Document:

VRA-2014-05.03-EX10.3

Exhibit 10.3  
Senior Executive Annual Incentive Compensation Plan 
Fiscal 2015
Plan Overview
Awards under this Senior Executive Annual Incentive Compensation Plan ("Annual Plan") are granted under and governed by the terms and conditions of the Vera Bradley, Inc. 2010 Equity and Incentive Plan (the “2010 Plan”), as amended.  Any term capitalized herein but not defined will have the meaning set forth in the 2010 Plan.   
The Annual Plan is designed to give each eligible Participant (as defined in the attached Administrative Guidelines) an opportunity to share in the Company's success for the fiscal year ending January 31, 2015 (the "Performance Period").  The target incentive opportunity for the Performance Period is based on a percentage of each Participant's Base Salary (as defined herein).  Each Participant's incentive opportunity is based on two independent performance measures: (1) corporate performance (made up of net revenue and operating income), and (2) performance to strategic objective goals.
The weighting of the independent performance measures relative to the total target incentive opportunity is outlined below:

	
					
	 
	Corporate Performance
	 
	Strategic Objective Performance

	 
	Net Revenue
	Operating Income
	 

	 
	35%
	40%
	 
	25%

Corporate Performance
That portion of the payout which is contingent upon corporate performance is based on meeting two independent financial metrics, currently defined as net revenue and operating income weighted at 47% and 53%, respectively, of the corporate performance target.  Assuming at least threshold levels are met during the Performance Period, the actual payout levels range from 25%-200% of target.
	
					
	Net Revenue - 47% Weighting

	Performance
	 
	Performance Level*
	 
	Payout %

	Threshold
	 
	88%
	 
	25%

	Target
	 
	100%
	 
	100%

	Excellence
	 
	112%
	 
	200%

  
	
					
	Operating Income - 53% Weighting

	Performance
	 
	Performance Level*
	 
	Payout %

	Threshold
	 
	88%
	 
	25%

	Target
	 
	100%
	 
	100%

	Excellence
	 
	112%
	 
	200%

*  Payout levels are determined using linear interpolation for results falling between the three performance levels.

Strategic Objective Performance
Strategic objective performance payout is based on results as determined by the Board of Directors.  Assuming threshold levels are met, the actual payout levels range from 0%-150% of target based on the schedule below.   In order for the portion of the incentive payout tied to strategic objectives to occur, the Participant must have a minimum annual performance rating of 2.5 and must meet all other criteria set forth in the Administrative Guidelines.
	
				
	Incentive Rating
	 
	 
	Strategic Objectives Payout

	Significantly Exceeded
	 
	 
	150%

	Exceeded
	 
	 
	125%

	Met All Expectations
	 
	 
	100%

	Met Most Expectations
	 
	 
	75%

	Did Not Meet Expectations
	 
	 
	0%

Incentive Opportunity
As outlined in the Plan Overview (above), the target incentive opportunity is determined based on a percentage of each Participant's Base Salary (as defined below).  
	
				
	 
	Incentive Opportunity (Percent of Base Salary)

	Participant Level
	Threshold
	Target
	Excellence

	Functional Management 6 
	25%
	50%
	93.8%

	Functional Management 5 
	22.5%
	45%
	84.4%

The actual total annual incentive that can be earned under this Annual Plan is based on the level of both corporate and strategic objective performance achieved (as described above) and can range from 0% of the "Target" (for performance levels below the "Threshold" level) to a maximum of between 162.5% and 187.5% of the "Target" (for performance levels at or above the "Excellence" level), depending upon the Participant's position.
"Base Salary" is defined as the Participant's gross base salary (before taxes and deductions) paid by the Company to the Participant during the Performance Period.

Administrative Guidelines - Provide additional information regarding how the plan will be administered.
  

