in full as of December 28, 2005.
|
(2)
|
Represents an annual grant to non-employee members of the Board, including Mr. Benaroya, consisting of 15,000 options issued on November 1, 2006 under the
2004 Plan. These options vested ratably over a five-year period, commencing on November 1, 2007, and were vested in full as of November 1, 2011.
|
(3)
|
Represents an annual grant to non-employee members of the Board, including Mr. Benaroya, consisting of 15,000 options issued on December 27, 2007 under the
2004 Plan. These options vested ratably over a five-year period, commencing on December 27, 2008, and were vested in full as of December 27, 2012.
|
(4)
|
Represents an annual grant to non-employee members of the Board, including Mr. Benaroya, consisting of 15,000 options issued on July 10, 2008 under the
Current Plan. These options vest ratably over a five-year period, commencing on July 10, 2009.
|
(5)
|
Represents an annual grant to non-employee members of the Board, including Mr. Benaroya, consisting of 15,000 options issued on September 22, 2009 under the
Current Plan. These options vest ratably over a five-year period, commencing on September 22, 2010.
|
(6)
|
Represents an annual grant to non-employee members of the Board, including Mr. Benaroya, consisting of 15,000 SARs issued on July 15, 2010 under the Current
Plan. These SARs vest ratably over a five-year period, commencing on July 15, 2011.
|
(7)
|
Represents an annual grant to non-employee members of the Board, including Mr. Benaroya, consisting of 14,250 SARs (and 5,000 RSUs discussed in footnote 8 below)
issued on July 19, 2011 under the Current Plan. These SARs vest ratably over a five-year period, commencing on July 19, 2012.
|
(8)
|
Represents the unvested portion of an annual grant to non-employee members of the Board, including Mr. Benaroya, consisting of 5,000 RSUs (and 14,250 SARS
discussed in footnote 7 above) issued on July 19, 2011 under the Current Plan. The RSUs vest ratably over a five-year period, commencing on July 19, 2012.
|
(9)
|
Calculated using the closing price of the Companys Common Stock on December 31, 2012, the last business day of the year ($1.55).
|
(10)
|
Represents 10,000 options issued to Mr. Paglinco on August 10, 2007 under the 2004 Plan. The Options vested ratably over a five-year period, commencing on
August 10, 2008, and were vested in full on August 10, 2012.
|
(11)
|
Represents 13,900 SARs granted to Mr. Paglinco on October 6, 2008 under the Current Plan. The SARs vest ratably over a five-year period commencing
October 6, 2009.
|
(12)
|
Represents 10,000 SARs granted to Mr. Paglinco on August 14, 2009 under the Current Plan in connection with the promotion of Mr. Paglinco to VP and CFO.
The SARs vest ratably over a five-year period commencing August 14, 2010.
|
(13)
|
Represents 28,000 SARs granted to Mr. Paglinco on March 8, 2010 under the Current Plan, which vest ratably over a five year period commencing March 8,
2011.
|
(14)
|
Represents 22,500 SARs granted to Mr. Paglinco on March 9, 2012 under the Current Plan, which vest ratably over a five year period commencing March 9,
2013.
|
(15)
|
Represents the unvested portion of an original grant of 1,900 RSUs to Mr. Paglinco on October 6, 2008 under the Current Plan. The RSUs vest ratably over a
five-year period, commencing on October 6, 2009.
|
(16)
|
Represents the unvested portion of an original grant of 5,000 RSUs to Mr. Paglinco on August 14, 2009 under the Current Plan in connection with
Mr. Paglincos promotion to VP and CFO. The RSUs vest ratably over a five-year period, commencing on August 14, 2010.
|
53
(17)
|
Represents the unvested portion of an original grant of 10,000 RSUs to Mr. Paglinco on March 8, 2010 under the Current Plan, which vest ratably over a
five-year period, commencing on March 8, 2011.
|
(18)
|
Represents a grant of 7,500 RSUs to Mr. Paglinco on March 9, 2012 under the Current Plan, which vest ratably over a five-year period, commencing on
March 9, 2013.
|
(19)
|
Represents an inducement grant of 373,134 SARS to Ms. Carr on September 14, 2012 in connection with the commencement of her employment as Executive Vice
President and Chief Operating Officer of the Company, which vest ratably over a five-year period, commencing on September 14, 2013. Although these SARs were granted outside of the Current Plan, the provisions described under Grants Under
the Current Plan below apply to this grant. In addition, the provisions described above under Employment Contracts and Arrangements Ms. Carr in the event of a specified Change of Control events apply to this grant.
|
(20)
|
Represents the unexercised portion of an original grant of 40,000 options under the 2004 Plan on December 26, 2005, in connection with the commencement of
employment of Mr. Goldfarb. Under the original grant terms, all of such options were to vest and become exercisable ratably over a five-year period commencing December 26, 2006; however, all such options were deemed vested as of
December 28, 2005.
|
(21)
|
Represents 24,700 options granted to Mr. Goldfarb on December 27, 2007 under the 2004 Plan, which vested ratably over a five-year period commencing
December 27, 2008, and vested in full as of December 27, 2012.
|
(22)
|
Represents 50,000 SARs granted to Mr. Goldfarb on February 24, 2009 under the Current Plan, which vest ratably over a five year period commencing
February 24, 2010.
|
(23)
|
Represents 35,000 SARs granted to Mr. Goldfarb on March 8, 2010 under the Current Plan, which vest ratably over a five year period commencing March 8,
2011.
|
(24)
|
Represents 26,250 SARs granted to Mr. Goldfarb on March 9, 2012 under the Current Plan, which vest ratably over a five year period commencing March 9,
2013.
|
(25)
|
Represents the unvested portion of an original grant of 12,000 RSUs to Mr. Goldfarb on March 8, 2010 under the Current Plan, which vest ratably over a
five-year period, commencing on March 8, 2011.
|
(26)
|
Represents 8,750 RSUs granted to Mr. Goldfarb on March 9, 2012 under the Current Plan, which vest ratably over a five-year period, commencing on March 9,
2013.
|
(27)
|
Represents a grant of 30,000 SARs to Mr. Schaub on February 24, 2010 under the Current Plan in connection with the commencement of his employment, which vest
ratably over a five-year period commencing February 24, 2011. To the extent that the Compensation Committee, in connection with a business combination (as defined in the Current Plan), exercises its discretion to accelerate or modify the equity
award of any officer of any subsidiary of the Company, this equity award will be treated no less favorably than those of such other officer;
provided
, that this provision will not be applicable to any such acceleration or modification that is
in connection with the occurrence of a business combination involving solely another subsidiary or business unit of the Company (and the officers thereof) (the Schaub Provisions).
|
(28)
|
Represents a grant of 50,000 SARs to Mr. Schaub under the Current Plan on January 3, 2011, which will become fully exercisable on the earlier of
January 3, 2014 and the date of a change in control of any subsidiary of the Company for which Mr. Schaub is principally responsible, where his employment continues with such entity thereafter. The Schaub Provisions apply to this grant.
|
(29)
|
Represents 22,500 SARS granted to Mr. Schaub on March 9, 2012 under the Current Plan, which vest ratably over a five year period commencing March 9,
2013.
|
(30)
|
Represents the unvested portion of an original grant of 10,000 RSUs to Mr. Schaub under the Current Plan on February 24, 2010 in connection with the
commencement of his employment, which vest ratably over a five-year period commencing February 24, 2011. The Schaub Provisions apply to this grant.
|
(31)
|
Represents a grant of 10,000 RSUs to Mr. Schaub under the Current Plan on January 3, 2011, which will become fully exercisable on the earlier of
January 3, 2014 and the date of a change in control of any subsidiary of the Company for which Mr. Schaub is principally responsible, where his employment continues with such entity thereafter. The Schaub Provisions apply to this grant.
|
(32)
|
Represents a grant of 7,500 RSUs to Mr. Schaub on March 9, 2012 under the Current Plan, which vest ratably over a five-year period, commencing on
March 9, 2013.
|
Grants Under the 2004 Plan
Details with respect to provisions impacting: (i) the
acceleration of the vesting of options and restricted stock; and (ii) the exercise period of options, in either case issued under the 2004 Plan (including options described in footnotes (1), (2), (3), (10), (20) and (21) above) are
described in 2004 Stock Option, Restricted and Non-Restricted Stock Plan above.
54
Grants Under the Current Plan
Options
Details with respect to provisions impacting the acceleration of the vesting of options and the exercise period of options issued under the Current Plan (including options described
in footnotes (4) and (5) above), as well as other provisions governing the grant of such options, are set forth in the Current Plan, described in Equity Incentive Plan above.
SARs
SARs granted under the Current Plan (including SARS described in footnotes (6), (7), (11), (12), (13), (14), (22), (23), (24), (27),
(28) and (29) above) may be settled in cash, Common Stock, or a combination of both, in the sole discretion of the Compensation Committee, and are generally exercisable for a period of ten years from the date of grant. In the event of
disability (as defined in the Current Plan) or death of the SAR holder while in the employ/service of the Company, all unexercised SARs will be deemed vested and may be exercised for up to one year (or the exercise period, if shorter) after such
event. If the SAR holder retires (as defined in the relevant 401(k) Plan), vested unexercised SARs may be exercised within one year of such retirement or the remaining term of the grant, if earlier. If the SAR holders employment/service is
terminated for any other reason, any unexercised SARs will be cancelled and deemed terminated immediately, except that if employment/service is terminated by the Company for other than cause (as defined in the Current Plan), all
unexercised SARs, to the extent vested, may be exercised within 90 days of the date of such event (or the exercise period, if shorter). Other provisions governing grants of SARs under the Current Plan are set forth in the Current Plan (described in
Equity Incentive Plan above).
RSUs
RSUs issued under the Current Plan (including RSUs described in footnotes (8),
(15), (16), (17), (18), (25), (26), (30), (31) and (32) above) may be settled in cash, Common Stock, or a combination of both, in the sole discretion of the Compensation Committee. All non-vested RSUs are forfeited (at the time of
termination) if the holder has not remained in the continuous employment/service of the Company for the period during which the restrictions are applicable, except in the event of disability (as defined in the Current Plan) or death, in which case
all restrictions lapse as of the date of the relevant event. Other provisions governing grants of RSUs under the Current Plan are set forth in the Current Plan (described in Equity Incentive Plan above).
2012 Option Exercises and Stock Vested
The following table sets forth the number of shares of Company Common Stock acquired by NEOs during 2012 upon the exercise of options or SARs and the number of shares with respect to which restrictions on
restricted stock or RSUs held by NEOs lapsed during the year ended December 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of Shares
Acquired
on
Exercise (#)
|
|
Value Realized on
Exercise
($)
|
|
Number of Shares
Acquired
on Vesting (#)
|
|
Value Realized
on Vesting
($)
|
Raphael Benaroya
|
|
n/a
|
|
n/a
|
|
1,000
|
|
|
|
1,740
|
(1)
|
Guy Paglinco
|
|
n/a
|
|
n/a
|
|
3,880
|
|
|
|
8,805
|
(2)
|
Kerry Carr
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
|
n/a
|
|
Marc Goldfarb
|
|
n/a
|
|
n/a
|
|
3,120
|
|
|
|
8,494
|
(3)
|
Richard Schaub
|
|
n/a
|
|
n/a
|
|
2,000
|
|
|
|
6,140
|
(4)
|
David C. Sabin
|
|
n/a
|
|
n/a
|
|
5,000
|
|
|
|
8,250
|
(5)
|
(1)
|
The aggregate dollar amount realized upon vesting was computed using the closing price on the NYSE for the Companys Common Stock on July 19, 2012 ($1.74)
with respect to the vesting of 1,000 RSUs.
|
(2)
|
The aggregate dollar amount realized upon vesting was computed using the closing price on the NYSE for the Companys Common Stock on August 10, 2012 ($1.48)
with respect to the vesting of 500 shares of restricted stock, on October 5, 2012 ($1.46), the business day preceding the applicable vesting date of October 6, 2012 (a non-business day), with respect to the vesting of 380 RSUs, on
August 14, 2012 ($1.41), with respect to the vesting of 1,000 RSUs, and on March 8, 2012 ($3.05) with respect to the vesting of 2,000 RSUs.
|
(3)
|
The aggregate dollar amount realized upon vesting was computed using the closing price on the NYSE for the Companys Common Stock on December 27, 2012 ($1.63)
with respect to the vesting of 720 shares of restricted stock, and on March 8, 2012 ($3.05) with respect to the vesting of 2,400 RSUs.
|
(4)
|
The aggregate dollar amount realized upon vesting was computed using the closing price on the NYSE for the Companys Common Stock on February 24, 2012 ($3.07)
with respect to the vesting of 2,000 RSUs.
|
(5)
|
The aggregate dollar amount realized upon vesting was computed using the closing price on the NYSE for the Companys Common Stock on December 11, 2012
($1.65), with respect to the vesting of 5,000 RSUs. As a result of the execution by Mr. Sabin of a release in connection with his resignation as of September 11, 2012, 5,000 RSUs scheduled to vest of December 11, 2012 that would
otherwise have been forfeited upon such resignation were permitted to remain outstanding, vest and be settled on such date in accordance with their terms. See 2012 Outstanding Equity Awards at Fiscal Year End above.
|
55
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Our named executive officers may receive compensation in connection with the termination of their employment. The nature and amount of such compensation
depend on whether their employment terminates as a result of: (i) death; (ii) disability; (iii) retirement; (iv) termination by the Company without cause (either in connection with a change in control or not) or termination by
the executive with good reason; or (v) termination by the Company for cause or termination by the executive without good reason. Estimates of the compensation that each of our named executive officers would be entitled to receive under each of
these termination circumstances is described in the following tables, assuming that their employment terminated on December 31, 2012, the last business day of such year.
As Mr. Benaroya was not appointed President and Chief Executive Officer of the Company until March 14, 2013, the discussion below does not account for the termination provisions of his
employment with the Company, which are described in detail under the Section Employment Contracts and Arrangements Mr. Benaroya above. In connection with Mr. Benaroyas prior tenure as interim Executive Chairman and
acting CEO, pursuant to an agreement between RB, Inc. and the Company (also described in detail under the Section Employment Contracts and Arrangements Mr. Benaroya above), no termination of his position as acting CEO with a
trigger date of December 31, 2012 would have entitled him to any payments or benefits. In addition, the following tables do not reflect arrangements with respect to Mr. Sabin, who resigned from employment with the Company as of
September 11, 2012, which are discussed separately below under the caption Actual Terminations in 2012, or the terms of the Transition and Release Agreement, entered into between the Company and Mr. Paglinco in connection with his
resignation as CFO as of May 29, 2013, which are described in detail in a Current Report on Form 8-K filed by the Company on June 3, 2013. Note that Mr. Paglinco will remain an employee of the Company for a period of up to nine months following
his resignation as CFO.
The following tables do not include payments under the Companys (or its subsidiaries) 401(k) Plans,
or the Companys life insurance or disability plans, as these plans are available to all salaried employees generally and do not discriminate in scope, terms or operation, in favor of our executive officers.
Any actual compensation received by our named executive officers in the circumstances set forth below may be different than we describe because many
factors affect the amount of any compensation received. These factors include: the date of the executives termination of employment; the executives base salary at the time of termination; the Companys stock price at the time of
termination; and the executives age and service with the Company at the time of termination. In addition, although the Company has entered into individual agreements with certain of our named executive officers, in connection with a particular
termination of employment the Company and the named executive officer may mutually agree on severance terms that vary from those provided in pre-existing agreements.
The value of option and SAR acceleration is equal to the difference between the market price of the Companys Common Stock on December 31, 2012 ($1.55) and the exercise price of the relevant
option or SAR, multiplied by the number of options or SARs that would accelerate as a result of the triggering event. As the exercise prices of all outstanding options held by NEOs are in excess of the 2012 year-end price, no value would be
attributed to their acceleration on December 31, 2012. With respect to SARs, the exercise price of only two outstanding grants to NEOs (one to Ms. Carr and one to Mr. Goldfarb) are below the 2012 year-end price, and as a result, no
value would be attributed to their acceleration on December 31, 2012, other than with respect to those two grants. The value of the restricted stock and RSU acceleration in the tables below is equal to the market price of the Companys
Common Stock on December 31, 2012 multiplied by the number of shares of restricted stock or RSUs that become vested or non-forfeitable as a result of the triggering event. In all cases, if an NEO was terminated with cause or by the NEO without
good reason on December 31, 2012, such NEO would have been entitled only to the payment of amounts that had accrued at the time of termination, but had not been paid (other than payments under the ICBP, for which a participant must be in the
employ of the Company at the time of payment, which is in the year subsequent to the year of determination, following the closing of the books for such year).
56
Termination as a Result of Disability or Death*
|
|
|
|
|
|
|
|
|
|
|
|
|
NEO
|
|
SAR Acceleration ($)
|
|
|
RSU
Acceleration
($)
|
|
|
Total ($)
|
|
Raphael Benaroya
|
|
|
n/a
|
|
|
|
6,200
|
|
|
|
6,200
|
|
Guy Paglinco
|
|
|
n/a
|
|
|
|
24,614
|
|
|
|
24,614
|
|
Kerry Carr
|
|
|
78,358
|
|
|
|
n/a
|
|
|
|
78,358
|
|
Marc Goldfarb
|
|
|
400
|
|
|
|
24,723
|
|
|
|
25,123
|
|
Richard Schaub
|
|
|
n/a
|
|
|
|
36,425
|
|
|
|
36,425
|
|
*
|
As described above, this table does not include disability compensation under the Companys disability benefit plans, or death benefits under the Companys
life insurance plans. NEOs are not otherwise entitled to compensation in the event of death or disability beyond compensation and benefits accrued at the time of such event and the accelerated vesting of equity awards under the agreements governing
such awards. Generally, in the event of disability or death of an option or SAR holder while in the employ of the Company, all unvested options/SARs (including those granted to Mr. Benaroya in past years for his services as a Non-Employee
Director) will be deemed vested and all unexercised options/SARs may be exercised for up to one year (or the exercise period, if shorter) after such event (however, as the exercise price of outstanding options and all outstanding SARs held by NEOs
other than one grant of SARs to each of Ms. Carr and Mr. Goldfarb is in excess of $1.55, no value would be attributed to the acceleration of vesting with respect to options and SARs other than with respect to such grants). All restrictions
on non-vested RSUs lapse as of the date of Disability (as defined in the Current Plan) or death. All restrictions on non-vested shares of restricted stock lapse as of the date of death or Disability (as defined in the relevant plan), however, no NEO
held unvested shares of restricted stock as of December 31, 2012.
|
Termination as a Result of Retirement
NEOs are not entitled to compensation in the event of retirement beyond compensation and benefits accrued at the time of such event and
any applicable accelerated vesting of equity awards under the specific agreements governing such awards. Generally, under the Current Plan, if an option/SAR holder retires (as defined in the relevant 401(k) Plan), vested unexercised options/SARs may
be exercised within one year of such retirement or the remaining term of the grant, if earlier, but no accelerated vesting is triggered. Although options granted under the 2004 Plan generally vest in full upon retirement (other than those issued to
Mr. Benaroya in past years as a non-employee Director), as the exercise price of outstanding options held by NEOs is in excess of the closing price of the Companys Common Stock on the trigger date of December 31, 2012, no
value would be attributed to the acceleration of the vesting of such options. Retirement does not trigger accelerated vesting with respect to RSUs. All restrictions on non-vested shares of restricted stock lapse as of the date of retirement,
however, no NEO held unvested shares of restricted stock as of December 31, 2012. As a result of the foregoing, no NEO would receive payments or benefits upon a retirement occurring on December 31, 2012, other than, as described above,
amounts payable under the Companys 401(k) Plans.
Terminations without Cause or for Good Reason*
|
|
|
|
|
|
|
|
|
|
|
|
|
NEO
|
|
Cash(3)($)
|
|
|
Other Benefits(4)($)
|
|
|
Total($)
|
|
Kerry Carr (1)
|
|
|
175,000
|
|
|
|
3,838
|
|
|
|
178,838
|
|
Marc Goldfarb (2)
|
|
|
227,691
|
|
|
|
18,114
|
|
|
|
245,805
|
|
*
|
Mr. Benaroya was not an employee of the Company during 2012, and neither he nor RB, Inc. would have been entitled to payments or benefits in the event of the
termination of the agreement with RB, Inc. governing the provision of his services as Executive Chairman and acting CEO. In addition, subsequent to the termination of the Companys Severance Policy as of April 26, 2012, payments and
benefits upon termination of the employment of an NEO by the Company without Cause or by the NEO for Good Reason are governed solely by the terms of the NEOs individual employment agreement with the Company. As a
result, neither Mr. Paglinco nor Mr. Schaub would be entitled to any payments or benefits upon a termination of their employment as of December 31, 2012 under these circumstances (other than, as discussed above, amounts previously
earned but unpaid). The entitlement to the payments and benefits set forth in the table above are subject to the relevant executive officer executing the Companys general form of release.
|
57
(1)
|
With respect to Ms. Carr: (A) Cause shall mean she: (i) shall have been convicted of or entered a plea of nolo contendere with respect to any
felony or any other crime (other than minor traffic offenses) involving fraud, theft, misappropriation, dishonesty, or embezzlement; (ii) shall have committed intentional acts that materially impair the goodwill or business of the Company or
cause material damage to its property, goodwill or business; (iii) shall have refused to, or willfully failed to, perform her material duties; (iv) shall have violated in any material respect any written policies or procedures of the
Company; or (v) shall have breached the representations and warranties set forth in her employment agreement (subject to a 10 day cure period, if applicable); and (B) Good Reason shall mean her removal as Chief Operating
Officer (without terminating her employment) or other material diminution of her duties or responsibilities without her express written consent (subject to a 30 day cure period, if applicable). The Committee deemed it appropriate to provide a
limited degree of income protection to Ms. Carr in the event of a termination of employment under these circumstances, determining that the amounts provided were reasonable in the context of her total compensation package.
|
(2)
|
With respect to Mr. Goldfarb: Cause shall generally mean: refusal or repeated failure to perform his duties as an employee of the Company; gross
negligence or willful misconduct in connection with his employment; misappropriation or fraud with regard to the Company or its assets; or conviction of, or the pleading of guilty or nolo contendere to a felony, or to the extent involving the assets
of or business of the Company, a misdemeanor or other criminal offense. In addition, Mr. Goldfarb shall be entitled to the benefits set forth above in the event that he terminates his employment with the Company for reasons other than his own
voluntary resignation. The Committee deemed it appropriate to provide a limited degree of income protection to Mr. Goldfarb in the event of a termination of employment under these circumstances, determining that the amounts provided were
reasonable base on tenure and in the context of his total compensation package.
|
(3)
|
Represents the number of months of severance to which each of Ms. Carr and Mr. Goldfarb would be entitled pursuant to their respective employment
arrangements with the Company (6 and 8 months, respectively). See Employment Contracts and Arrangements above. Severance will be paid over the course of the severance period in accordance with the Company regular salary payment schedule
(not in a lump sum), unless otherwise required by Section 409A of the Code. Payments will terminate in the event that new employment is obtained by the relevant individual.
|
(4)
|
Represents the cost to the Company for: (i) each of Ms. Carr and Mr. Goldfarb to remain on the Companys health and dental insurance plan ($3,838
and $15,914, respectively), during the applicable severance period, and (ii) a car allowance for Mr. Goldfarb for 60 days following termination ($2,200).
|
Change in Control*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEO
|
|
SAR Acceleration ($)
|
|
|
Restricted
Stock/RSU
Acceleration ($)
|
|
|
Cash ($)
|
|
|
Other
Benefits ($)
|
|
|
Total ($)
|
|
Raphael Benaroya
|
|
|
n/a
|
|
|
|
6,200
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
6,200
|
|
Guy Paglinco(1)(3)
|
|
|
n/a
|
|
|
|
24,614
|
|
|
|
271,625
|
|
|
|
33,472
|
|
|
|
329,711
|
|
Kerry Carr (2)(3)
|
|
|
78,358
|
|
|
|
n/a
|
|
|
|
350,000
|
|
|
|
7,676
|
|
|
|
436,034
|
|
Marc Goldfarb(1)(3)
|
|
|
400
|
|
|
|
24,723
|
|
|
|
341,537
|
|
|
|
37,072
|
|
|
|
403,732
|
|
Richard Schaub
|
|
|
n/a
|
|
|
|
36,425
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
36,425
|
|
*
|
Under each of the Current Plan and the 2004 Plan, the Committee generally has the discretion to accelerate the vesting of unvested options/SARs, and to terminate
vesting restrictions on unvested restricted stock/RSU awards in the event of changes in the capital structure of the Company and specified business combinations, including a change of control of the Company. The information in the table above
assumes that the Committee has exercised such discretion to accelerate the vesting of all outstanding equity awards in full. As the exercise prices of all outstanding options held by NEOs, and all outstanding SARs held by NEOs except for one grant
to each of Ms. Carr and Mr. Goldfarb were in excess of the closing price of the Companys Common Stock on December 31, 2012, however, no value would be attributed to the acceleration of the vesting of options and SARS on such
date (other than with respect to those two grants).
|
58
(1)
|
In accordance with the Change of Control letters issued to each of Messrs. Paglinco and Goldfarb, if the employment of the executive officer is terminated
by the Company without Cause, or by such executive officer for Good Reason within the 365-day period following the consummation of a Change in Control (each as defined in the Compensation Discussion and Analysis above under the caption
Post-Termination Benefits Change in Control Letters), such executive officer would be entitled to the following, assuming a termination date of December 31, 2012: (a) severance payments equal to 12 months of base salary
in effect on the termination date (paid in accordance with the Companys normal payroll practices); 12 months of continued medical, dental and other applicable insurance benefits ($23,872 for each of Messrs. Paglinco and Goldfarb); and 12
months continuation of any automobile perquisite in effect on the date of termination ($9,600 for Mr. Paglinco and $13,200 for Mr. Goldfarb); (b) unpaid IC Payments under the ICBP, if any, for the year prior to the year of
termination, and a pro rata portion of such executives bonus under the ICBP, if any, for the year in which such termination occurs assuming the Target had been achieved, up to 25% of the non-pro-rated amount (as no IC Payments were earned by
Messrs. Paglinco or Goldfarb in either 2011 or 2012, no amounts under this provision would become payable); and (c) any unvested equity that remains outstanding immediately prior to such termination will become immediately vested or
non-forfeitable. These payments and benefits will not be reduced or terminated in the event of the subsequent employment of the applicable executive officer, and are subject to execution by such NEO of the Companys form of release.
|
(2)
|
If the employment of Ms. Carr is terminated by the Company without Cause or by Ms. Carr for Good Reason (each as defined in footnote 1 to the
Terminations without Cause or for Good Reason table above
)
within six months following the consummation of a Change in Control (defined Employment Contracts and Arrangements under the caption Ms. Carr above), she
will be entitled to twelve months of severance ($350,000), and will be entitled to remain on the Companys health and dental plan for twelve months ($7,676). Pursuant to an amendment to Ms. Carrs employment agreement, if
Ms. Carrs employment is terminated by the Company without Cause or by Ms. Carr for Good Reason within nine months following a specified change of control transaction, all unvested SARs will vest in full. Although such amendment was
not in effect as of the trigger date of December 31, 2012, such acceleration has been included in the table as described above. These payments and benefits are subject to execution of the Companys form of release.
|
(3)
|
We have provided these benefits we deemed them reasonable for critical members of our senior corporate staff in order to help ensure their cooperation and the
continuity of management should any of the aforementioned events occur, and to help eliminate from any decision-making process potential distractions caused by concerns over personal financial and employment security. The elements of the various
change in control definitions were chosen to cover a diverse range of circumstances where either the ownership or leadership of the Company changed to a degree sufficient in our view to warrant the provision of protections to the specified
executives in order to encourage them to continue their employment through a change in control to ensure a smooth transition when and if required.
|
Actual Terminations in 2012
Effective at the close of business on
September 11, 2012, David C. Sabin resigned as President of Kids Line and CoCaLo. In connection therewith, Mr. Sabin also resigned from all other positions with the Company and its subsidiaries. In connection with his departure,
Mr. Sabin, Kids Line and CoCaLo (the Employer Group) executed a Separation and Release Agreement, dated September 11, 2012 (the Release), pursuant to which Mr. Sabin received the following payments and
benefits:
(a) severance payments equal to his current base salary, less applicable withholdings, and reimbursement for COBRA premiums, in each
case through December 31, 2012 ($144,327 and $4,663, respectively), paid in accordance with the Employer Groups normal payroll practices;
(b) Reimbursement for certain expenses related to his temporary housing and automobile in Los Angeles, as well as related moving expenses and certain legal expenses, which were paid pro rata during the
severance period (an aggregate of $20,000); and
(c) 5,000 restricted stock units (out of an original grant of 25,000 restricted stock units
issued to Mr. Sabin on December 11, 2009) scheduled to vest on December 11, 2012 that would otherwise have been forfeited by Mr. Sabin were permitted to remain outstanding and vest in accordance with their terms (at an assumed
value of $8,250 based on the closing price of the Companys Common Stock on the NYSE on the vesting date), for a total of $177,240.
The
Release contains, among other things, a full mutual irrevocable release of claims by the parties, and a reaffirmation by Mr. Sabin of the confidentiality provisions and 12-month non-solicitation restrictions in his employment agreement.
