Document:

Exhibit 10.22

 

 

 

 

INCENTIVE BONUS AGREEMENT

 

This INCENTIVE BONUS AGREEMENT (this “Agreement”) is made this 4th day of June, 2019, by and between Iteris, Inc., a Delaware corporation (the “Company”), and Jim Chambers (“Executive”).

 

WHEREAS, the Company wishes to recognize Executive’s contributions to the Company and its business, and to incentivize Executive’s contributions to the Company by offering Executive compensation if certain milestones are met as described herein.

 

NOW, THEREFORE, in consideration of Executive’s services to the Company and the mutual promises and covenants contained in this Agreement, Executive and the Company agree as follows.

 

1.                                    Certain Definitions.  As used in this Agreement, the following terms have the meanings given to such terms below.

 

(a)                              “Base Salary” means Executive’s annual base salary as in effect at the time the First Milestone or the Second Milestone is achieved.  For avoidance of doubt, Base Salary does not include variable pay, such as bonuses and commissions, equity-based compensation, such as stock options, other supplemental pay, and all non-cash compensation, employee benefits and incentives provided by the Company.

 

(b)                             “Code” means the Internal Revenue Code of 1986, as the same may be amended from time to time.

 

(c)                               “First Milestone” has the meaning set forth on Schedule A hereto.

 

(d)                             “Second Milestone” has the meaning set forth on Schedule A hereto.

 

(e)                               “Section 409A” means section 409A of the Code and the regulations and other guidance promulgated thereunder and any state law of similar effect.

 

2.                                    Incentive Bonus.  Executive will be eligible to receive an “Incentive Bonus” in the amount described in Section 2(a) below, subject to the conditions and provisions set forth below.

 

(a)                              Amount of Incentive Bonus.  If the First Milestone is met, the amount of the Incentive Bonus will be 0.9 times Executive’s Base Salary.  If the Second Milestone is met, the amount of the Incentive Bonus will be 1.5 times Executive’s Base Salary.

 

(b)                             Conditions.  In order for Executive to receive the Incentive Bonus, each of the following conditions must be met.  No Incentive Bonus is earned by Executive, nor payable by the Company, unless and until each of the conditions is met.

 

 

 

(i)                                  Either the First Milestone or the Second Milestone must have occurred on or before December 31, 2021.

 

(ii)                              Executive must remain continuously employed by the Company through the earlier of the date on which the First Milestone or the Second Milestone has occurred.

 

(iii)                          If requested by the Company, Executive must sign and not revoke a general release in a form acceptable to the Company releasing the Company, its affiliates, and its and their officers, directors, and employees, from all claims occurring up to the date Executive signs the release, excepting claims which cannot be released by private agreement as a matter of law.

 

(c)                               Timing and Nature of Payment.  Subject to satisfaction of the conditions in Section 2(b) above, the Incentive Bonus will be paid to Executive in cash within five (5) days following the date on which the First Milestone or the Second Milestone, as applicable, has occurred.

 

3.                                    Tax Matters.

 

(a)                              The Company may withhold from any amounts payable under this Agreement, such federal, state and local taxes as the Company determines are required to be withheld pursuant to any applicable law.  Executive agrees that he/she will be solely responsible for any taxes that may be due and owing by Executive as a result of any payment of monies under this Agreement.  Executive has not relied on any no representations of the Company regarding the tax treatment of any payments provided pursuant to this Agreement and is encouraged to seek his or her own personal tax advice.

 

(b)                             The parties acknowledge and agree that all benefits or payments provided by the Company to Executive pursuant to this Agreement are intended either to be exempt from the provisions of Section 409A, or to be in compliance with Section 409A, and the Agreement shall be interpreted to the greatest extent possible to be so exempt or in compliance.  Without limiting the generality of the preceding sentence, the parties intend that payments set forth in this Agreement satisfy, to the greatest extent possible, the exemption from the application of Section 409A provided under Treasury Regulation Section 1.409A-1(b)(4).  If there is an ambiguity in the language of the Agreement, or if Section 409A guidance indicates that a change to the Agreement is required or desirable to achieve exemption or compliance with Section 409A, Company and Executive agree to renegotiate in good faith to clarify the ambiguity or make such change.  Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest, or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.

