Document:

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of the 21st day of December, 2010 (the “Effective Date”), by and between Sugartown Worldwide, Inc., a Pennsylvania corporation (the “Company”), and Scott A. Beaumont, a resident of the Commonwealth of Pennsylvania (“Employee”).

 

R E C I T A L S

 

The Company desires to employ Employee and to have the benefit of his skills and services, and Employee desires to accept employment with the Company, on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual promises, terms, covenants and conditions set forth herein, and the performance of each, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending legally to be bound, agree as follows:

 

AGREEMENTS

 

1.                                       Employment; Term.  The term of this Agreement shall begin on the Effective Date and continue through January 31, 2015 or  until terminated pursuant to Section 6 of this Agreement  (the “Term”).

 

2.                                       Duties.  Employee shall be employed by the Company to serve as the Chief Executive Officer of the Lilly Pulitzer Group (the “Lilly Pulitzer Group”), which is an operating group of the Company’s parent, Oxford Industries, Inc. (“Oxford”), and shall have such responsibilities, duties and authorities consistent with an Employee at his level as are assigned to him by the Company’s parent Oxford through the President of Oxford.  Employee shall fulfill his duties and responsibilities in a reasonable and appropriate manner and in compliance with the Company’s policies and the laws and regulations that apply to the Company’s operation and administration.  Other than during any vacation, sick or personal time provided to Employee, Employee shall devote his full business time and attention to the business and affairs of the Company and shall not be engaged in, or employed by, any other business enterprise; provided, however, that notwithstanding the foregoing, it shall not be a violation of this Agreement for Employee to (A) serve, with the consent of the Executive Committee of the Oxford Board of Directors consistent with Oxford’s conflict of interest and business ethics policy, on boards, committees or similar bodies of any entity subject to compliance with Section 7 hereof, (B) serve or participate on the boards, committees or similar bodies of the entities listed on Exhibit A hereto, and as an officer of the entity listed therein to the extent disclosed therein, the service and participation of which has received the requisite consent from Oxford, and/or (C) manage Employee’s personal affairs and investments.  Employee will be based at the headquarters of the

 

 

Lilly Pulitzer Group in or around Philadelphia, Pennsylvania.  Employee will be required to travel (domestically and/or internationally) from time to time in the performance of his duties.

 

3.                                       Compensation.  For all services rendered by Employee, the Company shall compensate Employee as follows:

 

(a)                    Base Salary.  Employee shall receive a base salary (the “Base Salary”) at the annualized rate of (i) THREE HUNDRED TWENTY THOUSAND DOLLARS ($320,000.00) for the period commencing on the Effective Date and continuing through December 31, 2010, (ii) FOUR HUNDRED THOUSAND DOLLARS ($400,000.00) for the period commencing on January 1, 2011 and continuing through December 31, 2011 and (iii) FOUR HUNDRED FIFTY THOUSAND DOLLARS ($450,000.00) for the period commencing on January 1, 2012 through the end of the Term.  The Base Salary shall be payable, less applicable withholdings, in reasonable periodic installments in accordance with the Company’s regular payroll practices in effect from time to time, but not less frequently than twice monthly.

 

(b)                   Additional Compensation.  Beginning after the first anniversary of the Effective Date, at the sole discretion of the Company, in addition to the Base Salary, Employee may be eligible to receive cash and/or equity bonus compensation in accordance with bonus opportunities established by the Company, in its sole discretion.  For purposes of clarity, the Company has no current plans and no obligation to pay any bonus pursuant to this paragraph 3(b).

 

4.                                       Other Benefits.

 

(a)                    Expense Reimbursement.  The Company shall reimburse Employee for (or, at the Company’s option, pay) all reasonable business travel and other out of pocket expenses reasonably incurred or paid by Employee in connection with, or related to, the performance of Employee’s duties, responsibilities or services under this Agreement in accordance with the applicable policies of the Company and its affiliates during the Term.  All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company’s expense reporting policy applicable to employees of the Company at the level of Employee’s position, as well as applicable federal and state tax record keeping requirements.  All such reimbursements will be made in any event no later than the last day of Employee’s taxable year following the taxable year in which the expense was incurred.  The expenses reimbursed by the Company during any taxable year of Employee will not affect the expenses reimbursed by the Company in another taxable year.  Further, this right to reimbursement is not subject to liquidation or exchange for another benefit.

 

(b)                   Participation in Employee Benefits Plans.  During the Term, the Employee is entitled to participate in the health, hospitalization, major medical,

 

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dental, life and long term disability insurance coverage generally consistent with that provided by the Company to other senior executives of the Lilly Pulitzer Group pursuant to the terms of such benefits and plans as they are in effect from time to time.  For such coverage during the Term, the Company will pay on Employee’s behalf one hundred percent (100%) of the health, dental, life and long term disability insurance premiums for Employee and his dependents; and to the extent the Company does not pay those amounts for other full-time employees of the Lilly Pulitzer Group, the Company will report those payments as taxable income on Employee’s IRS Form W-2.  For purposes of this Agreement, “dependents” is defined as the Employee’s spouse and his children who are properly claimed as and recognized by the Internal Revenue Service as dependents on the Federal Income Tax filings of Employee.  If and when the Company develops plans, benefits or programs in addition to the health, dental, life and long term disability insurance described above, Employee shall be entitled to participate therein on the same basis as other full-time employees of the Lilly Pulitzer Group.  In addition, Employee shall be entitled to participate in any 401(k) plan and any employee savings plan on the same basis as offered to other full-time employees of the Lilly Pulitzer Group.

 

(c)                    Vacation.  In addition to Company holidays, Employee shall be entitled to twenty-five (25) days of paid vacation time annually each year during the Term, which annual paid vacation time accrues in full as of January 1 of each year.  Employee may carry forward five (5) unused days of vacation time from the preceding year into each succeeding year.

 

5.                                       Existing Employment Agreement. Employee acknowledges that any employment agreement or arrangement between Employee and the Company (“Existing Employment Agreement”) in effect immediately prior to the Effective Date, including, without limitation, the employment agreement between Employee and the Company, dated as of January 1, 2010, shall be terminated as of the Effective Date, and Employee hereby waives all rights he has under such Existing Employment Agreement, including, without limitation, any right to receive any bonus payment, severance payment or any right under any wage continuation provision, other than the right to receive unpaid base compensation earned through the Effective Date.

 

6.                                       Termination; Rights on Termination.

 

(a)                            Termination.  Employee’s employment is “at will” and Employee and the Company may terminate such employment at any time.  Employee’s employment may be terminated in any one of the following ways, prior to the expiration of the Term:

 

(i)                                     Termination by the Company for Good Cause.  The Company may terminate this Agreement and Employee’s employment for Good Cause immediately upon providing written notice to Employee.  “Good Cause” shall mean: (A) Employee’s willful and continued failure to

 

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perform any substantial duty as required under this Agreement; (B) Employee’s willful engagement in any gross misconduct or knowing violation of the applicable policies of the Company or its affiliates; (C) Employee’s engagement in any activity that is in breach of Section 7 of this Agreement; (D) Employee’s engagement in any act of fraud or dishonesty against the Company or its affiliates; (E) any theft, conversion or misappropriation of the property of Company or its affiliates by the Employee; (F) Employee’s engagement in any material breach of federal or state securities laws or regulations; (G) Employee being intoxicated or in possession of any illegal substance in the workplace; (H) Employee’s engagement in an act of assault or other act of violence; (I) Employee’s engagement in any willful act which brings disrepute to the Company or any of its affiliates or materially impairs any of their reputations; (J) Employee’s harassment of any individual in the workplace based on age, gender or other protected status or class or violation of any applicable policy of the Company or its affiliates regarding harassment; or (K) Employee’s conviction for any felony or misdemeanor charge (other than charges related to routine traffic and other similar, insignificant violations); provided, that in the event the Company desires to terminate Employee’s employment for Good Cause under clause (A) above, the Company shall first give Employee written notice of such intent, a detailed and specific description of the reasons and basis therefor, and, if such behavior is susceptible to cure, thirty (30) days to remedy or cure such perceived breaches or deficiencies.  In the event of such termination for Good Cause, no compensation or benefits shall be payable to Employee after the date of termination, except as provided for in paragraph 6(b).