59
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of May 23, 2013, the shares of Common Stock beneficially owned by each director of the Company, each named
executive officer of the Company and by all directors and executive officers of the Company as a group. None of the shares of Common Stock beneficially owned by directors as set forth in the table below constitute directors qualifying shares
nor have any of the shares set forth in the table below been pledged as security.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Director, Officer or
Identity of Group
|
|
Shares of Common
Stock
Beneficially
Owned (1)(14)
|
|
|
Shares of Common
Stock
Acquirable
Within 60 days (2)(14)
|
|
|
Total Shares
of
Common Stock
Beneficially
Owned
(14)
|
|
|
% of
Outstanding
Common Stock
|
|
Raphael Benaroya
|
|
|
296,278
|
(3)
|
|
|
319,000
|
(4)
|
|
|
615,278
|
|
|
|
2.8
|
%
|
Kerry Carr
|
|
|
|
|
|
|
|
(5)
|
|
|
|
|
|
|
N/A
|
|
Mario Ciampi
|
|
|
62,640
|
(6)
|
|
|
39,000
|
(8)
|
|
|
101,640
|
|
|
|
*
|
|
Marc S. Goldfarb (7)
|
|
|
31,423
|
|
|
|
44,700
|
|
|
|
76,123
|
|
|
|
*
|
|
Frederick Horowitz
|
|
|
1,000
|
|
|
|
54,000
|
(8)
|
|
|
55,000
|
|
|
|
*
|
|
Hugh R. Rovit
|
|
|
1,000
|
|
|
|
|
(9)
|
|
|
1,000
|
|
|
|
*
|
|
Guy Paglinco (10)
|
|
|
58,925
|
|
|
|
10,000
|
|
|
|
68,925
|
|
|
|
*
|
|
David C. Sabin (11)
|
|
|
5,000
|
|
|
|
|
|
|
|
5,000
|
|
|
|
*
|
|
Salvatore Salibello
|
|
|
6,000
|
|
|
|
54,000
|
(8)
|
|
|
60,000
|
|
|
|
*
|
|
Richard F. Schaub, Jr. (12)
|
|
|
7,500
|
|
|
|
|
|
|
|
7,500
|
|
|
|
*
|
|
Michael Zimmerman (13)
|
|
|
4,462,373
|
|
|
|
54,000
|
(8)
|
|
|
4,516,373
|
|
|
|
20.6
|
%
|
All directors and officers as a group (12 persons**)
|
|
|
4,928,889
|
|
|
|
574,700
|
|
|
|
5,503,589
|
|
|
|
24.5
|
%
|
**
|
Does not include David Sabin, who resigned from the Company in September of 2012, and includes Dean Robinson, an executive officer not otherwise included in the chart.
|
(1)
|
Each individual has the sole power to vote and dispose of the shares of Common Stock set forth in the table, except as provided in footnote 13 below.
|
(2)
|
Consists of shares subject to stock options granted by the Company that are currently vested and therefore exercisable within 60 days of May 23, 2013 (no unvested
stock options are currently scheduled to vest within such time period). In the remainder of the footnotes below, where equity grants are described as not exercisable within 60 days of May 23, 2013, or not scheduled to vest
within 60 days of May 23, 2013, such grants are not currently scheduled to vest and/or be settled within such time period, without taking into account any vesting acceleration provisions described in
Grants Under the 2004
Plan
and
Grants Under the Current Plan
following the footnotes to the 2012 Outstanding Equity Awards at Fiscal Year End table above, or triggered under specified circumstances under any NEOs individual
arrangements with the Company
.
|
(3)
|
Excludes 315 shares owned by Mr. Benaroyas wife, of which Mr. Benaroya disclaims beneficial ownership.
|
(4)
|
Excludes: (i) 156,000 options not exercisable within 60 days of May 23, 2013; (ii) 29,250 SARs (8,850 of which are currently vested, 5,850 of which are
scheduled to vest within 60 days of May 23, 2013, and the remainder of which are not scheduled to vest within 60 days of May 23, 2013) and 4,000 RSUs (1,000 of which are scheduled to vest within 60 days of May 23, 2013), which, in
each case, when vested and exercised/settled, may be settled in shares of Common Stock, cash or a combination of both in the sole discretion of the Compensation Committee, in either case not at the election of Mr. Benaroya; and
(iii) 600,000 SARs (31,250 of which are currently vested, 31,250 of which are scheduled to vest within 60 days of May 23, 2013, and the remainder of which are not scheduled to vest within 60 days of May 23, 2013, all of which, when
vested and exercised, may be settled solely for cash, unless shareholder approval for the conversion of all such unexercised SARs into stock options (on a one-for-one basis) is obtained at the Companys next annual meeting of shareholders.
|
(5)
|
Excludes 373,134 SARs, none of which are scheduled to vest within 60 days of May 23, 2013, which, when vested and exercised, may be settled in shares of Common
Stock, cash or a combination of both in the sole discretion of the Compensation Committee, in either case not at the election of Ms. Carr.
|
(6)
|
Of the number of shares listed, 61,640 are owned by PrenKid, LLC, a limited liability company owned 50% by Mr. Ciampi and 50% by Mr. Zimmerman.
|
80
(7)
|
Excludes: (i) 11,800 RSUs not scheduled to vest within 60 days of May 23, 2013, which such RSUs, when vested, may be settled in shares of Common Stock, cash
or a combination of both in the sole discretion of the Compensation Committee, and not at the election of Mr. Goldfarb; and (ii) 111,250 SARs (66,250 of which are vested and the remainder of which are not scheduled to vest within 60 days
of May 23, 2013), which, when vested and exercised, may be settled in shares of Common Stock, cash or a combination of both in the sole discretion of the Compensation Committee, and not at the election of Mr. Goldfarb.
|
(8)
|
Excludes: (i) 6,000 options not exercisable within 60 days of May 23, 2013; (ii) 9,000 RSUs, 1,000 of which are scheduled to vest within 60 days of
May 23, 2013; and (iii) 43,500 SARs (8,850 of which are currently vested, 5,850 of which are scheduled to vest within 60 days of May 23, 2013, and the remainder of which are not scheduled to vest within 60 days of May 23, 2013),
all of which RSUs and SARs, when vested and exercised (in the case of SARs), may be settled in shares of Common Stock, cash or a combination of both in the sole discretion of the Compensation Committee, in either case not at the election of
Mr. Ciampi, Mr. Horowitz, Mr. Salibello, or Mr. Zimmerman, as applicable.
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(9)
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Excludes: (i) 9,000 RSUs, 1,000 of which are scheduled to vest within 60 days of May 23, 2013; and (ii) 43,500 SARs (8,850 of which are currently vested,
5,850 of which are scheduled to vest within 60 days of May 23, 2013, and the remainder of which are not scheduled to vest within 60 days of May 23, 2013), all of which RSUs and SARs, when vested and exercised (in the case of SARs), may be
settled in shares of Common Stock, cash or a combination of both in the sole discretion of the Compensation Committee, in either case not at the election of Mr. Rovit.
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(10)
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Excludes: (i) 12,380 RSUs which are not scheduled to vest within 60 days of May 23, 2013, all of which, when vested, may be settled in shares of Common Stock,
cash or a combination of both in the sole discretion of the Compensation Committee, and not at the election of Mr. Paglinco; and (ii) 74,400 SARs (38,420 of which are vested and the remainder of which are not scheduled to vest within 60
days of May 23, 2013), which, in each case, when vested and exercised, may be settled in shares of Common Stock, cash or a combination of both in the sole discretion of the Compensation Committee, in either case not at the election of
Mr. Paglinco. The treatment of Mr. Paglincos outstanding equity awards in connection with his resignation as CFO is described in a Current Report on Form 8-K filed by the Company on June 3, 2013. Note that Mr. Paglinco will remain an
employee of the Company for a period of up to nine months following his resignation as CFO.
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(11)
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As a result of the resignation of Mr. Sabin from the Company as of September 11, 2012: (i) the 8,750 unvested RSUs and 26,250 unvested SARS granted to
Mr. Sabin on March 9, 2012 were forfeited and cancelled; and (ii) with respect to the original grant of 150,000 SARs to Mr. Sabin on December 11, 2009 in connection with the commencement of his employment, 50,000 of such
vested SARs had been previously exercised (and shares issued in connection therewith sold), another 50,000 of such vested SARS expired on December 11, 2012, and the remaining unvested 50,000 SARs were forfeited and cancelled. With respect to
the original grant of 25,000 RSUs to Mr. Sabin on December 11, 2009 in connection with the commencement of his employment: (i) 10,000 of such RSUs had previously vested and been settled (and shares issued in connection therewith
sold); (ii) 10,000 of such unvested RSUs were forfeited upon such resignation; and (iii) in connection with the execution of his Release (described above), the 5,000 remaining unvested RSUs scheduled to vest on December 11, 2012 which
would otherwise have been forfeited in connection with his resignation were permitted to vest and be settled on such date in accordance with their terms.
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(12)
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Excludes: (i) 20,000 RSUs which are not scheduled to vest within 60 days of May 23, 2013, which when vested, may be settled in shares of Common Stock, cash or
a combination of both in the sole discretion of the Compensation Committee, and not at the election of Mr. Schaub; and (ii) 102,500 SARs (22,500 of which are currently vested and the remainder of which are not scheduled to vest within 60
days of May 23, 2013), which, in each case, when vested and exercised, may be settled in shares of Common Stock, cash or a combination of both in the sole discretion of the Compensation Committee, in either case not at the election of
Mr. Schaub.
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(13)
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With respect to 4,399,733 shares, see footnote (1) in the Security Ownership of Certain Beneficial Owners table set forth below, and note that an
additional 61,640 shares are owned by PrenKid, LLC, a limited liability company owned 50% by Mr. Ciampi and 50% by Mr. Zimmerman.
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(14)
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Information provided from public filings of the relevant individuals.
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81
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of May 23, 2013, with respect to each person (including any group as that term is used in Section 13(d)(3)
of the Exchange Act) who is known to the Company to be the beneficial owner of more than five percent of the outstanding shares of Common Stock: (i) the name and address of such owner, (ii) the number of shares beneficially owned, and
(iii) the percentage of the total number of shares of Common Stock outstanding so owned.
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Name and Address of Beneficial Owner
|
|
Number of
Shares
Beneficially
Owned
|
|
|
Percent of Class*
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Prentice Capital Management, LP
623 Fifth Avenue
New York, NY 10022
|
|
|
4,399,733
|
(1)
|
|
|
20.1
|
%
|
Michael Zimmerman
c/o Prentice Capital Management, LP
623 Fifth Avenue
New York, NY 10022
|
|
|
4,516,373
|
(1)
|
|
|
20.6
|
%
|
Morehead Opportunity Fund, LP
1101 Haynes Street, Suite 108
Raleigh, North Carolina 27604
|
|
|
1,946,415
|
(2)
|
|
|
8.9
|
%
|
Leap Tide Capital Management, LLC
Jan Loeb
10451 Mill Run Circle, Suite 400
Owings Mills, MD
21117
|
|
|
1,819,971
|
(3)
|
|
|
8.3
|
%
|
Royce and Associates, LLC
745 Fifth Avenue
New York, NY 10151
|
|
|
1,330,950
|
(4)
|
|
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6.1
|
%
|
Barclays Global Investors, NA
Barclays Global Fund Advisors
400 Howard Street
San Francisco, CA 94105
|
|
|
1,247,784
|
(5)
|
|
|
5.7
|
%
|
Grace & White, Inc.
515 Madison Avenue Suite 1700
New York, NY 10022
|
|
|
1,185,356
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(6)
|
|
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5.4
|
%
|
Dimensional Fund Advisors LP
Palisades West, Building One
6300 Bee Cave Road
Austin, Texas 78746
|
|
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1,123,532
|
(7)
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|
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5.1
|
%
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*
|
Note that because the beneficial ownership of certain of the shares of Common Stock listed herein is shared by certain of such beneficial owners, as determined pursuant
to the rules of the SEC, the percentages set forth in this table aggregate to a higher number than would be reflected without the listing of such shared ownership.
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(1)
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Based on a Schedule 13D filed on August 14, 2006 by Prentice Capital Management, L.P. (Prentice) and Michael Zimmerman as reporting persons (the
Prentice 13D), and information provided to us by Prentice and Mr. Zimmerman subsequent to such filing. Prentice serves as investment manager to private investment funds and managed accounts (the Managed Entities), and as
such, has voting and dispositive authority over the shares beneficially owned by such Managed Entities, and may therefore be deemed to be the beneficial owner of such shares. The Managed Entities consist of: Prentice Consumer Partners, LP (owning
3,110,229 shares) and S.A.C. Capital Associates, LLC (owning 1,289,504 shares). Mr. Zimmerman is the managing member of Prentice Management GP, LLC, the general partner of Prentice, and a manager of Prentice Consumer Partners, LP. As such, he
may be deemed to control Prentice and the Managed Entities, and may therefore also be deemed to be the beneficial owner of the shares beneficially owned by such entities. In addition, Prentice and Mr. Zimmerman may be deemed to constitute a
group within the meaning of Section 13(d)(3) of the Exchange Act, and have reported shared voting and dispositive power with respect to the shares beneficially owned by the Managed Entities, however, each of Prentice and
Mr. Zimmerman disclaims beneficial ownership of all such shares, except to the extent of their pecuniary interest therein. In addition, Mr. Zimmerman was granted: (i) options to purchase 15,000 shares of Common Stock on each of
November 1, 2006, December 27, 2007, July 10, 2008, and September 22, 2009; (ii) 15,000 SARs on July 15, 2010; and (iii) 14,250 SARs and 5,000 RSUs on each of July 19, 2011 and August 14, 2012, each for
his service as a director of the Company. Each such grant vests ratably over a 5-year period commencing on the first anniversary of the date of grant. As a result, the number of shares reported in the table as beneficially owned by
Mr. Zimmerman includes: (i) options to purchase 54,000 shares of Common Stock (51,000 of which are currently vested and 3,000 of which are scheduled to vest within 60 days of May 23, 2013); and (ii) 1,000 vested RSUs which were
settled in stock. Excludes 9,000 unvested RSUs (1,000 of which are scheduled to vest within 60 days of May 23, 2013), and all 43,500 SARs (8,850 of which are currently vested, and 5,850 of which are scheduled to vest within 60 days of
May 23, 2013), which when such RSUs and SARs are vested, may be settled (upon exercise in the case of SARs), in shares of Common Stock, cash, or a combination of both in the sole discretion of the Compensation Committee, and not at the election
of Mr. Zimmerman. As noted in footnote (13) of Security Ownership of Management above, 61,640 shares are owned by PrenKid, LLC, a limited liability company owned 50% by Mr. Zimmerman and 50% by Mr. Ciampi. Note that
as a result of a typographical error, the number of shares shown as beneficially owned by Mr. Zimmerman in this table as of April 23, 2013 in the Companys Amendment No. 1 to Annual Report on Form 10K/A for the year ended
December 31, 2012 was incorrectly reported to be 4,462,373 shares.
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82
(2)
|
As reported in a Schedule 13D/A filed on July 17, 2012 by Morehead Opportunity Fund, LP (the Reporting Person). The general partner of the Reporting
Person is Morehead Capital Advisors I, LLC (Morehead Capital Advisors). The manager of Morehead Capital Advisors is Mr. Quinton Maynard. By virtue of his position with Morehead Capital Advisors, Mr. Maynard has the sole power
to vote and dispose of the shares owned by the Reporting Person.
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(3)
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Based on a Schedule 13G filed on January 31, 2012 by Leap Tide Capital Management, LLC and Jan Loeb as reporting persons (pursuant to such Schedule 13G, Jan Loeb
is the managing member of Leap Tide Capital), and information provided to us by Raphael Benaroya in October 2012 with respect to his purchase from Leap Tide of 250,000 shares of the Companys Common Stock.
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(4)
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As reported on the Schedule 13G/A filed by Royce & Associates, LLC (RA) with the SEC on January 14, 2013. RA is an investment adviser
registered under Section 203 of the Investment Advisors Act of 1940 and is the beneficial owner of the securities reported therein, with sole voting and dispositive power with respect to such securities.
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(5)
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As reported in a Schedule 13G filed on February 5, 2009 (the Barclays 13G) by the Barclays entities described below. Barclays Global Investors, NA
(a bank) has the sole power to vote or direct the vote with respect to 387,051 of the shares covered by the report, and the sole power to dispose or direct the disposition with respect to 487,142 of the shares covered by the report; Barclays Global
Fund Advisors (an investment advisor) has the sole power to vote or direct the vote with respect to 560,869 of the shares covered by the report, and the sole power to dispose or direct the disposition with respect to 749,581 of the shares covered by
the report; and Barclays Global Investors, Ltd (a non-US institution) has the sole power to dispose or direct the disposition with respect to 11,061 of the shares covered by the report. In addition, Barclays Global Investors Japan Limited (a non-US
institution), Barclays Global Investors Canada Limited (a non-US institution), Barclays Global Investors Australia Limited (a non-US institution), Barclays Global Investors (Deutschland) AG (a non-US institution), although they report no beneficial
ownership, are reporting persons under the Barclays 13G. The Barclays 13G states that the shares reported are held in trust accounts for the economic benefit of the beneficiaries of those accounts.
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(6)
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As reported in a Schedule 13G filed on January 30, 2013, Grace & White, Inc., an investment adviser registered under Section 203 of the Investment
Advisors Act of 1940, reports sole voting power over 150,667 of the shares covered by the report, and sole dispositive power with respect to all 1,185,356 shares covered by the report.
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(7)
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As reported in Amendment No. 5 to Schedule 13G filed on February 11, 2013 by Dimensional Fund Advisors LP (the Dimensional 13G/A).
Dimensional Fund Advisors LP (Dimensional), an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company
Act of 1940, and serves as investment manager to certain other commingled group trusts and separate accounts. These investment companies, trusts and accounts are the Funds. In certain cases, subsidiaries of Dimensional may act as an
adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager, neither Dimensional or its subsidiaries possess investment and/or voting power over the securities described in the Dimensional 13G/A that are
owned by the Funds, and may be deemed to be the beneficial owner of such securities. Dimensional has reported the sole power to vote or direct the vote with respect to 1,105,280 of the shares covered by the Dimensional 13G/A, and the sole power to
dispose or direct the disposition of all shares covered by the Dimensional 13G/A (1,123,532), however, all such securities are owned by the Funds. Dimensional disclaims beneficial ownership of such securities. The Funds have the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the sale of, the securities held in their respective accounts. To the knowledge of Dimensional, as reported in the Dimensional 13G/A, the interest of any one such Fund does not
exceed 5% of the class of such securities.
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83
TRANSACTIONS WITH RELATED PERSONS
The Company entered into an agreement with RB, Inc., a Delaware corporation wholly-owned by Mr. Benaroya, effective September 12, 2011, to
provide for the full-time services of Mr. Benaroya as interim Executive Chairman and acting CEO until the earlier of: (i) December 31, 2011; and (ii) the appointment of a new chief executive officer or written notice from the
Company. A fee of $300,000 was paid by the Company to RB, Inc. for Mr. Benaroyas services during this period. On February 14, 2012, this agreement was modified and extended (by letter agreement), pursuant to which RB, Inc. agreed to
continue to provide the full-time services of Mr. Benaroya as interim Executive Chairman and acting CEO of the Company on a month-to-month basis, effective as of January 1, 2012, subject to termination by either the Company or RB, Inc. at
any time upon ten days written notice to the other party, for a fee of $100,000 per calendar month during such continuation period. Notwithstanding the stated contractual amount, commencing as of September 2012, RB, Inc. advised the Company to
reduce the fee to $75,000 per calendar month. Upon termination of the agreement (as of March 14, 2013), the fee payable for the month of termination was prorated to reflect the actual number of days in such month during which such agreement was
in effect. Mr. Benaroya was not be paid directors fees during the term of his engagement as interim Executive Chairman, nor did he participate in any bonus program, employee benefit plan or other compensation arrangement with the Company.
On March 14, 2013, the Company and Mr. Benaroya entered into an employment agreement with respect to his employment as President and Chief Executive Officer of the Company, the terms of which are described in detail in the section
captioned Employment Contracts and Arrangements above. See the Summary Compensation table above for a description of all amounts paid by the Company to or for the services of Mr. Benaroya for the periods shown therein.
Effective September 12, 2012, Renee Pepys-Lowe was appointed President of Kids Line and CoCaLo. CoCaLo contracts for warehousing and distribution
services from a company that is managed by the spouse of Ms. Pepys-Lowe. For the years ended December 31, 2012 and 2011, CoCaLo paid approximately $2.9 million and $2.8 million, respectively, to such company for these services.
As of August 10, 2006, the Company entered into the IRA with the Prentice Buyers and another unrelated entity (which is no longer a party to the
IRA), pursuant to which the Company has, subject to specified limitations, agreed to nominate for election with respect to all shareholders meetings or consents concerning the election of members of the Board, two Prentice Directors. The current
Prentice Directors are Messrs. Ciampi and Zimmerman. Mr. Ciampi is a partner of Prentice, and a manager and member of one of the current Prentice Buyers, and Mr. Zimmerman is the Managing Member of the general partner of Prentice, a
manager of one of the current Prentice Buyers and the CEO of Prentice. The Company has also granted certain registration rights to Prentice. See the Companys Current Report on Form 8-K dated August 14, 2006, with respect to further
details regarding the IRA.
Review and Approval of Transactions with Related Persons
The Audit Committee of the Board is responsible for assisting the Board in fulfilling its oversight responsibilities by, among other things, monitoring
any transactions between related persons (including, but not limited to, officers, directors, and principal shareholders) and the Company or its subsidiaries (other than normal and usual compensation arrangements). This obligation is set forth in
writing in our Audit Committee Charter. In order to fulfill this obligation, the Audit Committee reviews with the Board any such proposed transactions involving such related persons and/or their immediate family members for the Boards
consideration and ultimate approval. Related party transactions which are ongoing are subject to ongoing review by the Audit Committee to determine whether it is in our best interest and our shareholders best interest to continue, modify or
terminate the related party transaction. No director may participate in the approval of a related party transaction with respect to which he or she is a related party.
To identify related person transactions, each year, we require our directors and officers to complete Questionnaires identifying any transactions with us in which such persons or their family members have
an interest. The Audit Committee or the Board reviews all related person transactions due to the potential for a conflict of interest. A conflict of interest occurs when a persons private interest interferes in any way (or even appears to
interfere) with the interests of the Company as a whole. A conflict situation can arise when an employee, officer or director takes actions or has interests that may make it difficult to perform his or her Company work objectively and effectively.
In considering the approval of any proposed transaction with a related person, the Board considers a variety of factors, including, but not
limited to:
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|
whether the terms of such transaction are consistent with those that could be obtained from third-parties;
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whether the Company would receive a benefit from proceeding with a related person that would otherwise be unavailable (in terms of knowledge of the Company, for
example);
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the nature of the related persons interest in the transaction;
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the material terms of the transaction, including, without limitation, the amount and the type of transaction;
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whether the transaction would impair the judgment of a director or executive officer to act in the best interests of the Company;
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84
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whether the transaction would compromise the independence of a director in accordance with independence standards applicable to the Company and such director;
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the materiality of the transaction to the related person and any entity with which such related person is affiliated;
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the materiality of the transaction to the Company; and
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any other factors deemed appropriate by the Board.
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The Board has reviewed and approved all of the transactions discussed in this section. We expect our directors, officers and employees to act and make decisions that are in our best interests and
encourage them to avoid situations which present a conflict between our interests and their own personal interests. In addition, we are prohibited from extending personal loans to, or guaranteeing the personal obligations of, any director or
officer. A copy of our current Code of Business Conduct and Ethics is available on our website.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Companys officers and directors, and persons who own beneficially more than ten percent of a
registered class of the Companys equity securities, to file reports of ownership and changes in ownership with the SEC and the NYSE. Officers, directors and greater than ten percent shareholders are required to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such Section 16(a) forms received by it, or
written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that, during the fiscal year ended December 31, 2012, all filing requirements applicable to its officers, directors and
greater than ten percent shareholders were complied with on a timely basis except for the following: Raphael Benaroya, the Companys Chairman, President and CEO, filed a late Form 4 on December 12, 2012 with respect to the purchase of
1,390, 2,319, and 8,600 shares of the Companys Common Stock on December 4, 2012, December 5, 2012 and December 6, 2012, respectively.
SHAREHOLDER PROPOSALS
In order to be
included in the proxy statement and form of proxy relating to the 2014 Annual Meeting of Shareholders (the 2014 Meeting), in the event the 2014 Meeting is not advanced or delayed by more than 30 calendar days from the date of the 2013
Meeting, proposals of shareholders intended to be presented at the 2014 Meeting must be received by the Company on or before February 4, 2014. Any such proposals should be submitted in writing to: Corporate Secretary, Kid Brands, Inc., One
Meadowlands Plaza, 8
th
Floor, East Rutherford, New Jersey
07073. Shareholders who intend to present a proposal at such meeting without inclusion of such proposal in the Companys proxy materials are requested to provide advance notice of such proposal to the Company at the aforementioned address on or
before April 18, 2014. If a shareholder fails to provide notice by this date, then the holders of the proxies with respect to the 2014 Meeting will use their discretionary authority to vote the shares of Common Stock they represent with respect to
the proposal as they may determine.
INCORPORATION BY REFERENCE
The SEC allows us to incorporate by reference information into this Proxy Statement, which means that we can disclose important information
to you by referring you to other documents that we have filed separately with the SEC and are making available to you with this this Proxy Statement. The information incorporated by reference is deemed to be part of this Proxy Statement. This Proxy
Statement incorporates by reference the entirety of the following Items from our Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on April 16, 2013: (i) Item 7, Managements
Discussion and Analysis of Financial Condition and Results of Operations, Item 7A, Quantitative and Qualitative Disclosures about Market Risk, and Item 8 Financial Statements and Supplementary Data.
By Order of the Board of Directors,
MARC S.
GOLDFARB
Corporate Secretary
East Rutherford, New Jersey
June 4,
2013
85
APPENDIX A
EMPLOYMENT AGREEMENT
THIS AGREEMENT made on March 14, 2013 (the
Commencement Date) by and between Kid Brands, Inc., a New Jersey corporation (together with its successors and assigns, the Company), and Raphael Benaroya (the Executive and, together with the Company, the
Parties).
The Parties intending to be legally bound hereby agree as follows.
1.
TERM
. This Agreement shall be for a term commencing on the Commencement Date and ending on the fourth anniversary of the
Commencement Date, with annual extensions thereafter unless the Company or the Executive provides written notice of termination to the other Party at least four months prior to the end of the original four-year term or any subsequent annual
extension (the original term, as may be from time to time extended, being referred to as the Term).
2.
POSITION; DUTIES
. The Executive shall be employed as President and Chief Executive Officer of the Company and shall have the authorities and responsibilities customarily associated with the status of such positions at other New York Stock
Exchange listed companies. In his capacity as President and Chief Executive Officer, the Executive shall report directly to the Companys Board of Directors (the Board) and shall have ultimate responsibility for all the
Companys current and future operations in the U.S. and abroad. Upon termination of the Executives employment for any reason, if and to the extent requested by the Company, the Executive shall promptly resign from the Board and from all
other positions that the Executive then holds with the Company or any affiliate and promptly execute all documentation for such resignations.
The Executive shall devote substantially all of his business time, effort and energies to the business of the Company; provided, however, that notwithstanding the foregoing, the Executive may
(a) serve as an officer or director of the entities for whom he serves as such on the Commencement Date and other entities, (b) engage in civic, charitable, public service and community activities and affairs, (c) accept and fulfill a
reasonable number of speaking engagements, and (d) manage his personal investments and affairs, as long as such activities do not interfere, individually or in the aggregate, with his obligations and the proper performance of his duties and
responsibilities to the Company under this Agreement in any material respect. If the Executive accepts an appointment to serve on the board of directors or in any other capacity with any for profit business entity for which he does not serve on the
Commencement Date, the Executive shall provide notice thereof to the Chair of the Nominating/Governance Committee of the Board.
3.
COMPENSATION AND BENEFITS
. Subject in each case to the provisions of Section 4 of this Agreement in the event that his
employment hereunder terminates, the Executive shall be entitled to the following compensation and benefits during the Term.
(A)
Base Salary
. The Company will pay the Executive a base salary at an annual rate of $650,000, payable in accordance with the Companys usual payroll practices and prorated for the period of
his service during 2013. The Compensation Committee of the Board shall consider an increase of base salary annually in its discretion. The base salary shall not be decreased at any time or for any purpose during the Term, provided, however, that the
Board may decrease Executives Base Salary rate if such reduction is (i) made in conjunction with cost cutting measures, (ii) consistent in all material respects (including, without limitation, duration and rate of reduction) with
reductions applicable to the Companys senior executive officers generally, and (iii) made pursuant to the Executives recommendation or with the Executives consent. The annual rate of the Executives base salary as in
effect from time to time is referred to herein as Base Salary; provided, however, that, for the purpose of determining severance payable under Section 4, the term Base Salary shall be determined without regard to any
across-the-board temporary salary reduction that may be in effect at the Termination Date.
A-1
(B)
Incentive Compensation
. The Executive will be entitled to an
annual incentive compensation opportunity under the Companys Incentive Compensation Bonus Program as attached to the Companys 2012 proxy statement (ICBP) subject to all the terms thereof (except as otherwise provided in this
Agreement) for the year 2013 and future years. The Executives annual bonus shall range from 0% to 100% of Base Salary depending on the achievement of performance goals, with payout of 50% of Base Salary upon achievement of target goals.
Performance goals for each year (including 2013) will be established by the Compensation Committee of the Board within 90 days after the beginning of such year, and the Executive shall have the opportunity to consult with the Compensation Committee
in advance of the establishment of that years performance goals. The Executives bonus opportunity for 2013 will be based upon a full year of service in 2013. The performance goals applicable to the Executive for any year will be
consistent with or not more stringent than any comparable performance goals applicable to any other executive of the Company for such year. In the event of any conflict between the provisions of the ICBP and the provisions of this Agreement, the
provisions of this Agreement shall control. Any amendment to the ICBP shall not apply to the Executive without his consent. Any earned bonus will be paid to the Executive after the end of the performance year and the determination by the
Compensation Committee of the achievement of the performance goals at the same time as paid to other officers, but no later than March 15 of the following year unless the audit of the Companys financial statements is not completed by
March 15 in which event such determination and payment shall be made in such year promptly upon completion of the audit.
(C)
Equity Compensation
. At the close of the first full trading day after announcement of this Agreement, the Executive shall receive an equity grant of incentive stock options (ISOs),
nonqualified stock options (NQSOs) and stock appreciation rights (SARs or Cash SARs) covering one million shares of common stock (Common Stock) of the Company as follows:
(i) ISOs: incentive stock options covering 200,000 shares of Common Stock to be awarded under the Companys Equity
Incentive Plan and having the terms set forth herein and in Attachment 1 hereto;
(ii) NQOs: nonqualified stock
options covering 200,000 shares of Common Stock to be awarded outside the Companys Equity Incentive Plan and having the terms set forth herein and in Attachment 2 hereto; and
(iii) Cash SARs: stock appreciation rights covering 600,000 shares of Common Stock exercisable for cash to be awarded
under the Companys Equity Incentive Plan and having the terms set forth herein and in Attachment 3 hereto. Notwithstanding anything to the contrary contained herein (and upon stockholder approval as provided below), the Company will replace
the Cash SARs with non-qualified stock options for 600,000 shares under the Companys Equity Incentive Plan at the same exercise price per share and upon substantially the same other terms and conditions as the Cash SARs being replaced, in
which event all references in this Agreement to the Cash SARs or SARs will thereafter be deemed to refer to the replacement options (Replacement Options). It is understood and acknowledged by the Parties that, as a condition of issuing
the Replacement Options, the Replacement Options must be approved by the Companys stockholders. The Company shall use its reasonable best efforts to have the Replacement Options approved at the next annual meeting of the Companys
stockholders. For the sake of clarity, if the Replacement Options are not so approved by the Companys stockholders, then the Replacement Options will not be awarded and the Cash SARs will continue in full force and effect.
The ISOs and Replacement Options will be covered by the Companys registration statement on Form S-8 for the
Companys Equity Incentive Plan. The Company will cause the NQOs to be registered at the Companys expense on a Form S-8 within thirty days of the Commencement Date. The Company shall keep the registration statements effective until all
the Executives shares of Common Stock covered thereby are sold, or may be sold without restriction pursuant to Rule 144 under the Securities Act of 1933, as amended (the Act). Consistent with the foregoing, the Executive
recognizes that the exercise of the NQOs (and the disposition of the underlying shares of Company Common Stock) are not currently registered under an effective registration statement under the Act. The Executive agrees not to exercise the NQOs
unless such exercise is covered by an effective registration on Form S-8 under the Act, unless the Executive provides an investment representation to the Company that he is acquiring the shares to be received upon such exercise for his own account
and not with a view to distribution or the issuance of Common Stock by the Company upon such exercise is not otherwise prohibited under the Act. The Executive recognizes that the disposition of the shares of Common Stock underlying the ISOs,
NQOs and Replacement Options by affiliates will not be covered by an effective registration statement under the Act. In the event that the Executive receives shares of Common Stock upon exercise of the ISOs, NQOs or Replacement Options and the
disposition of each share is not covered by an effective registration statement under the Act, or is not otherwise exempt from such registration, the shares shall be restricted against transfer to the extent required by the Act and Rule 144
thereunder. The certificates evidencing any such shares may have a statement placed thereon to reflect their status as restricted securities. Notwithstanding the foregoing, nothing contained within this paragraph shall be deemed or
construed to be a waiver or release of the Companys obligations hereunder (including specifically those contained in Section 3(C)(iii) above, which shall remain in effect and absolute.
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The ISOs, NQOs and Cash SARs shall become exercisable and vested as set
forth below and shall expire on the tenth anniversary of the date of grant subject to earlier expiration as set forth in this Agreement.
The ISOs shall become exercisable and vested as follows subject to earlier termination as set forth in this Agreement:
|
|
|
|
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Date of Grant
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- 50,000 shares
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First anniversary of Date of Grant
|
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- 50,000 shares
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Second Anniversary of Date of Grant
|
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- 50,000 shares
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Third Anniversary of Date of Grant
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- 50,000 shares
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The NQOs shall become exercisable and vested as follows subject to earlier termination as
set forth in this Agreement:
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Date of Grant
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- 200,000 shares
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The 600,000 Cash SARs shall become vested and exercisable as follows subject to earlier
termination as set forth in this Agreement:
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24 Consecutive Monthly Installments starting on the last day of the calendar month in which the Date of Grant occurs and,
thereafter
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- 15,625 shares Per Month
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24 Consecutive Monthly Installments starting on the last day of the calendar month in which the second anniversary of the Date of
Grant occurs
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- 9,375 shares Per Month
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The exercise price of the ISOs, NQOs and SARs shall be the closing price of the Common
Stock on the New York Stock Exchange on the date of grant.
(D)
Board Fees
. The Executive will not be
entitled to any cash fees or other payments or equity grants for service as a director.
(E)
Expense
Reimbursement
. The Company will reimburse the Executive for business expenses reasonably incurred by him in the performance of his duties with the Company, in accordance with the Companys expense reimbursement policy.