 

 

 

(c)                               Notwithstanding any other provision of this Agreement to the contrary, if any payment or benefit provided or to be provided by the Company to Executive or for Executive’s benefit pursuant to the terms of this Agreement or otherwise (“Covered Payments”) constitute parachute payments (“Parachute Payments”) within the meaning of the Code and would, but for this Section 3(c) be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (i) the Net Benefit (as defined below) to the Executive of the Covered Payments after payment of the Excise Tax to (ii) the Net Benefit to the Executive if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under clause (i) above is less than the amount under clause (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax (that amount, the “Reduced Amount”).  As used herein, “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes.  Any such reduction shall be made in accordance with Section 409A.  Any determination required under this Section 3(c) shall be made in writing in good faith by the accounting firm that was the Company’s independent auditor immediately before the Divestiture (the “Accountants”) which shall provide detailed supporting calculations to the Company and the Executive as requested by the Company or the Executive.  The Company and the Executive shall provide the Accountants with such information and documents as the Accountants may reasonably request in order to make a determination under this Section 3(c). For purposes of making the calculations and determinations required by this Section 3(c), the Accountants may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code.  The Accountants determinations shall be final and binding on the Company and the Executive.

 

4.                                    Continued Services.  Nothing in this Agreement confers on Executive any right to continue in the service of the Company for any period of time or restricts in any way the right of the Company or Executive to terminate Executive’s services relationship with the Company at any time.

 

5.                                    Miscellaneous Provisions.

 

(a)                              Entire Agreement.  This Agreement, along with Schedule A hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements (whether written or oral and whether express or implied) between the parties to the extent related to such subject matter.

 

(b)                             Successors and Assigns.  This Agreement will be binding upon and inure to the benefit of the parties and their respective successors, permitted assigns and, in the case of Executive, heirs, executors, and/or personal representatives.  Executive may not assign, delegate or otherwise transfer any of Executive’s rights, interests or obligations in this Agreement without the prior written approval of the Company.

 

(c)                               Notices.  Any notice pursuant to this Agreement must be in writing and will be deemed effectively given to the other party on (i) the date it is actually delivered by personal delivery of such notice in person; (ii) one business day after its deposit for overnight delivery in the custody of a reputable overnight courier service (such as FedEx); or (iii) three business days after the date it is mailed by certified mail, return receipt requested, postage prepaid; in the case of Executive, to his/her most recent address as shown in the records of the Company, and in the case of the Company, to its then-current corporate headquarters, addressed to the attention of the Chief Executive Officer.

 

 

 

(d)                             Severability.  Each provision of this Agreement is severable from every other provision of this Agreement.  Any provision of this Agreement that is determined by any court of competent jurisdiction to be invalid or unenforceable will not affect the validity or enforceability of any other provision hereof or the invalid or unenforceable provision in any other situation or in any other jurisdiction.  Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

 

(e)                               Governing Law.  This Agreement will be governed by and construed in accordance with the laws of the State of California, without regard to that body of law known as choice of law.

 

(f)                                Amendments and Waivers.  No amendment of any provision of this Agreement will be valid unless the amendment is in writing and signed by the Company and Executive.  No waiver of any provision of this Agreement will be valid unless the waiver is in writing and signed by the waiving party.  The failure of a party at any time to require performance of any provision of this Agreement will not affect such party’s rights at a later time to enforce such provision.  No waiver by a party of any breach of this Agreement will be deemed to extend to any other breach hereunder or affect in any way any rights arising by virtue of any other breach.

 

(g)                              Construction.  The section headings in this Agreement are inserted for convenience only and are not intended to affect the interpretation of this Agreement.  The word “including” in this Agreement means “including without limitation.”  All words in this Agreement will be construed to be of such gender or number as the circumstances require.

 

(h)                             Counterparts.  This Agreement may be executed in two or more counterparts, each of which will be deemed an original and all of which will be part of the same Agreement.  Facsimile or PDF reproductions of original signatures will be deemed binding for the purpose of the execution of this Agreement.

 

[Signature Page Immediately Follows]

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above.