 

(ii)                                  Termination by the Company Without Good Cause.  The Company may, without Good Cause and for any reason whatsoever, terminate this Agreement and Employee’s employment, effective thirty (30) days after written notice is provided to Employee.  Upon such termination without Good Cause, the compensation described in paragraph 6(b) shall be payable to Employee, and the severance pay described in paragraph 6(c) shall be payable to Employee provided he executes and does not revoke a release as described in paragraph 6(d).

 

(iii)                               Termination by Employee for Good Reason.  Employee may, for Good Reason (as defined in paragraph 6(a)(vi)), terminate this Agreement and Employee’s employment effective thirty (30) days after written notice is provided to the Company; provided, such notice must be given within one hundred twenty (120) days of the initial existence of the Good Reason condition. Upon such termination for Good Reason, the compensation described in paragraph 6(b) shall be payable to Employee, and the severance pay described in paragraph 6(c) shall be payable to

 

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Employee provided he executes and does not revoke a release as described in paragraph 6(d).

 

(iv)                              Termination by Employee Without Good Reason.  Employee may, without Good Reason, terminate this Agreement and Employee’s employment effective thirty (30) days after written notice is provided to the Company. In the event of such a termination, no compensation or benefits shall be payable to Employee after the date of termination, except as provided for in paragraph 6(b).

 

(v)                                 Termination Due to Death or Disability.  This Agreement and Employee’s employment shall terminate immediately upon his death.  In addition, the Company may terminate this Agreement and Employee’s employment upon his becoming disabled.  For this purpose, “disabled” or “disability” means Employee would be entitled to long-term disability benefits under the Company’s long-term disability plan as in effect from time to time, assuming for the purpose of such determination that Employee is actually participating in such plan at such time.  If the Company does not maintain a long-term disability plan, “disabled” or “disability” shall mean that Employee is unable to perform the substantial duties of his job for a period of at least ninety (90) consecutive days or for a period of at least ninety (90) days in the aggregate in any twelve (12) consecutive month period due to a medically determinable physical or mental impairment. In the event of termination of Employee’s employment due to his death or by the Company due to his disability, no compensation or benefits shall be payable to Employee after the date of termination, except as provided for in paragraph 6(b).

 

(vi)                              Good Reason.  “Good Reason” shall mean any of the following conditions that remain uncured after the expiration of thirty (30) days following Employee’s delivery of written notice of such condition to the President or Chief Executive Officer of Oxford: (A) the Company’s requirement, as a condition of continued employment in Employee’s current position or any future position, that Employee relocate his principal place of employment to any area outside a fifty (50) mile radius of the metropolitan Philadelphia area; (B) a material reduction in Employee’s duties or responsibilities that is inconsistent with Employee’s position as Chief Executive Officer of the Lilly Pulitzer Group; (C) a material breach by the Company of any of its obligations under this Agreement; or (D) a material reduction in Employee’s Base Salary (other than in connection with a general decrease in the salary for other executive employees of the Lilly Pulitzer Group) without Employee’s written consent.

 

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(b)                           Payment Through Termination.  Upon termination of Employee’s employment for any reason provided for in this Agreement, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements (including payments for accrued vacation and sick leave, in each case in accordance with, and to the extent provided under, applicable policies of the Company) due through the effective date of termination.  No other compensation will be due or payable to Employee subsequent to termination, except as expressly provided by this Section 6 or required by law.

 

(c)                            Payment for Termination Without Good Cause or For Good Reason.  In the event of termination of Employee’s employment by the Company without Good Cause or by Employee for Good Reason (the date on which such termination becomes effective shall be referred to as the “Termination Date”) during the period commencing on the Effective Date through December 31, 2011, Employee shall receive from the Company an amount of severance pay equal to his Base Salary calculated from the Termination Date until the second (2nd) anniversary of the Effective Date (with such period being referred to as “Severance Period No. 1”).  In the event of termination of Employee’s employment by the Company without Good Cause or by Employee for Good Reason during the period commencing on January 1, 2012 through January 31, 2014, Employee shall receive from the Company an amount of severance pay equal to his Base Salary calculated from the Termination Date until the first (1st) anniversary of the Termination Date (with such period being referred to as “Severance Period No. 2”). In the event of termination of Employee’s employment by the Company without Good Cause or by Employee for Good Reason during the period commencing on February 1, 2014 through January 31, 2015, Employee shall receive from the Company an amount of severance pay equal to his Base Salary calculated from the Termination Date until January 31, 2015 (with such period being referred to as “Severance Period No. 3,” and Severance Period No. 1, Severance Period No. 2 and Severance Period No. 3 being referred to collectively and individually as the “Severance Period”). Except as provided in paragraph 6(d), the amount of severance pay determined under any of the three preceding sentences, whichever is applicable, shall be paid commencing upon the date Employee incurs a separation from service (as defined in Treasury Regulation Section 1.409A-1(h); a “Separation from Service”) and shall be paid in substantially equal installments in accordance with the Company’s regular payroll procedures for similarly-situated employees for the number of months in Severance Period No. 1, Severance Period No. 2 or Severance Period No. 3, whichever is applicable.  Each payment of severance pay under this paragraph shall be considered a separate payment for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”).

 

(d)                           Release Agreement.  Employee’s entitlement to any severance pay under paragraph 6(c) is conditioned upon Employee’s first entering into, and not revoking, a release agreement in such form and with such terms, as prescribed by the Company in its general form as prescribed from time to time; provided, such

 

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release agreement shall be delivered to Employee within seven (7) days after the date of his Separation from Service.  During the period permitted to Employee to review the release agreement, he may request and negotiate for changes thereto; provided, the Company shall retain the sole discretion as to whether or not to accept and make any such changes.  Any payment of severance pay due under paragraph 6(c) shall be delayed until after the expiration of the seven (7)-day revocation period required for an effective age-based release, and any amount otherwise due under said paragraph before the end of such revocation period shall be paid upon the day after the end of such period in a single lump-sum payment, but not later than March 15 of the calendar year following the calendar year in which his separation from service occurs; provided, if all or any portion of the severance pay that is payable to Employee under paragraph 6(c) within the 60-day period commencing on his Separation from Service is subject to, and not exempt from, Section 409A, all severance pay payable within such 60-day period shall be paid on the 60th day after his Separation from Service regardless of how quickly he executes his release agreement.

 

(e)                            Earnout Payments. Notwithstanding anything to the contrary, the cessation of Employee’s employment with the Company for any reason (whether by termination, resignation or otherwise) shall have no effect on (i) the obligation of Oxford, the Company or their respective successors and assigns from making any payments that may be due under the Earnout Agreement, dated December 21, 2010, by and among Oxford, the Company and Sugartown Worldwide Holdings, Inc. (“Holdco”), or (ii) Employee’s share of any payment made to Holdco pursuant to the terms of such Earnout Agreement.

 

(f)                              Survival.  All rights and obligations of the Company and Employee under this Agreement shall cease as of the effective date of termination, except that (i) the Company’s obligations under Section 6 shall survive such termination in accordance with its terms and (ii) Employee’s obligations under Sections 7, 8 and 10 shall survive such termination in accordance with their terms.

 

7.                                       Employee Covenants.

 

(a)                            During the Term or, if employment is terminated prior to January 31, 2015, until the later of (x) the second (2nd) anniversary of the Effective Date or (y) the earlier of (1) the date twelve (12) months following such termination or (2) January 31, 2015 (any such period, a “Restricted Period”), Employee shall not, directly or indirectly, for himself or on behalf of or in conjunction with any other person, company, partnership, corporation, business, group or other entity (each, a “Person”) (other than on behalf of the Company or its Associated Companies):

 

(i)                                     engage within the Territory (as defined below), as an officer, director, owner, partner, member, joint venturer, or in a managerial capacity (whether as an employee, independent contractor, or consultant) in any business activity or enterprise engaged in the Business

 

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Activities (as defined below); provided, that, during the term of Employee’s employment pursuant to this Agreement, the foregoing shall not prevent Employee from acquiring or holding up to one percent (1%) of the outstanding shares of any company whose common stock is traded on a national or regional securities exchange or in the over-the-counter market and which represents less than ten percent (10%) of the market value of the Employee’s personal investment portfolio; provided, further, following the termination of Employee’s employment for any reason, the foregoing shall not prevent Employee from acquiring or holding up to five percent (5%) of the outstanding shares of any company whose common stock is traded on a national or regional securities exchange or in the over-the-counter market. For the avoidance of doubt, nothing herein shall restrict Employee’s passive investment in or ownership of shares or other interests in mutual funds or exchange traded funds.