(F)
Other Benefits
. The Executive will be entitled to participate in the Companys employee benefit plans and
perquisites applicable to senior executives generally as in effect from time to time and on a basis no less favorable than those provided to other senior executives.
(G)
Vacation
. The Executive will be entitled to four weeks of vacation annually (or such greater amount provided in
applicable Company policies or as may be provided to any other senior executive of the Company) to be taken at times determined by the Executive. Any vacation time not taken during any year may not be carried over to subsequent years, unless and
except to the extent that a more favorable carry-over policy applies to any other executive of the Company; provided, however, that unused vacation for one year may be carried over to the next year if and to the extent that the unused vacation is
attributable to business exigencies of the Company; provided further, that if the Executive is paid for such carried over vacation upon termination of employment by the Company without Cause or termination by the Executive for Good Reason, the
amount of such payment shall reduce the severance payment under Section 4(B)(iv).
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(H)
Directors and Officers Insurance and Indemnification
.
(i) The Company agrees that (a) if the Executive is made a party, or is threatened to be made a party, to
any legal proceeding by reason of the fact that he is or was a director, officer, employee, agent, manager, consultant, or representative of the Company or any affiliates or subsidiaries thereof, or (b) if any legal claim is made, or threatened
to be made, that arises out of or relates to the Executives service in any of the foregoing capacities, then the Executive shall promptly be indemnified and held harmless by the Company to the fullest extent legally permitted against any and
all costs, expenses, liabilities, and losses (including, without limitation, reasonable attorneys fees, judgments, interest, expenses of investigation, penalties, fines, ERISA excise taxes or penalties but not excise taxes under
Section 280G of the Internal Revenue Code, and amounts paid or to be paid in settlement) incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a
director, officer, employee, agent, manager, consultant or representative of the Company and shall inure to the benefit of the Executives heirs, executors, and administrators. The Company shall advance to the Executive all costs and expenses
incurred by him in connection with any such legal proceeding or legal claim within 15 days after receiving written notice requesting such an advance. Such notice shall include an undertaking by the Executive to repay the amount advanced if he is
ultimately determined not entitled to indemnification against such costs and expenses as authorized under this Agreement or applicable law.
(ii) Neither the failure of the Company to have made a determination in connection with any request for indemnification or advancement under this Section that the Executive has satisfied any applicable
standard of conduct nor a determination by the Company that the Executive has not met any applicable standard of conduct, shall create a presumption that the Executive has not met an applicable standard of conduct.
(iii) During the term of employment and for a period of six years thereafter, the Company shall keep in place a
directors and officers liability insurance policy (or policies) providing comprehensive coverage to the Executive equal to at least that which is in effect currently or, if greater, the coverage that the Company provides for any other
present or former senior executive or director of the Company.
(iv) The indemnification and advancement of
expenses provided by, or granted pursuant to, the provisions of this Agreement shall not be deemed exclusive of (but instead shall be in addition to) any other rights to which Executive may be entitled, including without limitation under the
Companys certificate of incorporation or by-laws, pursuant to any applicable law, statute or regulation, or by other contractual arrangement, and whether as to actions taken (or omitted to be taken) in Executives official capacity or as
to actions taken (or omitted to be taken) in another capacity while holding such office.
4.
CONSEQUENCES OF
TERMINATION
. The payments under this Section 4 are the only termination payments to which the Executive is entitled upon termination of his employment prior to the end of the Term regardless of the date during the Term in which employment
is terminated.
(A)
Termination by Company for Cause or Termination by Executive without Good Reason
. If
the Executives employment under this Agreement is terminated prior to the end of the Term by the Company for Cause (as defined below) or by the Executive without Good Reason (as defined below), the Executive will be entitled to receive the
following (promptly following such termination in the case of clause (i) and at the time specified in Section 3(B) in the case of clause (ii) below):
(i) Base Salary earned through the date that the Executives employment hereunder terminates (the Termination
Date);
(ii) ICBP amounts referenced in Section 3(B) hereof (ICBP Amounts) earned for
any prior completed calendar year and not yet paid; and
(iii) other vested amounts and benefits, if any, under
and in accordance with the terms of any applicable plan, program, corporate governance document, policy, agreement or arrangement of the Company in which the Executive participated prior to the date of this Agreement (collectively, the Accrued
Compensation) provided that the Executive may exercise ISOs, NQOs and SARs after the Termination Date as set forth below.
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In addition, if the Executive is terminated by the Company for Cause or terminates his
employment without Good Reason, any ISOs, NQOs and SARs that have not yet vested shall immediately terminate and be forfeited. In the event of termination of employment by the Company for Cause, the Executives ISOs, NQOs and SARs that had
become vested prior to the Executives Termination Date shall remain exercisable until and, to the extent not exercised, shall expire on (x) the close of the second trading day following the date upon which applicable law permits Executive
to exercise in full the ISOs, NQOs and SARs and sell the underlying shares to be acquired upon such exercise, but in no event prior to (y) the end of the 30
th
Open Window Trading Day (as defined below) following the Executives Termination Date. For the purposes of this
Agreement, an Open Window Trading Day is any trading day during which Company insiders (including directors and executive officers) are not prohibited from selling and purchasing shares of Company Common Stock, whether pursuant to
Company insider trading policies or applicable law. In the event of termination of employment by the Executive without Good Reason, the Executives ISOs, NQOs and SARs that had become vested prior to the Executives Termination Date shall
remain exercisable until and, to the extent not exercised, shall expire at the end of the six-month period following the Termination Date or, if later, at the end of the 30
th
Open Window Trading Day following the Termination Date; provided, however that if, on the last trading day in such
six-month period, Company insider trading policy or applicable law prohibits the Executive from exercising the equity awards and/or selling the shares acquired upon such exercise, then the expiration date of those awards will be extended until the
close of the next trading day (i) on which the awards may be exercised and shares may be sold without violating such Company policy or applicable law and (ii) as to which the required notice of an Open Window Trading Day (referenced below)
was given to Executive prior to the opening of trading on such day. Notwithstanding the foregoing, in no event shall the ISOs, NQOs and SARs be exercisable after the expiration of their 10-year stated terms. On and after the Termination Date and
until the early expiration date of the ISOs, NQOs and SARs pursuant to this paragraph, the Company shall provide adequate notice to the Executive (which may be by e-mail and/or other electronic means) so that the Executive will know which days will
and which days will not be Open Window Trading Days and upon which the awards may be exercised and the underlying shares may be sold by Executive.
In the event that the termination of employment of the Executive occurs as a result of the expiration of this Agreement at the end of its Term, the Executive shall be entitled to (x) the payments set
forth in (i), (ii) and (iii) above (promptly following such termination in the case of clause (i) and at the time specified in Section 3(B) in the case of clause (ii), as well as to (y) an amount equal to the ICBP Amount
which would have been earned by the Executive for the calendar year of termination if the Executives employment had continued through the end of the year based upon achievement of performance goals, multiplied by a fraction, the numerator of
which is the number of days elapsed from the beginning of the year to the end of the Term, and the denominator is the number of days in such calendar year. In addition, all of the ISOs, NQOs and SARs will be exercisable by the Executive for the
remainder of their respective terms.
Cause shall mean: (A) willful failure by the Executive
to perform his material duties hereunder as an employee of the Company; (B) the Executives conviction of, or plea of guilty or nolo contendere to, a felony; (C) the Executives theft or misuse of material Company property; or
(D) willful misconduct or an act of moral turpitude which is materially injurious to the Company, monetarily or otherwise; provided that Cause does not include a finding of liability in pending or future shareholder, derivative or punitive
class actions or other civil actions. For purposes of this Agreement, no act or failure to act by the Executive shall be deemed willful unless it is knowingly and intentionally done, or omitted to be done, by the Executive in bad faith
and without a belief that the Executives action or omission was in the best interest of the Company. No termination of the Executives employment will be treated as for Cause unless, prior to such termination: (i) the
Executive has been provided written notice from the Board setting forth in reasonable detail the basis on which the Company is considering terminating his employment for Cause (a Cause Notice); (ii) upon the
Executives request within 10 days of his receipt of the Cause Notice, the Executive has been afforded a review by the Board within 14 days following his request for such review; and (iii) within 14 days after such review, the Board
confirms, by affirmative vote of a majority of the members (other than the Executive) and by written notice to the Executive, that Cause exists. Notwithstanding the foregoing, the Executive may cure the basis on which the Company is
considering terminating his employment (and thereby avoid a termination for Cause) at any time following the date on which a Cause Notice is received and prior to the expiration of the 14-day review period described in (iii) above, except that
the cure period does not apply to the extent that the act or omission is not curable.
(B)
Termination by
the Company without Cause or Termination by Executive for Good Reason
. If the Executives employment under this Agreement is terminated prior to the end of the Term by the Company without Cause or by the Executive for Good Reason, the
Executive will be entitled to receive the following:
(i) Base Salary earned through the Termination Date;
(ii) ICBP Amounts earned for any prior completed calendar year and not yet paid;
(iii) the Accrued Compensation;
(iv) Base Salary at the rate in effect at the Termination Date (determined without regard to any reduction that may then be in effect pursuant to Section 3(A) above) for a period of nine months after
the Termination Date;
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(v) an amount equal to the ICBP Amount which would have been earned by the
Executive for the year of termination if the Executives employment had continued through the end of the year based upon achievement of performance goals, multiplied by a fraction, the numerator of which is the number of days elapsed from the
beginning of the year to the Termination Date, and the denominator of which is the number of days in the year; and
(vi) the Company will pay to the Executive the amount of COBRA premiums for his and his familys coverage to the extent that the Executive had elected such coverage under the Companys medical
and dental plans during the nine months following the Termination Date and shall continue to cover the Executive under the Companys life insurance program for nine months.
Any amounts payable pursuant to clause (i) of this paragraph (B) shall be paid promptly after the Termination
Date; any amounts payable pursuant to clause (ii) or (v) of this paragraph (B) shall be paid within the time specified in Section 3(B); and any amounts payable pursuant to clause (iii) of this paragraph (B) shall be
paid pursuant to the terms of the applicable plans or arrangements. Any amounts payable pursuant to clause (iv) of this paragraph (B) shall be paid in consecutive equal monthly payments commencing on the first day of the month following
the Termination Date; provided that, if and to the extent necessary to prevent the Executive from being subject to adverse tax consequences under Section 409A of the Internal Revenue Code (Section 409A), the first six months of the
continued Base Salary payments shall not be paid until, and shall be paid in a single sum payment on, the first day after the six month anniversary of the Termination Date, with the remaining monthly payments to begin on the first day of the seventh
month following the Termination Date. At the end of the period during which the Company is paying the Executives premiums for medical and dental coverage, the Executive and any eligible family members may elect COBRA continuation coverage at
his own expense for the remainder, if any, of the required COBRA period. All amounts payable under this Agreement shall be without interest if paid when due.
In order to receive any payments or benefits under clauses (ii), (iv), (v) or (vi) of this paragraph (B) and accelerated vesting of ISOs, NQOs and SARs set forth in the following paragraph,
the Executive must execute and deliver to the Company a release provided by the Company in substantially the form of Exhibit A hereto which shall have become irrevocable within 52 days following the Termination Date.
If the Executives employment under this Agreement is terminated prior to the end of the Term by the Company without
Cause or by the Executive for Good Reason, any unvested ISOs, NQOs and SARs (as well as any unvested additional equity awards that may be granted to the Executive) shall become immediately vested on the Termination Date and shall be exercisable for
the remainder of their terms. Notwithstanding the foregoing, if the Company terminates the employment of the Executive without Cause prior to the first anniversary of the Commencement Date, the Executive will forfeit the last 250,000 Cash SARs that
would have become vested if the Executives employment had not terminated; provided, however, that no such forfeiture shall occur if a Change of Control occurs prior to the Executives Termination Date or if the Executive is terminated
following the commencement of discussions leading to a Change of Control or within six months prior to the consummation of a Change of Control; it being understood that in the event of any such forfeiture, 350,000 Cash SARs, as well as the 200,000
ISOs and the 200,000 NQOs, shall be fully vested and shall be exercisable for the remainder of their terms in accordance with the first sentence of this paragraph.
As of the Termination Date, except as set forth in this Agreement, the Executive shall not be entitled to any further
payments or benefits from the Company.
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Good Reason shall mean the occurrence of any of the following
events without the Executives express written consent: (A) a diminution of the Executives Base Salary except as permitted by Section 3(A) or a diminution of the Executives annual bonus opportunity described in
Section 3(B) to less than 100% of Base Salary with a target bonus of less than 50% of Base Salary; (B) a diminution in the Executives position, title, authority, duties, or responsibilities; (C) a relocation of the
Companys headquarters office at which the Executive is employed outside of a 35 mile radius of the current office, but Good Reason shall not mean a relocation to the current offices of La Jobi, Inc.; (D) a material breach of this
Agreement by the Company; or (E) in connection with a Change of Control, the failure or refusal by the successor or acquiring company (or parent thereof) to expressly assume the obligations of the Company under this Agreement. The Executive
must provide written notice to the Company of the existence of the condition constituting the Good Reason within 30 days of the Executives having actual knowledge of the existence of the condition and, if the condition is curable, the Company
will then have 30 days from receipt of such notice during which the Company may remedy the condition and not be required to pay the amounts set forth in this Section 4(B). If full cure is made by the Company within such 30 day cure period, Good
Reason shall be deemed not to have occurred and the Executives employment will be deemed to have continued under and subject to the provisions of this Agreement; provided, however, that the same condition may be cured by the Company only once
during the Term. Failure of the Company promptly to make payment to the Executive in cash upon exercise of all or any part of the Cash SARs at a time when such payment would cause an Event of Default under the Companys Credit Agreement with
Salus Capital Partners, LLC, as such Credit Agreement is currently in effect, shall constitute a breach of this Agreement by the Company but shall not, in and of itself, constitute Good Reason, provided that any such payment is made on
or promptly (but not more than five days) after the date that payment would not cause such an Event of Default. In addition, if the Cash SARs are not converted into Replacement Options, the failure of the Company promptly to make payment to the
Executive in cash upon exercise of all or any part of the vested Cash SARs at time when such payment would cause an Event of Default under the Salus Credit Agreement, as such Credit Agreement is currently in effect, will not be deemed to be a breach
of this Agreement (i) during the period prior to the Companys 2013 annual shareholders meeting or (ii) thereafter for a period of 90 days while the Parties seek a resolution, provided that in any event, any such payment is made
promptly (but not more than five days) after the date that payment would not cause such an Event of Default, and provided further that, if a Change of Control occurs, (x) any amount owed to the Executive in respect of the exercise of such Cash
SARs shall be paid to the Executive on or before the date of such Change of Control and (y) the successor entity in the Change of Control shall not be entitled to rely on the above described carve out for an Event of Default under the Salus
Credit Agreement as a reason for the non-payment of cash to the Executive upon his exercise of all or a portion of the Cash SARs (which non-payment would then constitute immediate grounds for Executive to terminate this Agreement for Good Reason).
(C)
Termination on Disability or Death
. In the event that the employment of the Executive terminates
prior to the end of the Term by reason of Disability (as defined below), the Executive shall be entitled to the payments set forth in clauses (i), (ii), (iii), (v) and (vi) of Section 4(B) including payments under the Companys
long term disability insurance plan to the extent provided for therein. The Company may terminate the Executives employment by reason of Disability if (and only if) the Executive is absent from work for at least 135 consecutive
days or for 135 days (whether or not consecutive) in any calendar year by reason of a physical or mental illness or injury. In the event that the employment of the Executive terminates before the end of the Term by reason of death, the amounts set
forth in clauses (i), (ii), (iii) and (v) of Section 4(B) shall be paid to his estate and the death benefit under the Companys life insurance program shall be paid to his designated beneficiary, or estate in the absence of
designated beneficiary and the Executives family shall be entitled to reimbursement for the continued COBRA continuation coverage benefits set forth in Section 4(B)(vi).
In addition, if the Executives employment under this Agreement is terminated prior to the end of the Term by reason of Disability or death, any unvested ISOs and SARs (as well as any unvested
additional equity awards that may be granted to the Executive) shall become vested on the Termination Date to the same extent as if the Executive had completed an additional two years of service with the Company after the Termination Date and all
vested ISOs, NQOs and SARs (or Replacement Options, if applicable) shall be exercisable for one year following the Termination Date, or the expiration of their respective terms, if earlier.
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(D)
Change of Control
. If the Executives employment under this
Agreement is terminated prior to the end of the Term by the Company without Cause or by the Executive for Good Reason at any time on or after, or within six months before, the occurrence of a Change of Control, the Executive will be entitled to the
payments and benefits set forth in Section 4(B) subject to the terms thereof (including, without limitation, acceleration of vesting and continuing exercisability of outstanding ISOs, NQOs, SARs and other equity awards). Notwithstanding the
foregoing, if a Change of Control occurs and outstanding ISOs, NQOs, SARs and/or other Company equity awards (the Transaction Date Equity Awards) are not assumed or converted into comparable awards with respect to stock of the acquiring
or successor company (or parent thereof), then, immediately prior to the Change of Control, each such Transaction Date Equity Award, whether or not previously vested, shall be converted into the right to receive cash or, at the election of the
Executive, consideration in a form that is pari passu with the form of the consideration payable to the Companys stockholders in exchange for their shares, in an amount or having a value equal to the product of (i) the per share fair
market value of the Companys Common Stock (based upon the consideration payable to the Companys stockholders), less, if applicable, the per share exercise price under such Transaction Date Equity Award, multiplied by (ii) the number
of shares of Common Stock covered by such Transaction Date Equity Award (such product being referred to as the Award Cash-Out Amount). A Transaction Date Equity Award that is not assumed or converted (as described above) may be canceled
at the time of the Change of Control for no consideration if the per share exercise price of such Transaction Date Equity Award is greater than such per share fair market value of the Companys Common Stock (determined with regard to all per
share consideration, including the value of any contingent and/or deferred consideration payable in the Change of Control transaction). The Award Cash-Out Amount with respect to each Transaction Date Equity Award will be paid or settled at the time
of or promptly (but not more than 10 days) following the occurrence of the Change of Control; provided, however, that, for the avoidance of doubt, if the Companys stockholders receive deferred and/or contingent consideration, then the
Executive will be entitled to receive such deferred and/or contingent consideration as and when payable to the Companys stockholders as if the shares of Common Stock covered by his Transaction Date Equity Awards had been outstanding at the
time of the Change of Control.
Change of Control means any of the following:
(a) any one person or more than one person acting as a group directly or indirectly acquires ownership of shares of the
Company that, together with the shares of the Company held by such person or group, constitutes more than 40% of the total fair market value or total voting power of the shares of the Company; provided, however, that if any one person or more than
one person acting as a group is considered to own more than 40% of the total fair market value or total voting power of the shares of the Company on the date hereof, the acquisition of additional shares by the same person or persons shall not
constitute a Change of Control under this clause (a). An increase in the percentage of shares of the Company owned by any one person or persons acting as a group as a result of a transaction in which the Company acquires its own shares in exchange
for property will be treated as an acquisition of shares of the Company by such person or persons for purposes of this clause (a);
(b) any one person or more than one person acting as a group directly or indirectly acquires, or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or
persons, ownership of shares of the Company having 30% or more of the total voting power of the shares of the Company; provided, however, that if any one person or more than one person acting as a group so acquires 30% or more of the total voting
power of the shares of the Company, the acquisition of additional control of the Company by the same person or persons shall not constitute a Change of Control under clause (a) or (b) of this definition;
(c) one-half or more of the members of the Companys Board are replaced during any 18-month
period by directors whose appointment or election is not endorsed by at least 66
2/3
% of the Companys Board prior to the date of such appointment or election, but excluding, for purposes of such endorsement, any individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of directors of the Company; or
(d) any one
person or more than one person acting as a group acquires, or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons, assets from the Company that have a total gross fair market value
equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that a transfer of assets by the Company shall not be treated as a Change of
Control if the assets are transferred to (i) a shareholder of the Company immediately before the asset transfer in exchange for or with respect to shares of the Company, (ii) an entity, 50% or more of the total value or voting power of
which is owned, directly or indirectly, by the Company, (iii) a person or more than one person acting as a group that owns, directly or indirectly, shares of the Company having 50% or more of the total value or total voting power of all
outstanding shares of the Company or (iv) an entity, at least 50% of the total value or voting power of which is owned by a person or persons described in clause (iii) above; and provided, further, that for purposes of clauses (i), (ii),
(iii) and (iv) above, a persons status is determined immediately after the transfer of the assets. For purposes of this clause (d), gross fair market value means the value of the assets of the Company, or the value of the assets
being disposed of, determined without regard to any liabilities associated with such assets.
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For the avoidance of doubt, a Change of Control will be deemed to have occurred upon the
consummation of a merger or consolidation of, or similar type of corporate transaction involving, the Company or any direct or indirect subsidiary of the Company with any other corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof)
more than 60% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation;
(E)
Parachute Payment Excise Tax
. Notwithstanding anything herein to the contrary, if the Executive determines that
any amounts due to him under this Agreement and any other plan or program of the Company constitute a parachute payment, as such term is defined in Section 280G(b)(2) of the Code, and the amount of the parachute payment, reduced by
all federal, state and local taxes applicable thereto, including the excise tax imposed pursuant to Section 4999 of the Code, is less than the amount that the Executive would receive if he were paid three times his base amount, as
defined in Section 280G(b)(3) of the Code, less $1.00, reduced by all federal, state and local taxes applicable thereto, then at the Executives request the Company shall reduce the aggregate of the amounts constituting the parachute
payment to an amount that will equal three times the Executives base amount less $1.00. The Executive shall have the right to specify the portion of such reduction, if any, that will be made under this Agreement and each plan or program of the
Company.
(F)
No Mitigation
. In the event of any termination of the employment of the Executive
hereunder prior to the end of the Term, the Executive shall be under no obligation to seek other employment or otherwise mitigate damages, and there shall be no offset against any amounts due him on account of any remuneration attributable to any
subsequent employment that he may obtain.
5.
CONFIDENTIALITY
. The Executive shall, during and after his employment by
the Company and except in connection with performing services on behalf of (or for the benefit of) the Company or any of its affiliates, keep secret and retain in the strictest confidence all confidential, proprietary and non-public matters,
tangible or intangible, of or related to the Company, its shareholders, subsidiaries, affiliates, successors, assigns, officers, directors, attorneys, fiduciaries, representatives, employees, licensees and agents including, without limitation, trade
secrets, business strategies and operations, customer lists, manufacturers, material suppliers, financial information, personnel information, legal advice and counsel obtained from counsel, information regarding litigation, actual, pending or
threatened, research and development, identities and habits of employees and agents and business relationships, and shall not disclose them to any person, entity or any federal, state or local agency or authority, except as may be required by law.
Notwithstanding the foregoing, nothing in this Agreement or elsewhere shall prohibit the Executive from making any statement or disclosure (i) to the extent required by law; (ii) to the extent required by subpoena or other legal process
(upon receipt of which the Executive shall promptly give the Company written notice thereof in order to afford the Company an opportunity to contest such disclosure); (iii) with the Companys prior written consent; or (iv) in
confidence to an attorney for the purpose of obtaining legal advice.
Upon termination of his employment with the Company, the
Executive shall return to the Company all confidential, proprietary and non-public materials, and any other property of the Company, in his physical possession. The personal property of the Executive, including documents relating to his benefits,
compensation, tax liabilities, personal obligations (e.g., restrictive covenants), and the like, shall not be subject to return pursuant to the preceding sentence.
For purposes of this Section 5, any such matters or materials shall cease to continue to be confidential, proprietary and non-public (and thus no longer be governed by the restrictions of this
Section 5), if, when and to the extent that such matters or material become public other than by reason of the Executives failure to comply with the restrictions of this Section 5.
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6.
NON-COMPETE; NONSOLICITATION
. The Executive agrees that during his employment by
the Company and for nine months thereafter, he shall not, directly or indirectly, engage or be interested in (as owner, partner, stockholder, employee, director, officer, agent, fiduciary, consultant or otherwise), with or without compensation, any
line of business in which the Company or its affiliates is actively engaged (or, in the case of cessation of employment, in which the Company or any of its consolidated subsidiaries is then engaged at the time of such cessation); provided, however,
that the Executive may own stock or other equity securities representing up to 5% of the value and/or voting power of any publicly traded company, and provided that nothing herein shall restrict the Executive from providing services to any entity
that is in competition with the Company if the competitive business unit of such entity is not the primary business of such entity, and if the Executive is not directly involved in activities that are in competition with the Company. The Executive
further agrees that for nine months following the Termination Date, the Executive will not:
(i) directly or
indirectly, contact, solicit, or accept if offered to him, or direct any person, firm, corporation, association or other entity to contact, solicit or accept if offered, any of the Companys customers, prospective customers, or suppliers for
the purpose of providing any products and/or services that are the same as or similar to the specific products and services provided by the Company to its customers during the Term; or
(ii) solicit or accept if offered to the Executive, with or without solicitation, on his behalf or on behalf of any other person, the services of any person who is then a current employee of the Company
(or was an employee during the six-month period preceding the Executives Termination Date), to terminate employment or an engagement with the Company, nor hire or agree to hire any such current or former employee into employment with the
Executive or any company, individual or other entity; provided, however, that this subpart (ii) will not apply to applications for employment from any current or former employee of the Company in response to a general solicitation that is not
directed at any such current or former employee; and provided further that this subpart (ii) shall not be deemed to preclude any future employer of the Executive from hiring any such current or former employee of the Company without the input
or participation by the Executive.
The provisions of this Section 6 shall not apply if the termination of employment of the Executive
occurs as a result of the expiration of this Agreement at the end of its Term.
7.
NONDISPARAGEMENT
. The Executive
shall, after his employment with the Company has terminated, refrain from any action that could reasonably be expected to harm the reputation or goodwill of the Company, its subsidiaries, affiliates and any shareholder holding more than 5% of the
Companys voting securities, including, without limitation, making derogatory comments about the character or ability of the Company or its directors, officers, employees, shareholders, agents or representatives. Likewise, the Company shall use
commercially reasonable efforts to cause its officers, directors and agents to refrain from making any statements or taking any action that could reasonably be expected to harm the personal or business reputation of the Executive or of any member of
his family, including, without limitation, making or permitting others to make derogatory comments about the character or ability of the Executive. The Parties will cooperate with each other on the preparation of a press release announcing the
execution of this Agreement that is reasonably satisfactory to each of them.
8.
REMEDY FOR BREACH AND MODIFICATION
.
The Executive acknowledges that the provisions of Sections 5 and 6 of this Agreement are reasonable and necessary for the protection of the Company and that the Company may be irreparably damaged if these provisions are not specifically enforced.
Accordingly, the Executive agrees that, in addition to any other relief or remedies available to the Company, the Company shall be entitled to obtain appropriate temporary, preliminary and permanent injunctive or other equitable relief for the
purposes of restraining the Executive from any actual or threatened breach of or otherwise enforcing these provisions and no bond or security will be required in connection therewith. The Parties acknowledge that the provisions of Section 7 of
this Agreement are reasonable and necessary for the protection of their interests and that either Party may be irreparably damaged if these provisions are not specifically enforced. Accordingly, each of the Parties agrees that, in addition to any
other relief or remedies that may be available, each of them shall be entitled to obtain appropriate temporary, preliminary and permanent injunctive or other equitable relief for the purposes of restraining the other from any actual or threatened
breach of or otherwise enforcing these provisions and no bond or security will be required in connection therewith.
9.
SEVERABILITY
. If any provision of this Agreement is deemed invalid or unenforceable, such provision shall be deemed modified and limited to the extent necessary to make it valid and enforceable.
10.
COUNTERPARTS; FACSIMILES
. This Agreement may be executed in two or more counterparts, each of which shall be considered an
original, but all of which together shall constitute the same instrument. Signatures delivered by facsimile shall be effective for all purposes.
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11.
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GOVERNING LAW; JURISDICTION
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(A) This Agreement shall be governed by, and construed and interpreted in accordance with its express terms, and otherwise in accordance with the laws of the State of New York, without regard to conflicts
of laws principles.
(B) Except as otherwise specifically provided in Section 8 (relating to the ability
of a Party to seek injunctive or other equitable relief from a court), any claim or controversy arising out of or relating to this Agreement or the breach hereof shall be resolved exclusively by arbitration. A Party must file a demand for
arbitration within the same statute of limitations period applicable to the legal claim asserted. The demand for arbitration and/or statement of claim must specify (a) the factual basis on which the claim is made; (b) the statutory
provision or legal theory under which the claim is made; and (c) the nature and extent of any relief or remedy sought. The arbitration will be administered in accordance with the Employment Dispute Resolution Rules of the American Arbitration
Association (AAA), in the New York, New York metropolitan area before an experienced employment law arbitrator licensed to practice law in that jurisdiction who has been selected in accordance with such Rules. The fees of the AAA and the
arbitrator and the administrative expenses of any such arbitration proceeding will be shared equally by the Company and the Executive. Each party may be represented by counsel of its or his own choosing and at its or his own expense. The
arbitrators award will be enforceable, and a judgment may be entered thereon, in a federal or state court of competent jurisdiction in the state where the arbitration was held. The decision of the arbitrator will be final and binding.
12.
NOTICES
. Any notice or other communication made or given in connection with this Agreement may be given by
counsel, shall be in writing, and, if to a Party, shall be deemed to have been duly given when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by electronic
mail or facsimile with confirmation of transmission by the transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to a Party at his or its address or facsimile
number set forth below or at such other address or facsimile number as a Party may specify by notice to the other Party:
To
the Executive, at his principal residence as reflected in the records of the Company,
with a copy to him at his principal
business office during his employment with
the Company or at
raphael.benaroya@gmail.com
Fax No.: (201) 568-4839
With a simultaneous copy to:
Sheldon G. Nussbaum, Esq.
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, NY 10103
snussbaum@fulbright.com
Fax No. (212) 318-3400
To the Company:
One Meadowlands Plaza
8
th
Floor
East Rutherford, NJ 07073
Attention: Marc S. Goldfarb, Esq. General Counsel
MGoldfarb@KidBrands.com
Fax No.: (201) 405-7377
With a simultaneous copy to:
Edward P. Smith, Esq.
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, NY 10112
esmith@chadbourne.com
Fax No.: (212) 541-5369
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13.
ENTIRE AGREEMENT; AMENDMENT
This Agreement, including its Attachments, represents
the entire agreement between the Parties and supersedes all prior agreements between the Parties with respect to its subject matter and cannot be changed or terminated orally. In the event of a conflict between the provisions of this Agreement, on
the one hand, and the provisions of an ISO, NQO or SAR grant agreement and/or the Companys Equity Incentive Plan (with respect to awards made thereunder), on the other hand, the provisions of this Agreement shall control except to the extent
that the provisions of the ISO, NQO or SAR grant agreements and/or the Companys Equity Incentive Plan are more favorable to the Executive. Upon the Commencement Date, the Agreements between RB, Inc. and the Company dated September 11,
2011 and February 12, 2012 shall terminate.
14.
WAIVER
. The failure of any Party or person to insist upon strict
adherence to any term of this Agreement (including all attachments) on any occasion shall not be considered a waiver or deprive that Party or person of the right thereafter to insist upon strict adherence to that term or any other term of this
Agreement (including all attachments). Any waiver must be in writing and must specifically identify the provision(s) of this Agreement (including all attachments) being affected.
15.
END OF TERM
. The provisions of Sections 3, 4, 5, 6, 7, 8, 11, 12, 13 and 14 shall continue after the end of the Term.
16.
ASSIGNMENT
. Except as otherwise provided in this Section 16, this Agreement shall inure to the benefit of and
be binding upon the Parties and their respective heirs, representatives, successors and assigns. This Agreement shall not be assignable by the Executive, and shall be assignable by the Company only to any corporation or other entity that succeeds to
all, or substantially all, of the Companys business or assets, and that expressly assumes (or assumes by operation of law in any merger or consolidation) the Companys obligations hereunder; provided, however, that no such assignment
shall invalidate or negate the rights of the Executive pursuant to the provisions hereof, including, without limitation, any such rights relating to a Change of Control. In any such event, the term Company, as used herein shall mean the
Company, as defined above, and any such successor or assignee. In the event of the Executives death or a judicial determination of his incapacity, references in this Agreement (including its attachments) to the Executive shall be
deemed to include, as appropriate, his estate, heirs and/or legal representatives.
17.