 

	
EMPLOYEE:
    	
 
    	
COMPANY:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Iteris, Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Jim Chambers
    	
 
    	
By:
    	
/s/ Jeff McDermott
    
	
Jim Chambers
    	
 
    	
 
    	
Jeff McDermott
    
	
Sr. VP and GM for AWA
    	
 
    	
 
    	
Sr. VP Human Resources
    

 

 

 

Schedule A

 

Schedule A has been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish supplementally a copy of the omitted exhibit upon request by the U.S. Securities and Exchange Commission.ex_146397.htm

 

Exhibit 10(a)     

2019 LONG-TERM INCENTIVE PROGRAM AWARD AGREEMENT

 

	
			Participant:

				 	 	
			Cash Percentage of Award:

				
			50%

			
	
			Date of Grant:

				
			March 18, 2019

				 	
			Phantom Share Percentage of Award:

				
			50%

			
	
			Maximum LTIP Award (total)1:

				
			 

				 	
			Target LTIP Award (total)1:

				 
	
			Maximum Cash Amount:

				
			 

				 	
			Target Cash Amount:

				 
	
			Maximum Number of 

			Phantom Shares:

				
			 

			 

				 	
			Target Number of 

			Phantom Shares:

				 

 

1. Grant of LTIP Award. For valuable consideration, receipt of which is hereby acknowledged, Hovnanian Enterprises, Inc., a Delaware Corporation (the "Company"), hereby grants the Long-Term Incentive Program award opportunity (the "Award") listed above to the Participant, on the terms and conditions hereinafter set forth. The Award granted hereunder is made as a standalone award, separate and apart from, and outside of, the 2012 Company Amended and Restated Stock Incentive Plan (the "Plan"), and shall not constitute an Award granted under or pursuant to that Plan. Notwithstanding the foregoing, the terms, conditions and definitions set forth in the Plan and the 2019 Long-Term Incentive Program adopted in connection with the Plan (the "LTIP"), which Plan and LTIP, as amended from time to time, shall apply to the Award as though the Award had been granted under the Plan (including but not limited to the adjustment provision contained in the Plan), and the Award shall be subject to such terms, conditions and definitions which are hereby incorporated herein by reference and made a part hereof. Notwithstanding the foregoing, the Award shall not be counted for purposes of calculating the aggregate number of shares that may be issued or transferred pursuant to awards under the Plan or for purposes of calculating the award limitations under the Plan (including pursuant to Section 3 of the Plan). The Award represents an unfunded, unsecured right of the Participant to receive cash payments, a portion of which shall represent the value of a number of Shares of the Company’s Class A Common Stock on the New York Stock Exchange ("Phantom Shares"), on the date(s) specified under the LTIP, subject to the performance and time vesting conditions set forth thereunder. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan or the LTIP, as applicable. A copy of the LTIP is attached hereto as Exhibit A.

 

2. Amount of Award; Vesting and Timing of Payments. The target amount of the Award listed above represents the amount of cash and payment of cash in respect of Phantom Shares that the Participant will be eligible to receive if the performance levels achieved during the Performance Period correspond to a payout level of 100% of target under the terms of the LTIP, assuming the time vesting requirements set forth under the LTIP are also met. The actual amount of cash, including cash in respect of Phantom Shares, payable in respect of the Award may be more or less than the targeted amounts, and the amounts (if any) that become payable under the Award will be paid to the Participant at such times and subject to such performance and time vesting conditions as set forth under the LTIP.

 

3. Adjustments Upon Certain Events. Subject to the terms of the Plan and the LTIP, in the event of any change in the outstanding Shares by reason of any Share dividend or split, reorganization, recapitalization, merger, consolidation, amalgamation, spin-off or combination transaction or exchange of Shares or other similar events (collectively, an "Adjustment Event"), the Committee shall, in its sole discretion, make an appropriate and equitable adjustment in the number of Phantom Shares subject to this Agreement to reflect such Adjustment Event. Any such adjustment made by the Committee shall be final and binding upon the Participant, the Company and all other interested persons.