 

(ii)                                  Solicit or attempt to solicit for employment or engagement, recruit or attempt to recruit for employment or engagement any employee, agent or contract worker of the Company or the Associated Companies (as defined below) with whom Employee had contact during the course of his employment with the Company; provided, however, the foregoing shall not restrict Employee from (A) having contact with individuals as part of, or following their response to, generalized searches for employment, or (B) recruiting or soliciting individuals whose employment was terminated by the Purchaser or the Company not less than eighteen (18) months prior to such recruitment or solicitation or attempted recruitment or solicitation.

 

(iii)                               Solicit or attempt to solicit any business related to the Business Activities from any Person who, as of the date of the solicitation or attempted solicitation or within twelve (12) months prior to that date, is or was a customer of the Company, or an actively sought prospective customer, with whom Employee had contact (through sales calls, presentations, or other business dealings) during the course of his employment with the Company.

 

(b)                           For purposes of Sections 7 through 11:

 

(i)                                     References to the “Territory” shall mean Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West

 

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Virginia, Wisconsin, Wyoming, District of Columbia and all other U.S. territories and possessions, Canada and Mexico.

 

(ii)                                  References to the “Associated Companies” shall mean any entity directly or indirectly controlling or controlled by or under direct or indirect common control with the Company. As used in the definition of “Associated Companies,” “control,” “controlling” or “controlled by” means the power to direct the management and policies of such entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

 

(iii)                               References to the “Business Activities” shall mean the business of designing, marketing, procuring, wholesaling and/or retailing apparel and/or footwear for women, children and/or men.

 

(c)                            The covenants in this Section 7 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant.  If any provision of this Section 7 relating to the time period, scope, or geographic areas of the restrictive covenants shall be declared by a court of competent jurisdiction to exceed the maximum time period, scope, or geographic area, as applicable, that such court deems reasonable and enforceable, then this Agreement shall automatically be considered to have been amended and revised to reflect such determination.

 

(d)                           All of the covenants in this Section 7 shall be construed as an agreement independent of any other provisions in this Agreement, and the existence of any claim or cause of action Employee may have against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants.

 

(e)                            Employee has carefully read and considered the provisions of this Section 7 and, having done so, agrees that the restrictive covenants in this Section 7 impose a fair and reasonable restraint on Employee and are reasonably required to protect the interests of the Company and its officers, directors, employees, and stockholders.  Employee covenants that he will not challenge the enforceability of this Section 7 nor will he raise any equitable defense to its enforcement.

 

8.                                       Trade Secrets and Confidential Information.

 

(a)                            For purposes of this Section 8, “Confidential Information” means any data or information with respect to the conduct or details of the business conducted by the Company and its Associated Companies, other than Trade Secrets, that is valuable to the Company and/or its Associated Companies and not generally known or reasonably ascertainable to the public or to competitors of the Company.  “Trade Secret” means information with respect to the conduct or details of the business conducted by the Company and its Associated Companies, including, but

 

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not limited to, any data, formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers or other information similar to any of the foregoing, which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

 

(b)                           Employee acknowledges he is employed by the Company in a confidential relationship wherein he, in the course of his employment with the Company, has received or will receive and has had or will have access to Confidential Information and Trade Secrets, including but not limited to confidential and secret business and marketing plans, strategies and studies, detailed client/customer lists and information relating to the operations and business requirements of those clients/customers and, accordingly, he is willing to enter into the covenants contained in Sections 7 and 8 of this Agreement in order to provide the Company with what he considers to be reasonable protection for its interests.

 

(c)                            Employee hereby agrees that, during the Term and for a period of five years thereafter, he will hold in confidence all Confidential Information that came into his knowledge during his employment by the Company and will not disclose, publish or make use of such Confidential Information without the prior written consent of the Company.

 

(d)                           Employee shall hold in confidence all Trade Secrets that came into his knowledge during his employment by the Company and shall not disclose, publish or make use of at any time after the date hereof such Trade Secrets without the prior written consent of the Company for as long as the information remains a Trade Secret.

 

(e)                            Employee hereby agrees that all inventions, developments, methods, processes, writings, designs, works of authorship, and ideas conceived or developed by Employee during his employment, or reduced to practice by Employee during his employment and for three (3) months thereafter, which are directly or indirectly useful in, or relate to, the business of or services provided by or sold by the Company or any of its Associated Companies shall be promptly and fully disclosed by Employee to an appropriate executive officer of the Company (accompanied by all papers, drawings, data and other materials relating thereto) and shall be the Company’s exclusive property. Employee will, upon the Company’s request and at its expense (but without any additional compensation to Employee), execute all documents reasonably necessary to assign Employee’s right, title and interest in any such invention, development, method, process,

 

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writing, design, work of authorship, or idea to the Company (and to direct issuance to the Company of all patents or copyrights with respect thereto).

 

(f)                              Notwithstanding the foregoing, the provisions of paragraph 8(c) and paragraph 8(d) will not apply to the extent of (i) information required to be disclosed by Employee in the ordinary course of his duties hereunder or (ii) Confidential Information that otherwise becomes generally known in the industry or to the public through no act or omission of Employee or any person or entity acting by or on Employee’s behalf, or which is required to be disclosed by court order or applicable law.

 

(g)                           The parties agree that the restrictions stated in this Section 8 are in addition to and not in lieu of protections afforded to trade secrets and confidential information under applicable state law. Nothing in this Agreement is intended to or shall be interpreted as diminishing or otherwise limiting the Company’s right under applicable state law to protect its trade secrets and confidential information.

 

9.                                       Indemnification; Directors and Officers Liability Insurance.  The Company will indemnify Employee for and defend Employee from claims arising from the Employee’s good faith performance of his duties as an employee of the Company to the fullest extent permitted under applicable law and in accordance with the terms and conditions provided in the articles of incorporation and By-Laws of the Company (or equivalent governing documents to the extent the Company is not a corporation).  The Company will maintain liability insurance covering Employee’s potential liability in connection with his performance of his obligations hereunder commensurate with the coverage provided to Oxford’s officers and directors from time to time.

 

10.                                 Key Man Insurance.  Employee shall reasonably cooperate with the Company should the Company determine at any time during the Term, at the Company’s cost and expense, to pursue a “Key Man” insurance policy or other similar insurance arrangement on Employee.  Employee acknowledges and agrees that such cooperation may include normal and customary health screenings or such other measures as the Company may reasonably request of Employee.

 

11.                                 Return of Company Property.  All records, designs, patents, business plans, financial statements, manuals, memoranda, customer lists, customer database, rolodex and other property delivered to or compiled by Employee by or on behalf of the Company (including the respective Associated Companies thereof) or its representatives, vendors or customers which pertain to the business of the Company (including the respective Associated Companies thereof) shall be and remain the property of the Company, and be subject at all times to its discretion and control.  Upon the request of the Company and, in any event, upon the termination of Employee’s employment with the Company, Employee shall deliver all such materials to the Company; provided, that Employee shall be permitted to retain a copy of this Agreement, employee benefit materials generally distributed to employees and his personal rolodex or address book.  Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company which are

 

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collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee’s employment.

 

12.                                 No Prior Agreements.  Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his employment by the Company and the performance of his duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity.

 

13.                                 Assignment; Binding Effect.  Employee understands that he has been selected for employment by the Company on the basis of his personal qualifications, experience and skills.  Employee agrees, therefore, he cannot assign all or any portion of his performance under this Agreement.  The Company may assign, in its sole discretion, all or part of this Agreement to the purchaser of substantially all of the assets of the Company.  Without limitation of the foregoing, the Company’s rights under this Agreement may be assigned to, and the Company’s obligations hereunder assumed by, any successor entity or employer into which the Company is merged or consolidated.  Subject to the preceding three sentences, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective heirs, legal representatives, successors and assigns.

 

14.                                 Complete Agreement; Waiver; Amendment.  Employee has no oral representations, understandings, or agreements with the Company or any of its officers, directors, or representatives covering the same subject matter as this Agreement.  This Agreement is the final, complete, and exclusive statement of expression of the agreement between the Company and Employee with respect to the subject matter hereof, and cannot be varied, contradicted, or supplemented by evidence of any prior or contemporaneous oral or written agreement. This written Agreement may not be later modified except by a further writing signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by a writing signed by the party waiving the benefit of such term.

 

15.                                 Notice.  Whenever any notice is required hereunder, it shall be given in writing addressed as follows:

 

	
To the Company:
  	
Sugartown Worldwide, Inc.
  