CODES
. The Board has adopted a
Code of Business Conduct and Ethics and a Code of Ethics for Principal Executive Officer and Senior Financial Officers which are currently posted on the Companys website. The Executive is expected to require compliance with those codes by the
employees covered thereby and to comply himself.
18.
DEDUCTIONS
. The Company may deduct from the compensation
described herein any applicable Federal, state and/or city withholding taxes, any applicable social security contributions, and any other amounts which may be required to be deducted or withheld by the Company pursuant to any Federal, state or city
laws, rules or regulations or any election he shall have made.
19.
SECTION 409A
. Anything in this Agreement to the
contrary notwithstanding:
(A) It is intended that any amounts payable under this Agreement will either be exempt from or
comply with Section 409A and all regulations, guidance and other interpretive authority issued thereunder so as not to subject the Executive to payment of any additional tax penalty or interest imposed under Section 409A, and this
Agreement will be interpreted on a basis consistent with such intent. References to Termination Date or termination of employment herein mean a termination of employment that constitutes a Separation from Service within the meaning of
Section 409A.
(B) To the extent that the reimbursement of any expenses or the provision of any in-kind benefits under
this Agreement is subject to Section 409A, (i) the amount of such expenses eligible for reimbursement, or in-kind benefits to be provided during any one calendar year shall not affect the amount of such expenses eligible for reimbursement,
or in-kind benefits to be provided, in any other calendar year (provided that this clause (i) will not be violated with regard to expenses reimbursed under any arrangement covered by Internal Revenue Code Section 105(b) solely because such
expenses are subject to a limit related to the period the arrangement is in effect); (ii) reimbursement of any such expense shall be made by no later than December 31 of the year following the calendar year in which such expense is
incurred; and (iii) the Executives right to receive such reimbursements or in-kind benefits shall not be subject to liquidation or exchange for another benefit.
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(C) Whenever payments under this Agreement are to be made in installments, each such
installment shall be deemed to be a separate payment for purposes of Section 409A. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period
shall be within the sole discretion of the Company.
(D) To the extent any amount payable to the Executive is subject to his
entering into a release of claims with the Company and any such amount is a deferral of compensation under Section 409A and which amount could be payable to the Executive in either of two taxable years, and the timing of such payment is not
subject to terms and conditions under another plan, program or agreement of the Company that otherwise satisfies Section 409A, such payments shall be made or commence, as applicable, on the fifth business day following the date the release
condition described in Section 4(B) is satisfied, provided however, that, if the 52 day release effective period spans more than one calendar year, the payment shall be made on the first business day of the second calendar year or, if later,
the fifth business day following the date the release condition is satisfied.
20.
EXPENSES OF PREPARATION OF
AGREEMENT
. Each of the Company and the Executive shall bear its own expenses for the preparation and negotiation of this Agreement, provided that the Company shall reimburse the Executive for his legal fees with respect to this Agreement to a
maximum of $40,000.
21.
PURCHASE OF COMPANY STOCK
. During the period beginning on the
Commencement Date and ending on the 30
th
Open Window
Trading Day following the Commencement Date, the Executive may purchase from the Company up to 200,000 shares of the Common Stock (but in no event more than 1% of the outstanding number of shares at the time of purchase) at fair market value at the
time of purchase.
22.
CAPTIONS
. The captions in this Agreement are for convenience of reference only and shall not be
given any effect in the interpretation of this Agreement.
IN WITNESS WHEREOF, the Executive and the Company have signed this
Agreement as of the date first set forth above.
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KID BRANDS, INC.
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By:
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/s/ Frederick Horowitz
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Name: Frederick Horowitz
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Title: Chair,
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Compensation Committee
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THE EXECUTIVE
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/s/ Raphael Benaroya
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Raphael Benaroya
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Exhibit A
GENERAL RELEASE
1.
GENERAL RELEASE OF ALL CLAIMS
The undersigned individual (the Executive) hereby irrevocably releases and forever discharges any and all known and unknown
liabilities, debts, obligations, causes of action, demands, covenants, contracts, liens, controversies and any other claim of whatsoever kind or nature that the Executive ever had, now has or may have in the future against Kid Brands, Inc. (the
Company), its shareholders, subsidiaries, affiliates, successors, assigns, officers, directors, attorneys, fiduciaries, representatives, employees, licensees, agents and assigns (the Releasees), to the extent arising out of
or related to the performance of any services to or on behalf of the Company or the termination of those services and other than claims for payments, benefits or entitlements preserved by Section 4, and claims for indemnification, advancement
of expenses and directors and officers liability insurance coverage under Section 3(H), of the Employment Agreement dated as of March 14, 2013, between the Company and the Executive (the Employment Agreement),
including without limitation: (i) any such claims arising out of or related to any federal, state and/or local labor or civil rights laws including, without limitation, the federal Civil Rights Acts of 1866, 1871, 1964, the Equal Pay Act, the
Older Workers Benefit Protection Act, the Rehabilitation Act, the Jury Systems Improvement Act, the Uniformed Services Employment and Reemployment Rights Act, the Vietnam Era Veterans Readjustment Assistance Act, the National Labor Relations Act,
the Worker Adjustment and Retraining Notification Act, the Family and Medical Leave Act of 1993, the Employee Retirement Income Security Act of 1974, the Age Discrimination in Employment Act, the Americans with Disabilities Act of 1990, the Fair
Labor Standards Act of 1938, the New York Human Rights Law, the New Jersey Law Against Discrimination, the New Jersey wage and hour laws, and the New Jersey Conscientious Employee Protection Act, the California Fair Employment and Housing Act, the
California Labor Code; (ii) any and all other such claims arising out of or related to any contract, any and all other federal, state or local constitutions, statutes, rules, regulations or executive orders; or (iii) any and all such
claims arising from any common law right of any kind whatsoever, including, without limitation, any claims for any kind of tortious conduct, promissory or equitable estoppel, defamation, breach of the Companys policies, rules, regulations,
handbooks or manuals, breach of express or implied contract or covenants of good faith, wrongful discharge or dismissal, and/or failure to pay, in whole or part, any compensation of any kind whatsoever (collectively, Executives
Claims).
Execution of this Release by the Executive operates as a complete bar and defense against any and all of the
Executives Claims against the Company and/or the other Releasees. If the Executive should hereafter assert any Executives Claims in any action or proceeding against the Company or any of the Releasees, as applicable, in any forum, this
Release may be raised as and shall constitute a complete bar to any such action or proceeding and the Company and/or the Releasees shall be entitled to recover from the Executive all costs incurred, including attorneys fees, in defending
against any such Executives Claims.
Executive further waives and relinquishes any rights and benefits which he has or
may have under California Civil Code § 1542 to the fullest extent that he may lawfully waive all such rights and benefits pertaining to the subject matter of this Release. Civil Code § 1542 provides that a general release does not extend
to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. Executive acknowledges that he is aware that he may
later discover facts in addition to or different from those which he now knows or believes to be true with respect to the subject matter of this Release, but it is his intention to fully and finally forever settle and release any and all claims,
matters, disputes, and differences, known or unknown, suspected and unsuspected, which now exist, may later exist or may previously have existed between the parties to the extent set forth in the first paragraph hereof, and that in furtherance of
this intention this Release shall be and remain in effect as a full and complete general release to the extent set forth in the first paragraph herein, notwithstanding discovery or existence of any such additional or different facts.
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2.
OPPORTUNITY FOR REVIEW
The Executive acknowledges that he has had a reasonable opportunity to review and consider the terms of this Release for a period of at
least 45 days, that he understands and has had the opportunity to receive counsel regarding his/ her respective rights, obligations and liabilities under this Release and that to the extent that the Executive has taken less than 45 days to consider
this Release, the Executive acknowledges that he has had sufficient time to consider this Release and to consult with counsel and that he does not desire additional time to consider this Release. As long as the Executive signs and delivers this
Release within such 45 day time period, he will have seven days after such delivery to revoke his decision by delivering written notice of such revocation to the Company. If the Executive does not revoke his decision during that seven-day period,
then this Release shall become effective on the eighth day after being delivered by the Executive.
3.
BINDING EFFECT
This Release is binding on the Executives heirs and personal representative.
4.
GOVERNING LAW; MISCELLANEOUS
The provisions of Sections 9, 10, 11, 12 and 14 of the Employment Agreement shall be deemed incorporated into this Release as if fully set forth herein. Any claim or dispute arising under or relating to
this Release, or the breach, termination or validity of this Release, shall be subject to Section 11 of the Employment Agreement.
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KID BRANDS, INC.
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By:
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Name:
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Title:
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Raphael Benaroya
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ATTACHMENT 1
[ISO]
KID BRANDS, INC.
INCENTIVE STOCK OPTION AGREEMENT
Date of Grant: March , 2013
INCENTIVE STOCK OPTION AGREEMENT (the
Agreement) dated as of the date set forth above between Kid Brands, Inc., a New Jersey corporation (the Company), and Raphael Benaroya (the Grantee).
1.
Confirmation of Grant; Exercise Price
. The Company hereby confirms the grant to the Grantee, effective as of the date set forth above, of an Incentive Stock Option (the Option) with
respect to 200,000 shares of the Common Stock, stated value $0.10 per share, of the Company (Common Stock) at an exercise price of $ per share (Exercise Price). The Option granted hereunder is issued under and subject to
the terms of the Companys Equity Incentive Plan (the Plan), which is incorporated into this Agreement by reference, and the terms and provisions of this Agreement, all in accordance with the Employment Agreement entered into
between the Company and the Grantee dated March 14, 2013 (the Employment Agreement). Unless otherwise defined in this Agreement, capitalized terms used in this Agreement shall have the meanings ascribed to them in the Plan and the
Employment Agreement. If there is any conflict between the provisions of this Agreement, the Plan and the Employment Agreement, the provisions of the Employment Agreement shall control. The Option is intended to be an Incentive Stock Option within
the meaning of Section 422 of the Code, although the Company makes no representation or guarantee that the Option will qualify as an Incentive Stock Option.
2.
Vesting
. Except as provided in Section 3 below, the Option shall vest and become exercisable as follows subject to the continued employment of the Grantee on the respective vesting date:
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Date of Grant
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50,000 shares
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First anniversary of Date of Grant
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50,000 shares
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Second anniversary of Date of Grant
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50,000 shares
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Third anniversary of Date of Grant
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50,000 shares
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To the extent that the aggregate Fair Market Value (determined on the Date of Grant) of the shares of Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by the Grantee during any calendar year (under all plans of the Company and its affiliates) exceeds $100,000, the Options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be treated as Nonqualified Stock Options.
3.
Accelerated Vesting Provisions;
Termination of Option
.
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(a)
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Normal Expiration Date
. Unless an earlier expiration date is specified in this Section 3, the Option shall terminate on the tenth anniversary of the Date of
Grant and not be exercisable thereafter.
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(b)
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Termination without Cause or for Good Reason
. If the Grantees employment is terminated by the Company without Cause or by the Grantee for Good Reason (in
either case, within the meaning of and as described in the Employment Agreement), then (i) to the extent not previously vested, the Option shall become immediately vested on the date of termination of employment, and (ii) the Option shall
be exercisable for the remainder of its ten-year term.
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(A)
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Termination for Cause or without Good Reason
. In the event that, before the Option is fully vested, the Company terminates the employment of the Grantee for
Cause or the Grantee terminates his employment without Good Reason, the portion of the Option that has not yet vested shall immediately terminate and be forfeited and, to the extent not previously exercised, the vested portion of the Option will
continue to be exercisable until the earlier expiration date determined under and in accordance with the applicable terms and conditions of Section 4(A) of the Employment Agreement (as they pertain to a termination for Cause or without Good
Reason).
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(B)
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Death or Disability
. If the Grantees employment is terminated by reason of death or Disability (within the meaning of the Employment Agreement), any
previously unvested portion of the Option shall become vested on the date of termination of employment to the same extent as if the Grantee had competed an additional two years of service with the Company after the Termination Date and, to the
extent vested, shall be exercisable for one year after the Termination Date or the expiration of the ten-year term of the Option, whichever is shorter.
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4.
Transferability
. The Option shall not be transferable other than to a designated beneficiary in
the event of the Grantees death as set forth below or by will or by the laws of descent or distribution and shall be exercisable during the Grantees lifetime, subject to Section 3, only by the Grantee. The Grantee acknowledges and
agrees that a violation of this Section 4 will cause the Company irreparable injury for which adequate remedy at law is not available. Accordingly, the Grantee agrees that the Company shall be entitled to an injunction, restraining order or
other equitable relief, without the posting of any bond, to prevent the breach of this Section 4 and to enforce the terms and provisions hereof in any court of competent jurisdiction in the United States or any state thereof, in addition to any
other remedy to which it may be entitled at law or equity. If the Grantee dies before the expiration of the Option, the Grantees designated beneficiary shall succeed to the Grantees rights with respect to the Option, subject to the
provisions hereof. For this purpose, the Grantee may designate a beneficiary in writing to the Company and may change a previous designation in the same manner. If no beneficiary is designated or if no designated beneficiary shall the Grantee, then
the Grantees estate will be deemed to be his designated beneficiary.
5.
Restrictions on Exercise
. The Option may be
exercised only with respect to full shares of Common Stock. The shares covered by the Option have been registered under the Securities Act of 1933, as amended, on Form S-8 covering the Plan. The Company shall keep such registration statement
effective until all the Grantees shares of Common Stock covered thereby may be sold without restriction pursuant to Rule 144 under the Securities Act of 1933, as amended
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6.
Exercise and Tax Withholding
.
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(a)
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Exercise
. The Option may be exercised by giving written notice to the Secretary of the Company which shall specify the number of shares of Common Stock to be
purchased. The exercise price of the Option shall be paid in cash or, in the sole discretion of the Committee: (a) by the delivery of shares of Common Stock of the Company then owned by the Grantee; (b) to the extent the Option does not
qualify as an Incentive Stock Option, by directing that the Company withhold shares otherwise deliverable upon exercise to satisfy the exercise price; or (c) by delivery of a copy of irrevocable instructions to a broker to deliver promptly to
the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one of more brokerage firms. The Committee may prescribe any other methods
of paying the exercise price that it determines is consistent with applicable law and the purpose of the Plan. The Company may require the Grantee to furnish or execute such other documents as the Company shall reasonably deem necessary: (i) to
evidence such exercise; and (ii) to comply with or satisfy the requirements of the Securities Act of 1933, applicable state securities laws or any other applicable law.
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(b)
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Withholding
. If tax withholding is required on the exercise of the Option, the Grantee is required to remit to the Company an amount sufficient to satisfy any
statutory U.S. federal, state and local tax withholding requirements with respect thereto (Withholding Taxes). Such remittance may be required prior to the issuance of any shares of Common Stock in respect of the exercise of the Option
to the Grantee. Notwithstanding the foregoing, the Committee may, in its sole discretion, in lieu of all or any portion of a cash payment in respect of Withholding Taxes, permit the Grantee to elect to have the Company withhold cash or shares of
Common Stock deliverable upon exercise of the Option having an aggregate Fair Market Value, determined on the date the obligation to withhold or pay such taxes arises, equal to the amount (or portion thereof) required to be withheld. Any fraction of
a share of Common Stock which would be required to satisfy the Grantees Withholding Tax obligation shall be disregarded and the remaining number of shares shall be delivered to the Grantee.
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7.
Adjustments
.
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(a)
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The provisions of Sections 14.1 and 14.2 of the Plan are incorporated herein by reference to the extent applicable; provided that in no event will the Grantee be
treated less favorably than any other Plan participants with respect to any adjustment or non-adjustment of the Option.
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(b)
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Notwithstanding the foregoing, if a Change of Control (as defined in the Employment Agreement) occurs and the outstanding Option is not assumed or converted into
comparable awards with respect to stock of the acquiring or successor company (or parent thereof) , then, immediately prior to the Change of Control, the Option, whether or not previously vested, shall be converted into the right to receive cash or,
at the election of the Grantee, consideration in a form that is pari passu with the form of consideration payable to the Companys stockholders in exchange for their shares, in the amount, form, manner, time(s) of payment and otherwise upon the
terms and conditions set forth in Section 4(D) of the Employment Agreement. If the Option is not assumed or converted (as described above), it may be canceled at the time of the Change of Control for no consideration if the per share exercise
price of the Option is greater than such per share fair market value of the Companys Common Stock (determined with regard to all per share consideration, including the value of any contingent and/or deferred consideration payable in the Change
of Control transaction).
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(c)
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If, by reason of a change in capitalization described in this Section 7, the Grantee shall be entitled to new, additional or different shares of stock or
securities of the Company or any other corporation in respect of this Option, in the event that the Option continues, such new, additional or different shares shall thereupon be subject to all of the conditions and restrictions which were applicable
to the shares of Common Stock subject to the Option, as the case may be, prior to such change in capitalization.
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8.
No Right
to Continued Employment
. Nothing contained in this Agreement shall confer upon the Grantee any right with respect to continuance of employment or service by the Company nor limit in any way the right of the Company to terminate or modify the
employment or retention of the Grantee at any time, with or without Cause.
9.
No Rights as Stockholder
. The Grantee shall have no
voting or other rights as a stockholder of the Company with respect to the shares of Common Stock underlying the Option until the exercise of the Option and the issuance of a certificate or certificates to him for Option shares in respect thereof.
No adjustment shall be made for dividends or other rights for which the record date is prior to the issuance of such certificate or certificates.
10.
Limitations on Delivery of Certificates
. The Company shall not be required to issue or deliver a certificate for Option shares hereunder unless the issuance of such certificate complies with
all applicable legal requirements including, without limitation, compliance with the provisions of applicable state securities laws, the Securities Act of 1933, as amended (the Securities Act), the Securities Exchange Act of 1934, as
amended, and the requirements of the exchange, if any, on which the Companys shares of Common Stock may, at that time be listed.
11.
Disposition of Common Stock
. Notwithstanding anything contained in the Plan or herein to the contrary, in the event that the disposition of any shares acquired upon exercise of the Option is not covered by a then current registration
statement under the Securities Act, and is not otherwise exempt from such registration, such shares shall be restricted against transfer to the extent required by the Securities Act and Rule 144 or other regulations thereunder. The certificate
evidencing any of such shares may contain a statement placed thereon to reflect their status as restricted securities as aforesaid. Notwithstanding the foregoing, nothing contained herein shall be deemed or construed to be a waiver or release of the
Companys registration obligations pursuant to Section 3(C) of the Employment Agreement, which shall remain in effect and absolute.
12.
Miscellaneous.
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(a)
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Notices
. All notices and other communications required or permitted by this Agreement shall be in writing and shall be deemed given to a party when:
(a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; or (c) received
or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the following addresses, facsimile numbers or e-mail addresses and marked to the attention of the person (by name or title) designated below (or to
such other address, facsimile number, e-mail address or person as a party may designate by notice to the other party):
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if to the Company, to it at:
Kid Brands, Inc., One Meadowlands Plaza, 8th Floor,
East Rutherford, New Jersey 07073Attention: Corporate Secretary, Fax no.: 201-405-7377, E-mail address: mgoldfarb@kidbrands.com.
if to the Grantee, to the Grantee at his principal residence as reflected in the records of the Company, with a copy to him at his principal business office during his employment with the Company or at
raphael.benaroya@gmailcom.
Fax no.: (201) 568-4839.
A-18
Any notice received: (i) after 5:00 p.m. local time on any business day; or (ii) on a day that is
not a business day, will be deemed to have been given on the next following business day.
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(b)
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Binding Effect; Benefits
. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and
assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in
respect of any agreement or any provision contained herein.
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(c)
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Amendment
. This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Grantee and the Company.
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(d)
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Assignability
. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Grantee
without the prior written consent of the Company.
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(e)
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Applicable Law
. To the extent the federal laws of the United States do not otherwise control, this Agreement shall be governed by and construed in accordance
with the law of the State of New York, regardless of conflicts of law principles thereof.
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(f)
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Section and Other Headings
. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
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(g)
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Counterparts: Facsimiles
. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together
shall constitute one and the same instrument. Signatures by facsimile (including in Adobe Acrobat format) will be deemed to be original signatures for all purposes hereunder.
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(h)
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Severability
. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included.
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(i)
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Tax Status of the Option
. The Option is not intended to be treated as an arrangement that provides for a deferral of compensation subject to Section 409A of
the Internal Revenue Code. This Agreement shall be construed and applied so as to ensure that the Option is not covered by Section 409A. The Option Exercise Price shall never become less than the Fair Market Value of the underlying shares of
Common Stock on the date of grant.
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(j)
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Share Certificates
. All references to shares of Common Stock or certificates in this Agreement shall refer to either shares represented by certificates or
uncertificated shares, and no such reference shall be construed to require certificated shares or to grant additional or different rights or obligations as between the holders of certificated and uncertificated shares of the Company.
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IN WITNESS WHEREOF, the Company and the Grantee have executed this Incentive Stock Option Agreement as of the date first above
written.
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KID BRANDS, INC.
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By:
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Name:
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Title:
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GRANTEE
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RAPHAEL BENAROYA
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A-19
ATTACHMENT 2
[NQO]
KID BRANDS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
Date of Grant: March , 2013
NONQUALIFIED STOCK OPTION
AGREEMENT (the Agreement) dated as of the date set forth above between Kid Brands, Inc., a New Jersey corporation (the Company), and Raphael Benaroya (the Grantee).
1.
Confirmation of Grant; Exercise Price
. The Company hereby confirms the grant to the Grantee, effective as of the date set forth above, of a
Nonqualified Stock Option (the Option) with respect to 200,000 shares of the Common Stock, stated value $0.10 per share, of the Company (Common Stock) at an exercise price of $ per share (Exercise Price). The
Option granted hereunder is granted pursuant to the terms of the Employment Agreement entered into between the Company and the Grantee dated March 14, 2013 (the Employment Agreement), but outside the terms of the Companys
Equity Incentive Plan (the Plan). Unless otherwise defined in this Agreement, capitalized terms used in this Agreement shall have the meanings ascribed to them in the Employment Agreement. If there is any conflict between the provisions
of this Agreement and the Employment Agreement, the provisions of the Employment Agreement shall control. The Option is intended to be a nonqualified stock option for federal income tax purposes.
2.
Vesting; Term
. The Option is fully vested on the Date of Grant. Unless an earlier expiration date is specified in Section 3 below, the
Option shall be exercisable at any time on or prior to the tenth anniversary of the Date of Grant and not be exercisable thereafter.
3.
Termination of Employment
.
(A)
Termination without Cause or for Good Reason
. If the Grantees employment is
terminated by the Company without Cause or by the Grantee for Good Reason (in either case, within the meaning of and as described in the Employment Agreement), then the Option shall be exercisable for the remainder of its ten-year term.
(B)
Termination for Cause or without Good Reason
. If the Grantees employment is terminated by the Company without Cause or by
the Grantee for Good Reason, the Option shall continue to be exercisable until its earlier expiration date, determined under and in accordance with the applicable terms and conditions of Section 4(A) of the Employment Agreement (as they pertain
to a termination for Cause or without Good Reason).
(C)
Death or Disability
. If the Grantees employment is
terminated by reason of death or Disability (within the meaning of the Employment Agreement), the Option shall be exercisable for one year after the Termination Date or the expiration of the ten-year term of the Option, whichever is shorter.
4.
Transferability
. Except as otherwise provided herein, the Option shall not be transferable other than to a designated beneficiary
in the event of the Grantees death as set forth below or by will or by the laws of descent or distribution and shall be exercisable during the Grantees lifetime, subject to Section 3, only by the Grantee. The Grantee acknowledges
and agrees that a violation of this Section 4 will cause the Company irreparable injury for which adequate remedy at law is not available. Accordingly, the Grantee agrees that the Company shall be entitled to an injunction, restraining order or
other equitable relief, without the posting of any bond, to prevent the breach of this Section 4 and to enforce the terms and provisions hereof in any court of competent jurisdiction in the United States or any state thereof, in addition to any
other remedy to which it may be entitled at law or equity. Notwithstanding the foregoing, the Option may be transferred by a gift to a member of the Grantees Immediate Family or trusts for their benefit, subject to the restrictions set forth
herein. Immediate Family shall mean a persons spouse, parents, children, grandchildren, siblings, mothers and fathers-in-law, sons and daughters-in-law, and brothers and sisters-in-law. If the Grantee dies before the expiration of
the Option, the Grantees designated beneficiary shall succeed to the Grantees rights with respect to the Option, subject to the provisions hereof. For this purpose, the Grantee may designate a beneficiary in writing to the Company and
may change a previous designation in the same manner. If no beneficiary is designated or if no designated beneficiary shall survive the Grantee, then the Grantees estate will be deemed to be his designated beneficiary.
A-20
5.
Restrictions on Exercise
. The Option may be exercised only with respect to full shares of Common
Stock.
The Company shall register the shares covered by the Option at the Companys expense on a Form S-8 within 30 days
of the Grantees Commencement Date under the Employment Agreement and keep such registration statement effective until all the Grantees shares of Common Stock covered thereby may be sold without restriction pursuant to Rule 144 under the
Securities Act of 1933, as amended
.
6.
Exercise and Tax Withholding
.
(A)
Exercise
. The Option may be exercised by giving written notice to the Secretary of the Company which shall specify the number
of shares of Common Stock to be purchased. The exercise price of the Option shall be paid in cash or, in the sole discretion of the Committee: (a) by the delivery of shares of Common Stock of the Company then owned by the Grantee; (b) by
directing that the Company withhold shares otherwise deliverable upon exercise to satisfy the exercise price; or (c) by delivery of a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan
proceeds to pay the exercise price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. The Committee may permit any other method of paying the exercise price that it
determines is consistent with applicable law and the purpose of the Option. The Company may require the Grantee to furnish or execute such other documents as the Company shall reasonably deem necessary: (i) to evidence such exercise; and
(ii) to comply with or satisfy the requirements of the Securities Act of 1933, applicable state securities laws or any other applicable law.
(B)
Withholding
. If tax withholding is required on the exercise of the Option, the Grantee is required to remit to the Company an amount sufficient to satisfy any statutory U.S. federal, state and
local tax withholding requirements with respect thereto (Withholding Taxes). Such remittance may be required prior to the issuance of any shares of Common Stock in respect of the exercise of the Option to the Grantee. Notwithstanding the
foregoing, the Committee may, in its sole discretion, in lieu of all or any portion of a cash payment in respect of Withholding Taxes, permit the Grantee to elect to have the Company withhold cash or shares of Common Stock deliverable upon exercise
of the Option having an aggregate Fair Market Value, determined on the date the obligation to withhold or pay such taxes arises, equal to the amount (or portion thereof) required to be withheld. Any fraction of a share of Common Stock which would be
required to satisfy the Grantees Withholding Tax obligation shall be disregarded and the remaining number of shares shall be delivered to the Grantee.
7.
Adjustments
.
(A) The provisions of Sections 14.1 and 14.2 of the Plan
are incorporated herein by reference to the extent applicable; provided that in no event will the Grantee be treated less favorably than any other Plan participants with respect to any adjustment or non-adjustment of the Option.
(B) Notwithstanding the foregoing, if a Change of Control (as defined in the Employment Agreement) occurs and the outstanding Option is
not assumed or converted into comparable awards with respect to stock of the acquiring or successor company (or parent thereof), then, immediately prior to the Change of Control, the Option, whether or not previously vested, shall be converted into
the right to receive cash or, at the election of the Grantee, consideration in a form that is pari passu with the form of consideration payable to the Companys stockholders in exchange for their shares, in the amount, form, manner, time(s) of
payment and otherwise upon the terms and conditions set forth in Section 4(D) of the Employment Agreement. If the Option is not assumed or converted (as described above), it may be canceled at the time of the Change of Control for no
consideration if the per share exercise price of the Option is greater than such per share fair market value of the Companys Common Stock (determined with regard to all per share consideration, including the value of any contingent and/or
deferred consideration payable in the Change of Control transaction).
(C) If, by reason of a change in capitalization
described in this Section 7, the Grantee shall be entitled to new, additional or different shares of stock or securities of the Company or any other corporation in respect of this Option, in the event that the Option continues, such new,
additional or different shares shall thereupon be subject to all of the conditions and restrictions which were applicable to the shares of Common Stock subject to the Option, as the case may be, prior to such change in capitalization.
8.
No Right to Continued Employment
. Nothing contained in this Agreement shall confer upon the Grantee any right with respect to continuance of
employment or service by the Company nor limit in any way the right of the Company to terminate or modify the employment or retention of the Grantee at any time, with or without Cause.
A-21
9.
No Rights as Stockholder
. The Grantee shall have no voting or other rights as a stockholder of the
Company with respect to the shares of Common Stock underlying the Option until the exercise of the Option and the issuance of a certificate or certificates to him for Option shares in respect thereof. No adjustment shall be made for dividends or
other rights for which the record date is prior to the issuance of such certificate or certificates.
10.
Disposition of Common Stock
.
Notwithstanding anything contained herein to the contrary, in the event that the disposition of any shares acquired upon exercise of the Option is not covered by a then current registration statement under the Securities Act, and is not otherwise
exempt from such registration, such shares shall be restricted against transfer to the extent required by the Securities Act and Rule 144 or other regulations thereunder. The certificate evidencing any of such shares may contain a statement placed
thereon to reflect their status as restricted securities as aforesaid. Notwithstanding the foregoing, nothing contained herein shall be deemed or construed to be a waiver or release of the Companys registration obligations pursuant to
Section 3(C) of the Employment Agreement, which shall remain in effect and absolute.
11.
Limitations on Delivery of Certificates
.
The Company shall not be required to issue or deliver a certificate for Option shares hereunder unless the issuance of such certificate complies with all applicable legal requirements including, without limitation, compliance with the provisions of
applicable state securities laws, the Securities Act of 1933, as amended (the Securities Act), the Securities Exchange Act of 1934, as amended, and the requirements of the exchange, if any, on which the Companys shares of Common
Stock may, at that time be listed.
(A)
Notices
. All notices and other communications required or permitted by this Agreement shall be in writing and shall be deemed given to a party when: (a) delivered to the appropriate address by hand or by nationally recognized overnight
courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each
case to the following addresses, facsimile numbers or e-mail addresses and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number, e-mail address or person as a party may designate by
notice to the other party):
if to the Company, to it at:
Kid Brands, Inc.
One Meadowlands Plaza, 8th Floor
East Rutherford, New Jersey 07073
Attention: Corporate Secretary
Fax no.: 201-405-7377
E-mail address: mgoldfarb@kidbrands.com
if to the Grantee, to the Grantee at his
principal residence as reflected in the records of the Company, with a copy to him at his principal business office during his employment with the Company or at raphael.benaroya@gmailcom.
Fax no.: (201) 568-4839.
Any notice received: (i) after 5:00 p.m. local time on any business day; or (ii) on a day that is not a business day, will be deemed to have
been given on the next following business day.
(B)
Binding Effect; Benefits
. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their
respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
(C)
Amendment
. This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Grantee and the Company.
(D)
Assignability
. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof
shall be assignable by the Grantee without the prior written consent of the Company.
(E)
Applicable Law
. To the extent
the federal laws of the United States do not otherwise control, this Agreement shall be governed by and construed in accordance with the law of the State of New York, regardless of conflicts of law principles thereof.
(F)
Section and Other Headings
. The section and other headings contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
A-22
(G)
Counterparts: Facsimiles
. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument. Signatures by facsimile (including in Adobe Acrobat format) will be deemed to be original signatures for all
purposes hereunder.
(H)
Severability
. In the event any provision of this Agreement shall be held illegal or invalid for
any reason, the illegality or invalidity shall not affect the remaining parts of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included.
(I)
Tax Status of the Option
. The Option is not intended to be treated as an arrangement that provides for a deferral of
compensation subject to Section 409A of the Internal Revenue Code. This Agreement shall be construed and applied so as to ensure that the Option is not covered by Section 409A; and this Agreement shall be deemed amended to the extent
reasonably necessary, as determined by the Committee in its sole discretion, to exclude the Option from the application of Section 409A or to comply with Section 409A, if necessary. The Option Exercise Price shall never become less than
the Fair Market Value of the underlying shares of Common Stock on the date of grant.
(J)
Share Certificates
. All
references to shares of Common Stock or certificates in this Agreement shall refer to either shares represented by certificates or uncertificated shares, and no such reference shall be construed to require certificated shares or to grant additional
or different rights or obligations as between the holders of certificated and uncertificated shares of the Company.