 

4. No Right to Continued Employment. Neither the Plan, the LTIP nor this Agreement shall be construed as giving the Participant the right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss the Participant, free from any liability or any claim under the Plan, the LTIP or this Agreement, except as otherwise expressly provided herein.

 

5. No Acquired Rights. The Participant acknowledges and accepts that the Board and the Committee have the power to amend or terminate the Plan and the LTIP, to the extent permitted thereunder, at any time and that the granting of this Award to the Participant is entirely at the discretion of the Committee and does not obligate the Company or any of its Affiliates to offer such participation in the future (whether on the same or different terms). The Participant further acknowledges and accepts that this Award is not to be considered part of any normal or expected compensation and that the termination of the Participant's employment under any circumstances whatsoever will give the Participant no claim or right of action against the Company or its Affiliates in respect of any loss of rights under this Agreement, the Plan or the LTIP that may arise as a result of such termination of employment.

 

6. No Rights of a Shareholder. The Participant shall have no voting, dividend or other rights or privileges as a shareholder of the Company.

 

7. Transferability. This Award may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution, and any purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance not permitted by this Section 7 shall be void and unenforceable against the Company or any Affiliate.

 

8. Withholding. The Participant may be required to pay to the Company or any Affiliate and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any transfer of cash due under this Agreement, or from any compensation or other amount owing to the Participant, applicable withholding taxes with respect to any transfer under this Agreement, and to take such action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. Notwithstanding the foregoing, if the Participant's employment with the Company terminates prior to the payment or transfer of all of the cash under this Agreement, the payment of any applicable withholding taxes with respect to any further payments of cash under this Award shall be made solely through withholding of cash otherwise payable under this Agreement in amounts equal to the statutory minimum withholding liability.

 

9. Non-Solicitation Covenants. 

 

(a) The Participant acknowledges and agrees that, during the Participant's employment with the Company and its Affiliates and upon the Participant's termination of employment with the Company and its Affiliates for any reason, for a period commencing on the termination of such employment and ending on the second anniversary of such termination, the Participant shall not, whether on Participant's own behalf or on behalf of or in conjunction with any person, company, business entity or other organization whatsoever, directly or indirectly:

 

(i) solicit any employee of the Company or its Affiliates with whom the Participant had any contact during the last two years of the Participant's employment, or who worked in the same business segment or division as the Participant during that period to terminate employment with the Company or its Affiliates;

 

(ii) solicit the employment or services of, or hire, any such employee whose employment with the Company or its Affiliates terminated coincident with, or within twelve (12) months prior to or after the termination of Participant's employment with the Company and its Affiliates;

 

(iii) directly or indirectly, solicit to cease to work with the Company or its Affiliates any consultant then under contract with the Company or its Affiliates.

 

(b) It is expressly understood and agreed that although the Participant and the Company consider the restrictions contained in this Section 9 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or any other restriction contained in this Agreement is an unenforceable restriction against the Participant, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

 

10. Specific Performance. The Participant acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Section 9 would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, the Participant agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.

 

11. Choice of Law. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

 

12. Plan and LTIP. By entering into this Agreement, the Participant agrees and acknowledges that a copy of the Plan and the LTIP has been made available to the Participant. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan or LTIP, the applicable terms and provisions of the Plan and LTIP will govern and prevail.

 

 

 

 

 

 

13. Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

14. 409A. Notwithstanding any other provisions of this Agreement, the Plan or the LTIP, this Award shall not be deferred, accelerated, extended, paid out or modified in a manner that would result in the imposition of an additional tax under Section 409A of the Code upon the Participant. In the event it is reasonably determined by the Committee that, as a result of Section 409A of the Code, the transfer of cash under this Agreement may not be made at the time contemplated hereunder without causing the Participant to be subject to taxation under Section 409A of the Code (including due to the Participant’s status as a "specified employee" within the meaning of Section 409A of the Code), the Company will make such payment on the first day that would not result in the Participant incurring any tax liability under Section 409A of the Code.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

 

	 	
			HOVNANIAN ENTERPRISES, INC.