	
 
  	
c/o Oxford Industries, Inc.
  
	
 
  	
222 Piedmont Avenue, N.E.
  
	
 
  	
Atlanta, Georgia 30308-3391
  
	
 
  	
Attn:  General Counsel
  
	
 
  	
 
  
	
To the Employee:
  	
Scott A. Beaumont
  
	
 
  	
414 Rock Creek Circle
  
	
 
  	
Berwyn, Pennsylvania 19132
  

 

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With a copy to (which copy shall not constitute notice):
  	
Pepper Hamilton LLP

3000 Two Logan Square

Eighteenth and Arch Streets

Philadelphia, PA 19103

Attn:  Barry M. Abelson
  

 

16.                                 Severability; Headings.  If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative.  This severability provision shall be in addition to, and not in place of, the provisions of paragraph 7(c) above. The Section and paragraph headings are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent of the Agreement or of any part hereof.

 

17.                                 Counterparts.  This Agreement may be executed and delivered in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Counterparts may be delivered via facsimile, electronic mail (including .pdf) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

18.                                 Equitable Remedy.  Because of the difficulty of measuring economic losses to the Company as a result of a breach of the covenants set forth in Section 7, 8, 9 and 10, and because of the immediate and irreparable damage that would be caused to the Company for which monetary damages would not be a sufficient remedy, it is hereby agreed that in addition to all other remedies that may be available to the Company at law or in equity, the Company shall be entitled to seek specific performance and any injunctive or other equitable relief as a remedy for any breach or threatened breach of Employee’s covenants.

 

19.                                 Construction.  No provision of this Agreement shall be construed against or interpreted to the disadvantage of Employee or the Company by any court or the government or judicial authority by reason of Employee or the Company having or being deemed to have structured or drafted such provision of this Agreement.

 

20.                                 Governing Law.  This Agreement shall in all respects be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, not including the choice of law rules thereof.

 

21.                                 Section 409A.  This Agreement and the amounts paid hereunder are intended to be exempt from, or in compliance with Section 409A, and should be interpreted as such. Notwithstanding anything in this paragraph to the contrary, to the extent any payments made under Section 6 are not exempt from Section 409A and Employee, as of the date of his Separation from Service, is a specified employee as defined in Treasury Regulation Section 1.409A-1(i), the payments described in Section 6 shall be delayed until six (6) months after the date of Executive’s Separation from Service, and any payments that would otherwise be payable during such six (6)-month period shall be accumulated without interest and paid in a lump sum

 

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on the day after the six (6)-month anniversary of the date of Employee’s Separation from Service.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Employment Agreement to be duly executed as of the date first written above.

 

 

	
 
  	
SUGARTOWN WORLDWIDE, INC.
  
	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
By:
  	
/s/ James B. Bradbeer, Jr.
  
	
 
  	
 
  	
Name: 
  	
James B. Bradbeer, Jr.
  
	
 
  	
 
  	
Title:
  	
President
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
EMPLOYEE:
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
/s/ Scott A. Beaumont
  
	
 
  	
Scott A. BeaumontExhibit 10.1

 

UNITED NATURAL FOODS, INC.

AMENDED AND RESTATED

2004 EQUITY INCENTIVE PLAN

 

1.                                      PURPOSE

 

The United Natural Foods, Inc. Amended and Restated 2004 Equity Incentive Plan (the “Plan”) is designed to enable employees, officers and directors of, and consultants and advisers to, United Natural Foods, Inc. (the “Company”) and its Subsidiaries to acquire or increase a proprietary interest in the Company, and thus to share in the future success of the Company’s business. Accordingly, the Plan is intended as a means not only of attracting and retaining outstanding personnel, but also of promoting a closer identity of interests between management and stockholders. The Board of Directors believes that the Awards granted under the Plan will be in the Company’s interest because the personnel eligible to receive Awards under the Plan will be those who are in positions to make important and direct contributions to the success of the Company.

 

2.                                      DEFINITIONS

 

In this Plan document, unless the context clearly indicates otherwise, words in the masculine gender shall be deemed to refer to females as well as males, any term used in the singular also shall refer to the plural, and the following capitalized terms shall have the following meanings:

 

(a)                                  “Affiliate” means (i) any entity that, directly or indirectly, is controlled by the Company, (ii) any entity in which the Company has a significant equity interest, (iii) an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act, and (iv) any entity in which the Company has at least twenty percent (20%) of the combined voting power of the entity’s outstanding voting securities, in each case as designated by the Board as being a participating employer in the Plan.

 

(b)                                 “Agreement” means the written agreement entered into by the Grantee and the Company evidencing the grant of an Award.

 

(c)                                  “Applicable Law” means the requirements relating to the administration of equity incentive plans under applicable state corporation laws, United States federal and state securities laws, the Code, any stock exchange or quotation system on which the Shares are listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted.

 

(d)                                 “Award” means a Restricted Share, Restricted Unit, Option, Bonus Share, Performance Share, Performance Unit or Stock Appreciation Right.

 

(e)                                  “Beneficiary” means the person or persons designated in writing by the Grantee as his beneficiary in respect of an Award; or, in the absence of an effective designation or if the designated person or persons predecease the Grantee, the Grantee’s Beneficiary shall be the person or persons who acquire by bequest or inheritance the Grantee’s rights in respect of an Award. In order to be effective, a Grantee’s designation of a Beneficiary must be on file with the Company before the Grantee’s death. Any such designation may be revoked and a new designation substituted therefor at any time before the Grantee’s death without the consent of the previously designated Beneficiary.

 

(f)                                    “Board of Directors” or “Board” means the Board of Directors of the Company.

 

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(g)                                 “Bonus Share” means a Share granted pursuant to Section 8.

 

(h)                                 “Change in Control” means the first to occur of the following events:

 

(1)                                  any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities of the Company under an employee benefit plan maintained by the Company or any corporation owned, directly or indirectly, by the Company’s stockholders in substantially the same proportions as their ownership of the Company’s stock, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or  indirectly, of securities of the Company representing 25% or more of the total combined voting power of the Company’s then-outstanding securities pursuant to a tender or exchange offer made directly to the Company’s stockholders and which the Board does not recommend such stockholders to accept;

 

(2)                                  three or more directors, whose election or nomination for election is not approved by a majority of the members of the Incumbent Board then serving as members of the Board, are elected within any single 24-month period to serve on the Board; or

 

(3)                                  approval by stockholders of the Company of:

 

(i)                                     a merger, consolidation or reorganization involving the Company, unless:

 

(A)                              the stockholders of the Company, immediately before the merger, consolidation or reorganization, own, directly or indirectly immediately following such merger, consolidation or reorganization, at least 75% of the combined voting power of the outstanding voting securities of the corporation resulting from such merger, consolidation or reorganization in substantially the same proportion as their ownership of the voting securities immediately before such merger, consolidation or reorganization;

 

(B)                                (B) individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least a majority of the board of directors of the surviving corporation immediately following such merger, consolidation or reorganization; and

 

(C)                                no person (other than (I) the Company or any Subsidiary thereof, (II) any employee benefit plan (or any trust forming a part thereof) maintained by the Company, any Subsidiary thereof, or the surviving corporation, or (III) any person who, immediately prior to such merger, consolidation or reorganization, had beneficial ownership of securities representing 25% or more of the combined voting power of the Company’s then-outstanding securities) has beneficial ownership of securities immediately following such merger, consolidation or reorganization representing 25% or more of the combined voting power of the surviving corporation’s then outstanding voting securities;

 

(ii)                                  a complete liquidation or dissolution of the Company; or

 

(iii)                               an agreement for the sale or other disposition of all or substantially all of the assets of the Company to any person (other than a transfer to a Subsidiary).

 

(i)                                     “Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

(j)                                     “Committee” means, except as otherwise determined by the Board in its discretion, a committee consisting of such number of members of the Compensation Committee of the Board of Directors with such qualifications as are required to satisfy the requirements of 

 

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(i) Rule 16b-3 under the Exchange Act or any successor rule of similar import and (ii) Section 162(m) of the Code, and the regulations thereunder, as in effect from time to time (or any successor provision of similar import).

 

(k)                                  “Covered Executive” means an individual who is determined by the Committee to be reasonably likely to be a “covered employee” under Section 162(m) of the Code, and to receive compensation that would exceed the deductibility limits under Section 162(m) as of the end of the Company’s taxable year for which an Award to the individual will be deductible.

