Exhibit 10.5

FORM OF PERFORMANCE-BASED AWARD AGREEMENT

[Insert XX]

 

  Re: Award Agreement—Grant of Performance Units

Dear             ,

Congratulations! In recognition of your continued dedication to Vera Bradley, we
are pleased to award you with a discretionary grant of Performance Units
(“Award”). This letter constitutes an Award Agreement between you and Vera
Bradley regarding the terms and conditions of the grant. In order for the Award
referenced in this Award Agreement to become effective, you must sign and date
this form and return a signed copy to Julie North by no later than
                    . [Insert]

While complete details of this grant are defined in the enclosed documents, a
high-level summary of this Award is as follows:

 

Type of Grant    Discretionary grant of Performance Units (“Performance RSUs”).
This is a one-time, discretionary grant to reward you for your continued
contribution to the success of Vera Bradley. Number of Performance RSUs   
[Insert XX] (See the attached Exhibit A for an explanation regarding the
determination of the number of the Performance RSUs granted under this Award
Agreement). Date of Grant of Award    [Insert XX] Performance Period    Fiscal
Years [Insert XX] Earning of Performance RSUs    The Performance RSUs will be
divided into three equal tranches of 1/3 each (each a separate “Tranche”) of the
total Award and allocated to each of the three fiscal years of the Company
ending during the Performance Period, with each such fiscal year being
considered a performance year (“Performance Year”). Importantly, each Tranche of
Performance RSUs must be “earned” and “vested” before it will be settled in the
form of Shares of the Company. Except as otherwise provided herein, (i) each
Tranche of Performance RSUs will be deemed earned only if the Net Income (as
defined in the [Insert XX] Restricted Stock Unit/Performance Unit Terms and
Conditions) of the Company for the applicable Performance Year meets or exceeds
the threshold level established by the Compensation Committee for such
Performance Year, and (ii) each Tranche of Performance RSUs will be deemed
vested only if you are continuously employed with the Company throughout the
Performance Period.

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Performance Level* for each Tranche

    

Threshold

  

Target

  

Excellence

Performance Level Attainment as % of Target [Insert XX]

  

[Insert XX]

   [Insert XX]   

[Insert XX]

Performance Level Attainment as % of Target [Insert XX]

  

[Insert XX]

  

[Insert XX]

  

[Insert XX]

Performance Level Attainment as % of Target [Insert XX]

  

[Insert XX]

  

[Insert XX]

  

[Insert XX]

Payout level** for Tranche of Performance RSUs

  

[Insert XX]

  

[Insert XX]

  

[Insert XX]

 

* - The actual number of Performance RSUs allocated to each Tranche that can be
earned under this Award Agreement is based on the level of performance achieved
(as summarized in the table above) during the applicable Performance Year and
can range from 0% of the “Target” (for performance levels below the “Threshold”
level) to a maximum of [Insert XX] of the “Target” (for performance levels at or
above the “Excellence” level).

** - Payout levels for each Tranche of Performance RSUs are based on the
attained percentage of the target Net Income for each respective Performance
Year (using linear interpolation for results falling between the three
performance levels).

 

Termination of Service

   In general, should your Service with Vera Bradley be terminated prior to the
last day of the Performance Period, all then outstanding Performance RSUs
(whether or not one or more Tranches have been earned as a result of the Net
Income for such Performance Year) will be forfeited to the Company. However, the
following provisions will apply if, during the Performance Period, you cease
providing Services due to death, Disability or Retirement (and provided that you
have not otherwise engaged in an act that would constitute Cause):   

•    Death or Disability: In the event that your Service with the Company
terminates as a result of your death or Disability during the Performance
Period, (i) with respect to Performance Years that have been completed at the
time of such death or Disability, each such Tranche shall be earned only to the
extent of actual performance for such Performance Year, and (ii) with

 

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respect to Performance Years that have not been completed at the time of such
death or Disability, each such Tranche shall be deemed to be earned based on the
“Target” level of performance for such Performance Year, but prorated based on
the number of full fiscal months (in which you provided Service throughout such
month) during the Performance Period. Any such earned Awards shall become fully
vested and paid out in Shares of Company stock pursuant to the settlement
provisions below. For purposes of this Award Agreement, “Disability” shall have
the meaning assigned to such term in the 2010 Plan.

 

•      Retirement: In the event your Service terminates as a result of your
Retirement during the Performance Period, each Tranche of outstanding Awards
shall be treated as earned (i) with respect to Performance Years that have been
completed at the time of such Retirement, each such Tranche shall be earned and
vested only to the extent of actual performance for such Performance Year, and
(ii) with respect to Performance Years that have not been completed at the time
of such Retirement, each such Tranche shall be deemed to be earned based on the
actual performance level attained for such Performance Year, but prorated based
on the number of full fiscal months (in which you provided Service throughout
such month) during the Performance Period. Any such earned Awards shall become
fully vested and paid out in Shares of Company stock pursuant to the settlement
provisions below. For purposes of this Award Agreement, “Retirement” shall have
the meaning assigned to such term in the 2010 Plan.