			
	 	
			By:

				 
	 	 	 
	 	 	 
	 	
			PARTICIPANT

			
	 	 	 
	 	 	 
	 	
			By:

				 
	 	 	 

 

 

 

1. Purpose

The purpose of the 2019 Long-Term Incentive Program ("LTIP") is to aid the Company in retaining key employees and to motivate them to exert their best efforts on behalf of the Company. The LTIP has been adopted pursuant to the terms of the 2012 Hovnanian Enterprises, Inc. Amended and Restated Stock Incentive Plan (the "2012 Plan") and is intended to incentivize achievement of certain Pre-tax Profit goals and certain Adjusted EBIT Return on Inventory goals. Capitalized terms used herein without definition have the meanings assigned to such terms under the 2012 Plan.

 

2. Participants

The Compensation Committee will designate the Participants who will be granted incentive awards under the LTIP, with the first such awards to be granted on or about March 18, 2019 (the "Initial Grant Date"). Additional Associates may be eligible to participate at the discretion of the Compensation Committee or at the discretion of the Company’s Chief Executive Officer (to the extent that the Compensation Committee has delegated granting authority to the Chief Executive Officer). The awards for Participants who are selected by the Compensation Committee to participate after the Initial Grant Date will be determined based on actual performance for the full Performance Period (as defined below) and will be prorated based on the number of full months of eligible service completed during the thirty-six (36) month Performance Period, subject to the vesting requirements outlined below in section 6.

 

3. Performance Period

The LTIP "Performance Period" will commence on November 1, 2018 and end on October 31, 2021.

 

4. Details

Each Participant will be eligible to receive an award based on the achievement of certain cumulative Pre-tax Profit levels in fiscal years 2019 through 2021, and certain Average Adjusted EBIT Return on Inventory levels for fiscal years 2019, 2020 and 2021. The award will be based on the closing Share price on the date the Participant is granted the award (the "Grant Date"); provided, however, that the Share price for new Participants will be no less than the Share price on the Initial Grant Date.

 

For purposes of the LTIP, "Pre-tax Profit" is defined as income (loss) before income tax expense and before income (loss) from unconsolidated joint ventures as reflected on the Company's audited financial statements plus income (loss) before income tax expense for the Company's unconsolidated joint ventures as reflected on their respective financial statements for the thirty-six month period ending October 31, 2021, excluding the impact of any items deemed by the Committee to be unusual or nonrecurring items and excluding losses from land impairments and gains or losses from debt repurchases/debt retirement such as call premiums and related issuance costs. "Average Adjusted EBIT Return on Inventory" is defined as the average of the quotients resulting from dividing (A) Adjusted EBIT by (B) Average Inventory for each of fiscal years 2019, 2020 and 2021. "Adjusted EBIT" is determined from the Company’s audited financial statements, excluding the impact of any items deemed by the Committee to be unusual or nonrecurring items and excluding losses from land impairments and gains or losses from debt repurchases/debt retirement such as call premiums and related issuance costs. "Average Inventory" equals the average of the ending inventory balances from the Company’s audited balance sheet, excluding capitalized interest and consolidated inventory not owned, for each of the five consecutive fiscal quarters ending with the last quarter of the fiscal year.

 

The following table illustrates the percent of the target award that can be achieved at each performance level. Awards will be interpolated between performance levels but will not be extrapolated above the maximum performance levels listed below.

 

	 	 	
			Average Adjusted EBIT Return on Inventory for FY 2019, FY 2020 and FY 2021

			
	 	 	
			10.50% 

			or less

				
			12.00%

				
			13.50%

				
			15.00%

				
			16.50%

				
			18.00%

				
			19.50% 

			or more

			
	
			Cumulative Pre-tax Profit

			for FY 2019 through FY 2021 

			(in millions)

				
			$100 or more

				
			100%

			of target award

				
			125%

			of target award

				
			150%

			of target award

				
			175%

			of target award

				
			200%

			of target award

				
			225%

			of target award

				
			250%

			of target award

			
	 	
			$75

				
			75%

			of target award

				
			100%

			of target award

				
			125%

			of target award

				
			150%

			of target award

				
			175%

			of target award

				
			200%

			of target award

				
			225%

			of target award

			
	 	
