Exhibit 10.3
HAMPSHIRE GROUP, LIMITED
2010 CASH BONUS INCENTIVE PLAN
1. Purpose.
The goal of the Hampshire Group, Limited Cash Bonus Incentive Plan is to align
the annual interests of its management and other key employees with those of the
Company and its stockholders by providing a cash bonus incentive for meeting
annual goals set by the Board of Directors of the Company.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) “2009 Stock Incentive Plan” means the 2009 Stock Incentive Plan adopted by
the Board of Directors of the Company in October 2009 and filed with the
Securities and Exchange Commission.
(b) “Board” means the Board of Directors of the Company.
(c) “Cause” is defined in the Company’s 2009 Stock Incentive Plan.
(d) “Change in Control” is defined in the Company’s 2009 Stock Incentive Plan.
(e) “Code” means the Internal Revenue Code of 1986, as amended from time to
time, including regulations there under and successor provisions and regulations
thereto.
(f) “Committee” means the Board or such other committee appointed by the Board
consisting of two or more individuals.
(g) “Company” means Hampshire Group, Limited, a Delaware corporation, and/or its
subsidiaries.
(h) “Consolidated EBITDA ” means consolidated earnings before interest expense,
income taxes, depreciation and amortization as defined in the Company’s Credit
Facility.
(i) “Credit Facility” means the Second Amended and Restated Credit Facility
Agreement and Guaranty dated August 7, 2009 or any subsequent credit facility
amendment or agreement put in place by the Company that modifies or supersedes
this agreement.
(j) “Disability” as defined in the Company’s 2009 Stock Incentive Plan.
(k) “Effective Date” means January 1, 2010.
(l) “Eligible Person” means (i) each employee of the Company, including each
such person who may also be an employee director of the Company; and (ii) any
person who has been offered employment or service by the Company; provided, that
such prospective service provider may not receive any payment or exercise any
right relating to a bonus award until such person has commenced employment or
service with the Company. An employee on an approved leave of absence may be
considered upon approval of the Committee as still in the employ of the Company
for purposes of eligibility for participation in the Plan.

 

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(m) “Employer” means the Company by which the Participant is principally
employed.
(n) “New Employee” means an employee hired during the then current fiscal year.
(o) “Operating Income” means income from operations, excluding discontinued
operations as outlined in the Company’s financial statements filed with the
Securities and Exchange Commission.
(p) “Participant” means an Eligible Person who has been approved by the
Committee and included in an exhibit under the Plan. For a current employee or a
New Employee that is not included as a Participant in the Plan that replaces or
assumes the duties of a Terminated Employee, who was a Participant in the Plan
prior to Termination, the Company may substitute the current or New Employee for
the Terminated Employee at the Terminated Employee’s target bonus percentage
level or a percentage level lower than that of the Terminated Employee’s without
the approval of the Committee.
(q) “Plan” means this Hampshire Group, Limited 2010 Cash Bonus Incentive Plan.
(r) “Terminated Employee” means an employee, whose employment with the Company
has been terminated, whether voluntarily or involuntarily with or without Cause,
during the then current fiscal year.
(s) “Termination” is defined in the Company’s 2009 Stock Incentive Plan.
3. Overview of Plan.
The Plan is a cash bonus incentive plan that requires certain metrics of
performance to be met before bonuses will be paid out to the Participants. The
basis of the bonuses is derived as a percentage of base salaries and is
re-evaluated each year. The range of the bonus paid out is dependent upon
results with 100% of the target bonus being paid out if 100% of the metrics are
achieved and all other performance objectives are met.
4. Basis of Bonus.
The basis for the annual bonus is the percentage of base salary of the
Participants that is in effect on the first day of each fiscal year. However,
exceptions to this policy may be made as long as these exceptions are in
writing, approved by the Committee, and in place prior to the end of the
applicable fiscal year.
Prior to the beginning of each fiscal year, the Company will evaluate the pool
of Eligible Employees for participation in the Plan and applicable bonus
percentage levels. If changes to exhibit for the Participants, the percentages,
and/or other information contained therein are deemed appropriate then the
Company will obtain Committee approval for such changes in a new exhibit for
that fiscal year and incorporate it into the Plan as a new exhibit. This new
exhibit will remain in effect for all future years until a revised exhibit is
approved by the Committee and placed in the Plan as an exhibit, which will
supersede the prior exhibits.
See Exhibit 1 for the 2010 Participants, target bonus percentage levels, and
other applicable information.
5. Metrics of Performance.
The Company must meet all financial covenants that are impacted by the accrual
and/or payment of bonuses under the Plan. These covenants include but are not
limited to the Consolidated EBITDA Covenant per the

 