IN WITNESS WHEREOF, the
Company and the Grantee have executed this Nonqualified Stock Option Agreement as of the date first above written.
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KID BRANDS, INC.
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By:
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Name:
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Title:
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GRANTEE
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RAPHAEL BENAROYA
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A-23
ATTACHMENT 3
[SAR]
KID BRANDS, INC.
STOCK APPRECIATION RIGHT AGREEMENT
Date of Grant: March , 2013
STOCK APPRECIATION RIGHT
AGREEMENT (the Agreement) dated as of the date set forth above between Kid Brands, Inc., a New Jersey corporation (the Company), and Raphael Benaroya (the Grantee).
1.
Confirmation of Grant; Exercise Price
. The Company hereby confirms the grant to the Grantee, effective as of the date set forth above, of
600,000 Stock Appreciation Rights (the SARs) at an exercise price of $ per SAR (Exercise Price). The SARs granted hereunder are granted pursuant to the terms of the Employment Agreement entered into between the Company
and the Grantee dated March 14, 2013 (the Employment Agreement), and under the terms of the Companys Equity Incentive Plan (the Plan). Unless otherwise defined in this Agreement, capitalized terms used in this
Agreement shall have the meanings ascribed to them in the Employment Agreement and the Plan. If there is any conflict between the provisions of this Agreement, the Plan and the Employment Agreement, the provisions of the Employment Agreement shall
control.
2.
Replacement Options
. Notwithstanding anything to the contrary contained herein, if and when the requisite stockholder
approval described in Section 3(C)(iii) of the Employment Agreement is obtained, any unexercised SARs will be converted into non-qualified stock options for shares of Company Common Stock on a one-for-one basis under the Plan at the Exercise
Price and upon substantially the same other terms and conditions as the Cash SARs, all in accordance with said Section 3(C)(iii), in which case all references in this Agreement to the Cash SARs or SARs will be deemed to refer to such
non-qualified stock options (Replacement Options). For the sake of clarity, if the requisite stockholder approval is not obtained, the Cash SARs will continue in full force and effect and will not be deemed to have become the Replacement
Options. If the SARs are converted into Replacement Options, the shares covered by such Options will be registered shares under the Securities Act of 1933, as amended, pursuant to the Form S-8 registration statement covering the Plan. The Company
shall keep such registration statement effective until all the Grantees shares of Common Stock covered thereby may be sold without restriction pursuant to Rule 144 under the Securities Act of 1933, as amended
.
The conversion of SARs for
Replacement Options must be for all and not a portion of the unexercised SARs, and once the SARs are converted into Replacement Options, the SARs shall no longer exist or be exercisable
3.
Vesting
. Except as provided in Section 3 below, the SARs shall vest as follows:
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24 consecutive monthly installments starting on the last day of the calendar month in which the Date of Grant occurs and,
thereafter
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15,625 SARs per month
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24 Consecutive monthly installments starting on the last day of the calendar month in which the second anniversary of the Date of
Grant occurs.
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9,375 SARs per month
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Each SAR shall be exercisable solely for cash in an amount equal to the excess of the Fair Market Value per share of
Company Common Stock on the date of exercise over the Exercise Price per share set forth in Section 1 above, unless outstanding SARs are converted into nonqualified stock options in accordance with the provisions of Section 2 above.
4.
Accelerated Vesting Provisions; Termination of SARs
.
(a)
Normal Expiration Date
. Unless an earlier expiration date is specified in this Section 3, the SARs shall terminate on the tenth anniversary of the Date of Grant and not be exercisable
thereafter.
(b)
Termination of Employment without Cause or for Good Reason
. If the Grantees employment is
terminated by the Company without Cause or by the Grantee for Good Reason (in either case, within the meaning of and as described in the Employment Agreement), then (i) any unvested SARs shall become immediately vested on the date of
termination of employment, and (ii) all outstanding SARs shall be exercisable for the remainder of their ten-year term. Notwithstanding the foregoing, if the Grantees employment is terminated without Cause prior to the first anniversary
of his Commencement Date, the Grantee will forfeit 250,000 of the SARs if (and only if) such forfeiture is mandated by the applicable provisions of Section 4(B) of the Employment Agreement.
A-24
(c)
Termination of Employment for Cause or without Good Reason
. In the event that,
before the SARs are fully vested, the Company terminates the employment of the Grantee for Cause or the Grantee terminates his employment without Good Reason, the portion of the SARs that have not yet vested shall immediately terminate and be
forfeited and, to the extent not previously exercised, the vested portion of the SARs will continue to be exercisable until the earlier expiration date determined under and in accordance with the applicable terms and conditions of Section 4(A)
of the Employment Agreement (as they pertain to a termination for Cause or without Good Reason).
(d)
Special Payment
Provision
. If the Cash SARs are not converted into Replacement Options, and if the Company fails to promptly make payment to the Grantee in cash upon exercise of all or any part of the vested Cash SARs at a time when such payment would cause an
Event of Default under the Salus Credit Agreement, the rights and obligations of the Company (or any successor or acquiring company or parent thereof) and of the Grantee shall be subject to the applicable terms and conditions of the Employment
Agreement.
(e)
Death or Disability
. If the Grantees employment is terminated by reason of death or Disability
(within the meaning of the Employment Agreement), any unvested SARs shall become vested on the date of termination of employment to the same extent as if the Grantee had competed an additional two years of service with the Company after the
Termination Date and shall be exercisable for one year after the Termination Date or the expiration of the term of the SARs, whichever is shorter. The remaining unvested SARs shall be forfeited.
5.
Transferability
. Except as otherwise provided herein, the SARs shall not be transferable other than to a designated beneficiary in the event of
the Grantees death as set forth below or by will or by the laws of descent or distribution and shall be exercisable during the Grantees lifetime, subject to Section 3, only by the Grantee. The Grantee acknowledges and agrees that a
violation of this Section 4 will cause the Company irreparable injury for which adequate remedy at law is not available. Accordingly, the Grantee agrees that the Company shall be entitled to an injunction, restraining order or other equitable
relief, without the posting of any bond, to prevent the breach of this Section 4 and to enforce the terms and provisions hereof in any court of competent jurisdiction in the United States or any state thereof, in addition to any other remedy to
which it may be entitled at law or equity. Notwithstanding the foregoing, the SARs may be transferred by a gift to a member of the Grantees Immediate Family or trusts for their benefit, subject to the restrictions set forth herein.
Immediate Family shall mean a persons spouse, parents, children, grandchildren, siblings, mothers and fathers-in-law, sons and daughters-in-law, and brothers and sisters-in-law. If the Grantee dies before the expiration of the
SARs, the Grantees designated beneficiary shall succeed to the Grantees rights with respect to the SARs, subject to the provisions hereof. For this purpose, the Grantee may designate a beneficiary in writing to the Company and may change
a previous designation in the same manner. If no beneficiary is designated or if no designated beneficiary shall survive the Grantee, then the Grantees estate will be deemed to be his designated beneficiary.
6.
Restrictions on Exercise
. The SARs may be exercised only with respect to full shares of Common Stock.
7.
Exercise and Tax Withholding
.
(a)
Exercise
. Vested SARs may be exercised in whole or in part by giving written notice to the Secretary of the Company which shall specify the number of SARs to be exercised. On or within five
days after any such exercise, the Company shall pay to the Grantee an amount equal to the number of SARs being exercised multiplied by the excess of the Fair Market Value per share of Common Stock on the exercise date (determined in accordance with
the Plan) over the Exercise Price, less applicable withholding taxes (which taxes shall be remitted by the Company to the applicable tax authority). Upon an exercise of vested Replacement Options, if any, the exercise price for the shares covered by
such exercise shall be paid in cash or, in the sole discretion of the Committee: (a) by the delivery of shares of Common Stock of the Company then owned by the Grantee; (b) by directing that the Company withhold shares otherwise
deliverable upon exercise to satisfy the exercise price; or (c) by delivery of a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. The Committee may prescribe any other method of paying the exercise price that it determines is consistent with applicable law and the
purpose of the Plan. The Company may require the Grantee to furnish or execute such other documents as the Company shall reasonably deem necessary: (i) to evidence such exercise; and (ii) to comply with or satisfy the requirements of the
Securities Act of 1933, applicable state securities laws or any other applicable law.
A-25
(b)
Withholding
. If tax withholding is required on the exercise of Replacement
Options, the Grantee is required to remit to the Company an amount sufficient to satisfy any statutory U.S. federal, state and local tax withholding requirements with respect thereto (Withholding Taxes). Such remittance may be required
prior to the issuance of any shares of Common Stock in respect of the exercise of the Replacement Option to the Grantee. Notwithstanding the foregoing, the Committee may, in its sole discretion, in lieu of all or any portion of a cash payment in
respect of Withholding Taxes, permit the Grantee to elect to have the Company withhold shares of Common Stock deliverable upon exercise of the Replacement Option having an aggregate Fair Market Value, determined on the date the obligation to
withhold or pay such taxes arises, equal to the amount (or portion thereof) required to be withheld. Any fraction of a share of Common Stock which would be required to satisfy the Grantees Withholding Tax obligation shall be disregarded and
the remaining number of shares shall be delivered to the Grantee.
8.
Adjustments
.
(a) The provisions of Sections 14.1 and 14.2 of the Plan are incorporated herein by reference to the extent applicable; provided that in
no event will the Grantee be treated less favorably than any other Plan participants with respect to any adjustment or non-adjustment of the Option.
(b) Notwithstanding the foregoing, if a Change of Control (as defined in the Employment Agreement) occurs and the outstanding SARs are not assumed or converted into comparable awards with respect to stock
of the acquiring or successor company (or parent thereof), then, immediately prior to the Change of Control, the SARs, whether or not previously vested, shall be converted into the right to receive cash or, at the election of the Grantee,
consideration in a form that is pari passu with the form of consideration payable to the Companys stockholders in exchange for their shares, in the amount, form, manner, time(s) of payment and otherwise upon the terms and conditions set forth
in Section 4(D) of the Employment Agreement. If the SARs are not assumed or converted (as described above), it may be canceled at the time of the Change of Control for no consideration if the per share exercise price of the SARs are greater
than such per share fair market value of the Companys Common Stock (determined with regard to all per share consideration, including the value of any contingent and/or deferred consideration payable in the Change of Control transaction).
(c) If, by reason of a change in capitalization described in this Section 8, the Grantee shall be entitled to new,
additional or different shares of stock or securities of the Company or any other corporation in respect of these SARs, in the event that the SARs continue, such new, additional or different shares shall thereupon be subject to all of the conditions
and restrictions which were applicable to the shares of Common Stock subject to the SARs, as the case may be, prior to such change in capitalization.
9.
No Right to Continued Employment
. Nothing contained in this Agreement shall confer upon the Grantee any right with respect to continuance of employment or service by the Company nor limit in any
way the right of the Company to terminate or modify the employment or retention of the Grantee at any time, with or without Cause.
10.
No
Rights as Stockholder
. The Grantee shall have no voting or other rights as a stockholder of the Company with respect to the shares of Common Stock underlying a Replacement Option until the exercise of the Replacement Option and the issuance of a
certificate or certificates to him for Replacement Option shares in respect thereof. No adjustment shall be made for dividends or other rights for which the record date is prior to the issuance of such certificate or certificates.
11.
Limitations on Delivery of Certificates
. The Company shall not be required to issue or deliver a certificate for Replacement Option shares
hereunder unless the issuance of such certificate complies with all applicable legal requirements including, without limitation, compliance with the provisions of applicable state securities laws, the Securities Act of 1933, as amended (the
Securities Act), the Securities Exchange Act of 1934, as amended, and the requirements of the exchange, if any, on which the Companys shares of Common Stock may, at that time be listed.
12.
Disposition of Common Stock
. Notwithstanding anything contained in the Plan or herein to the contrary, in the event that the disposition of
any shares acquired upon exercise of the Replacement Option is not covered by a then current registration statement under the Securities Act, and is not otherwise exempt from such registration, such shares shall be restricted against transfer to the
extent required by the Securities Act and Rule 144 or other regulations thereunder. The certificate evidencing any of such shares may contain a statement placed thereon to reflect their status as restricted securities as aforesaid. Notwithstanding
the foregoing, nothing contained herein shall be deemed or construed to be a waiver or release of the Companys registration obligations pursuant to Section 3(C) of the Employment Agreement, which shall remain in effect and absolute.
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(a)
Notices
. All notices and other communications required or permitted by this Agreement shall be in writing and shall be deemed given to a party when: (a) delivered to the appropriate address by hand or by nationally recognized overnight
courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each
case to the following addresses, facsimile numbers or e-mail addresses and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number, e-mail address or person as a party may designate by
notice to the other party):
if to the Company, to it at:
Kid Brands, Inc.
One Meadowlands Plaza, 8th Floor
East Rutherford, New Jersey 07073
Attention: Corporate Secretary
Fax no.: 201-405-7377
E-mail address: mgoldfarb@kidbrands.com
if to the Grantee, to the Grantee at his
principal residence as reflected in the records of the Company, with a copy to him at his principal business office during his employment with the Company or at raphael.benaroya@gmailcom.
Fax no.: (201) 568-4839.
Any notice received: (i) after 5:00 p.m. local time on any business day; or (ii) on a day that is not a business day, will be deemed to have been given on the next following business day.
(b)
Binding Effect; Benefits
. This Agreement shall be binding upon and inure to the benefit of the parties to this
Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal
or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
(c)
Amendment
. This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Grantee and the Company.
(d)
Assignability
. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Grantee without the prior written consent
of the Company.
(e)
Applicable Law
. To the extent the federal laws of the United States do not otherwise control, this
Agreement shall be governed by and construed in accordance with the law of the State of New York, regardless of conflicts of law principles thereof.
(f)
Section and Other Headings
. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
(g)
Counterparts: Facsimiles
. This Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original and all of which together shall constitute one and the same instrument. Signatures by facsimile (including in Adobe Acrobat format) will be deemed to be original signatures for all purposes hereunder.
(h)
Severability
. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included.
(i)
Tax Status of SARs
. The SARs are not intended to be treated as an arrangement that provides for a deferral of compensation
subject to Section 409A of the Internal Revenue Code. This Agreement shall be construed and applied so as to ensure that the SARs are not covered by Section 409A. The exercise price of the SARs/Replacement Option shall never become less
than the Fair Market Value of the underlying shares of Common Stock on the date of grant.
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(j)
Share Certificates
. All references to shares of Common Stock or certificates in
this Agreement shall refer to either shares represented by certificates or uncertificated shares, and no such reference shall be construed to require certificated shares or to grant additional or different rights or obligations as between the
holders of certificated and uncertificated shares of the Company.
IN WITNESS WHEREOF, the Company and the Grantee have executed this Stock
Appreciation Agreement as of the date first above written.
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KID BRANDS, INC.
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By:
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Name:
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Title:
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GRANTEE
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RAPHAEL BENAROYA
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APPENDIX B
KID BRANDS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
Date of Grant: March 15, 2013
NONQUALIFIED STOCK OPTION AGREEMENT (the Agreement) dated as of the date set forth above between Kid Brands, Inc., a New Jersey corporation
(the Company), and Raphael Benaroya (the Grantee).
Confirmation of Grant; Exercise Price
. The Company hereby
confirms the grant to the Grantee, effective as of the date set forth above, of a Nonqualified Stock Option (the Option) with respect to 200,000 shares of the Common Stock, stated value $0.10 per share, of the Company (Common
Stock) at an exercise price of $1.51 per share (Exercise Price). The Option granted hereunder is granted pursuant to the terms of the Employment Agreement entered into between the Company and the Grantee dated March 14, 2013
(the Employment Agreement), but outside the terms of the Companys Equity Incentive Plan (the Plan). Unless otherwise defined in this Agreement, capitalized terms used in this Agreement shall have the meanings ascribed
to them in the Employment Agreement. If there is any conflict between the provisions of this Agreement and the Employment Agreement, the provisions of the Employment Agreement shall control. The Option is intended to be a nonqualified stock option
for federal income tax purposes.
1.
Vesting; Term
. The Option is fully vested on the Date of Grant. Unless an earlier expiration date
is specified in Section 3 below, the Option shall be exercisable at any time on or prior to the tenth anniversary of the Date of Grant and not be exercisable thereafter.
2.
Termination of Employment
.
(a)
Termination without Cause or for Good Reason
. If
the Grantees employment is terminated by the Company without Cause or by the Grantee for Good Reason (in either case, within the meaning of and as described in the Employment Agreement), then the Option shall be exercisable for the remainder
of its ten-year term.
(b)
Termination for Cause or without Good Reason
. If the Grantees employment is terminated by the Company
without Cause or by the Grantee for Good Reason, the Option shall continue to be exercisable until its earlier expiration date, determined under and in accordance with the applicable terms and conditions of Section 4(A) of the Employment
Agreement (as they pertain to a termination for Cause or without Good Reason).
(c)
Death or Disability
. If the Grantees
employment is terminated by reason of death or Disability (within the meaning of the Employment Agreement), the Option shall be exercisable for one year after the Termination Date or the expiration of the ten-year term of the Option, whichever is
shorter.
3.
Transferability
. Except as otherwise provided herein, the Option shall not be transferable other than to a designated
beneficiary in the event of the Grantees death as set forth below or by will or by the laws of descent or distribution and shall be exercisable during the Grantees lifetime, subject to Section 3, only by the Grantee. The Grantee
acknowledges and agrees that a violation of this Section 4 will cause the Company irreparable injury for which adequate remedy at law is not available. Accordingly, the Grantee agrees that the Company shall be entitled to an injunction,
restraining order or other equitable relief, without the posting of any bond, to prevent the breach of this Section 4 and to enforce the terms and provisions hereof in any court of competent jurisdiction in the United States or any state
thereof, in addition to any other remedy to which it may be entitled at law or equity. Notwithstanding the foregoing, the Option may be transferred by a gift to a member of the Grantees Immediate Family or trusts for their benefit, subject to
the restrictions set forth herein. Immediate Family shall mean a persons spouse, parents, children, grandchildren, siblings, mothers and fathers-in-law, sons and daughters-in-law, and brothers and sisters-in-law. If the Grantee
dies before the expiration of the Option, the Grantees designated beneficiary shall succeed to the Grantees rights with respect to the Option, subject to the provisions hereof. For this purpose, the Grantee may designate a beneficiary in
writing to the Company and may change a previous designation in the same manner. If no beneficiary is designated or if no designated beneficiary shall survive the Grantee, then the Grantees estate will be deemed to be his designated
beneficiary.
B-1
4.
Restrictions on Exercise
. The Option may be exercised only with respect to full shares of Common
Stock.
The Company shall register the shares covered by the Option at the Companys expense on a Form S-8 within 30 days of the
Grantees Commencement Date under the Employment Agreement and keep such registration statement effective until all the Grantees shares of Common Stock covered thereby may be sold without restriction pursuant to Rule 144 under the
Securities Act of 1933, as amended.
5.
Exercise and Tax Withholding
.
(a)
Exercise
. The Option may be exercised by giving written notice to the Secretary of the Company which shall specify the number of shares of Common Stock to be purchased. The exercise price of
the Option shall be paid in cash or, in the sole discretion of the Committee: (a) by the delivery of shares of Common Stock of the Company then owned by the Grantee; (b) by directing that the Company withhold shares otherwise deliverable
upon exercise to satisfy the exercise price; or (c) by delivery of a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate the foregoing, the
Company may enter into agreements for coordinated procedures with one or more brokerage firms. The Committee may permit any other method of paying the exercise price that it determines is consistent with applicable law and the purpose of the Option.
The Company may require the Grantee to furnish or execute such other documents as the Company shall reasonably deem necessary: (i) to evidence such exercise; and (ii) to comply with or satisfy the requirements of the Securities Act of
1933, applicable state securities laws or any other applicable law.
(b)
Withholding
. If tax withholding is required on the exercise of
the Option, the Grantee is required to remit to the Company an amount sufficient to satisfy any statutory U.S. federal, state and local tax withholding requirements with respect thereto (Withholding Taxes). Such remittance may be
required prior to the issuance of any shares of Common Stock in respect of the exercise of the Option to the Grantee. Notwithstanding the foregoing, the Committee may, in its sole discretion, in lieu of all or any portion of a cash payment in
respect of Withholding Taxes, permit the Grantee to elect to have the Company withhold cash or shares of Common Stock deliverable upon exercise of the Option having an aggregate Fair Market Value, determined on the date the obligation to withhold or
pay such taxes arises, equal to the amount (or portion thereof) required to be withheld. Any fraction of a share of Common Stock which would be required to satisfy the Grantees Withholding Tax obligation shall be disregarded and the remaining
number of shares shall be delivered to the Grantee.
6.
Adjustments
.
(a) The provisions of Sections 14.1 and 14.2 of the Plan are incorporated herein by reference to the extent applicable; provided that in no event will the Grantee be treated less favorably than any other
Plan participants with respect to any adjustment or non-adjustment of the Option.
(b) Notwithstanding the foregoing, if a Change of Control
(as defined in the Employment Agreement) occurs and the outstanding Option is not assumed or converted into comparable awards with respect to stock of the acquiring or successor company (or parent thereof), then, immediately prior to the Change of
Control, the Option, whether or not previously vested, shall be converted into the right to receive cash or, at the election of the Grantee, consideration in a form that is pari passu with the form of consideration payable to the Companys
stockholders in exchange for their shares, in the amount, form, manner, time(s) of payment and otherwise upon the terms and conditions set forth in Section 4(D) of the Employment Agreement. If the Option is not assumed or converted (as
described above), it may be canceled at the time of the Change of Control for no consideration if the per share exercise price of the Option is greater than such per share fair market value of the Companys Common Stock (determined with regard
to all per share consideration, including the value of any contingent and/or deferred consideration payable in the Change of Control transaction).
B-2
(c) If, by reason of a change in capitalization described in this Section 7, the Grantee shall be
entitled to new, additional or different shares of stock or securities of the Company or any other corporation in respect of this Option, in the event that the Option continues, such new, additional or different shares shall thereupon be subject to
all of the conditions and restrictions which were applicable to the shares of Common Stock subject to the Option, as the case may be, prior to such change in capitalization.
7.
No Right to Continued Employment
. Nothing contained in this Agreement shall confer upon the Grantee any right with respect to continuance of employment or service by the Company nor limit in any
way the right of the Company to terminate or modify the employment or retention of the Grantee at any time, with or without Cause.
8.
No
Rights as Stockholder
. The Grantee shall have no voting or other rights as a stockholder of the Company with respect to the shares of Common Stock underlying the Option until the exercise of the Option and the issuance of a certificate or
certificates to him for Option shares in respect thereof. No adjustment shall be made for dividends or other rights for which the record date is prior to the issuance of such certificate or certificates.
9.
Disposition of Common Stock
. Notwithstanding anything contained herein to the contrary, in the event that the disposition of any shares
acquired upon exercise of the Option is not covered by a then current registration statement under the Securities Act, and is not otherwise exempt from such registration, such shares shall be restricted against transfer to the extent required by the
Securities Act and Rule 144 or other regulations thereunder. The certificate evidencing any of such shares may contain a statement placed thereon to reflect their status as restricted securities as aforesaid. Notwithstanding the foregoing, nothing
contained herein shall be deemed or construed to be a waiver or release of the Companys registration obligations pursuant to Section 3(C) of the Employment Agreement, which shall remain in effect and absolute.
10.
Limitations on Delivery of Certificates
. The Company shall not be required to issue or deliver a certificate for Option shares hereunder
unless the issuance of such certificate complies with all applicable legal requirements including, without limitation, compliance with the provisions of applicable state securities laws, the Securities Act of 1933, as amended (the Securities
Act), the Securities Exchange Act of 1934, as amended, and the requirements of the exchange, if any, on which the Companys shares of Common Stock may, at that time be listed.
(a)
Notices
. All
notices and other communications required or permitted by this Agreement shall be in writing and shall be deemed given to a party when: (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service
(costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the
following addresses, facsimile numbers or e-mail addresses and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number, e-mail address or person as a party may designate by notice to the
other party):
if to the Company, to it at:
Kid Brands, Inc.
One Meadowlands Plaza, 8th Floor
B-3
East Rutherford, New Jersey 07073
Attention: Corporate Secretary
Fax no.: 201-405-7377
E-mail address: mgoldfarb@kidbrands.com
if to
the Grantee, to the Grantee at his principal residence as reflected in the records of the Company, with a copy to him at his principal business office during his employment with the Company or at raphael.benaroya@gmailcom.
Fax no.: (201) 568-4839.
Any notice
received: (i) after 5:00 p.m. local time on any business day; or (ii) on a day that is not a business day, will be deemed to have been given on the next following business day.
(b)
Binding Effect; Benefits
. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement,
express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any
provision contained herein.
(c)
Amendment
. This Agreement may not be amended, modified or supplemented orally, but only by a written
instrument executed by the Grantee and the Company.
(d)
Assignability
. Neither this Agreement nor any right, remedy, obligation or
liability arising hereunder or by reason hereof shall be assignable by the Grantee without the prior written consent of the Company.
(e)
Applicable Law
. To the extent the federal laws of the United States do not otherwise control, this Agreement shall be governed by and construed in accordance with the law of the State of New York, regardless of conflicts of law principles
thereof.
(f)
Section and Other Headings
. The section and other headings contained in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this Agreement.
(g)
Counterparts: Facsimiles
. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument. Signatures by facsimile (including in Adobe Acrobat format) will be deemed to be original signatures
for all purposes hereunder.
(h)
Severability
. In the event any provision of this Agreement shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included.
(i)
Tax Status of the Option
. The Option is not intended to be treated as an arrangement that provides for a deferral of compensation subject to
Section 409A of the Internal Revenue Code. This Agreement shall be construed and applied so as to ensure that the Option is not covered by Section 409A; and this Agreement shall be deemed amended to the extent reasonably necessary, as
determined by the Committee in its sole discretion, to exclude the Option from the application of Section 409A or to comply with Section 409A, if necessary. The Option Exercise Price shall never become less than the Fair Market Value of
the underlying shares of Common Stock on the date of grant.
B-4
(j)
Share Certificates
. All references to shares of Common Stock or certificates in this Agreement
shall refer to either shares represented by certificates or uncertificated shares, and no such reference shall be construed to require certificated shares or to grant additional or different rights or obligations as between the holders of
certificated and uncertificated shares of the Company.
IN WITNESS WHEREOF, the Company and the Grantee have executed this Nonqualified Stock
Option Agreement as of the date first above written.
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KID BRANDS, INC.
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By:
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/s/ Frederick Horowitz
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Name: Frederick Horowitz
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Title: Chair,
Compensation Committee
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GRANTEE
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/s/ Raphael Benaroya
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RAPHAEL BENAROYA
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B-5
APPENDIX C
KID BRANDS, INC.
2013 EQUITY INCENTIVE PLAN
1. Purpose.
The Kid Brands, Inc. 2013 Equity Incentive Plan (as amended and in effect from time to time, the
Plan
) is intended
to provide incentives to allow the Company to attract, retain and motivate highly competent persons who provide services to Kid Brands, Inc., a New Jersey corporation (the
Company
), and its subsidiaries, by providing them with the
right to acquire a proprietary interest in the long-term success of the Company, and to reward their performance. The Plan shall serve as the successor to the Companys Equity Incentive Plan (the Prior Plan), and no further awards
shall be granted under the Prior Plan after the Plan Effective Date. All awards outstanding under the Prior Plan on the Plan Effective Date shall continue to be governed solely by the terms of the documents evidencing such award, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such awards.
2. Certain Definitions.
2.1 Award shall have the meaning ascribed to it in Section 5 hereof.
2.2 Award Agreement shall have the meaning ascribed to it in Section 5 hereof.
2.3 Board shall mean the Board of Directors of the Company as constituted from time to time.
2.4 Business Combination shall mean the consummation of a reorganization, merger, share exchange or consolidation, or sale of Common Stock if, in each case following such consummation, the
outstanding shares of Common Stock are converted into cash, property or securities of any issuer other than the Company. There may be successive Business Combinations.
2.5 Cause shall mean: (a) a Participants willful or grossly negligent failure to perform such Participants duties, (b) misconduct, including, but not limited to, any
unauthorized disclosure of any Participating Companys non-public information, or (c) any other conduct intended to, or which the Company determines has or is reasonably likely to, adversely affect the interests of any Participating
Company, including, but not limited to, commission of, or indictment or conviction for, or enter of a plea of nolo contendere with respect to, any criminal act;
provided
, that, notwithstanding the foregoing, if a Participant has an employment
or retention agreement with a Participating Company that defines Cause for termination, the definition of Cause used in such agreement shall be substituted for the foregoing.
2.6 Code shall mean the Internal Revenue Code of 1986, as amended.
2.7 Committee shall mean the Committee described in Section 3.1 hereof to administer the Plan.
2.8 Common Stock shall mean the common stock of the Company, $.10 stated value per share (as such stated value may be adjusted from time to time), or any securities issued in respect thereof
by the Company as a result of an event described in Section 14 hereof.
2.9 Company shall mean Kid Brands, Inc., a New Jersey
corporation.
2.10 Consultant shall mean any consultant or adviser to a Participating Company if: (i) the consultant or
adviser is a natural person, (ii) the consultant or adviser renders bona fide services to a Participating Company, and (iii) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly promote or maintain a market for the Companys securities.
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2.11 Date of Grant shall mean the date designated by the Committee as the date of an Award
hereunder, which shall not be earlier than the date the Committee authorizes (by resolution or written action) the grant of such Award, notwithstanding the date of any Award Agreement evidencing such Award. In the absence of a designated date or
fixed method of computing such date being specifically set forth in the Committees resolution, then the Date of Grant shall be the date of the Committees resolution or action. The Committee may grant Awards (other than Incentive Stock
Options) to Eligible Employees or to persons who are about to become employees of a Participating Company, to be effective and deemed to be granted on the occurrence of certain specified contingencies,
provided
that if the Award is granted to
either: (i) a person who is about to become an employee or Consultant of a Participating Company, or (ii) a person who is about to become a Non-Employee Director of the Company, such specified contingencies shall include, without
limitation, that such person becomes an employee or Consultant of a Participating Company or a member of the Board, as applicable.
2.12
Disability shall mean a physical or mental incapacity of a Participant which renders such Participant totally and permanently incapable of performing such Participants duties with a Participating Company,
provided
that proof
of disability under the federal Social Security Act shall be conclusive evidence of Disability hereunder; and
provided further
, and notwithstanding the foregoing, if a Participant has an employment or retention agreement with a Participating
Company, the definition of Disability used in such agreement, if any, shall be substituted for the foregoing. Disabled shall mean having a Disability.
2.13 Dividend Equivalent Right shall mean the right of a Participant to receive the equivalent value (either in cash or Common Stock) of all or any specified portion of any regular cash
dividends that would have been paid on a specified number of shares of Common Stock if such number of shares of Common Stock had been delivered to such Participant pursuant to such Award.
2.14 Eligible Employee shall mean any Non-Employee Director or any officer (including a director) or other employee or Consultant of any Participating Company.
2.15
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Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
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2.16 Fair Market Value of a share of Common Stock shall mean, on the date of determination: (i) if the Common Stock is then listed on either the New York Stock Exchange or another
national securities exchange, the last sale price of a share of Common Stock reflected on the consolidated tape at the close of the New York Stock Exchange or such other exchange on such date, or if there has been no sale on such day, on the first
preceding date on which a sale of Common Stock so occurred; (ii) if the Common Stock is not then listed on any such exchange, but is quoted on an over-the-counter market system then in use (OTC System), the last sale price of a
share of Common Stock at the close on such OTC System on such date, or if there has been no sale on such day on such OTC System, then the average of the bid and asked prices for a share of Common Stock on the OTC System at the end of such day
(
provided
, that if the Common Stock is then listed on: (A) more than one exchange, (B) more than one OTC system, or (C) at least one exchange and one OTC System, the principal market for such securities, as determined by the
Committee in good faith, shall be used); and (iii) if the Common Stock is not then listed on a national securities exchange or an OTC System, the amount determined by the Committee (or in accordance with procedures approved by the Committee) in
good faith.
2.17 Full Value Award means any Award that is not a Stock Option or a Stock Appreciation Right, and which is settled
by the issuance of shares of Common Stock.
2.18 Immediate Family shall mean, whether natural, adopted or step (where applicable),
a persons spouse, parents, children, grandchildren, siblings, mothers and fathers-in-law, sons and daughters-in-law, and brothers and sisters-in-law.