			$50

				
			50%

			of target award

				
			75%

			of target award

				
			100%

			of target award

				
			125%

			of target award

				
			150%

			of target award

				
			175%

			of target award

				
			200%

			of target award

			
	 	
			$25

				
			0%

			of target award

				
			15%

			of target award

				
			30%

			of target award

				
			45%

			of target award

				
			60%

			of target award

				
			75%

			of target award

				
			90%

			of target award

			
	 	
			Less than $25

				
			0%

			of target award

				
			0%

			of target award

				
			0%

			of target award

				
			0%

			of target award

				
			0%

			of target award

				
			0%

			of target award

				
			0%

			of target award

			

 

5. Examples

a. If cumulative Pre-tax Profit for fiscal years 2019 through 2021 is $50 million and Average Adjusted EBIT Return on Inventory for fiscal years 2019, 2020 and 2021 is 13.50%, a Participant would achieve an award equal to one hundred percent (100%) of the target award, subject to the vesting requirements in section 6.

 

b. If cumulative Pre-tax Profit for fiscal years 2019 through 2021 is $95 million and Average Adjusted EBIT Return on Inventory for fiscal years 2019, 2020 and 2021 is 14.40%, the Participant would achieve an award equal to one hundred and sixty percent (160%) of the target award (calculated by linear interpolation from the performance goals listed on the chart), subject to the vesting requirements in section 6.

 

c. If cumulative Pre-tax Profit for fiscal years 2019 through 2021 is $25 million and Average Adjusted EBIT Return on Inventory for fiscal years 2019, 2020 and 2021 is 12.00%, a Participant would achieve an award equal to fifteen percent (15%) of the target award, subject to the vesting requirements in section 6.

 

6. Payout Method and Conditions For Earning Award

The award is denominated fifty percent (50%) in cash and fifty percent (50%) in Phantom Shares (as defined in the Award Agreement to which this LTIP is attached as Exhibit A) provided, however, that (i) the target amount denominated in Phantom Shares will be determined based on the Fair Market Value of a Share as of the Grant Date (subject to the limitation under Section 6(a)) and (ii) the timing of payments for installments of the award denominated in cash and denominated in Phantom Shares will be determined using the respective values of the cash and Phantom Share portions of the award as of 10/31/2021, with all cash-denominated installments of the award becoming vested and payable before any Phantom Share denominated installments of the award becomes vested and payable pursuant to Section 6(b) below. For the avoidance of doubt, all payments under this LTIP will be made in cash.

 

a. The target award amount denominated in Phantom Shares will be determined by dividing the portion of the target award denominated in Phantom Shares by the closing Share price on the Grant Date, provided, however, that the Share price for new Participants will be no less than the Share price on the Initial Grant Date.

 

b. Except as provided in Section 6(c) – (f) below, as a condition of earning each portion of the award, Participants must be employed through the vesting dates outlined below. The vesting percentages relate to the award value as of 10/31/2021.

 

i. Sixty percent (60%) of the award will become vested on 10/31/2021 and payable in January 2022

 

ii. Twenty percent (20%) of the award will become vested on 10/31/2022 and payable in January 2023

 

iii. Twenty percent (20%) of the award will become vested on 10/31/2023 and payable in January 2024

 

Suppose an original Participant’s target award is $120,000.00 and the closing Share price on the Participant’s Grant Date is $0.58. Fifty percent (50%) of the award is denominated in cash and fifty percent (50%) of the award is denominated in Phantom Shares, resulting in a target cash award of $60,000.00 (target award x 50%) and a target Phantom Share award of 103,448 Phantom Shares (target award x 50% ÷ $0.58, rounded). Under this example, if the Participant earns one hundred and fifty percent (150%) of the target award, based on actual performance achievement, subject to the vesting requirements in this section 6, the Participant will be eligible to receive a cash portion of $90,000.00 ($60,000.00 target cash portion x 150%) and a Phantom Share portion of 155,172 Shares (103,448 target Phantom Share portion x 150%, rounded).