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Credit Facility and any applicable covenants put in place under this or future
bank agreements. Upon the achievement of the applicable financial covenants, a
bonus will be earned based upon the Company’s achievement of predetermined
performance metrics and objectives, individual performance objectives applicable
to each Participant. The applicable performance metrics will be determined by
the Committee each year. The performance metrics applicable to the 2010 fiscal
year are attached hereto as Exhibit 2.
6. Employment on Payment Date Requirement.
In addition to meeting the financial performance metrics outlined in section 5,
the Participant must be employed by the Company as of the day the bonus is paid
to be eligible to receive the earned and/or accrued bonus under the Plan.
7. Range of Bonus.
The bonus earned will be based on the range of actual performance against the
metrics approved by the Committee. The range of bonus amounts payable for the
2010 fiscal year is attached hereto as Exhibit 2.
To the extent that a bonus in excess of 100% of the target amount becomes
payable under the Plan, such bonus must be self funding and the Operating
Income, taking the bonuses into effect, must be in excess of budgeted Operating
Income for the applicable fiscal year. Therefore, if the bonus pool earned above
the 100% target provides less Operating Income than 100% of the budgeted
Operating Income in a given fiscal year, then the earned bonus pool will be
reduced pro-rata for all Participants to a level that allows the Company to
achieve 100% of the budgeted Operating Income.
Furthermore, if the bonus pool earned under this calculation places the Company
in a non-compliance position with its financial covenants then the earned bonus
pool will be reduced pro-rata for all Participants to a level that allows the
Company to meet such financial covenants.
8. Bonus Adjustment for Partial Year.
For Participants that are hired after the first day of the fiscal year that are
eligible under the Plan, they will be entitled to a pro-rata portion of their
annual bonus earned based on the number of days that they were employed by the
Company during the applicable fiscal year.
9. Administration.
(a) Authority of the Committee. Except as otherwise provided herein, the Plan
shall be administered by the Committee. The Committee shall have full and final
authority, in each case subject to and consistent with the provisions of the
Plan, to (i) select Eligible Persons to become Participants; (ii) grant or
revise bonus levels; (iii) prescribe or revise the rules and regulations for the
administration of the Plan; (iv) construe and interpret the Plan and correct
defects, supply omissions, or reconcile inconsistencies therein; (v) suspend the
Plan; and (vi) make all other decisions and determinations as the Committee may
deem necessary or advisable for the administration of the Plan. Any action of
the Committee shall be final, conclusive, and binding on all persons, including,
without limitation, the Company, Participants, and beneficiaries of
Participants.

 

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(b) Delegation. To the extent permitted by applicable law, the Committee may
delegate to officers or employees of the Company or committees thereof, the
authority, subject to such terms as the Committee shall determine, to perform
such functions, including but not limited to administrative functions, as the
Committee may determine appropriate. The Committee may appoint agents to assist
it in administering the Plan.
(c) Payment of Bonus. The bonuses under the Plan will be paid on or before March
15th of the year following the year in which the bonus is earned, subject to the
limitation of the Plan’s bonus accrual and/or payment causing covenant
compliance violations and the issuance of the Company’s audited financial
statements. The Committee under its discretion can adjust the payment date and
criteria for payment.
(d) Section 409A. The Company shall take into account compliance with
Section 409A of the Code in connection with any bonus payout under the Plan, to
the extent applicable.
(e) Termination of Employment or Service. Except as may otherwise be provided by
the Company in an independent written agreement with the employee approved by
the Committee, in the event of a Participant’s Termination with the Employer for
any reason prior to the time that such Participant’s bonus is paid, such
Participant’s bonus will be voided by the Company and forfeited by the
Participant.
(f) Change in Control. Notwithstanding the foregoing, except as may otherwise be
provided in writing and approved by the Committee, in connection with a Change
in Control, the pro-rata bonus earned based upon the achievement of the
applicable performance metrics through the date of the Change in Control will
become due and payable to the Participants concurrently with the Change in
Control.
10. Termination or Suspension of the Plan.
The Committee may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on the tenth (10th) anniversary of the
Effective Date. No bonus awards may be granted under the Plan while the Plan is
suspended or after it is terminated.
11. Effective Date of the Plan.
The Plan is effective as of the Effective Date.
12. Miscellaneous.
(a) Clawback/Recoupment Policy. Notwithstanding anything contained herein to the
contrary, all bonus awards earned and/or paid under the Plan shall be and remain
subject to any incentive compensation clawback or recoupment policy currently in
effect or as may be adopted by the Committee, and in each case, as may be
amended from time to time. Any such policy adoption or amendment shall in no
event require the prior consent of any Participant.

 

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(b) Payments Following Accidents or Illness. If the Committee shall find that
any person to whom any amount is payable under the Plan is unable to care for
his affairs because of illness or accident, or has died, then any payment due to
such person or his estate (unless a prior claim thereof has been made by a duly
appointed legal representative) may, if the Committee so directs the Company, be
paid to his spouse, child, relative, an institution maintaining or having
custody of such person, or any other person deemed by the Committee to be a
proper recipient on behalf of such person otherwise entitled to payment. Any
such payment shall be a complete discharge of the liability of the Committee and
the Company thereof.