2.19
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Incentive Stock Option shall mean a Stock Option which complies with Section 422 of the Code.
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2.20
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Non-Employee Director shall mean any member of the Board who is not an employee of a Participating Company.
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2.21
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Nonqualified Stock Option shall mean a Stock Option that is not an Incentive Stock Option.
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2.22
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Non-Restricted Stock shall mean Common Stock awarded hereunder that is not Restricted Stock.
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2.23
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Participant shall have the meaning ascribed to it in Section 4 hereof.
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2.24 Participating Company shall mean the Company or any directly or indirectly owned subsidiary
of the Company, as applicable.
2.25
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Performance-Based Award shall have the meaning ascribed to it in Section 11.1 hereof.
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2.26
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Plan shall have the meaning ascribed to it in Section 1 hereof.
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2.27 Plan Effective Date shall mean the date upon which the Plan shall be duly approved by the Companys shareholders.
2.28
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Plan Year shall mean the calendar year.
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2.29 Restricted Stock shall mean Common Stock awarded hereunder that is subject to restrictions, including risks of forfeiture, determined by the Committee in its sole discretion, as described
in Section 9 hereof, for so long as such Common Stock remains subject to any such restrictions.
2.30 Retirement or
Retire shall mean a Participants retirement after reaching his or her normal retirement age under the Kid Brands, Inc. 401(k) Plan.
2.31 Stock Appreciation Right shall mean a right to receive a payment in cash, Common Stock or a combination thereof, as determined by the Committee, in an amount or value equal to the excess
of: (i) the Fair Market Value, or other specified valuation (which may not exceed Fair Market Value), of a specified number of shares of Common Stock on the date the right is exercised, over (ii) the Fair Market Value or other specified
amount (which may not be less than Fair Market Value) of such shares of Common Stock on the date the right is granted, all as determined by the Committee in its sole discretion;
provided, however,
that if a Stock Appreciation Right is granted
in tandem with or in substitution for a Stock Option, the designated Fair Market Value for purposes of the foregoing clause (ii) shall be the Fair Market Value on the date such Stock Option was granted.
2.32 Stock Option shall mean either an Incentive Stock Option or a Nonqualified Stock Option to purchase Common Stock granted under
Section 7 hereof.
2.33 Stock Unit shall mean a notional account representing a Participants conditional right to
receive at a future date one (1) share of Common Stock.
2.34 Ten Percent Stockholder shall mean an Eligible Employee, who
the owns (within the meaning of Section 424(d) of the Code), more than ten percent (10%) of the total combined voting power of all classes of stock or other equity interests, as applicable, in the Company or a parent or subsidiary thereof.
3. Administration.
3.1
Committee
. The Plan will be administered by a committee (the
Committee
) appointed by the Board from among its members and shall be comprised of at least two (2) members, each of whom shall be, to the extent
applicable, an outside director within the meaning of Section 162(m) of the Code. In the absence of a contrary appointment, Committee shall mean the Compensation Committee of the Board. The foregoing notwithstanding, no
action or decision of the Committee shall be void or deemed not duly authorized solely because a member of the Committee did not meet a qualification requirement set forth in this Section 3.1. The Board may perform any function of the Committee
hereunder, in which case references to the Committee shall be deemed to include the Board, except with respect to matters which under Section 162(m) of the Code, or any related rules or regulations, are required to be determined solely by such
outside directors. Notwithstanding the foregoing or the other provisions of the Plan, in administering the Plan with respect to any Awards to Non-Employee Directors, the Board shall exercise the powers of the Committee, and in
administering the Plan with respect to any Awards to the Companys executive officers (including the approval of grants hereunder made to the foregoing), the Board and the Compensation Committee shall each exercise the powers of the Committee.
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3.2
Authority
. The Committee shall, subject to the provisions of the Plan, have absolute
discretion and authority: (i) to make and administer grants under the Plan (including to determine the form, amount and other terms and conditions of Awards granted, and to waive, amend or modify conditions initially established for grants,
including to accelerate vesting and to extend or limit the exercisability of grants, except as specifically restricted by the Plan), (ii) to determine when and to which Eligible Employees Awards will be granted, (iii) to determine whether,
to what extent and under what circumstances Awards may be settled, paid or exercised in cash, Common Stock or other property, or canceled, forfeited or suspended, (iv) to determine the terms and provisions of any Award Agreement hereunder and
any amendment of such Award Agreement, and (v) to establish, amend, waive and/or rescind any rules and regulations as it deems necessary for the proper administration of the Plan, including to make such determinations and interpretations and to
take such actions in connection with the Plan and any Awards granted hereunder as it deems necessary or advisable to carry out its purposes. All determinations and interpretations made by the Committee shall be final, binding and conclusive on all
Participants and their legal representatives, including, without limitation, as to any adjustments made pursuant to Section 14. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award
Agreement in the manner and to the extent it shall deem desirable. A majority of the members of the Committee shall constitute a quorum for any meeting of the Committee and a majority of a quorum may authorize any action. Any decision or
determination reduced to writing and signed by all of the members of the Committee shall be as fully effective as if made by a majority vote at a meeting duly called and held.
3.3
Delegation and Advisers
. The Committee may delegate to one or more of its members (including to a designated subcommittee), to management of the Company, to counsel for or advisors or
consultants to the Committee or to one or more other agents appointed by the Committee, such administrative duties as the Committee may deem advisable;
provided
, such delegation does not adversely effect any exemption provided by
Rule 16b-3 under the Exchange Act, prevent an Award from qualifying as a Performance-Based Award, if so intended, or otherwise complying with applicable law. The Committee, or any person to whom it has delegated duties as aforesaid, may employ
one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan. The Committee may employ such legal or other counsel, consultants and agents as it may deem desirable for the
administration of the Plan and may rely upon any opinion or computation received from any such counsel, consultant or agent. Expenses incurred by the Committee in the engagement of such counsel, consultant or agent shall be paid by the Participating
Company whose employees have benefited from the Plan, as determined by the Committee.
3.4
Limits on Liability
.
(i) Any liability of the Company to any Participant with respect to an Award shall be based solely upon contractual obligations
created by the Plan and any Award Agreement hereunder.
(ii) Except as may be required by law, neither the Company nor
any member or former member of the Board or the Committee, nor any other person participating in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability to any
party for any action taken, or not taken, in good faith under or with respect to the Plan.
(iii) To the fullest extent
permitted by law, each member and former member of the Board and the Committee and each person to whom the Board or the Committee delegates or has delegated authority under the Plan shall be entitled to indemnification by the Company against any
claim, loss, liability, judgment, damage, cost and reasonable expense incurred by such member, former member or other person by reason of any action taken, failure to act or determination made in good faith under or with respect to the Plan.
4. Participants.
Participants in the Plan will consist of each Eligible Employee that the Committee in its sole discretion designates
at any time and from time to time to receive an Award under the Plan (
Participants
). Designation of a Participant in any Plan Year shall not require the Committee to designate such person to receive an Award in any other Plan Year
or, once designated, to receive the same type or amount of Award as granted to the Participant in any other Plan Year. The Committee shall consider such factors as it deems pertinent in selecting Participants and in determining the type and amount
of their respective Awards.
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5. Type of Awards.
Awards under the Plan may be granted in any one or a combination of:
(a) Stock Options, (b) Stock Appreciation Rights, (c) Restricted Stock, (d) Stock Units, (e) Non-Restricted Stock, and/or (f) Dividend Equivalent Rights (individually, an Award, and collectively, the
Awards
). Any Award hereunder may, as determined by the Committee in its sole discretion, constitute a Performance-Based Award, as described in Section 11 hereof. All Awards granted under the Plan shall be evidenced by a
written agreement (an
Award Agreement
) between the Company and each Participant (which need not be identical with respect to each grant or Participant) that will provide the terms and conditions, not inconsistent with the
requirements of the Plan, associated with such Awards, as determined by the Committee in its sole discretion. Award Agreements must be executed by the Company and a Participant in order for the Award to which such Award Agreement relates to be
effective with respect to such Participant. Agreements pertaining to the award of Stock Options shall designate whether the Award represented thereby is intended to be an Incentive Stock Option or a Nonqualified Stock Option. In the event that such
agreement does not contain such designation, the Stock Option shall be treated for all purposes as a Nonqualified Stock Option. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet
the applicable provisions of Section 422 of the Code. Award Agreements evidencing Awards intended to qualify as performance-based compensation (as described in Section 162(m)(4)(C) of the Code) shall contain such terms and conditions as
may be necessary to meet the applicable provisions of Section 162(m) of the Code.
6. Common Stock Available Under the Plan.
6.1
Basic Limitations
.
(i) The aggregate number of shares of Common Stock that may be subject to, delivered in connection with, and/or available for Awards under the Plan shall be 2,500,000, which shall consist, in whole or in
part, of authorized but unissued shares of Common Stock or shares of Common Stock held in treasury,
provided
that no Participant shall be granted Awards of Stock Options and/or Stock Appreciation Rights hereunder for the purchase of more than
an aggregate of 750,000 shares of Common Stock in any Plan Year. The aggregate number of shares of Common Stock as to which Incentive Stock Options may be granted from time to time shall be 500,000 shares of Common Stock. The number of shares of
Common Stock available for the grant of Awards hereunder shall be reduced in accordance with the provisions of clause (ii) below. Notwithstanding the foregoing, the number of shares of Common Stock available under the Plan shall be subject to
Section 6.2 hereof, and may be adjusted in accordance with Section 14 hereof.
(ii) In connection with the grant of
a Stock Option or other Award, the number of shares of Common Stock available for issuance under the Plan shall be reduced by the number of shares of Common Stock in respect of which such Stock Option or other Award is granted or denominated;
provided
that notwithstanding the foregoing, each Full Value Award shall reduce the total number of shares of Common Stock available for issuance under the Plan by 1.45 shares of Common Stock for each share of Common Stock in respect of which
such Full Value Award is granted.
6.2
Additional Shares
. In the event all or a portion of an Award is forfeited, terminated or
cancelled, expires, is settled for cash, or otherwise does not result in the issuance of all or a portion of the shares of Common Stock subject to the Award in connection with the exercise or settlement of such Award (
Unissued
Shares
), any such Unissued Shares shall in each case again be available for Awards under the Plan, provided, however, that to the extent any such expired, canceled, forfeited or otherwise terminated Award (or portion thereof) was a Full
Value Award (or portion thereof), the number of shares of Common Stock that may again be available for issuance in respect of Awards granted under the Plan shall increase by 1.45 shares of Common Stock for every share of Common Stock allocable to
the expired, canceled, forfeited or otherwise terminated Full Value Award. Notwithstanding the foregoing, (1) no shares of Common Stock may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to
qualify as an incentive stock option under Section 422 of the Code; and (2) shares of Common Stock withheld by, or otherwise tendered to, the Company to satisfy a Participants tax withholding obligations in connection with an Award,
and shares tendered by a Participant as partial or full payment upon exercise of a Stock Option, shall not again become available for issuance under the Plan.
6.3
Expiration of Term
. Except as otherwise determined by the Committee in its sole discretion (up to the original term of the grant), in no event shall any Award hereunder be exercisable after the
expiration of the term of such Award.
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7. Stock Options.
7.1
Generally
. Stock Options will consist of Awards from the Company that will enable the holder to purchase a number of shares of Common Stock at set terms. Subject to the last sentence of
this Section 7.1, the Committee may, from time to time in its sole discretion, grant to Eligible Employees hereunder, one or more Incentive Stock Options, Nonqualified Stock Options, or both types of Stock Options. Each Stock Option shall be
subject to such terms and conditions, including vesting, as the Committee may determine from time to time in its sole discretion, subject to the limitations set forth in the remainder of this Section 7. The Committee shall promptly notify each
Participant of the Award of a Stock Option hereunder, including the Date of Grant thereof and whether such Stock Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option (or partly of each), and an Award Agreement evidencing
the terms and conditions of such Award shall promptly be executed and delivered by and on behalf of the Company and the Participant. Notwithstanding anything to the contrary herein, no Incentive Stock Options may be granted to a Non-Employee
Director, or to an individual who is not an employee of a Participating Company on the Date of Grant.
7.2
Exercise Price
. Each
Stock Option granted hereunder shall have a per-share exercise price as the Committee may determine on the Date of Grant, but not less than 100% of the Fair Market Value of a share of Common Stock on the Date of Grant (or 110% of Fair Market Value
in the case of grant of an Incentive Stock Option to a Ten Percent Stockholder).
7.3
Manner of Exercise; Payment of Exercise
Price
. Any Option granted hereunder shall be exercised by giving written notice of exercise to the Chief Financial Officer of the Company at the Companys principal executive office, which notice shall specify the number of shares of
Common Stock to be purchased. The exercise price of a Stock Option shall be paid in cash or, in the sole discretion of the Committee, (a) by the delivery of shares of Common Stock of the Company then owned by the Participant, (b) in the
case of Nonqualified Stock Options, by directing the Company to withhold shares otherwise deliverable upon exercise to satisfy the exercise price, or (c) by delivery of a copy of irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds to pay the exercise price, as long as such transaction is not impermissible under Section 13(k) of the Exchange Act (Section 402 of the Sarbanes-Oxley Act of 2002). To facilitate the foregoing,
the Company may enter into agreements for coordinated procedures with one or more brokerage firms. The Committee may prescribe any other method of paying the exercise price that it determines to be consistent with applicable law and the purpose of
the Plan.
7.4
Exercise Period and Vesting
. Stock Options granted under the Plan shall be exercisable at such time or times and
subject to such terms and conditions, including vesting, as shall be determined by the Committee;
provided, however
, that no Stock Option shall be exercisable later than ten (10) years from the Date of Grant (5 years from the Date
of Grant in the case of an Incentive Stock Option granted to a Ten-Percent Stockholder). When a Stock Option is no longer exercisable, it shall be deemed to have lapsed and terminated. Subject to the provisions of Section 7.5, which shall
govern Awards of Stock Options to Non-Employee Directors, unless otherwise provided in the Award Agreement relating to such Stock Options, Stock Options shall be subject to the following terms and conditions:
(i)
Vesting
. Each Stock Option shall vest and become exercisable ratably over five years (20% per year), commencing on the
first anniversary of the Date of Grant, and shall continue to be exercisable for a period of 10 years from the Date of Grant.
(ii)
Retirement, Death or Disability
. Notwithstanding clause (i), if a Participant: (A) becomes Disabled, or (B) dies while employed by a Participating Company, such
Participants outstanding unexercised Stock Options, whether or not vested and/or exercisable on the date of the applicable event, shall become fully vested and exercisable, and may be exercised by such Participant, or his or her legal
representative, estate, legatee(s) or permitted transferee(s), as applicable, for up to one year after the date of such Participants Disability or death, as applicable, or the remaining term of the Option, whichever period is shorter.
Notwithstanding clause (i), if a Participant Retires, such Participants outstanding unexercised Stock Options, to the extent vested and exercisable on the date of such Retirement, may be exercised by such Participant for up to one year after
the date of such Participants Retirement or the remaining term of the Option, whichever period is shorter.
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(iii)
Other Termination
. Notwithstanding clause (i), if a Participants
employment with a Participating Company terminates for any reason other than death, Disability or Retirement, such Participants outstanding unexercised Options will be cancelled and deemed terminated as of the date of termination;
provided
, however, that if a Participants employment is terminated by a Participating Company for reasons other than Cause, his or her outstanding unexercised Options, to the extent vested and exercisable on the date of termination, may
be exercised within 90 days after such termination, or the remaining term of the Option, whichever period is shorter.
7.5
Grants to
Non-Employee Directors
.
(i) Except as specified in this Section 7.5, Stock Options granted to Non-Employee
Directors shall be treated for all purposes like any other Stock Option granted under the Plan.
(ii) Unless otherwise
provided in the Award Agreement relating to such Award, each Stock Option granted to a Non-Employee Director hereunder shall vest and become exercisable ratably over five years (20% per year), commencing on the first anniversary of the Date of
Grant, and shall continue to be exercisable for a period of 10 years from the Date of Grant.
(iii) Notwithstanding
clause (ii) above, unless otherwise provided in the Award Agreement relating to such Award: (1) if a Non-Employee Director ceases to serve as a member of the Board for any reason other than such directors death or Disability, such
Non- Employee Directors non-vested Stock Options shall immediately terminate, and such Non-Employee Directors vested Stock Options shall remain exercisable for 90 days after the applicable termination date, or the remaining term of
the Stock Option, whichever period is shorter; and (2) in the event of the death or Disability of a Non-Employee Director while serving as a member of the Board, any of such Non-Employee Directors outstanding unexercised Options existing
on the date such service terminated, whether or not vested and/or exercisable on the date such service was terminated, shall become fully vested and exercisable, and may be exercised by such Non-Employee Directors estate, legatee(s), legal
representative or permitted transferee(s) for up to one year after such Non-Employee Directors death or final determination of Disability, as applicable, or the remaining term of the Stock Option, whichever period is shorter.
7.6
Limitations on Incentive Stock Options
. The terms and conditions of any Award of Incentive Stock Options shall be subject to, and shall
comply with, the applicable provisions of Sections 422 and 424 of the Code and any applicable rules or regulations promulgated thereunder, including the requirement that the aggregate Fair Market Value (determined as of the Date of Grant of the
Stock Option) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year (under all option plans of the Company and of any parent or subsidiary corporation, as
defined in Sections 424(e) and (f) of the Code) shall not exceed one hundred thousand dollars ($100,000);
provided
, however, that if such $100,000 limit is exceeded, the excess Incentive Stock Options shall be treated as Nonqualified
Stock Options.
8. Stock Appreciation Rights.
8.1
Generally
. The Committee may, from time to time in its sole discretion, grant Stock Appreciation Rights to Eligible Employees hereunder. Stock Appreciation Rights may be granted alone or
in tandem with Stock Options. Each Stock Appreciation Right shall be subject to such terms and conditions, including vesting, as the Committee shall determine in its sole discretion;
provided
, however, that if a Stock Appreciation Right is
granted in tandem with a Stock Option, the Stock Appreciation Right shall become exercisable and shall expire in the same manner as the corresponding Stock Option, unless otherwise determined by the Committee, and
provided further
, that if a
Stock Appreciation Right is granted in tandem with an Incentive Stock Option, such Stock Appreciation Right shall be exercisable only if the Fair Market Value of a share of Common Stock on the date of exercise exceeds the exercise price of the
related Incentive Stock Option. The Committee shall promptly notify each Participant of the Award of a Stock Appreciation Right, including the Date of Grant thereof, and an Award Agreement evidencing the terms and conditions of such Award shall
promptly be executed and delivered by and on behalf of the Company and the Participant.
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8.2
Exercise Period
. Stock Appreciation Rights granted under the Plan shall be exercisable at
such time or times as shall be determined by the Committee in its sole discretion;
provided, however
, that no Stock Appreciation Rights shall be exercisable later than ten (10) years after the Date of Grant; and
provided further,
that the time of exercise of any Stock Appreciation Right intended to be a 409A Award (as defined in Section 19.2 hereof) shall comply with applicable requirements of Code Section 409A. All Stock Appreciation Rights shall terminate at
such earlier times and upon such conditions or circumstances determined by the Committee in its sole discretion.
9. Restricted Stock
Awards.
9.1
Generally
. The Committee may, from time to time in its sole discretion, grant Restricted Stock Awards to
Eligible Employees hereunder, with or without requiring cash or other payment therefor in whole or in part. The Committee shall promptly notify each Participant of a Restricted Stock Award, including the Date of Grant thereof, and an Award Agreement
evidencing the terms and conditions of such Award shall promptly be executed and delivered by and on behalf of the Company and the Participant.
9.2
Payment of the Purchase Price
. If the Restricted Stock Award requires payment therefor, such payment may be made in any manner
authorized by the Committee, including any manner permitted for the payment of the exercise price of a Stock Option hereunder.
9.3
Terms
. Awards of Restricted Stock may be subject to such restrictions, terms and conditions as the Committee determines in its sole discretion, including, without limitation, vesting conditions. The Committee may at any time, in its
sole discretion, accelerate the time at which any or all restrictions will lapse or remove any or all of such restrictions with respect to any Award of Restricted Stock granted hereunder. Notwithstanding the foregoing, unless otherwise provided in
the Award Agreement relating to such Award, the following terms shall apply to Awards of Restricted Stock hereunder:
(i) except as provided in clauses (ii) and (iii) below, Awards of Restricted Stock hereunder shall vest ratably over five
years (20% per year), beginning on the first anniversary of the Date of Grant, and upon vesting, shall not be subject to any further restrictions hereunder;
(ii) except as provided in clause (iii) below, upon a Participants termination of employment for any reason (not including an authorized leave of absence), any non-vested Restricted Stock
shall be immediately forfeited and all rights of a Participant to such forfeited Restricted Stock shall terminate without payment of consideration by the Company;
(iii) in the event that the employment of a Participant is terminated as a result of his or her death or Disability prior to the lapse of all or part of the restrictions on such Participants
Restricted Stock, all restrictions on the Participants Restricted Stock shall lapse on the date of Participants death or Disability, as applicable.
9.4
Manner of Issuance
. Shares of Restricted Stock granted pursuant to an Award hereunder shall be issued in the name of the Participant as soon as reasonably practicable after the Award is
granted;
provided
that prior to such issuance, the Participant has executed the applicable Award Agreement pertaining thereto, has delivered a duly signed stock power, endorsed in blank, relating to the Common Stock covered by such an Award,
and, in the sole discretion of the Committee, has executed an escrow agreement and any other documents which the Committee may require as a condition to the issuance of such shares. At the sole discretion of the Committee, shares issued in
connection with a Restricted Stock Award shall be deposited together with the stock powers with an escrow agent (which may be the Company) designated by the Committee, until such time as all restrictions with respect thereto lapse, unless such
shares are earlier forfeited in accordance with the terms of such Award. The Committee may also require that the stock certificates evidencing such shares (or book entries) bear restrictive legends until the restrictions thereon shall have lapsed.
9.5
Rights as a Stockholder
. The Participant shall have, with respect to the shares of Common Stock subject to a Restricted
Stock Award, all of the rights of a holder of shares of Common Stock of the Company, including the right to vote the shares, except as otherwise provided in the Award Agreement relating to such Award.
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9.6
Transfer Restrictions
. None of the Restricted Stock awarded hereunder may be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of during the period in which the restrictions on such Restricted Stock are in effect.
9.7
Section 83(b) Election
. Any Participant who makes an election under Section 83(b) of the Code, or any successor section thereto, shall deliver a copy of such election to the Company
promptly after filing such election with the Internal Revenue Service.
10. Stock Units and Dividend Equivalent Rights.
10.1
Stock Units
.
The Committee may, from time to time in its sole discretion, grant Stock Units to Eligible Employees hereunder. Stock
Units may be subject to such terms and conditions including, but not limited to, vesting, acceleration of vesting and forfeiture as the Committee determines in its sole discretion. The Committee shall designate Awards of Stock Units as 409A Awards
or Non-409A Awards (each as defined in Section 19.2 hereof), and may include elective deferral features in its sole discretion. Shares of Common Stock issued pursuant to this Section 10.1 may be issued with or without other payments or
such other consideration as may be determined by the Committee in its sole discretion. The Committee shall promptly notify each Participant of the Award of Stock Units, including the Date of Grant thereof, and an Award Agreement evidencing the terms
and conditions of such Award shall promptly be executed and delivered by and on behalf of the Company and the Participant. Stock Units may be settled in the sole discretion of the Committee: (i) by the distribution to the Participant of shares
of Common Stock equal to his or her Stock Units, (ii) by a lump sum payment to the Participant of an amount in cash equal to the Fair Market Value of the shares of Common Stock which would otherwise be distributed to the Participant, or
(iii) by a combination of cash and Common Stock.
10.2
Dividend Equivalent Rights
. The Committee may from time to time in its sole
discretion grant Dividend Equivalent Rights to Eligible Employees hereunder. Dividend Equivalent Rights may be granted in tandem with another Award or as a separate Award. The terms and conditions applicable to each Dividend Equivalent Right,
including vesting, risks of forfeiture and other restrictions, shall be determined by the Committee in its sole discretion. Amounts payable in respect of Dividend Equivalent Rights may be paid currently or withheld until the lapsing of any
applicable restrictions thereon or until the vesting, exercise, payment, settlement or other lapse of restrictions on the Award to which the Dividend Equivalent Rights relate (the
Trigger Date
). Any amounts payable in respect of
Dividend Equivalent Rights shall be paid to the applicable Participant within two and one-half months of the Trigger Date. In the event that the amounts payable in respect of Dividend Equivalent Rights are withheld, the Committee shall determine
whether such withheld amounts are to be held in cash, reinvested in Common Stock or deemed (notionally) to be reinvested in Common Stock. If held in cash, the Committee, in its sole discretion, shall determine the rate of interest, if any, to
be credited on such amount at the end of each year (or portion thereof). Dividend Equivalent Rights may be settled in cash, shares of Common Stock, or a combination thereof, in a single installment or multiple installments, as determined by the
Committee in its sole discretion. The Committee shall promptly notify each Participant of the Award of Dividend Equivalent Rights, including the Date of Grant thereof, and an Award Agreement evidencing the terms and conditions of such Award shall
promptly be executed and delivered by and on behalf of the Company and the Participant.
11. Performance-Based Awards.
11.1
Generally
. Any Awards granted under the Plan may be granted in a manner such that the Awards qualify for the performance-based
compensation exception of Section 162(m) of the Code (
Performance-Based Awards
). As determined by the Committee in its sole discretion, either the granting or vesting of such Performance-Based Awards shall be based on
achievement of performance objectives determined in accordance with one or more of the performance criteria described below that apply to the individual Participant, one or more business units or the Company as a whole. Performance-Based Awards may
be made in the form of cash awards that otherwise comply with the requirements of this Section 11.
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11.2
Performance Criteria
. The performance criteria shall be as follows, individually or in
combination: (a) total stockholder return; (b) such total stockholder return as compared to the total return (on a comparable basis) of a publicly available index such as, but not limited to, the Standard & Poors 500 or the
Nasdaq-U.S. Index; (c) stock price; (d) net income or net operating income; (e) pre-tax earnings or profits; (f) EBIT or EBITDA, or Adjusted EBIT or EBITDA (net income before net interest expense, provision for income taxes,
depreciation, amortization and other non-cash, extraordinary and/or special items); (g) pre-tax operating earnings after interest expense and before bonuses, service fees, and extraordinary or special items; (h) operating margin;
(i) earnings per share or growth in earnings per share; (j) return on equity; (k) return on assets or capital; (l) return on investment; (m) adjusted net income; (n) working capital; (o) sales; (p) gross or
net revenues or changes in gross or net revenues; (q) cost of capital; (r) debt reduction; and/or (s) satisfaction of business expansion goals or goals relating to acquisitions or divestitures. Performance criteria may be measured on
a consolidated basis, by department, group or business unit, or for specified subsidiaries of the Company. The targeted level or levels of performance with respect to such performance criteria may be established at such levels and in such terms as
the Committee may determine, in its sole discretion, including in absolute terms, as a ratio, as a goal relative to performance in prior periods, or as a goal compared to the performance of one or more comparable companies or an index covering
multiple companies.
11.3
Establishment of Performance Goals
. With respect to Performance-Based Awards, the Committee shall
establish in writing: (i) the performance goals applicable to a specified performance period, and such performance goals shall state, in terms of an objective formula or standard, the method for computing the amount of compensation payable to
the Participant if such performance goals are obtained, and (ii) the individual employees or class of employees to which such performance goals apply;
provided, however
, that such performance goals shall be established in writing no
later than ninety (90) days after the commencement of the applicable performance period (but in no event after twenty-five percent (25%) of such performance period has elapsed). Performance periods may be of any length, as specified by the
Committee. Performance criteria and achievement of performance goals shall be determined in accordance with generally accepted accounting principles to the extent applicable.
11.4
Certification of Performance
. No Performance-Based Awards shall be payable to or vest with respect to, as the case may be, any Participant for a given period until the Committee has
certified in writing that the performance goals (and any other material terms) applicable to such period have been satisfied.
11.5
Modification of Performance-Based Awards
. With respect to any Awards intended to qualify as Performance-Based Awards, the Committee may, in its sole discretion, within the time and subject to the other limitations prescribed by
Section 162(m) of the Code, adjust or modify the calculation of performance goals in order to prevent the dilution or enlargement of the rights of any Participant with respect to such Performance-Based Award: (a) in the event of, or in
anticipation of, any unusual or extraordinary corporate item, transaction, event or development, (b) in recognition of, or in anticipation of, any other unusual or nonrecurring event affecting the Company or the financial statements of the
Company, or (c) in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions. Notwithstanding the foregoing, with respect to any Awards intended to qualify as Performance-Based
Awards, after establishment of a performance goal, the Committee shall not revise such performance goal or increase the amount of compensation payable thereunder (as determined in accordance with Section 162(m) of the Code) upon the attainment
of such performance goal, or otherwise exercise discretion to increase any amount payable in respect of a Performance-Based Award;
provided
that the Committee may reduce or eliminate the number of shares of Common Stock or cash granted,
vested or payable upon the attainment of such performance goal. Notwithstanding the foregoing, no Eligible Employee who is an employee of the Company or any Participating Company may receive a Performance-Based Award in excess of $2.0 million during
any three (3) year period.
12. Awards of Non-Restricted Stock.
The Committee may from time to time in its sole discretion grant
Awards of Non-Restricted Stock to Eligible Employees hereunder. The Committee shall determine in its sole discretion the terms and conditions of such Awards. The Committee may, in its sole discretion, direct the Company to issue shares of Common
Stock subject to restrictive legends and/or stop transfer instructions which are consistent with the terms and conditions of the Award of Non-Restricted Stock. The Committee shall promptly notify each Participant of the Award of Non-Restricted
Stock, including the Date of Grant thereof, and an Award Agreement evidencing the terms and conditions of such Award shall promptly be executed and delivered by and on behalf of the Company and the Participant.
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13. Foreign Laws.
The Committee may grant Awards to Eligible Employees who are subject to the tax and
other laws of nations other than the United States, which Awards may have terms and conditions determined by the Committee to be necessary to comply with applicable foreign laws and local compensation customs and practices, and that may differ from
those applicable to other Participants,
provided
that no modification pursuant to this Section 13 shall be made to increase the share limitations set forth in Section 6 hereof. The Committee may take any action which it deems
advisable to obtain approval of such Awards by the appropriate foreign governmental entity;
provided, however
, that no such Awards may be granted pursuant to this Section 13 and no action may be taken which would result in a violation of
the Code, Exchange Act or any other applicable law, or that would require prior stockholder approval (until such approval is obtained).
14. Dilution and Other Adjustments.
(i) Awards granted under the Plan and any Award Agreements, the maximum number of shares of Common Stock deliverable under all
Awards and with respect to Incentive Stock Options stated in Section 6.1, and/or the maximum number of shares of Common Stock with respect to which Stock Options and/or Stock Appreciation Rights may be granted to or measured with respect to any
one person during any period stated in Section 6.1, shall be subject to adjustment or substitution, as determined by the Committee in its sole discretion, as to the number, price or kind of a share of Common Stock or other consideration subject
to such Awards, and any and all other matters deemed appropriate by the Committee, including, without limitation, accelerating the vesting, settlement and/or exercise period pertaining to any Award hereunder, or as otherwise determined by the
Committee to be equitable, in the event of changes in the outstanding Common Stock or in the capital structure of the Company by reason of a dissolution or liquidation of the Company, sale of all or substantially all of the assets of the Company,
mergers, consolidations or combinations with or into any other entity if the Company is the surviving entity, stock or extraordinary dividends, stock splits, reverse stock splits, stock combinations, rights offerings, statutory share exchanges
involving capital stock of the Company, reorganizations, recapitalizations, reclassifications, exchanges, spin-offs, dividends in kind, or other relevant changes in capitalization.