 

(l)                                     “Effective Date” means December 1, 2004.

 

(m)                               “Exchange Act” means the Securities Exchange Act of 1934, as amended and in effect from time to time.

 

(n)                                 “Fair Market Value” means, when used in connection with the Shares on a certain date, the fair market value of a Share as determined by the Committee, and shall be deemed equal to the closing price at which Shares are traded on such date (or on the next preceding day for which such information is ascertainable at the time of the Committee’s determination) as reported for such date by National Association of Securities Dealers Automated Quotations System (or if Shares are not traded on such date, on the next preceding day on which Shares are traded).

 

(o)                                 “Grantee” means a person to whom an Award has been granted under the Plan.

 

(p)                                 “Incentive Stock Option” means an option to purchase Shares from the Company that is granted under Section 13 of the Plan and that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.

 

(q)                                 “Incumbent Board” means those persons who either (i) have been members of the Board since the Effective Date or (ii) are new directors whose election by the Board or nomination for election by the stockholders of the Company was approved by a vote of at least three-fourths of the members of the Board then in office who either were directors described in clause (i) hereof or whose election or nomination for election was previously so approved, provided that an individual whose election or nomination for election is approved as a result of either an actual or threatened election contest or proxy contest, including by reason of any agreement intended to avoid or settle any election contest or proxy contest, will be deemed not to have been so approved for purposes of this definition. For purposes of this Section 2(o), “director” means a person who is a member of the Board.

 

(r)                                    “Insider” means an individual who is subject to reporting requirements of Section 16(a) of the Exchange Act on the relevant date.

 

(s)                                  “NASDAQ Rules” means the shareholder approval rules described in Rule 5635(c) and IM-5635-1 of the Nasdaq Stock Market Marketplace Rules, any official interpretation thereof, or any successor provision.

 

(t)                                    “Non-Qualified Stock Option” means an option to purchase Shares from the Company that is granted under Section 13 of the Plan and is not intended to be an Incentive Stock Option.

 

(u)                                 “Option” means an Incentive Stock Option or a Non-Qualified Stock Option.

 

(v)                                 “Option Price” means the purchase price payable to purchase one Share upon the exercise of an Option.

 

(w)                               “Performance Share” means an Award made pursuant to Section 9.

 

(x)                                   “Performance Unit” means an Award made pursuant to Section 10(b).

 

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(y)                                 “Restricted Share” means an Award granted pursuant to Section 7.

 

(z)                                   “Restricted Unit” means an Award made pursuant to Section 10(a).

 

(aa)                            “Restriction Period” means the period during which (i) the transfer of Restricted Shares or Performance Shares is limited in some way (based on the passage of time, achievement of performance goals, or the occurrence of other events determined by the Committee in its discretion) and (ii) the Restricted Shares or Performance Shares are subject to a substantial risk of forfeiture, as provided in Section 7 or 9.

 

(bb)                          “Shares” means shares of the Company’s common stock, par value $0.01 per share, or any security into which such shares may be converted by reason of any event of the type referred to in Section 17 or 18.

 

(cc)                            “Stock Appreciation Right” or “SAR” means a right that provides payment in accordance with Section 12.

 

(dd)                          “Subsidiary” means a subsidiary of the Company within the meaning of Section 424(f) of the Code (or a successor provision of similar import).

 

3.                                      EFFECTIVE DATE AND DURATION OF THE PLAN.

 

(a)                                  The Plan shall be effective as of the Effective Date, subject to approval of the Plan by the affirmative votes of the holders of a majority of the securities of the Company present or represented and entitled to vote at a meeting duly held in accordance with applicable law. Upon such approval of the Plan, all Awards granted under the Plan on or after the Effective Date shall be fully effective as if such approval had occurred on the Effective Date. If the Plan is not approved as set forth in this Section 3(a), any Awards granted under the plan shall be null and void and of no effect. The Plan shall terminate upon the close of business on the day next preceding the tenth anniversary of the Effective Date.

 

(b)                                 Awards may be granted at any time prior to the termination of the Plan pursuant to Section 21. An Award outstanding at the time the Plan is terminated shall not cease to be or cease to become exercisable pursuant to its terms solely because of the termination of the Plan.

 

(c)                                  No Awards of Performance Shares and Performance Units that are intended to constitute performance-based compensation under Section 162(m) of the Code shall be made on any date to a Covered Executive, unless the requirements of Treas. Reg.ss.1.162-27(e)(4)(vi) (regarding shareholder approval of the material terms of the performance goal) have been satisfied.

 

4.                                      SHARES SUBJECT TO THE PLAN.

 

(a)                                  Subject to adjustment as provided in Section 17, the number of Shares initially reserved for issuance pursuant to Awards made under the Plan shall be 2,500,000 Shares. Shares issued under the Plan may consist in whole or in part of authorized but unissued Shares or treasury Shares.

 

(b)                                 If an Award expires or is terminated, surrendered or cancelled without having been exercised in full, or is otherwise forfeited in full or in part, then the unissued Shares that were subject to such Award and/or such surrendered, cancelled or forfeited Shares, as the case may be, shall become available for future grant under the Plan (unless the Plan has terminated).

 

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5.                                      ADMINISTRATION OF THE PLAN.

 

(a)                                  The Plan shall be administered by the Committee.

 

(b)                                 The Committee may adopt, amend and rescind rules and regulations relating to the Plan as it may deem proper, shall make all other determinations necessary or advisable for the administration of the Plan, and may provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company, to the extent not contrary to the express provisions of the Plan; provided, that the Committee may take action only upon the agreement of a majority of its members then in office. The powers of the Committee shall include plenary authority to interpret the Plan.

 

(c)                                  Subject to the provisions of the Plan, the Committee may determine: (i) the persons to whom Awards shall be granted; (ii) the number of Shares subject to each Award; (iii) the type of each Award; (iv) the frequency of each Award and the date on which each Award shall be granted; (v) the term of each Award; (vi) the restrictions and other terms and conditions applicable to each grant of Awards; (vii) any performance goals applicable to Awards; and (viii) the provisions of any instruments evidencing Awards. Any Award granted to a member of the Committee shall be approved by the Board.

 

(d)                                 The determinations, interpretations, and other actions made or taken by the Committee under the Plan shall be final, binding, and conclusive for all purposes and upon all persons.

 

(e)                                  To the extent permitted by Applicable Law, the Committee may delegate to one or more executive officers of the Company the power to:

 

(i)                                     grant Awards to employees of the Company and Subsidiaries, provided that: (A) the Committee shall fix the terms of the Awards to be granted by such executive officers and the maximum number of shares subject to Awards that the executive officers may grant; (B) no executive officer shall be authorized to grant Awards to himself or to any Insider; and (C) an executive officer may  not grant any Award that is intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code; and

 

(ii)                                  exercise such other powers under the Plan as the Committee may determine, provided that the Committee may not delegate its authority with respect to: (A) non-ministerial actions with respect to Insiders; (B) non-ministerial actions with respect to Awards that are intended to qualify as performance-based compensation within the meaning of Section 162(m) of the code; or (C) certification that any performance goals and any other material terms of Awards intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code have been satisfied.

 

To the extent any powers have been delegated to an executive officer of the Company pursuant to this Section 5(e), the references in the Plan to the Committee shall be deemed to include such executive officer.

 

6.                                      ELIGIBILITY TO RECEIVE AWARDS.

 

Awards may be granted under the Plan to any employee or director of, or consultant to, the Company or of any Subsidiary, and all determinations by the Committee as to the identity of the persons to whom Awards shall be granted shall be conclusive. For purposes of this Section 6: (i) an “employee” means any person who is an employee, as defined in Section 3401(c) of the Code, of the Company or a Subsidiary; (ii) a “director” means a person, other than an employee, who is a member of the Board; and (iii) a “consultant” means a person, other than an employee, who is a natural person engaged by the Company or Subsidiary of the Company to render services to such entity, including an advisor.

 

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7.                                      RESTRICTED SHARES.

 

Subject to the terms of the Plan, including the following terms and conditions, the Committee may authorize the grant or sale to a Grantee of Restricted Shares that provide a Grantee full ownership of the Shares when the restrictions established by the Committee lapse or are removed. The Committee may impose such conditions and/or restrictions on such Restricted Shares as the Committee may determine, including without limitation, time-based restrictions on vesting, restrictions based upon the achievement of specific performance goals (including but not limited to performance goals based on the criteria listed in Section 11), restrictions under applicable federal or state securities laws and/or a requirement that the Grantee pays a stipulated purchase price for each Restricted Share.