1.    The CEO direct reports at a level of Vice President, Senior Vice President and Executive Vice President are eligible to participate in this annual plan, except participants in any other annual incentive compensation plan, which shall be determined by the Compensation Committee, in the Committee’s sole discretion. 
2.      Participation in this Annual Plan neither gives any employee the right to be retained as an employee nor limits the Company's right to discharge or discipline any employee.
3.    Annual incentive payments based upon corporate performance will become earned (i.e., vested) only if the Company achieves levels of "Net Revenue" and "Operating Income" (as defined below) over the Performance Period as approved by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”).   
(a)    Certification of Results.  Before any Awards under the Annual Plan are deemed earned with respect to a Performance Period, the Compensation Committee shall certify, in accordance with Section 9.5 of the 2010 Plan, in writing (i) that the performance goals have been met for the Performance Period, and (ii) the calculation of "Operating Income" and "Net Revenue" for the Performance Period.
(b)    Definition of "Operating Income".  For purposes of this Annual Plan, the term "Operating Income" means, with respect to the Performance Period related to any Awards, the Company's consolidated operating income, as determined in accordance with U.S. GAAP, adjusted to exclude the effects, as shown on the financial statements furnished as part of Form 8-K (announcing the Company's fiscal year-end financial results) for any fiscal year of the Company ending with or within the Performance Period, of (i) any acquisition during the Performance Period, including the amortization expense of intangible assets acquired during the Performance Period, (ii) material charges or income arising from litigation, (iii) corporate restructuring, asset impairment, or other special charges, and (iv) cumulative effect of changes to U.S. GAAP accounting.
(c)    Definition of "Net Revenue".  For purposes of this Annual Plan, the term "Net Revenue" means, with respect to the Performance Period related to any Awards, the Company's consolidated net revenue, as determined in accordance with U.S. GAAP.  
4.    All Participants will receive an award that is prorated based on Base Salary earned during the Performance Period. 
In the event that a Participant joins the Company at any time during the final three fiscal months of the Performance Period, such participant will be eligible to receive an Award which is based solely upon the corporate performance portion, and which will be calculated based upon actual corporate performance and prorated as described in the preceding sentence.  Such a Participant shall not be eligible for the personal performance portion of the award.
7.    All goal attainment calculations will follow normal rounding guidelines (i.e., 93.1% to 93.49% = 93%; 93.5% to 93.9% = 94%).  
8.    Payments under the Annual Plan will be paid in cash after the end of the Company's fiscal tax year but no later than the 15th day of the third month following the Company's fiscal tax year on which the annual incentives under this Annual Plan are based.  

9.    The Company shall have the power and the right to deduct or withhold an amount sufficient to satisfy federal, state, and local taxes (including FICA obligations), domestic or foreign, and other deductions required to be withheld by law with respect to this Award.
10.    Record keeping and computation required by this Annual Plan will be subject to review by third-party auditors, and by the Compensation Committee.
11.    Interpretations, determinations, and actions regarding plan administration shall be made by the Compensation Committee.  Any such determinations and any interpretation, rule, or decision under the Annual Plan or in carrying out or administering the Annual Plan, is final and binding for all purposes and upon all interested persons, their heirs, and personal representatives.  The Company or its designee may rely conclusively on determinations made by the Company and its auditors to determine related information for purposes of administration of the Annual Plan, whether such information is determined by the Company, its auditors, or a third-party vendor engaged to provide such information to the Company.  
12.    While it is the intent of the Company to continue this Annual Plan as stated herein, the Company reserves the right to amend or discontinue the plan at any time in its sole discretion.
13.    No Participant can assign, encumber or transfer any of his or her rights and interests under the Award described in this document, except, in the event of his or her death, by will or the laws of descent and distribution.
14.    The rights granted under this document are in all respects subject to the provisions of the 2010 Plan to the same extent and with the same effect as if they were set forth fully therein.  If the terms of this document or the Award conflict with the terms of the 2010 Plan, the 2010 Plan will control.VRA-2014.05.03-EX10.4

Exhibit 10.4
May 5, 2014

Dear Karen,

I am pleased to offer you the position of Executive Vice President, Retail and Wholesale Sales Channels at Vera Bradley, Inc. and its subsidiaries effective as of May 12, 2014, reporting to the Chief Executive Officer, with duties and responsibilities commensurate with such position. Your work location will be New York, New York but your position will require weekly travel to Fort Wayne, Indiana. A detailed overview of the compensation and benefits associated with this offer follows.  Please note that this offer is contingent upon the successful completion of your background check and pre-employment drug screen.  

Upon acceptance of this offer, please sign a copy of this letter and return it to Julie North, Vice President, Human Resources.  Please feel free to contact me should you have any questions regarding the offer details. 

We are thrilled you are joining Vera Bradley!  Your experience, qualifications, and positive energy will be an excellent addition to our team!

Compensation
Your bi-weekly base salary will be $15,770 which equates to an annual base salary of $410,020.