(ii) Outstanding Awards and Award Agreements, and the maximum number of shares of Common Stock with respect to which Stock Options
and/or Stock Appreciation Rights may be granted to or measured with respect to any one person during any period stated in Section 6.1, shall be subject to adjustment or substitution, as determined by the Committee in its sole discretion, as to
the number, price or kind of a share of Common Stock or other consideration subject to such Awards, and any and all other matters deemed appropriate by the Committee, including, without limitation, accelerating the vesting, settlement and/or
exercise period pertaining to any Award hereunder, or as otherwise determined by the Committee to be equitable, in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution
or enlargement of the rights granted to, or available for, Participants, or which otherwise warrants equitable adjustment in the sole discretion of the Committee because it interferes with the intended operation of the Plan. The foregoing
notwithstanding, unless the Committee otherwise determines, no such adjustment shall be made to a Stock Option which shall, within the meaning of Sections 424 and 409A of the Code, as applicable, constitute such a modification, extension or renewal
of a Stock Option as to cause it to be considered the grant of a new option. Any adjustments under this Section 14 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange
Act. Further, with respect to Awards intended to qualify as performance-based compensation under Section 162(m) of the Code, such adjustments or substitutions shall be made only to the extent that the Committee determines that such
adjustments or substitutions may be made without causing the Company to be denied a tax deduction on account of Section 162(m) of the Code. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such
adjustment shall be conclusive and binding for all purposes.
14.2
Business Combinations
. In connection with a Business Combination,
the Committee, in its sole discretion, may provide for one or more of the following: (i) the continuation of the Plan and/or the assumption of the Awards granted hereunder by a successor corporation (or a parent or subsidiary thereof),
(ii) the substitution for such Awards of new awards covering the stock of a successor corporation (or a parent or subsidiary thereof), with appropriate adjustments as to the number and kind of shares and exercise prices, (iii) upon
10 days advance notice (or such shorter notice period as may be deemed necessary by the Committee under the specified circumstances of the Business Combination) from the Committee to the affected Participants, the acceleration of the
vesting, settlement and/or exercise period pertaining to any Award hereunder, or (iv) upon 10 days advance notice (or such shorter notice period as may be deemed necessary by the Committee under the specified circumstances of the
Business Combination) from the Committee to the affected Participants, (x) the cancellation of any outstanding Awards that are then exercisable or vested and the payment to the holders thereof, in cash or stock, or any combination thereof, of
the value of such Awards based upon the price per share of stock received or to be received by other stockholders of the Company in connection with the Business Combination, and (y) the cancellation of any Awards that are not then exercisable
or vested. In the event of any continuation, assumption or substitution contemplated by the foregoing clauses, the Plan and/or such Awards shall continue in the manner and under the terms so provided and in a manner consistent with Sections 409A and
424 of the Code, as applicable.
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14.3
Carryover Restrictions
. If, by reason of a change in capitalization described in this
Section 14, a Participant shall be entitled to new, additional or different shares of stock or securities of the Company or any other corporation in respect of his or her Award, such new, additional or different shares shall thereupon be
subject to all of the conditions, restrictions and performance criteria which were applicable to the shares of Common Stock subject to the Award, as the case may be, prior to such change in capitalization, except to the extent rendered inoperable by
virtue of the applicable transaction.
15. Nontransferability.
Each Award granted under the Plan to a Participant (other than
Non-Restricted Stock Awards and Restricted Stock Awards with respect to which all restrictions have lapsed) shall not be transferable otherwise than by will or the laws of descent and distribution, and shall be exercisable, during the
Participants lifetime, only by the Participant. Notwithstanding the foregoing, the Committee in its sole discretion may permit the transferability of an Award (other than an Incentive Stock Option) by a Participant to a member of the
Participants Immediate Family or trusts for the benefit of such persons, or partnerships, corporations, limited liability companies or other entities owned solely by such persons, including trusts for such persons, subject to any restriction
included in the grant of the Award.
16. Other Provisions.
The grant of any Award under the Plan may also be subject to such other
provisions (whether or not applicable to the Award granted to any other Participant) as the Committee in its sole discretion determines appropriate, including, without limitation, provisions for the forfeiture of, or restrictions on resale or other
disposition of, Common Stock acquired under any form of Award, provisions for the acceleration of exercisability or vesting of Awards (subject to Section 19.1), performance conditions other than those imposed under Section 11, provisions
to comply with federal and state securities laws, or conditions as to the Participants employment in addition to those specifically provided for under the Plan.
17. Withholding.
If a Participating Company is for any reason required to withhold any amount under federal, state or local tax law in connection with any Award (Withholding Taxes), the
Participant or other recipient shall be required to pay such Participating Company the amount of any such Withholding Taxes. The applicable Participating Company shall have the right to require the payment of any such Withholding Taxes before any
Common Stock is issued pursuant to any Award hereunder or any restrictions pertaining to any Award granted hereunder are removed. The Committee may, in its sole discretion, in lieu of all or any portion of a cash payment regarding such Withholding
Taxes, permit a Participant to elect to have the Company withhold shares of Common Stock (or allow the return of shares of Common Stock) having a Fair Market Value equal to the amount (or portion thereof) required to be withheld.
18. Employment Rights.
Nothing in the Plan or in any Award Agreement hereunder shall confer upon any Participant the right to continue in the
employment or service of any Participating Company or affect any right which such Participating Company may have to terminate or modify the employment or retention of the Participant with or without Cause.
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19. Tax Compliance.
19.1
Certain Limitations on Awards to Ensure Compliance with Section 409A
. For purposes of the Plan, references to an Award term or event (including any authority or right of the
Company or a Participant) being permitted under Section 409A shall mean, for a 409A Award, that the term or event is intended not to cause the Participant to be liable for payment of interest or a tax penalty under Section 409A
and, for a Non-409A Award, that the term or event is intended to cause the Award to be treated as not subject to Section 409A. In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on
a Participant by Section 409A of the Code or damages for failing to comply with or be exempt from Section 409A. Notwithstanding any other provisions of the Plan, the terms of any 409A Award and any Non-409A Award, including any authority
of the Company and rights of the Participant with respect to the Award, that do not, in the Committees view, either comply with or satisfy the requirements to be exempt from, Section 409A, shall be modified, and limited to the extent
necessary and permissible to either comply with or be exempt from Section 409A, or be interpreted in a manner consistent with the requirements necessary for compliance with or exemption from Section 409A, as applicable. For this purpose,
notwithstanding any other provisions of the Plan, the Company shall have no authority to accelerate distributions relating to 409A Awards that would not comply with Section 409A, any distribution subject to Section 409A(a)(2)(A)(i)
(separation from service) to a key employee as defined under Section 409A(a)(2)(B)(i) shall not occur earlier than the earliest time permitted under Section 409A(a)(2)(B)(i), any distribution triggered by a Participants
termination of employment and intended to qualify under Section 409A(a)(2)(A)(i) shall be made only at such time as the Participant has had a separation from service within the meaning of Section 409A(a)(2)(A)(i), and any
authorization of payment of cash to settle a Non-409A Award shall apply only to the extent permitted under Section 409A for such Award.
19.2
Certain Terms Relating to Code Section 409A
.
409A Awards
means Awards that are intended to be subject to Code
Section 409A and the regulations thereunder.
Non-409A Awards
means Awards other than 409A Awards (including those exempt as short-term deferrals under Treasury Regulation § 1.409A-1(b)(4) and any successor
regulation). Although the Committee retains authority under the Plan to grant Awards on terms that will qualify those Awards as 409A Awards, all Awards hereunder are intended to be Non-409A Awards unless otherwise expressly specified by the
Committee.
19.3
Unfunded Plan
. Participants shall have no right, title, or interest whatsoever in or to any investments which
the Company may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between
the Company and any Participant, beneficiary, legal representative or any other person. To the extent that any person acquires rights from the Company under the Plan, such rights shall be no greater than the rights of an unsecured general creditor
of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as
expressly set forth in the Plan. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended.
20. No Fractional Shares.
No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, or Awards, or other property shall be issued or paid in lieu of fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. In the absence of an alternate
determination by the Committee, the number of shares of Common Stock subject to any Award shall be rounded down to the next whole number, without any payment in respect of eliminated fractional shares.
21. Additional Limitations on Payment, Settlement or Exercise of an Award
. Participants may be required to comply with any timing or other
restrictions with respect to the payment, settlement or exercise of an Award, including a window-period limitation, as may be imposed in the sole discretion of the Committee.
22. Duration, Amendment and Termination.
22.1
Amendment, Modification and Termination
of the Plan
. Except as provided in this Section 22.1, the Committee may at any time: (i) amend, modify, terminate or suspend the Plan, and (ii) alter or amend any or all Award Agreements hereunder to the extent permitted by the
Plan and applicable law. Amendments of the Plan are subject to approval of the stockholders of the Company only as required by applicable law, regulation or stock exchange requirement, or if the amendment has the effect of increasing the total
number of shares available under the Plan, except as contemplated by Section 14. Further, no amendment to the Plan or an Award Agreement which reduces a Stock Option or SAR exercise price below that provided for in Section 7 shall be
effective unless it is approved by the stockholders of the Company. No termination, suspension, modification or amendment of the Plan or any Award Agreement hereunder shall impair or adversely affect any right acquired by any Participant or such
Participants permitted transferee under an Award granted before the date of termination, suspension, modification or amendment unless the consent of such Participant or transferee is obtained. It is conclusively presumed that any adjustment
for changes in capitalization provided for in Section 14 hereof does not adversely affect any right of a Participant or other person under an Award.
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22.2
Duration of the Plan
. The Plan shall remain in effect until all stock
subject to it shall be distributed or all Awards have expired or lapsed, whichever is latest to occur, or the Plan is terminated pursuant to Section 22.1 hereof. No Award shall be granted under the Plan after the fifth (5
th
) anniversary of the Plan Effective Date, but Awards outstanding
at that time shall remain outstanding and governed by the terms of the Plan.
23. Other Benefit and Compensation Programs.
23.1
Non-Exclusivity of Plan
. The adoption of the Plan by the shareholders of the Company shall not be construed as amending, modifying or
rescinding any previously approved incentive arrangement or as creating any limitations on the power of the Board or the Committee, as applicable, to adopt such other incentive arrangements as it may deem desirable, including, without limitation,
the granting of stock options otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.
23.2
Compensation Under Other Plans
. Payments and other benefits received by a Participant pursuant to an Award shall not be deemed a part of a Participants regular, recurring compensation
for purposes of any termination, indemnity or severance pay laws and shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan, contract or similar arrangement provided by any Participating
Company, unless expressly so provided by such other plan, contract or arrangement or the Committee determines in its sole discretion that an Award or portion of an Award should be so included.
23.3
Conflicts with Other Agreements
. Notwithstanding anything herein to the contrary, in the event that any provision of the Plan, relevant Award
agreement, or decision of the Committee hereunder conflicts with the provisions of any written agreement between a Participating Company and a Participant in a manner which adversely affects the rights of any Participant under such agreement, the
provisions of such agreement shall control.
24. Compliance With Applicable Legal Requirements.
24.1
Registration or Approval
. The Company shall not be required to issue or deliver shares distributable pursuant to the Plan unless such
issuance and/or delivery complies with all applicable legal requirements including, without limitation, compliance with the provisions of applicable state securities laws, the Securities Act of 1933, as amended (the Securities Act), the
Exchange Act, and the requirements of the exchanges, if any, on which the Common Stock may, at that time, be listed.
24.2
Restrictions on
Transfer
. Notwithstanding anything contained in the Plan or any Award Agreement to the contrary, in the event that the disposition of shares of Common Stock acquired pursuant to the Plan is not covered by a then-current registration statement
under the Securities Act, and is not otherwise exempt from such registration, such shares shall be restricted against transfer to the extent required by the Securities Act and Rule 144 or other applicable regulations thereunder. Any
certificates (or book entries) evidencing any of such shares shall be appropriately amended or have an appropriate legend placed thereon to reflect their status as restricted securities as aforesaid.
25. Mitigation of Excise Tax.
Unless otherwise provided for in the Award Agreement or in any other agreement between the Company (or a
Participating Company) and the Participant, if any payment or right accruing to a Participant under this Plan (without the application of this Section 25), either alone or together with other payments or rights accruing to the Participant from
the Company or a Participating Company, would constitute a parachute payment (as defined in Section 280G of the Code and regulations thereunder), such payment or right shall be reduced to the largest amount or greatest right that
will result in no portion of the amount payable or right accruing under the Plan being subject to an excise tax under Section 4999 of the Code or being disallowed as a deduction under Section 280G of the Code. The determination of whether
any reduction in the rights or payments under this Plan is necessary shall be made by the Company. The Participant shall cooperate in good faith with the Company in making such determination and providing any necessary information for this
purpose.
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26. Multiple Awards.
The Committee may grant more than one Award to an Eligible Employee during the
term of the Plan and/or in any Plan Year, either in addition to, or in substitution for, one or more Awards previously granted to that Eligible Employee.
27. Stock Certificates
. Notwithstanding anything in the Plan to the contrary, to the extent the Plan provides for the issuance of stock certificates to reflect the issuance of shares of Common
Stock, such issuance may be effected on a non-certificated basis to the extent not prohibited by applicable law or the applicable rules of any stock exchange on which the Common Stock is then traded.
28. Governing Law.
To the extent that federal laws of the United States do not otherwise control, the Plan, Awards granted hereunder, Award
Agreements and all actions taken pursuant to the Plan shall be governed and construed in accordance with the laws of the State of New Jersey, without giving effect to conflicts of law principles thereof.
29. Severability.
In case any one or more provisions of this Plan shall be held invalid, illegal, or unenforceable in any respect under applicable
law and regulation (including Rule 16b-3 under the Exchange Act, Code Section 162(m) and Code Section 409A), the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and
the invalid, illegal, or unenforceable provision shall be deemed null and void; however, to the extent permitted by law, any provision that could be deemed null and void shall first be construed, interpreted, or revised retroactively to permit this
Plan to be construed in compliance with all applicable law (including Rule 16b-3, Code Section 162(m) and Code Section 409A) so as to foster the intent of this Plan.
30. Successors and Assigns
. The Plan and all Award Agreements hereunder shall be binding upon and inure to the benefit of the successors (including by way of merger), assigns and heirs of the
respective parties.
31. Effective Date.
The Plan has been adopted by the Board and will become effective as of the Plan Effective
Date.
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APPENDIX D
KID BRANDS, INC.
EQUITY INCENTIVE PLAN
Effective July 10, 2008
1. Purpose.
The Kid Brands, Inc. Equity Incentive Plan (as amended and in effect from time to time, the
Plan
) is intended to
provide incentives to allow the Company to attract, retain and motivate highly competent persons who provide services to Kid Brands, Inc., a New Jersey Corporation (the
Company
), and its subsidiaries, by providing them with the
right to acquire a proprietary interest in the long-term success of the Company, and to reward their performance. The Plan shall serve as the successor to the Companys 2004 Stock Option, Restricted and Non-Restricted Stock Plan (the
Prior Plan), and no further awards shall be granted under the Prior Plan after the Plan Effective Date. All awards outstanding under the Prior Plan on the Plan Effective Date shall continue to be governed solely by the terms of the
documents evidencing such award, and no provision of the Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such awards.
2. Certain Definitions.
2.1 Award shall have the meaning ascribed to it in
Section 5 hereof.
2.2 Award Agreement shall have the meaning ascribed to it in Section 5 hereof.
2.3 Board shall mean the Board of Directors of the Company as constituted from time to time.
2.4 Business Combination shall mean the consummation of a reorganization, merger, share exchange or consolidation if, in each case following
such consummation, the outstanding shares of Common Stock are converted into cash, property or securities of any issuer other than the Company. There may be successive Business Combinations.
2.5 Cause shall mean: (a) a Participants willful or grossly negligent failure to perform such Participants duties, (b) serious misconduct, including, but not limited to,
any unauthorized disclosure of any Participating Companys non-public information, or (c) any other conduct intended to, or which the Company determines has or is reasonably likely to, adversely affect the interests of any Participating
Company, including, but not limited to, commission of, or indictment or conviction for, any criminal act;
provided
, that, notwithstanding the foregoing, if a Participant has an employment or retention agreement with a Participating Company
that defines Cause for termination, the definition of Cause used in such agreement shall be substituted for the foregoing.
2.6 Code shall mean the Internal Revenue Code of 1986, as amended.
2.7
Committee shall mean the Committee described in Section 3.1 hereof to administer the Plan.
2.8 Common Stock
shall mean the common stock of the Company, $.10 stated value per share (as such stated value may be adjusted from time to time), or any securities issued in respect thereof by the Company as a result of an event described in Section 14 hereof.
2.9 Company shall mean Kid Brands, Inc., a New Jersey corporation.
2.10 Consultant shall mean any consultant or adviser to a Participating Company if: (i) the consultant or adviser is a natural person, (ii) the consultant or adviser renders bona
fide services to a Participating Company, and (iii) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or
maintain a market for the Companys securities.
2.11 Date of Grant shall mean the date designated by the Committee as the
date of an Award hereunder, which shall not be earlier than the date the Committee authorizes (by resolution or written action) the grant of such Award, notwithstanding the date of any Award Agreement evidencing such Award. In the absence of a
designated date or fixed method of computing such date being specifically set forth in the Committees resolution, then the Date of Grant shall be the date of the Committees resolution or action. The Committee may grant Awards (other than
Incentive Stock Options) to Eligible Employees or to persons who are about to become employees of a Participating Company, to be effective and deemed to be granted on the occurrence of certain specified contingencies,
provided
that if the
Award is granted to either: (i) a person who is about to become an employee or Consultant of a Participating Company, or (ii) a person who is about to become a Non-Employee Director of the Company, such specified contingencies shall
include, without limitation, that such person becomes an employee or Consultant of a Participating Company or a member of the Board, as applicable.
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2.12 Disability shall mean a physical or mental incapacity of a Participant which renders such
Participant totally and permanently incapable of performing such Participants duties with a Participating Company,
provided
that proof of disability under the federal Social Security Act shall be conclusive evidence of Disability
hereunder; and
provided further
, and notwithstanding the foregoing, if a Participant has an employment or retention agreement with a Participating Company, the definition of Disability used in such agreement, if any, shall be substituted for
the foregoing. Disabled shall mean having a Disability.
2.13 Dividend Equivalent Right shall mean the right of a
Participant to receive the equivalent value (either in cash or Common Stock) of all or any specified portion of any regular cash dividends that would have been paid on a specified number of shares of Common Stock if such number of shares of Common
Stock had been delivered to such Participant pursuant to such Award.
2.14 Eligible Employee shall mean any Non-Employee Director
or any officer (including a director) or other employee or Consultant of any Participating Company.
2.15 Exchange Act shall mean
the Securities Exchange Act of 1934, as amended.
2.16 Fair Market Value of a share of Common Stock shall mean, on the date of
determination: (i) if the Common Stock is then listed on either the New York Stock Exchange or another national securities exchange, the last sale price of a share of Common Stock reflected on the consolidated tape at the close of the New York
Stock Exchange or such other exchange on such date, or if there has been no sale on such day, on the first preceding date on which a sale of Common Stock so occurred; (ii) if the Common Stock is not then listed on any such exchange, but is
quoted on an over-the-counter market system then in use (OTC System), the last sale price of a share of Common Stock at the close on such OTC System on such date, or if there has been no sale on such day on such OTC System, then the
average of the bid and asked prices for a share of Common Stock on the OTC System at the end of such day (
provided
, that if the Common Stock is then listed on: (A) more than one exchange, (B) more than one OTC system, or (C) at
least one exchange and one OTC System, the principal market for such securities, as determined by the Committee in good faith, shall be used); and (iii) if the Common Stock is not then listed on a national securities exchange or an OTC System,
the amount determined by the Committee (or in accordance with procedures approved by the Committee) in good faith.
2.17 Full Value
Award means any Award that is not a Stock Option or a Stock Appreciation Right, and which is settled by the issuance of shares of Common Stock.
2.18 Immediate Family shall mean, whether natural, adopted or step (where applicable), a persons spouse, parents, children, siblings, mothers and fathers-in-law, sons and
daughters-in-law, and brothers and sisters-in-law.
2.19 Incentive Stock Option shall mean a Stock Option which complies with
Section 422 of the Code.
2.20 Non-Employee Director shall mean any member of the Board who is not an employee of a
Participating Company.
2.21 Nonqualified Stock Option shall mean a Stock Option that is not an Incentive Stock Option.
2.22 Non-Restricted Stock shall mean Common Stock awarded hereunder that is not Restricted Stock.
2.23 Participant shall have the meaning ascribed to it in Section 4 hereof.
2.24 Participating Company shall mean the Company or any directly or indirectly owned subsidiary of the Company, as applicable.
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2.25 Performance-Based Award shall have the meaning ascribed to it in Section 11.1 hereof.
2.26 Plan shall have the meaning ascribed to it in Section 1 hereof.
2.27 Plan Effective Date shall mean the date upon which the Plan shall be duly approved by the Companys shareholders.
2.28 Plan Year shall mean the calendar year.
2.29 Restricted Stock shall mean Common Stock awarded hereunder that is subject to restrictions, including risks of forfeiture, determined by the Committee in its sole discretion, as described
in Section 9 hereof, for so long as such Common Stock remains subject to any such restrictions.
2.30 Retirement or
Retire shall mean a Participants retirement after reaching his or her normal retirement age under the Companys 401(k) Plan.
2.31 Severance Plan shall mean the Companys Change in Control Severance Plan, adopted as of January 29, 2003, as amended from time to time.
2.32 Stock Appreciation Right shall mean a right to receive a payment in cash, Common Stock or a combination thereof, as determined by the
Committee, in an amount or value equal to the excess of: (i) the Fair Market Value, or other specified valuation (which may not exceed Fair Market Value), of a specified number of shares of Common Stock on the date the right is exercised, over
(ii) the Fair Market Value or other specified amount (which may not be less than Fair Market Value) of such shares of Common Stock on the date the right is granted, all as determined by the Committee in its sole discretion;
provided,
however,
that if a Stock Appreciation Right is granted in tandem with or in substitution for a Stock Option, the designated Fair Market Value for purposes of the foregoing clause (ii) shall be the Fair Market Value on the date such Stock
Option was granted.
2.33 Stock Option shall mean either an Incentive Stock Option or a Nonqualified Stock Option to purchase
Common Stock granted under Section 7 hereof.
2.34 Stock Unit shall mean a notional account representing a Participants
conditional right to receive at a future date one (1) share of Common Stock.
2.35 Ten Percent Stockholder shall mean an
Eligible Employee, who the owns (within the meaning of Section 424(d) of the Code), more than ten percent (10%) of the total combined voting power of all classes of stock or other equity interests, as applicable, in the Company or a parent
or subsidiary thereof.
3. Administration.
3.1
Committee
.
The Plan will be administered by a committee (the
Committee
) appointed by the Board from among its members and shall be comprised of at least two
(2) members, each of whom shall be, to the extent applicable an outside director within the meaning of Section 162(m) of the Code. In the absence of a contrary appointment, Committee shall mean the Compensation
Committee of the Board. The foregoing notwithstanding, no action or decision of the Committee shall be void or deemed not duly authorized solely because a member of the Committee did not meet a qualification requirement set forth in this
Section 3.1. The Board may perform any function of the Committee hereunder, in which case references to the Committee shall be deemed to include the Board, except with respect to matters which under Section 162(m) of the Code, or any
related rules or regulations, are required to be determined solely by such outside directors. Notwithstanding the foregoing or the other provisions of the Plan, in administering the Plan with respect to any Awards to Non-Employee
Directors, the Board shall exercise the powers of the Committee.
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3.2
Authority
.
The Committee shall, subject to the provisions of the Plan, have absolute
discretion and authority: (i) to make and administer grants under the Plan (including to determine the form, amount and other terms and conditions of Awards granted, and to waive, amend or modify conditions initially established for grants,
including to accelerate vesting and to extend or limit the exercisability of grants, except as specifically restricted by the Plan), (ii) to determine when and to which Eligible Employees Awards will be granted, (iii) to determine whether,
to what extent and under what circumstances Awards may be settled, paid or exercised in cash, Common Stock or other property, or canceled, forfeited or suspended, (iv) to determine the terms and provisions of any Award Agreement hereunder and
any amendment of such Award Agreement, and (v) to establish, amend, waive and/or rescind any rules and regulations as it deems necessary for the proper administration of the Plan, including to make such determinations and interpretations and to
take such actions in connection with the Plan and any Awards granted hereunder as it deems necessary or advisable to carry out its purposes. All determinations and interpretations made by the Committee shall be final, binding and conclusive on all
Participants and their legal representatives, including, without limitation, as to any adjustments made pursuant to Section 14. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award
Agreement in the manner and to the extent it shall deem desirable. A majority of the members of the Committee shall constitute a quorum for any meeting of the Committee and a majority of a quorum may authorize any action. Any decision or
determination reduced to writing and signed by all of the members of the Committee shall be as fully effective as if made by a majority vote at a meeting duly called and held.
3.3
Delegation and Advisers
.
The Committee may delegate to one or more of its members (including to a designated subcommittee), to management of the Company, to counsel for or advisors or
consultants to the Committee or to one or more other agents appointed by the Committee, such administrative duties as the Committee may deem advisable;
provided
, such delegation does not adversely effect any exemption provided by
Rule 16b-3, prevent an Award from qualifying as a Performance-Based Award, if so intended, or otherwise complying with applicable law. The Committee, or any person to whom it has delegated duties as aforesaid, may employ one or more persons to
render advice with respect to any responsibility the Committee or such person may have under the Plan. The Committee may employ such legal or other counsel, consultants and agents as it may deem desirable for the administration of the Plan and may
rely upon any opinion or computation received from any such counsel, consultant or agent. Expenses incurred by the Committee in the engagement of such counsel, consultant or agent shall be paid by the Participating Company whose employees have
benefited from the Plan, as determined by the Committee.
3.4
Limits on Liability
.
(i) Any liability of the Company to any Participant with respect to an Award shall be based solely upon contractual obligations
created by the Plan and any Award Agreement hereunder.
(ii) Except as may be required by law, neither the Company nor
any member or former member of the Board or the Committee, nor any other person participating in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability to any
party for any action taken, or not taken, in good faith under or with respect to the Plan.
(iii) To the fullest extent
permitted by law, each member and former member of the Board and the Committee and each person to whom the Board or the Committee delegates or has delegated authority under the Plan shall be entitled to indemnification by the Company against any
claim, loss, liability, judgment, damage, cost and reasonable expense incurred by such member, former member or other person by reason of any action taken, failure to act or determination made in good faith under or with respect to the Plan.
4. Participants.
Participants in the Plan will consist of each Eligible Employee that the Committee in its sole discretion designates
at any time and from time to time to receive an Award under the Plan (
Participants
). Designation of a Participant in any Plan Year shall not require the Committee to designate such person to receive an Award in any other Plan Year
or, once designated, to receive the same type or amount of Award as granted to the Participant in any other Plan Year. The Committee shall consider such factors as it deems pertinent in selecting Participants and in determining the type and amount
of their respective Awards.
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5. Type of Awards.
Awards under the Plan may be granted in any one or a combination of:
(a) Stock Options, (b) Stock Appreciation Rights, (c) Restricted Stock, (d) Stock Units, (e) Non-Restricted Stock, and/or (f) Dividend Equivalent Rights (individually, an Award, and collectively, the
Awards
). Any Award hereunder may, as determined by the Committee in its sole discretion, constitute a Performance-Based Award, as described in Section 11 hereof. All Awards granted under the Plan shall be evidenced by a
written agreement (an
Award Agreement
) between the Company and each Participant (which need not be identical with respect to each grant or Participant) that will provide the terms and conditions, not inconsistent with the
requirements of the Plan, associated with such Awards, as determined by the Committee in its sole discretion. Award Agreements must be executed by the Company and a Participant in order for the Award to which such Award Agreement relates to be
effective with respect to such Participant. Agreements pertaining to the award of Stock Options shall designate whether the Award represented thereby is intended to be an Incentive Stock Option or a Nonqualified Stock Option. In the event that such
agreement does not contain such designation, the Stock Option shall be treated for all purposes as a Nonqualified Stock Option. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet
the applicable provisions of Section 422 of the Code. Award Agreements evidencing Awards intended to qualify as performance-based compensation (as described in Section 162(m)(4)(C) of the Code) shall contain such terms and conditions as
may be necessary to meet the applicable provisions of Section 162(m) of the Code.
6. Common Stock Available Under the Plan.
6.1
Basic Limitations
.
(i) The aggregate number of shares of Common Stock that may be subject to, delivered in connection with, and/or available for Awards under the Plan shall be 1,500,000, which shall consist of
(x) the number of shares of Common Stock that remain available for issuance, as of the Plan Effective Date, under the Prior Plan (655,969), plus (y) an additional 844,031 shares, and shall consist, in whole or in part, of authorized but
unissued shares of Common Stock or shares of Common Stock held in treasury,
provided
that no Participant shall be granted Awards of Stock Options hereunder for the purchase of more than 350,000 shares of Common Stock in any Plan Year. The
number of shares of Common Stock available for the grant of Awards hereunder shall be reduced in accordance with the provisions of clause (ii) below. Notwithstanding the foregoing, the number of shares of Common Stock available under the Plan
shall be subject to Sections 6.2 and 6.3 hereof, and may be adjusted in accordance with Section 14 hereof.
(ii) In connection with the grant of a Stock Option or other Award, the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the number of shares of Common Stock in respect of which such Stock Option or other Award is granted or denominated;
provided
that notwithstanding the foregoing, each Full Value Award shall reduce the total
number of shares of Common Stock available for issuance under the Plan by 1.45 shares of Common Stock for each share of Common Stock in respect of which such Full Value Award is granted.
6.2
Additional Shares
. In the event all or a portion of an Award is forfeited, terminated or cancelled, expires, is settled for cash, or otherwise does not result in the issuance of all or a
portion of the shares of Common Stock subject to the Award in connection with the exercise or settlement of such Award (
Unissued Shares
), any such Unissued Shares shall in each case again be available for Awards under the Plan,
provided, however, that to the extent any such expired, canceled, forfeited or otherwise terminated Award (or portion thereof) was a Full Value Award (or portion thereof), the number of shares of Common Stock that may again be available for issuance
in respect of Awards granted under the Plan shall increase by 1.45 shares of Common Stock for every share of Common Stock allocable to the expired, canceled, forfeited or otherwise terminated Full Value Award. The preceding sentences of this
Section 6.2 shall apply (i) to any awards outstanding on the Plan Effective Date under the Prior Plan, up to a maximum of an additional 1,750,000 shares, and (ii) only for purposes of determining the aggregate number of shares of
Common Stock subject to Awards, delivered in connection with Awards, or generally available for Awards, but shall not apply for purposes of determining the maximum number of shares of Common Stock with respect to which Stock Options may be granted
to any individual Participant in any Plan Year. Notwithstanding the foregoing, no shares of Common Stock may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option
under Section 422 of the Code.
6.3
Business Acquisition Grants
. In connection with the acquisition of any business by the
Company or any of its subsidiaries, any then-outstanding options or other similar rights or other equity awards pertaining to such business may be assumed or replaced by Awards under the Plan upon such terms and conditions as the Committee
determines in its sole discretion, and to the extent any shares of Common Stock are to be delivered as or in connection with Awards under the Plan in replacement for any such grants, awards, options or rights of another business, such shares shall,
to the extent permitted by applicable law and stock exchange rule, be in addition to those available under the Plan as provided by Sections 6.1 and 6.2.
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6.4
Expiration of Term
. Except as otherwise provided in the Severance Plan, in no event shall any
Award hereunder be exercisable after the expiration of the term of such Award, either as determined by the Committee in its sole discretion, as set forth in the applicable Award Agreement, or as accelerated or otherwise modified in accordance with
the provisions hereof.
7. Stock Options.
7.1
Generally
. Stock Options will consist of Awards from the Company that will enable the holder to purchase a number of shares of Common Stock at set terms. Subject to the last sentence of
this Section 7.1, the Committee may, from time to time in its sole discretion, grant to Eligible Employees hereunder, one or more Incentive Stock Options, Nonqualified Stock Options, or both types of Stock Options. Each Stock Option shall be
subject to such terms and conditions, including vesting, as the Committee may determine from time to time in its sole discretion, subject to the limitations set forth in the remainder of this Section 7. The Committee shall promptly notify each
Participant of the Award of a Stock Option hereunder, including the Date of Grant thereof and whether such Stock Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option (or partly of each), and an Award Agreement evidencing
the terms and conditions of such Award shall promptly be executed and delivered by and on behalf of the Company and the Participant. Notwithstanding anything to the contrary herein, no Incentive Stock Options may be granted to a Non-Employee
Director, or to an individual who is not an employee of a Participating Company on the Date of Grant.