 

(a)                                  Restricted Share Agreement. Each Award of Restricted Shares shall be evidenced by an Agreement that shall specify the Restriction Period, the number of Shares granted and such other terms and conditions as the Committee, in its sole discretion, shall determine. The Committee, in its discretion, may accelerate the time at which any restrictions on Restricted Shares shall lapse or be removed.

 

(b)                                 Treatment of Restricted Shares. A certificate or certificates representing the number of Restricted Shares granted under an Award may be registered in the name of the Grantee. Unless the Committee determines otherwise, Restricted Shares shall be held by the Company as escrow agent until the restrictions on such Shares have lapsed. Except as provided in Section 19, Restricted Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Restriction Period. The foregoing to the contrary notwithstanding, the Committee may, in its discretion, provide that a Grantee’s ownership of Restricted Shares prior to the lapse of any transfer restrictions or any other applicable restrictions shall, in lieu of such certificates, be evidenced by a “book entry” (i.e., a computerized or manual entry) in the records of the Company or its designated agent in the name of the Grantee who has received such Award, and confirmation and account statements sent to the Grantee with respect to such book-entry Shares may bear the restrictive legend referenced in paragraph (c) of this Section 7. Such records of the Company or such agent shall, absent manifest error, be binding on all Grantees who receive Awards of Restricted Shares evidenced in such manner.

 

(c)                                  Removal of Restrictions. Restricted Shares covered by each Award shall be released from escrow as soon as practicable after the last day of the Restriction Period. Subject to Section 14, after the restrictions have lapsed, the Grantee shall be entitled to have any legend relating to restrictions under this Section 7 removed from his or her Share certificate, and the Shares shall be freely transferable by the Grantee.

 

(d)                                 Voting Rights. During the Restriction Period, Grantees holding Restricted Shares may exercise full voting rights with respect to those Shares, unless otherwise provided in the applicable Agreement.

 

(e)                                  Dividends and Other Distributions. During the Restriction Period, Grantees holding Restricted Shares shall be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Agreement. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Restricted Shares with respect to which they were paid and shall be held by the Company as escrow agent until the restrictions on the Restricted Shares with respect to which they were paid have lapsed.

 

(f)                                    Right of Repurchase of Restricted Shares. The Company shall have the right to repurchase Restricted Shares at their original issuance price or other stated or formula price (or to require forfeiture of such Shares if issued at no cost) in the event that conditions specified in 

 

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the applicable Agreement with respect to such Shares are not satisfied prior to the end of the applicable Restriction Period.

 

8.                                      BONUS SHARES.

 

Subject to the terms of the Plan, the Committee may authorize the grant of Bonus Shares in consideration for services rendered by a Grantee to the Company or a Subsidiary. Bonus Shares shall be awarded pursuant to an Agreement containing such terms and conditions as may be established by the Committee.

 

9.                                      PERFORMANCE SHARES.

 

Subject to the terms of the Plan, including the following terms and conditions, the Committee may authorize the grant or sale to a Grantee of Performance Shares that are designed to constitute performance-based compensation under ss.162(m) of the Code. Such Performance Shares shall be earned by satisfying specified performance goals and shall provide a Grantee full ownership of the Shares when the Committee determines that such performance goals have been met. At the time of the Award of Performance Shares, the Committee shall impose on the Award restrictions based upon the achievement of specific performance goals using one or more of the criteria set forth in Section 11, and may impose such other conditions and/or restrictions on Performance Shares as the Committee may determine, including but not limited to time-based restrictions on vesting, restrictions under applicable federal or state securities laws and/or a requirement that the Grantee pay a stipulated purchase price for each Performance Share.

 

(a)                                  Performance Share Agreement. Each Award of Performance Shares shall be evidenced by an Agreement that shall specify the performance goals, the Restriction Period, the number of Shares granted and such other terms and conditions as the Committee, in its sole discretion, shall determine.

 

(b)                                 Treatment of Performance Shares. A certificate or certificates representing the number of Performance Shares granted under an Award may be registered in the name of the Grantee. Unless the Committee determines otherwise, Performance Shares shall be held by the Company as escrow agent until the Committee determines that the performance goals have been met. Except as provided in Section 19, Performance Shares may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until the Committee determines that the applicable performance goals have been met. The foregoing to the contrary notwithstanding, the Committee may, in its discretion, provide that a Grantee’s ownership of Performance Shares prior to the lapse of any transfer restrictions or any other applicable restrictions shall, in lieu of such certificates, be evidenced by a “book entry” (i.e., a computerized or manual entry) in the records of the Company or its designated agent in the name of the Grantee who has received such Award, and confirmation and account statements sent to the Grantee with respect to such book-entry Shares may bear the restrictive legend referenced in paragraph (c) of this Section 9. Such records of the Company or such agent shall, absent manifest error, be binding on all Grantees who receive Awards of Performance Shares evidenced in such manner.

 

(c)                                  Removal of Restrictions. Except as provided in Section 15, the restrictions imposed on Performance Shares shall expire, lapse or be removed based solely on account of the attainment of performance goals established by the Committee using one or more of the performance criteria set forth in Section 11. Performance Shares covered by each Award shall be removed from escrow as soon as practicable after the Committee determines that the applicable performance goals have been met. Subject to Section 14, after the Committee determines that such goals have been met, the Grantee shall be entitled to have any legend relating to restrictions under this Section 9 removed from his or her Share certificate, and the Shares shall be freely transferable by the Grantee.

 

(d)                                 Voting Rights. During the Restriction Period, Grantees holding Performance Shares may exercise full voting rights with respect to those Shares, unless otherwise provided in the Agreement.

 

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(e)                                  Dividends and Other Distributions. During the Restriction Period, Grantees holding Performance Shares shall be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Agreement. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Performance Shares with respect to which they were paid and shall be held by the Company as escrow agent until the Committee determines that the performance goals applicable to the Performance Shares with respect to which they were paid have been satisfied.

 

(f)                                    Right of Repurchase of Performance Shares. The Company shall have the right to repurchase Performance Shares at their original issuance price or other stated or formula price (or to require forfeiture of such Shares if issued at no cost) in the event the performance goals applicable to such Shares have not been met.

 

(g)                                 Certification in Writing. Prior to the release of restrictions on any Performance Shares, the Committee shall certify in writing (which may be set forth in the minutes of the Committee) that the performance goals and all other material terms of the Award have been met.

 

(h)                                 Limit for Covered Executives. No Covered Executive may receive Awards of more than 50,000 Performance Shares during any fiscal year of the Company

 

10.                               RESTRICTED UNITS AND PERFORMANCE UNITS.

 

Subject to the terms of the Plan, including the following terms and conditions, the Committee may authorize the grant of Restricted Units and/or Performance Units that constitute rights, denominated in cash or cash units, to receive, at a specified future date, payment in cash or Shares (as determined by the Committee) of an amount equal to all or a portion of the value of a unit determined by the Committee. Restricted Units shall set forth the right to receive such payments when the restrictions established by the Committee lapse or are removed. Performance Units are designed to constitute performance-based compensation under ss.162(m) of the Code and shall set forth the right to receive payments when the performance goals established by the Committee have been met.

 

(a)                                  Restricted Unit Agreements. At the time of Award of Restricted Units, the Committee shall determine the restrictions applicable to the Restricted Units. Each Award of Restricted Units shall be evidenced by an Agreement that shall specify the number of Restricted Units granted and such other terms and conditions as the Committee, in its sole discretion, shall determine, including but not limited to performance goals based on the criteria listed in Section 11. The Committee, in its discretion, may accelerate the time at which any restrictions on Restricted Units shall lapse or be removed.

 

(b)                                 Performance Unit Agreements. At the time of the Award of Performance Units, the Committee shall determine the performance factors applicable to the Performance Units, using one or more of the criteria set forth in Section 11. Each Award of Performance Units shall be evidenced by an Agreement that shall specify the performance goals, the number of Performance Units granted, and such other terms and conditions as the Committee, in its sole discretion, shall determine.

 

(c)                                  Certification in Writing. Prior to the payment of any Performance Units, the Committee shall certify in writing (which may be set forth in the minutes of the Committee) that the performance goals and all other material terms of the Award have been met.