 

If your Service with the Company shall terminate during the Performance Period
for any reason other than death, Disability, or Retirement, all Performance RSUs
granted hereunder (whether or not a Tranche was previously earned) shall be
forfeited to the Company.

Change in Control    Notwithstanding anything to the contrary in this Award
Agreement, in the event of the consummation of a Change in Control of the
Company (and provided that you remain continuously employed with the Company
until such Change in Control) during the Performance Period, then each Tranche
of outstanding Awards shall be treated as earned (i) with respect to Performance
Years that have been completed at the time of such Change in Control, such
Tranche shall be earned and vested only to the extent of actual performance for
such Performance Year, and (ii) with respect to Performance Years

 

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   that have not been completed at the time of such Change in Control, each such
Tranche shall be deemed to be earned at the Target level, with any such earned
Performance RSUs becoming fully vested. Performance RSUs payable upon a Change
in Control shall be paid immediately prior to the Change in Control in the form
of one Share of Company stock for each vested Performance RSU. Partial Shares
(along with any accumulated dividends) will be paid in cash at the same time the
Shares are delivered. Settlement    Except as it applies to Tranches that are
deemed to be earned at “Target” and become payable due to a Change in Control or
due to termination of Service as a result of death or Disability, no Awards will
become payable unless the Committee certifies that the performance goals in the
Award Agreement have been attained with respect to the applicable Performance
Year during the Performance Period in a manner that complies with Code Section
162(m) and the 2010 Plan. Any earned Performance RSUs will be paid in the form
of one Share of Company stock for each earned whole Performance RSU. Delivery of
the Share(s) will be made, including delivery with respect to a Disabled
Participant, or to the estate of a deceased Participant, after the end of the
Performance Period and not later than the 15th day of the third month following
the end of the Performance Period. Shares will be credited to an account
established for the benefit of the Participant with the Company’s administrative
agent. The Participant will have full legal and beneficial ownership with
respect to the Shares at that time. Partial Shares (along with any accumulated
dividends) will be paid in cash at the same time the Shares are delivered.
Withholding Taxes    You acknowledge and agree that the Company shall have the
power and the right to deduct or withhold, an amount sufficient to satisfy
federal, state, and local taxes (including your FICA obligation), domestic or
foreign, required by law to be withheld with respect to this Award.

These Performance RSUs have been granted under and are governed by the terms and
conditions of the Vera Bradley, Inc. 2010 Equity and Incentive Plan (the “2010
Plan”), as amended. The enclosed Statement of General Information and
Availability of Information for the 2010 Plan forms part of a Section 10(a)
prospectus covering securities that have been registered under the Securities
Act of 1933, as amended. This document is also enclosed to provide further
information and background. Any term capitalized herein but not defined will
have the meaning set forth in the 2010 Plan.

Please see the enclosed [Insert XX] Restricted Stock Unit/Performance Unit Terms
and Conditions for further information regarding your Award. It is very
important that you keep these documents in a safe place because they describe
your rights and responsibilities under the Performance Units and 2010 Plan and
explain where and how to obtain other documents and information to which you are
entitled.

 

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Again, thank you for your continued contribution to the success of our
organization! Your efforts are applauded and truly appreciated. If you have any
questions regarding this discretionary grant, please contact Kevin Sierks in
Finance or Julie North in Human Resources.

Sincerely,

Jeff Blade

Acknowledgement & Acceptance of Award Agreement and Related Terms

By your signature and the signature of the Company’s representative (above) on
this Award Agreement, you and the Company agree that this Award of Performance
Units is granted under and governed by the terms and conditions of the 2010
Plan, the [Insert XX] Restricted Stock Unit/Performance Unit Terms and
Conditions and this Award Agreement. You acknowledge that you have reviewed the
2010 Plan, the [Insert XX] Restricted Stock Unit/Performance Unit Terms and
Conditions, and this Award Agreement in their entirety, have had an opportunity
to obtain the advice of counsel prior to executing this Award Agreement, and
fully understand all provisions of the 2010 Plan, the [Insert XX] Restricted
Stock Unit/Performance Unit Terms and Conditions and this Award Agreement.
Further, by signing below, you hereby agree to (i) accept as binding, conclusive
and final all decisions or interpretations of the Committee upon any questions
relating to the 2010 Plan, the [Insert XX] Restricted Stock Unit/Performance
Unit Terms and Conditions and this Award Agreement, and (ii) notify the Company
upon any change in your residence address.

“Participant”

Signature:                    

Printed Name:                    

Date:                    

 

 

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Exhibit A

Explanation of How Awards of Performance RSUs Were Determined

Award levels of grants of Performance RSUs were determined according to the
following chart:

 

Participant Level

   Performance RSU Opportunity

CEO

   [Insert XX]

M6 (EVP)

   [Insert XX]

M5 and P7 (VP)

   [Insert XX]

M4 and P6 (Sr. Director)

   [Insert XX]

 

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