You will be eligible for both a pro-rata Annual Incentive and a Long-term Incentive for Vera Bradley’s fiscal 2015.  These incentives are tied to performance during fiscal 2015, which begins February 2, 2014 and ends January 31, 2015.  

In fiscal 2015, your pro-rata Annual Incentive will be approximately $145,000 based on achievement of company financial targets and a set of strategic objectives approved by our Board of Directors. The fiscal 2015 Annual Incentive is anticipated to be paid in March 2015.  Thereafter, your target incentive under the Annual Incentive plan will be set by the Compensation Committee.  Also in fiscal 2015, you will be eligible for a Long-Term Incentive, with a target grant of $246,012.  Both the Annual Incentive and the Long-Term Incentive grants are subject to specific plan documents, which will be provided to you at your time of hire. These incentives are also described in further detail in the attached Total Rewards Summary.

As additional consideration, you will receive a one-time grant of 5,000 Restricted Stock Units (RSUs).  These RSU’s will vest ratably over three years and will be subject to specific plan documents that will be provided upon grant.

Benefits
Listed below is information regarding our complete benefits package based on a tentative May 12, 2014 start date.  Further details can be found in the attached Vera Bradley Employee Benefits Guide.
		
	•
	Nine (9) paid holidays annually 

		
	•
	25 days (200 hours) of paid managed time off (MTO) per calendar year. MTO provides for time away from work for any purpose.

		
	•
	Short-term disability insurance (one year waiting period)

		
	•
	Long-term disability insurance (one year waiting period)

		
	•
	Life insurance coverage equal to one times your annual salary with a minimum of $50,000, maximum of $200,000 

(30 day waiting period)
		
	•
	Health/Dental insurance through Anthem.  Vera Bradley pays a portion of both the employee and dependent premium 

after a 30 day waiting period
		
	•
	Section 125 Flexible Spending Plan (30 day waiting period).  You can create a non-taxable account to pay 

non-reimbursable medical expenses and dependent care expenses.
		
	•
	A 401(k) Profit Sharing Plan (one year waiting period). Your eligibility date will be July, 2015.  

		
	•
	Ability to purchase on account, Vera Bradley product at discounted pricing

		
	•
	Participation in the Vera Bradley, Inc. 2014 Executive Severance Plan 

Karen, please note that this letter merely memorializes our offer to you and does not constitute a written employment contract for any specific term.  Your employment with Vera Bradley will be on an "at will" basis, which means that either party may end the employment relationship at any time without notice, for any reason.

Sincerely,

Robert T. Wallstrom
President & Chief Executive Officer

Accepted by Karen Peters
	
					
	/s/ Karen Peters
	 
	5/12/2014
	 
	 

	Karen Peters
	 
	Date
	 
	 

Total Rewards Summary
Karen Peters - EVP, Retail and Wholesale Sales Channels

	
			
	Total Cash and Awards
	Value
	Details

	Annual Base Salary
	$410,020
	$15,770 paid bi-weekly

	Targeted Annual Cash Incentive - FY2015
	$205,010
	Target based on 50% of annual salary. Pro-rata for FY2015 equates to approximately$145K (8.5 months assuming a May 12, 2014 start date)

	Targeted Annual Long-Term Equity Incentive - FY2015
	$246,012
	Target based on 60% of annual salary (60% performance based, vest after completion of 3 year performance cycle; 40% time based vesting ratably over three years)

	Total Direct Annual Compensation
	$861,042
	 

	
			
	Retirement and Employee Health & Welfare
	Value
	Details

	Company 401k match contributions
	$12,500
	Assumes participation at maximum IRS contribution of $17,500.  One year waiting period to participate in 401K.

	Company provided health and welfare benefits
	$18,200
	Estimated annual average contribution paid by Vera Bradley for employee's behalf for health, dental, life and AD&D coverages.  Assumes employee plus family medical and dental coverage elected.

	Estimated Annual Company Contributions of Retirement and Employee Health & Welfare Benefits
	$30,700
	 

	
			
	One-time Awards
	Value
	Details

	Equity Grant awarded upon first day of employment with Vera Bradley
	$135,0000
	Granted in 5,000 shares Restricted Stock Units (RSUs) equivalent to $135,000 assuming a $27 stock price. This grant will vest ratably over three years.

	One-Time Awards 
	$135,000
	 

	
		
	Other Considerations
	Details

	Severance
	Eligible for the Vera Bradley Severance Plan at such time as it is adopted by the Board of Directors (currently anticipated in May 2014)

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