 

(d)                                 Limit for Covered Executives. The maximum value of Awards of Performance Units granted to any Covered Executive in any fiscal year shall not exceed $2 million. The foregoing limitation shall be applied at the time of settlement, regardless of whether such settlement is made in cash or Shares.

 

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11.                               PERFORMANCE CRITERIA.

 

(a)                                  Unless and until the Company’s stockholders approve a change in the general performance criteria set forth in this Section 11, the performance criteria to be used for purposes of grants of Performance Shares and Performance Units may be measured at the Company level, at a Subsidiary level, or at an operating unit, business unit or individual level, and shall be chosen from among:

 

(i)                                     Increase in net sales;

 

(ii)                                  Pretax income before allocation of corporate overhead and/or bonus;

 

(iii)                               Gross profits;

 

(iv)                              Earnings before interest, taxes, depreciation and amortization;

 

(v)                                 Earnings before interest and taxes;

 

(vi)                              Earnings per share;

 

(vii)                           Net income;

 

(viii)                        Return on stockholders’ equity;

 

(ix)                                Return on assets;

 

(x)                                   Meeting or reducing budgeted expenditures;

 

(xi)                                Attainment of division, group or corporate financial goals;

 

(xii)                             Reduction in costs.

 

(xiii)                          Appreciation in or maintenance of the price of the common stock or any publicly-traded securities of the Company;

 

(xiv)                         Comparisons with various stock market indices;

 

(xv)                            Comparisons with performance metrics of peer companies;

 

(xvi)                         Increase in market share; or

 

(xvii)                      Economic value-added models.

 

(b)                                 The performance goals applicable to an Award of Performance Shares or Performance Units shall be sufficiently specific that a third party having knowledge of the relevant facts could determine whether the goals are met. The Committee shall, at the time it establishes the performance goals for an Award, specify the period over which the performance goals relate. The establishment of the actual performance goals and, if a grant is based on more than one of the foregoing criteria, the relative weighting of such criteria, shall be at the sole discretion of the Committee; provided, however, that in all cases the performance goals must be established by the Committee in writing no later than 90 days after the commencement of the period to which the performance goals relate (or, if less, no later than after 25% of the period has elapsed) and when achievement of the performance goals is substantially uncertain. The Committee may adjust the performance target(s) with respect to Awards of Performance Shares and Performance Units, but only to decrease the amount of compensation that otherwise would be due upon the attainment of the performance target(s).

 

(c)                                  The performance goals with respect to any Performance Share or Performance Unit shall be measured over a period no longer than three consecutive years.

 

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12.                               STOCK APPRECIATION RIGHTS.

 

(a)                                  Subject to the terms and conditions of the Plan, the Committee may authorize the grant of Stock Appreciation Rights that, on exercise, entitle the Grantee to receive an amount in cash equal to the excess (if any) of (i) the Fair Market Value of a Share on the date of exercise over (ii) the Fair Market Value of a Share on the date of grant, multiplied by the number of Shares with respect to which the SAR is exercised.

 

(b)                                 The number of Shares with respect to which a SAR or SARs may be granted to a Covered Executive during any fiscal year of the Company may not exceed 50,000.

 

13.                               STOCK OPTIONS.

 

(a)                                  Grant. Subject to the provisions of the Plan and other Applicable Laws, the Committee shall have sole and complete authority to determine the Grantees to whom Options shall be granted, the number of Shares subject to each Award, the Option Price therefore and the conditions and limitations applicable to the exercise of each Option. An Option may be granted with or without a related SAR. A SAR may be granted with or without a related Option. The grant of an Option shall occur when the Committee by resolution, written consent or other appropriate action determines to grant such Option for a particular number of Shares to a particular Grantee at a particular Option Price or such later date as the Committee shall specify in such resolution, written consent or other appropriate action. The Committee shall have the authority to grant Incentive Stock Options and to grant Non-Qualified Stock Options. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with Section 422 of the Code, as from time to time amended, and any regulations implementing such statute. A person who has been granted an Option under the Plan may be granted additional Options under the Plan if the Committee shall so determine; provided, however, that to the extent the aggregate Fair Market Value (determined at the time the Incentive Stock Option is granted) of the Shares with respect to which all Incentive Stock Options are exercisable for the first time by an employee during any calendar year (under all plans described in Section 422(d) of the Code of the employee’s employer corporation and its parent and Subsidiaries) exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options.

 

(b)                                 Price. The Committee in its sole discretion shall establish or specify the Option Price at the time each Option is granted. The Option Price for an Option may not be less than one hundred percent (100%) of the Fair Market Value of the Shares with respect to which the Option is granted on the date of grant (including such later dates as the Committee shall specify in accordance with paragraph (a) of this Section 13) of such Option.

 

(c)                                  Term. Subject to the Committee’s authority under Section 5 of this Plan, each Option and all rights and obligations thereunder shall expire on the date determined by the Committee and specified in the Award Agreement. The Committee shall be under no duty to provide terms of like duration for Options granted under the Plan. Notwithstanding the foregoing and except as provided in paragraph (d)(i) of this Section 13, no Option shall be exercisable after the expiration of ten (10) years from the date such Option was granted.

 

(d)                                 Exercise.

 

(i)                                     Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement or thereafter. The Committee shall have full and complete authority to determine whether an Option will be exercisable in full at any time or from time to time during the term of the Option, or to provide for the exercise thereof in such installments, upon the 

 

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occurrence of such events and at such times during the term of the Option as the Committee may determine. The Committee may provide, at or after grant, that the period of time over which an Option, other than an Incentive Stock Option, may be exercised shall be automatically extended if on the scheduled expiration of such Award, the Grantee’s exercise of such Award would violate applicable securities law; provided, however, that during the extended exercise period the Option may only be exercised to the extent such Award was exercisable in accordance with its terms immediately prior to such scheduled expiration date; provided further, however, that such extended exercise period shall end not later than thirty (30) days after the exercise of such Option first would no longer violate such laws.

 

(ii)                                  The Committee may impose such conditions with respect to the exercise of Options, including without limitation, any relating to the application of federal, state or foreign securities laws or the Code, as it may deem necessary or advisable.

 

(iii)                               An Option may be exercised in whole or in part at any time, with respect to whole Shares only, within the period permitted thereunder for the exercise thereof, and shall be exercised by written notice of intent to exercise the Option, delivered to the Company at its principal office, and payment in full to the Company at the direction of the Committee of the amount of the Option Price for the number of Shares with respect to which the Option is then being exercised.

 

(iv)                              Payment of the Option Price shall be made (A) in cash or cash equivalents, (B) at the discretion of the Committee, by transfer, either actually or by attestation, to the Company of unencumbered Shares previously acquired by the Grantee valued at the Fair Market Value of such Shares on the date of exercise (or next succeeding trading date, if the date of exercise is not a trading date), together with any applicable withholding taxes (which taxes may be satisfied in accordance with the terms of Section 16 of the Plan), such transfer to be upon such terms and conditions as determined by the Committee, (C) by a combination of such cash (or cash equivalents) and such Shares, or (D) at the discretion of the Committee and subject to applicable securities laws, by (x) delivering a notice of exercise of the Option and simultaneously selling the Shares thereby acquired, pursuant to a brokerage or similar agreement approved in advance by proper officers of the Company, using the proceeds of such sale as payment of the Option Price, together with any applicable withholding taxes (which taxes may be satisfied in accordance with the terms of Section 16 of the Plan) or (y) withholding Shares otherwise deliverable to the Grantee pursuant to the Option having an aggregate Fair Market Value at the time of exercise equal to the total Option Price together with any applicable withholding taxes (which taxes may be satisfied in accordance with the terms of Section 16 of the Plan). Until the optionee has been issued the Shares subject to such exercise, he or she shall possess no rights as a stockholder with respect to such Shares.

 

(e)                                  Ten Percent Stock Rule. Notwithstanding any other provisions in the Plan, if at the time an Option is otherwise to be granted pursuant to the Plan, the Grantee owns directly or indirectly (within the meaning of Section 424(d) of the Code) Shares of the Company possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or its parent or Subsidiary or Affiliate corporations (within the meaning of Section 422(b)(6) of the Code), then any Incentive Stock Option to be granted to such optionee or rights holder pursuant to the Plan shall satisfy the requirement of Section 422(c)(5) of the Code, and the Option Price shall be not less than one hundred ten percent (110%) of the Fair Market Value of the Shares of the Company on the date of grant (including such later date as the Committee shall specify in accordance with paragraph (d)(i)

 

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of this Section 13), and such Option by its terms shall not be exercisable after the expiration of five (5) years from the date such Option is granted.