 

Assume that the Share price on October 31, 2021 is $1.25 so the value of the Phantom Share denominated portion for vesting purposes is $193,965.00 (155,172 x $1.25). The value of the cash denominated portion of the award is not affected by stock price fluctuations and therefore remains at $90,000 resulting in a total award value of $283,965.00 ($193,965.00 + $90,000.00) as of 10/31/2021.

 

Per the vesting schedule, the award vests sixty percent (60%) on 10/31/2021, twenty percent (20%) on 10/31/2022 and twenty percent (20%) on 10/31/2023 with the cash denominated portion of the award vesting before the Phantom Share portion. Sixty percent (60%) of the total award value as of 10/31/2021 is $170,379.00 ($283,965.00 x 60%). Since the cash denominated portion is less than this amount, $90,000.00 in cash and 64,304 Phantom Shares ($80,379.00 ÷ $1.25, rounded up) will vest on 10/31/2021 and be paid in January 2022. The Phantom Shares will be valued by reference to the closing price of a share of Class A Common Stock on the New York Stock Exchange as late as administratively practicable preceding the payout date in January 2022 and the result will be paid in cash on the payout date. Continuing with the example above, if the closing stock price preceding the January 2022 payout date is $1.50, the 64,304 Phantom Shares would be valued at $96,456.00 (64,304 x $1.50) for a total cash payment of $186,456 ($90,000.00 cash + $96,456.00 cash value of Phantom Shares) in January 2022.

 

On 10/31/2022, an additional twenty percent (20%) of the total award value as of 10/31/2021, or $56,793.00 ($283,965.00 x 20%), is scheduled to vest. Since the entire cash denominated portion had vested in the prior year, 45,435 Phantom Shares ($56,793 ÷ $1.25, rounded up) will vest on 10/31/2022 and be paid in January 2023. The Phantom Shares will be valued by reference to the closing price of a share of Class A Common Stock on the New York Stock Exchange as late as administratively practicable preceding the payout date in January 2023 and the result will be paid in cash on the payout date. Continuing with the example above, if the closing stock price preceding the January 2023 payout date is $1.50, the 45,435 Phantom Shares would be valued at $68,153.00 (45,435 x $1.50) for a total cash payment of $68,153.00 in January 2023.

 

On 10/31/2023, the remaining portion of the award is scheduled to vest. Since the entire cash denominated portion and 109,739 Phantom Shares (64,304 + 45,435) had vested in prior years, the remaining 45,433 Phantom Shares (155,172 – 109,739) will vest on 10/31/2023 and be paid in January 2024. The Phantom Shares will be valued by reference to the closing price of a share of Class A Common Stock on the New York Stock Exchange as late as administratively practicable preceding the payout date in January 2024 and the result will be paid in cash on the payout date. Continuing with the example above, if the closing stock price preceding the January 2024 payout date is $1.50, the 45,433 Phantom Shares would be valued at $68,150.00 (45,433 x $1.50) for a total cash payment of $68,150.00 in January 2024.

 

c. In the event a Participant ceases to be employed by the Company due to death prior to the end of the Performance Period, the Participant’s beneficiary will be eligible for a prorata award payable in January 2022. The award will be determined based on actual performance for the full Performance Period and will be prorated based on the number of full months of eligible service completed during the thirty-six (36) month Performance Period. In the event a Participant ceases to be employed by the Company due to death following the end of the Performance Period, the Participant’s beneficiary will be eligible to receive any unpaid, earned portion of the award within seventy-five (75) days.

 

d. In the event a Participant ceases to be employed by the Company due to Disability prior to the end of the Performance Period, the Participant will be eligible to receive a prorata award on the scheduled payout dates. The award will be determined based on actual performance for the full Performance Period and will be prorated based on the number of full months of eligible service completed during the thirty-six (36) month Performance Period. In the event a Participant ceases to be employed by the Company due to Disability following the end of the Performance Period, the Participant will be eligible to receive any unpaid, earned portions of the award on the scheduled payout dates as if there was no termination of employment.