7.2
Exercise Price
. Each
Stock Option granted hereunder shall have a per-share exercise price as the Committee may determine on the Date of Grant, but not less than 100% of the Fair Market Value of a share of Common Stock on the Date of Grant (or 110% of Fair Market Value
in the case of a Ten Percent Stockholder).
7.3
Manner of Exercise; Payment of Exercise Price
. Any Option granted hereunder
shall be exercised by giving written notice of exercise to the Chief Financial Officer of the Company at the Companys principal executive office, which shall specify the number of shares of Common Stock to be purchased. The exercise price of a
Stock Option shall be paid in cash or, in the sole discretion of the Committee, (a) by the delivery of shares of Common Stock of the Company then owned by the Participant, (b) in the case of Nonqualified Stock Options, by directing the
Company to withhold shares otherwise deliverable upon exercise to satisfy the exercise price, or (c) by delivery of a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the
exercise price, as long as such transaction is not impermissible under Section 13(k) of the Exchange Act (Section 402 of the Sarbanes-Oxley Act of 2002). To facilitate the foregoing, the Company may enter into agreements for coordinated
procedures with one or more brokerage firms. The Committee may prescribe any other method of paying the exercise price that it determines to be consistent with applicable law and the purpose of the Plan.
7.4
Exercise Period and Vesting
. Stock Options granted under the Plan shall be exercisable at such time or times and subject to such terms
and conditions, including vesting, as shall be determined by the Committee;
provided, however
, that no Stock Option shall be exercisable later than ten (10) years from the Date of Grant (5 years from the Date of Grant in the case of
an Incentive Stock Options granted to a Ten-Percent Stockholder). Subject to the terms of the Severance Plan, when a Stock Option is no longer exercisable, it shall be deemed to have lapsed and terminated. Subject to the provisions of
Section 7.5, which shall govern Awards of Stock Options to Non-Employee Directors, unless otherwise provided in the Award Agreement relating to such Stock Options, Stock Options shall be subject to the following terms and conditions:
(i)
Vesting
. Each Stock Option shall vest and become exercisable ratably over five years (20% per year),
commencing on the first anniversary of the Date of Grant, and shall continue to be exercisable for a period of 10 years from the Date of Grant.
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(ii)
Retirement, Death or Disability
. Notwithstanding clause (i), if a
Participant: (A) becomes Disabled, or (B) dies while employed by a Participating Company, such Participants outstanding unexercised Stock Options, whether or not vested and/or exercisable on the date of the applicable event, shall
become fully vested and exercisable, and may be exercised by such Participant, or his or her legal representative, estate, legatee(s) or permitted transferee(s), as applicable, for up to one year after the date of such Participants Retirement,
Disability or death, as applicable, or the remaining term of the Option, whichever period is shorter. Notwithstanding clause (i), if a Participant Retires, such Participants outstanding unexercised Stock Options, to the extent vested and
exercisable on the date of such Retirement, may be exercised by such Participant for up to one year after the date of such Participants Retirement or the remaining term of the Option, whichever period is shorter.
(iii)
Other Termination
. Notwithstanding clause (i), and subject to clause (iv), if a Participants employment with a
Participating Company terminates for any reason other than death, Disability or Retirement, such Participants outstanding unexercised Options will be cancelled and deemed terminated as of the date of termination;
provided
, however, that
if a Participants employment is terminated by a Participating Company for reasons other than Cause, his or her outstanding unexercised Options, to the extent vested and exercisable on the date of termination, may be exercised within
90 days after such termination, or the remaining term of the Option, whichever period is shorter.
(iv) If the
Participant is also a Participant under the Severance Plan, and the terms of such Participants Stock Option Award conflict with the terms of the Severance Plan (in a manner which adversely affect the rights of such Participant), such conflict
shall be resolved in accordance with the provisions of Section 6.7(b) of the Severance Plan.
7.5
Grants to Non-Employee
Directors
.
(i) Except as specified in this Section 7.5, Stock Options granted to Non-Employee Directors shall
be treated for all purposes like any other Stock Option granted under the Plan.
(ii) Notwithstanding anything to the
contrary herein, unless otherwise provided in the Award Agreement relating to such Award, each Stock Option granted to a Non-Employee Director hereunder shall vest and become exercisable ratably over five years (20% per year), commencing on the
first anniversary of the Date of Grant, and shall continue to be exercisable for a period of 10 years from the Date of Grant.
(iii) Notwithstanding anything to the contrary herein, unless otherwise provided in the Award Agreement relating to such Award: (1) if a Non-Employee Director ceases to serve as a member of the
Board for any reason other than such directors death or Disability, such Non-Employee Directors non-vested Stock Options shall immediately terminate, and such Non-Employee Directors vested Stock Options shall remain exercisable for
90 days after the applicable termination date, or the remaining term of the Stock Option, whichever period is shorter; and (2) in the event of the death or Disability of a Non-Employee Director while serving as a member of the Board, any
of such Non-Employee Directors outstanding unexercised Options existing on the date such service terminated, whether or not vested and/or exercisable on the date such service was terminated, shall become fully vested and exercisable, and may
be exercised by such Non-Employee Directors estate, legatee(s), legal representative or permitted transferee(s) for up to one year after such Non-Employee Directors death or final determination of Disability, as applicable, or the
remaining term of the Stock Option, whichever period is shorter.
7.6
Limitations on Incentive Stock Options
. The terms and
conditions of any Award of Incentive Stock Options shall be subject to, and shall comply with, the applicable provisions of Sections 422 and 424 of the Code and any applicable rules or regulations promulgated thereunder, including the
requirement that the aggregate Fair Market Value (determined as of the Date of Grant of the Stock Option) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year
(under all option plans of the Company and of any parent or subsidiary corporation, as defined in Sections 424(e) and (f) of the Code) shall not exceed one hundred thousand dollars ($100,000);
provided
, however, that if such $100,000
limit is exceeded, the excess Incentive Stock Options shall be treated as Nonqualified Stock Options.
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8. Stock Appreciation Rights.
8.1
Generally
. The Committee may, from time to time in its sole discretion, grant Stock Appreciation Rights to Eligible Employees hereunder. Stock Appreciation Rights may be granted alone or
in tandem with Stock Options. Each Stock Appreciation Right shall be subject to such terms and conditions, including vesting, as the Committee shall determine in its sole discretion;
provided
, however, that if a Stock Appreciation Right is
granted in tandem with a Stock Option, the Stock Appreciation Right shall become exercisable and shall expire in the same manner as the corresponding Stock Option, unless otherwise determined by the Committee, and
provided further
, that if a
Stock Appreciation Right is granted in tandem with an Incentive Stock Option, such Stock Appreciation Right shall be exercisable only if the Fair Market Value of a share of Common Stock on the date of exercise exceeds the exercise price of the
related Incentive Stock Option. The Committee shall promptly notify each Participant of the Award of a Stock Appreciation Right, including the Date of Grant thereof, and an Award Agreement evidencing the terms and conditions of such Award shall
promptly be executed and delivered by and on behalf of the Company and the Participant.
8.2
Exercise Period
. Stock Appreciation
Rights granted under the Plan shall be exercisable at such time or times as shall be determined by the Committee in its sole discretion;
provided, however
, that no Stock Appreciation Rights shall be exercisable later than ten (10) years
after the Date of Grant; and
provided further,
that the time of exercise of any Stock Appreciation Right intended to be a 409A Award (as defined in Section 19.2 hereof) shall comply with applicable requirements of Code Section 409A.
All Stock Appreciation Rights shall terminate at such
earlier times and upon such conditions or circumstances determined by the Committee in
its sole discretion.
9. Restricted Stock Awards.
9.1
Generally
. The Committee may, from time to time in its sole discretion, grant Restricted Stock Awards to Eligible Employees hereunder, with or without requiring cash or other payment
therefor in whole or in part. The Committee shall promptly notify each Participant of a Restricted Stock Award, including the Date of Grant thereof, and an Award Agreement evidencing the terms and conditions of such Award shall promptly be executed
and delivered by and on behalf of the Company and the Participant.
9.2
Payment of the Purchase Price
. If the Restricted Stock
Award requires payment therefor, such payment may be made in any manner authorized by the Committee, including any manner permitted for the payment of the exercise price of a Stock Option hereunder.
9.3
Terms
. Awards of Restricted Stock may be subject to such restrictions, terms and conditions as the Committee determines in its sole
discretion, including, without limitation, vesting conditions;
provided, however
, that if a Participant also participates in the Severance Plan, and the terms of such Award conflict with the terms of the Severance Plan (in a manner which
adversely affects the rights of such Participant), such conflict shall be resolved in accordance with Section 6.7(b) of the Severance Plan. The Committee may at any time, in its sole discretion, accelerate the time at which any or all
restrictions will lapse or remove any or all of such restrictions with respect to any Award of Restricted Stock granted hereunder. Notwithstanding the foregoing, unless otherwise provided in the Award Agreement relating to such Award, the following
terms shall apply to Awards of Restricted Stock hereunder:
(i) except as provided in clauses (ii) and
(iii) below, Awards of Restricted Stock hereunder shall vest ratably over five years (20% per year), beginning on the first anniversary of the Date of Grant, and upon vesting, shall not be subject to any further restrictions hereunder;
(ii) except as provided in clause (iii) below, upon a Participants termination of employment for any reason
(not including an authorized leave of absence), any non-vested Restricted Stock shall be immediately forfeited and all rights of a Participant to such forfeited Restricted Stock shall terminate without payment of consideration by the Company,
provided, however
, that if a Participant also participates in the Severance Plan, and this provision conflicts with the terms of the Severance Plan (in a manner which adversely affects the rights of such Participant), such conflict shall be
resolved in accordance with Section 6.7(b) of the Severance Plan;
(iii) in the event that the employment of a
Participant is terminated as a result of his or her death or Disability prior to the lapse of all or part of the restrictions on such Participants Restricted Stock, all restrictions on the Participants Restricted Stock shall lapse on the
date of Participants death or Disability, as applicable.
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9.4
Manner of Issuance
. Shares of Restricted Stock granted pursuant to an Award hereunder shall be
issued in the name of the Participant as soon as reasonably practicable after the Award is granted;
provided
that prior to such issuance, the Participant has executed the applicable Award Agreement pertaining thereto, has delivered a duly
signed stock power, endorsed in blank, relating to the Common Stock covered by such an Award, and, in the sole discretion of the Committee, has executed an escrow agreement and any other documents which the Committee may require as a condition to
the issuance of such shares. At the sole discretion of the Committee, shares issued in connection with a Restricted Stock Award shall be deposited together with the stock powers with an escrow agent (which may be the Company) designated by the
Committee, until such time as all restrictions with respect thereto lapse, unless such shares are earlier forfeited in accordance with the terms of such Award. The Committee may also require that the stock certificates evidencing such shares (or
book entries) bear restrictive legends until the restrictions thereon shall have lapsed.
9.5
Rights as a Stockholder
. The
Participant shall have, with respect to the shares of Common Stock subject to a Restricted Stock Award, all of the rights of a holder of shares of Common Stock of the Company, including the right to vote the shares, except as otherwise provided in
the Award Agreement relating to such Award.
9.6
Transfer Restrictions
. None of the Restricted Stock awarded hereunder may be sold,
assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of during the period in which the restrictions on such Restricted Stock are in effect.
9.7
Section 83(b) Election
. Any Participant who makes an election under Section 83(b) of the Code, or any successor section thereto, shall deliver a copy of such election to the Company
promptly after filing such election with the Internal Revenue Service.
10. Stock Units and Dividend Equivalent Rights.
10.1
Stock Units
. The Committee may, from time to time in its sole discretion, grant Stock Units to Eligible Employees hereunder. Stock
Units may be subject to such terms and conditions including, but not limited to, vesting, acceleration of vesting and forfeiture as the Committee determines in its sole discretion. The Committee shall designate Awards of Stock Units as 409A Awards
or Non-409A Awards (each as defined in Section 19.2 hereof), and may include elective deferral features in its sole discretion. Shares of Common Stock issued pursuant to this Section 10.1 may be issued with or without other payments or
such other consideration as may be determined by the Committee in its sole discretion. The Committee shall promptly notify each Participant of the Award of Stock Units, including the Date of Grant thereof, and an Award Agreement evidencing the terms
and conditions of such Award shall promptly be executed and delivered by and on behalf of the Company and the Participant. Stock Units may be settled in the sole discretion of the Committee: (i) by the distribution to the Participant of shares
of Common Stock equal to his or her Stock Units, (ii) by a lump sum payment to the Participant of an amount in cash equal to the Fair Market Value of the shares of Common Stock which would otherwise be distributed to the Participant, or
(iii) by a combination of cash and Common Stock.
10.2
Dividend Equivalent Rights
. The Committee may from time to time in its sole
discretion grant Dividend Equivalent Rights to Eligible Employees hereunder. Dividend Equivalent Rights may be granted in tandem with another Award or as a separate Award. The terms and conditions applicable to each Dividend Equivalent Right,
including vesting, risks of forfeiture and other restrictions, shall be determined by the Committee in its sole discretion. Amounts payable in respect of Dividend Equivalent Rights may be paid currently or withheld until the lapsing of any
applicable restrictions thereon or until the vesting, exercise, payment, settlement or other lapse of restrictions on the Award to which the Dividend Equivalent Rights relate (the
Trigger Date
). Any amounts payable in respect of
Dividend Equivalent Rights shall be paid to the applicable Participant within two and one-half months of the Trigger Date. In the event that the amounts payable in respect of Dividend Equivalent Rights are withheld, the Committee shall determine
whether such withheld amounts are to be held in cash, reinvested in Common Stock or deemed (notionally) to be reinvested in Common Stock. If held in cash, the Committee, in its sole discretion, shall determine the rate of interest, if any, to
be credited on such amount at the end of each year (or portion thereof). Dividend Equivalent Rights may be settled in cash, shares of Common Stock, or a combination thereof, in a single installment or multiple installments, as determined by the
Committee in its sole discretion. The Committee shall promptly notify each Participant of the Award of Dividend Equivalent Rights, including the Date of Grant thereof, and an Award Agreement evidencing the terms and conditions of such Award shall
promptly be executed and delivered by and on behalf of the Company and the Participant.
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11. Performance-Based Awards.
11.1
Generally
. Any Awards granted under the Plan may be granted in a manner such that the Awards qualify for the performance-based compensation exemption of Section 162(m) of the Code
(
Performance-Based Awards
). As determined by the Committee in its sole discretion, either the granting or vesting of such Performance-Based Awards shall be based on achievement of performance objectives determined in accordance
with one or more of the performance criteria described below that apply to the individual Participant, one or more business units or the Company as a whole.
11.2
Performance Criteria
. The performance criteria shall be as follows, individually or in combination: (i) net earnings; (ii) earnings per share; (iii) revenues;
(iv) sales; (v) operating income; (vi) earnings before interest and taxes (EBIT); (vii) earnings before interest, taxes, depreciation and amortization (EBITDA); (viii) segment profit, as defined in the Companys
financial statements; (ix) achievement of working capital targets; (x) return on equity; (xi) return on capital or return on assets; (xii) expenses or expense ratios; (xiii) cash flow, free cash flow, cash flow return on
investment, net cash provided by operations, or economic profit created; (xiv) market price per share; (xv) total return to stockholders, and (xvi) specific strategic or operational business criteria, including market penetration,
geographic expansion, new concept development goals, new products, new projects or new ventures, customer satisfaction, staffing, training and development goals, goals relating to acquisitions, divestitures, affiliates and joint ventures.
Performance criteria may be measured on a consolidated basis, by department, group or business unit, or for specified subsidiaries of the Company. The targeted level or levels of performance with respect to such performance criteria may be
established at such levels and in such terms as the Committee may determine, in its sole discretion, including in absolute terms, as a ratio, as a goal relative to performance in prior periods, or as a goal compared to the performance of one or more
comparable companies or an index covering multiple companies.
11.3
Establishment of Performance Goals
. With respect to
Performance-Based Awards, the Committee shall establish in writing: (i) the performance goals applicable to a specified performance period, and such performance goals shall state, in terms of an objective formula or standard, the method for
computing the amount of compensation payable to the Participant if such performance goals are obtained, and (ii) the individual employees or class of employees to which such performance goals apply;
provided, however
, that such
performance goals shall be established in writing no later than ninety (90) days after the commencement of the applicable performance period (but in no event after twenty-five percent (25%) of such performance period has elapsed).
Performance periods may be of any length, as specified by the Committee. Performance criteria and achievement of performance goals shall be determined in accordance with generally accepted accounting principles to the extent applicable.
11.4
Certification of Performance
. No Performance-Based Awards shall be payable to or vest with respect to, as the case may be, any
Participant for a given period until the Committee has certified in writing that the performance goals (and any other material terms) applicable to such period have been satisfied.
11.5
Modification of Performance-Based Awards
. With respect to any Awards intended to qualify as Performance-Based Awards, the Committee may, in its sole discretion, within the time
prescribed by Section 162(m) of the Code, adjust or modify the calculation of performance goals in order to prevent the dilution or enlargement of the rights of any Participant with respect to such Performance-Based Award: (a) in the event
of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development, (b) in recognition of, or in anticipation of, any other unusual or nonrecurring event affecting the Company or the financial statements
of the Company, or (c) in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions. Notwithstanding the foregoing, with respect to any Awards intended to qualify as
Performance-Based Awards, after establishment of a performance goal, the Committee shall not revise such performance goal or increase the amount of compensation payable thereunder (as determined in accordance with Section 162(m) of the Code)
upon the attainment of such performance goal;
provided
that the Committee may reduce or eliminate the number of shares of Common Stock or cash granted, vested or payable upon the attainment of such performance goal.
12. Awards of Non-Restricted Stock.
The Committee may from time to time in its sole discretion grant Awards of Non-Restricted Stock to Eligible
Employees hereunder. The Committee shall determine in its sole discretion the terms and conditions of such Awards. The Committee may, in its sole discretion, direct the Company to issue shares of Common Stock subject to restrictive legends and/or
stop transfer instructions which are consistent with the terms and conditions of the Award of Non-Restricted Stock. The Committee shall promptly notify each Participant of the Award of Non-Restricted Stock, including the Date of Grant thereof, and
an Award Agreement evidencing the terms and conditions of such Award shall promptly be executed and delivered by and on behalf of the Company and the Participant.
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13. Foreign Laws.
The Committee may grant Awards to Eligible Employees who are subject to the tax and
other laws of nations other than the United States, which Awards may have terms and conditions determined by the Committee to be necessary to comply with applicable foreign laws and local compensation customs and practices, and that may differ from
those applicable to other Participants,
provided
that no modification pursuant to this Section 13 shall be made to increase the share limitations set forth in Section 6 hereof. The Committee may take any action which it deems
advisable to obtain approval of such Awards by the appropriate foreign governmental entity;
provided, however
, that no such Awards may be granted pursuant to this Section 13 and no action may be taken which would result in a violation of
the Code, Exchange Act or any other applicable law, or that would require prior stockholder approval (until such approval is obtained).
14. Dilution and Other Adjustments.
14.1
Adjustments
.
(i) Awards granted under the Plan and any Award Agreements, the maximum number of shares of Common Stock deliverable under all
Awards stated in Section 6.1, and/or the maximum number of shares of Common Stock with respect to which Stock Options may be granted to or measured with respect to any one person during any period stated in Section 6.1, shall be subject to
adjustment or substitution, as determined by the Committee in its sole discretion, as to the number, price or kind of a share of Common Stock or other consideration subject to such Awards, and any and all other matters deemed appropriate by the
Committee, including, without limitation, accelerating the vesting, settlement and/or exercise period pertaining to any Award hereunder, or as otherwise determined by the Committee to be equitable, in the event of changes in the outstanding Common
Stock or in the capital structure of the Company by reason of a dissolution or liquidation of the Company, sale of all or substantially all of the assets of the Company, mergers, consolidations or combinations with or into any other entity if the
Company is the surviving entity, stock or extraordinary dividends, stock splits, reverse stock splits, stock combinations, rights offerings, statutory share exchanges involving capital stock of the Company, reorganizations, recapitalizations,
reclassifications, exchanges, spin-offs, dividends in kind, or other relevant changes in capitalization.
(ii) Outstanding Awards and Award Agreements, and the maximum number of shares of Common Stock with respect to which Stock Options
may be granted to or measured with respect to any one person during any period stated in Section 6.1, shall be subject to adjustment or substitution, as determined by the Committee in its sole discretion, as to the number, price or kind of a
share of Common Stock or other consideration subject to such Awards, and any and all other matters deemed appropriate by the Committee, including, without limitation, accelerating the vesting, settlement and/or exercise period pertaining to any
Award hereunder, or as otherwise determined by the Committee to be equitable, in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution or enlargement of the rights
granted to, or available for, Participants, or which otherwise warrants equitable adjustment in the sole discretion of the Committee because it interferes with the intended operation of the Plan. Any adjustment in Incentive Stock Options under this
Section 14 shall be made only to the extent it does not constitute a modification within the meaning of Section 424(h)(3) of the Code, and only to the extent otherwise permitted by Sections 422 and 424 of the Code. Any
adjustments under this Section 14 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act and which otherwise is permissible under Code Section 409A. Further, with
respect to Awards intended to qualify as performance-based compensation under Section 162(m) of the Code, such adjustments or substitutions shall be made only to the extent that the Committee determines that such adjustments or
substitutions may be made without causing the Company to be denied a tax deduction on account of Section 162(m) of the Code. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be
conclusive and binding for all purposes.
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14.2
Business Combinations
. In connection with a Business Combination, the Committee, in its sole
discretion, may provide for: (i) the continuation of the Plan and/or the assumption of the Awards granted hereunder by a successor corporation (or a parent or subsidiary thereof), (ii) the substitution for such Awards of new awards
covering the stock of a successor corporation (or a parent or subsidiary thereof), with appropriate adjustments as to the number and kind of shares and exercise prices, (iii) upon 10 days advance notice from the Committee to the
affected Participants, the acceleration of the vesting, settlement and/or exercise period pertaining to any Award hereunder, or (iv) upon 10 days advance notice from the Committee to the affected Participants, (x) the
cancellation of any outstanding Awards that are then exercisable or vested and the payment to the holders thereof, in cash or stock, or any combination thereof, of the value of such Awards based upon the price per share of stock received or to be
received by other stockholders of the Company in connection with the Business Combination, and (y) the cancellation of any Awards that are not then exercisable or vested. In the event of any continuation, assumption or substitution contemplated
by the foregoing clauses, the Plan and/or such Awards shall continue in the manner and under the terms so provided.
14.3
Severance
Plan
. Notwithstanding the foregoing, in the event that any decision of the Committee under this Section 14 conflicts with the provisions of the Severance Plan in a manner which adversely affects the rights of any Participant thereunder,
such conflict shall be resolved in accordance with the provisions of Section 6.7(b) of the Severance Plan with respect to such Severance Plan Participant.
14.4
Carryover Restrictions
. If, by reason of a change in capitalization described in this Section 14, a Participant shall be entitled to new, additional or different shares of stock or
securities of the Company or any other corporation in respect of his or her Award, in the event that the Plan continues, such new, additional or different shares shall thereupon be subject to all of the conditions, restrictions and performance
criteria which were applicable to the shares of Common Stock subject to the Award, as the case may be, prior to such change in capitalization.
15. Nontransferability.
Each Award granted under the Plan to a Participant (other than Non-Restricted Stock Awards and Restricted Stock Awards
with respect to which all restrictions have lapsed) shall not be transferable otherwise than by will or the laws of descent and distribution, and shall be exercisable, during the Participants lifetime, only by the Participant. Notwithstanding
the foregoing, the Committee in its sole discretion may permit the transferability of an Award (other than an Incentive Stock Option) by a Participant to a member of the Participants Immediate Family or trusts for the benefit of such persons,
or partnerships, corporations, limited liability companies or other entities owned solely by such persons, including trusts for such persons, subject to any restriction included in the grant of the Award.
16. Other Provisions.
The grant of any Award under the Plan may also be subject to such other provisions (whether or not applicable to the Award
granted to any other Participant) as the Committee in its sole discretion determines appropriate, including, without limitation, provisions for the forfeiture of, or restrictions on resale or other disposition of, Common Stock acquired under any
form of Award, provisions for the acceleration of exercisability or vesting of Awards (subject to Section 19.1), performance conditions other than those imposed under Section 11, provisions to comply with federal and state securities laws,
or conditions as to the Participants employment in addition to those specifically provided for under the Plan.
17. Withholding.
If a Participating Company is for any reason required to withhold any amount under federal, state or local tax law in connection with any Award (Withholding Taxes), the Participant or other recipient shall be required to pay such
Participating Company the amount of any such Withholding Taxes. The applicable Participating Company shall have the right to require the payment of any such Withholding Taxes before any Common Stock is issued pursuant to any Award hereunder or any
restrictions pertaining to any Award granted hereunder are removed. The Committee may, in its sole discretion, in lieu of all or any portion of a cash payment regarding such Withholding Taxes, permit a Participant to elect to have the Company
withhold shares of Common Stock (or allow the return of shares of Common Stock) having a Fair Market Value equal to the amount (or portion thereof) required to be withheld.
18. Employment Rights.
Nothing in the Plan or in any Award Agreement hereunder shall confer upon any Participant the right to continue in the employment or service of any Participating Company or
affect any right which such Participating Company may have to terminate or modify the employment or retention of the Participant with or without Cause.
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19. Tax Compliance.
19.1
Certain Limitations on Awards to Ensure Compliance with Section 409A
. For purposes of the Plan, references to an Award term or event (including any authority or right of the
Company or a Participant) being permitted under Section 409A shall mean, for a 409A Award, that the term or event will not cause the Participant to be liable for payment of interest or a tax penalty under Section 409A and, for
a Non-409A Award, that the term or event will not cause the Award to be treated as subject to Section 409A. Notwithstanding any other provisions of the Plan, the terms of any 409A Award and any Non-409A Award, including any authority of the
Company and rights of the Participant with respect to the Award, that do not, in the Committees view, comply with Section 409A, shall be automatically modified and limited to the extent necessary to conform with Section 409A. For
this purpose, notwithstanding any other provisions of the Plan, the Company shall have no authority to accelerate distributions relating to 409A Awards that would not comply with Section 409A, any distribution subject to
Section 409A(a)(2)(A)(i) (separation from service) to a key employee as defined under Section 409A(a)(2)(B)(i) shall not occur earlier than the earliest time permitted under Section 409A(a)(2)(B)(i), any distribution
triggered by a Participants termination of employment and intended to qualify under Section 409A(a)(2)(A)(i) shall be made only at such time as the Participant has had a separation from service within the meaning of
Section 409A(a)(2)(A)(i), and any authorization of payment of cash to settle a Non-409A Award shall apply only to the extent permitted under Section 409A for such Award.
19.2
Certain Terms Relating to Code Section 409A
.
409A Awards
means Awards that are subject to Code Section 409A and the regulations thereunder.
Non-409A Awards
means Awards other than 409A Awards (including those exempt as short-term deferrals under Treasury Regulation § 1.409A-1(b)(4) and any successor regulation). Although the Committee retains
authority under the Plan to grant Awards on terms that will qualify those Awards as 409A Awards, all Awards hereunder are intended to be Non-409A Awards unless otherwise expressly specified by the Committee.
19.3
Unfunded Plan
. Participants shall have no right, title, or interest whatsoever in or to any investments which the Company may make to
aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any
Participant, beneficiary, legal representative or any other person. To the extent that any person acquires rights from the Company under the Plan, such rights shall be no greater than the rights of an unsecured general creditor of the Company. All
payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the
Plan. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended.
20. No Fractional Shares.
No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, or Awards, or other property shall be issued or paid in lieu of fractional shares or whether such
fractional shares or any rights thereto shall be forfeited or otherwise eliminated. In the absence of an alternate determination by the Committee, the number of shares of Common Stock subject to any Award shall be rounded down to the next whole
number, without any payment in respect of eliminated fractional shares.
21. Additional Limitations on Payment, Settlement or Exercise of
an Award
. Participants may be required to comply with any timing or other restrictions with respect to the payment, settlement or exercise of an Award, including a window-period limitation, as may be imposed in the sole discretion of the
Committee.
22. Duration, Amendment and Termination.
22.1
Amendment, Modification and Termination of the Plan
. Except as provided in this Section 22.1, the Committee may at any time: (i) amend, modify, terminate or suspend the Plan, and
(ii) alter or amend any or all Award Agreements hereunder to the extent permitted by the Plan and applicable law. Amendments of the Plan are subject to approval of the stockholders of the Company only as required by applicable law, regulation
or stock exchange requirement, or if the amendment has the effect of increasing the total number of shares available under the Plan, except as contemplated by Section 14. No termination, suspension, modification or amendment of the Plan or any
Award Agreement hereunder shall impair or adversely affect any right acquired by any Participant or such Participants permitted transferee under an Award granted before the date of termination, suspension, modification or amendment unless the
consent of such Participant or transferee is obtained. It is conclusively presumed that any adjustment for changes in capitalization provided for in Section 14 hereof does not adversely affect any right of a Participant or other person under an
Award.
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22.2
Duration of the Plan
. The Plan shall remain in effect until all stock subject to it shall be
distributed or all Awards have expired or lapsed, whichever is latest to occur, or the Plan is terminated pursuant to Section 22.1 hereof. No Award shall be granted under the Plan after the fifth anniversary of the Plan Effective Date, but
Awards outstanding at that time shall remain outstanding and governed by the terms of the Plan.
23. Other Benefit and Compensation
Programs.
23.1
Non-Exclusivity of Plan
. The adoption of the Plan by the shareholders of the Company shall not be construed as
amending, modifying or rescinding any previously approved incentive arrangement or as creating any limitations on the power of the Board or the Committee, as applicable, to adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.
23.2
Compensation Under Other Plans
. Payments and other benefits received by a Participant pursuant to an Award shall not be deemed a part of a Participants regular, recurring compensation
for purposes of any termination, indemnity or severance pay laws and shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan, contract or similar arrangement provided by any Participating
Company, unless expressly so provided by such other plan, contract or arrangement or the Committee determines in its sole discretion that an Award or portion of an Award should be so included.
24. Compliance With Applicable Legal Requirements.
24.1
Registration or Approval
. The Company shall not be required to issue or deliver shares distributable pursuant to the Plan unless such issuance and/or delivery complies with all applicable
legal requirements including, without limitation, compliance with the provisions of applicable state securities laws, the Securities Act of 1933, as amended (the Securities Act), the Exchange Act, and the requirements of the exchanges,
if any, on which the Common Stock may, at that time, be listed.
24.2
Restrictions on Transfer
. Notwithstanding anything contained in
the Plan or any Award Agreement to the contrary, in the event that the disposition of shares of Common Stock acquired pursuant to the Plan is not covered by a then-current registration statement under the Securities Act, and is not otherwise exempt
from such registration, such shares shall be restricted against transfer to the extent required by the Securities Act and Rule 144 or other applicable regulations thereunder. Any certificates (or book entries) evidencing any of such shares
shall be appropriately amended or have an appropriate legend placed thereon to reflect their status as restricted securities as aforesaid.
25. Multiple Awards.
The Committee may
grant more than one Award to an Eligible Employee during the term of the Plan and/or in any Plan Year, either in addition to, or in substitution for, one or more Awards previously granted to that Eligible Employee.
26. Stock Certificates
. Notwithstanding anything in the Plan to the contrary, to the extent the Plan provides for the issuance of stock
certificates to reflect the issuance of shares of Common Stock, such issuance may be effected on a non-certificated basis to the extent not prohibited by applicable law or the applicable rules of any stock exchange on which the Common Stock is then
traded.
27. Governing Law.
To the extent that federal laws of the United States do not otherwise control, the Plan, Awards granted
hereunder, Award Agreements and all actions taken pursuant to the Plan shall be governed and construed in accordance with the laws of the State of New Jersey, without giving effect to conflicts of law principles thereof.
28. Severability.
In the event any provision of the Plan is held illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
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29. Successors and Assigns
. The Plan and all Award Agreements hereunder shall be binding upon and
inure to the benefit of the successors (including by way of merger), assigns and heirs of the respective parties.
30. Effective Date.
The Plan has been adopted by the Board and will become effective as of the Plan Effective Date.
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