 

14.                               CONDITIONS UPON ISSUANCE OF SHARES.

 

The Company will not be obligated to deliver any Shares pursuant to the Plan or to remove restrictions from Shares previously delivered under the Plan until: (a) all conditions of the Award have been met or removed to the satisfaction of the Committee; (b) all other legal matters, including receipt of consent or approval of any regulatory body and compliance with all Applicable Law, in connection with the issuance and delivery of such Shares have been satisfied; and (c) the Grantee or Beneficiary has executed and delivered to the Company such representations or agreements as the Committee may consider appropriate to satisfy the requirements of Applicable Law.

 

The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue the Shares as to which such requisite authority shall not have been obtained.

 

15.                              RIGHTS UNDER CERTAIN CIRCUMSTANCES.

 

(a)                                  Death or Disability. Except as otherwise provided in the applicable Agreement, if a Grantee who has been in the continuous employment of the Company or a Subsidiary since the date on which an Award was granted becomes disabled or dies while in such employment, the restrictions imposed on the Award, including, but not limited to, any vesting period related to an Option, shall lapse; provided that, if the Award is intended to qualify as performance-based compensation under Section 162(m) of the Code, it shall cease to qualify as such performance-based compensation if the restrictions lapse under this Section 15(a). For purposes of this Section 15(a), “disabled” and “disability” means having a total and permanent disability, as defined in Section 22(e)(3) of the Code.

 

(b)                                 Termination of Employment for Any Other Reason. Except as otherwise provided in an Agreement, if a Grantee’s employment with the Company or a Subsidiary terminates before the restrictions imposed on the Award lapse, the performance goals have been satisfied or the Award otherwise vests, such Award shall be forfeited.

 

(c)                                  Change in Control. Except as otherwise provided in the applicable Agreement, all restrictions imposed on an Award shall lapse and the Award shall become fully vested if, within twelve months after the Company obtains actual knowledge that a Change in Control has occurred, a Grantee’s employment with the Company and its Subsidiaries ceases for any reason.

 

16.                               TAX WITHHOLDING.

 

The Company shall have the right to collect an amount sufficient to satisfy any Federal, State and/or local withholding tax requirements (including the Grantee’s FICA obligation) that might apply with respect to any Award to a Grantee in the manner specified in subsection (a) or (b) below. Alternatively, a Grantee may elect to satisfy any such withholding tax requirements in the manner specified in subsection (c) below to the extent permitted therein.

 

(a)                                  The Company shall have the right to require Grantees to remit to the Company an amount sufficient to satisfy any such withholding tax requirements.

 

(b)                                 The Company and its Subsidiaries also shall, to the extent permitted by law, have the right to deduct from any payment of any kind (whether or not related to the Plan) otherwise due to a Grantee any such taxes required to be withheld.

 

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(c)                                  If the Committee in its sole discretion approves, a Grantee may irrevocably elect to have any withholding tax obligation satisfied by (i) having the Company withhold Shares otherwise deliverable to the Grantee, or (ii) delivering to the Company Shares owned by the Grantee, provided that the Shares withheld or delivered have a Fair Market Value (on the date that such withholding or delivery occurs) equal to the minimum amount required to be withheld.

 

17.                               ADJUSTMENT FOR CHANGES IN CAPITALIZATION.

 

(a)                                  In the event that there is any change in the Shares through merger, consolidation, reorganization, recapitalization or otherwise; or if there shall be any dividend on the Shares, payable in Shares; or if there shall be a stock split or a combination of Shares, the aggregate number of shares available for Awards, the number of Shares subject to outstanding Awards, and the exercise price per Share of each outstanding Award shall be equitably and proportionately adjusted by the Board of Directors (and, as applicable equitably and proportionately adjusted in such manner as is consistent with Sections 422 and 409 of the Code and the regulations thereunder and with Section 162(m) of the Code) to prevent dilution or enlargement of the rights of the Grantees; provided that any fractional Shares resulting from such adjustments shall be eliminated. The Board of Directors may, in its sole discretion (i) accelerate the vesting of an outstanding Award or (ii) accelerate the termination date of an outstanding Award in connection with the liquidation, dissolution, merger, reorganization or other consolidation of the Company upon notice to the affected Grantees.

 

(b)                                 The Board’s determination with respect to any such adjustments shall be conclusive.

 

18.                               EFFECTS OF MERGER OR OTHER REORGANIZATION.

 

Except to the extent otherwise provided in an Agreement, if the Company shall be the surviving corporation in a merger or other reorganization, outstanding Awards granted under the Plan shall extend to stock and securities of the Company after the merger or other reorganization to the same extent as Shares held by a person who held, immediately before the merger or reorganization, the number of Shares corresponding to the number of Shares covered by the Award.

 

19.                               TRANSFERABILITY OF AWARDS.

 

Unless determined otherwise by the Committee, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee. If the Committee makes an Award transferable, such Award shall contain such additional terms and conditions as the Committee deems appropriate. Notwithstanding the foregoing, subject to the approval of the Committee in its sole discretion, Awards may be transferable to members of the immediate family of the Grantee and to one or more trusts for the benefit of such family members, partnerships in which such family members are the only partners, or corporations in which such family members are the only stockholders. “Members of the immediate family”  means the Grantee’s spouse, children, stepchildren, grandchildren, parents, grandparents, siblings (including half brothers and sisters) and individuals who are family members by adoption.

 

20.                               PROHIBITION ON REPRICING.

 

Notwithstanding any other provision of the Plan, the Committee shall not “reprice” any Option, SAR or other Award granted under the Plan if such repricing would have the effect of decreasing with respect to a SAR the deemed Fair Market Value of a Share referred to in Section 12(a)(ii) or decreasing with respect to an Option the Option Price applicable to such Option, or other similar 

 

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effect. For this purpose, a “repricing” includes a tandem cancellation and regrant of an Award or any other amendment or action that would have substantially the same effect.

 

21.                               TERMINATION, SUSPENSION OR MODIFICATION OF THE PLAN.

 

The Board of Directors may at any time terminate, suspend, or modify the Plan; provided that the Board shall not, without approval by the affirmative votes of the holders of a majority of the securities of the Company present or represented and entitled to vote at a meeting duly held in accordance with applicable law, make any material revisions as defined in the NASDAQ Rules (other than through adjustment for changes in capitalization as provided in Section 17), including: (a) a material increase in the aggregate number of Shares for which Awards may be granted; (b) an expansion of the types of Awards available under the Plan; (c) a material expansion of the class of persons eligible for an Award; or (d) an extension of the maximum duration of the Plan. No termination, suspension or modification of the Plan shall adversely affect any right acquired by any Grantee, or by any Beneficiary, under the terms of any Award granted before the date of such termination, suspension or modification, unless such Grantee or Beneficiary shall expressly consent, but it shall be conclusively presumed that any adjustment pursuant to Section 16 does not adversely affect any such right.

 

22.                               NO EFFECT ON EMPLOYMENT OR SERVICE.

 

Neither the Plan nor any Award shall confer upon a Grantee any right with respect to continuing the Grantee’s relationship with the Company, nor shall it interfere in any way with the Grantee’s or the Company’s right to terminate such relationship at any time, with or without cause.

 

23.                               SEVERABILITY.

 

In the event that any provision of the Plan shall be held illegal or invalid for any reason, such 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 has not been included.

 

24.                               SECTION 409A COMPLIANCE.

 

(a)                                  No Award (or modification thereof) shall provide for deferral of compensation that does not comply with Section 409A of the Code unless the Committee, at the time of grant, specifically provides that the Award is not intended to comply with Section 409A of the Code. Notwithstanding any provision of this Plan to the contrary, if one or more of the payments or benefits received or to be received by a Grantee pursuant to an Award would cause the Grantee to incur any additional tax or interest under Section 409A of the Code, the Committee may reform such provision to maintain to the maximum extent practicable the original intent of the applicable provision without violating the provisions of Section 409A of the Code, including applying the appropriate definitions to terms whose meanings in this Plan differ from those set forth in Section 409A of the Code and the regulations promulgated thereunder, if necessary for payments hereunder to be permissible payments under Section 409A of the Code.

 

25.                               GOVERNING LAW.

 

Except to the extent that such laws may be superseded by any Federal law, the Plan shall be construed and its provisions enforced and administered in accordance with the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction.

 

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