 

e. In the event a Participant ceases to be employed by the Company due to "Retirement" following the end of the Performance Period, the Participant will be eligible to receive any unpaid, earned portions of the award on the scheduled payout dates as if there was no termination of employment. "Retirement" shall mean termination of employment on or after age 60, or on or after age 58 with at least 15 years of "Service" to the Company and its Subsidiaries immediately preceding such termination of employment. For this purpose, "Service" means the period of employment immediately preceding Retirement, plus any prior periods of employment with the Company and its Subsidiaries of one or more years' duration, unless they were succeeded by a period of non-employment with the Company and its Subsidiaries of more than three years' duration.

 

f. If a Change in Control occurs while awards remain outstanding under the LTIP, then (x) if such Change in Control occurs prior to October 31, 2021 any outstanding awards will be deemed earned at target level performance and (y) all earned awards (including any earned pursuant to the preceding clause (x)) will remain eligible to vest on the scheduled vesting dates subject to meeting the employment requirements described above; provided, however, that (i) in the event the Participant is involuntarily terminated without Cause or the Participant terminates employment for Good Reason, in either case, within two years following the Change in Control, then the remaining portion of such Participant’s earned award shall become fully vested and immediately payable to the Participant; (ii) in the event the Participant terminates employment due to Retirement or Disability within two years following the Change in Control, then the Participant’s earned award (as determined under Section 6(d) or (e) above)) shall become immediately payable to the Participant; (iii) in the event that the surviving corporation following the Change in Control is not publicly traded or, if the surviving corporation is otherwise not willing to convert the Phantom Share denominated portion of the awards into time-based vesting phantom share awards of the surviving corporation, then the outstanding awards shall be deemed fully vested as of the Change in Control date and, to the extent permissible under Section 409A of the Code and the regulations thereunder (including, without limitation, the plan termination rules thereunder), shall be immediately payable following the Change in Control; and (iv) amounts payable upon or following a Change in Control will be subject to delay in payments to the extent necessary to avoid subjecting the Participant to additional or accelerated taxes under Section 409A of the Code.

 

 

For purposes of the LTIP, "Cause" shall mean the occurrence of any of the following: (a) the willful and continued failure of the Participant to perform substantially all of his or her duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness) for a period of 10 days following a written demand for substantial performance that is delivered to such Participant by the Company, which specifically identifies the manner in which the Company believes the Participant has not substantially performed his or her duties; (b) dishonesty in the performance of the Participant's duties with the Company; (c) the Participant's conviction of, or plea of guilty or nolo contendere to, a crime under the laws of the United States or any state thereof constituting a felony or a misdemeanor involving moral turpitude; (d) the Participant's willful malfeasance or willful misconduct in connection with the Participant's duties with the Company or any act or omission which is injurious to the financial condition or business reputation of the Company or its affiliates; or (e) the Participant's breach of the provisions of Section 10 of the award agreement governing the LTIP award.

 

For purposes of the LTIP, "Good Reason" shall mean the occurrence of any of the following, without the Participant's express written consent: (a) any material diminution in the Participant's duties, titles or responsibilities with the

 

Company from those in effect immediately prior to a Change in Control or (b) any reduction in the Participant's annual base salary or any material reduction in the Participant's annual bonus opportunity, annual equity awards or Long-Term Incentive Program awards from the Participant's annual base salary or annual bonus opportunity, annual equity awards or Long-Term Incentive Program awards in effect immediately prior to a Change in Control. Notwithstanding the foregoing, no event shall constitute Good Reason unless the Participant provides the Company with written notice of such event within 60 days after the occurrence thereof and the Company fails to cure or resolve the behavior otherwise constituting Good Reason within 30 days of its receipt of such notice.

 

7. Non-Solicitation Covenants

 

a. Each Participant shall be required as a condition to receiving the award to acknowledge and agree that, during the Participant's employment with the Company and its Affiliates and upon the Participant's termination of employment with the Company and its Affiliates for any reason, for a period commencing on the termination of such employment and ending on the second anniversary of such termination, the Participant shall not, whether on Participant's own behalf or on behalf of or in conjunction with any person, company, business entity or other organization whatsoever, directly or indirectly:

 

i. solicit any employee of the Company or its Affiliates with whom the Participant had any contact during the last two years of the Participant's employment, or who worked in the same business segment or division as the Participant during that period to terminate employment with the Company or its Affiliates;

 

ii. solicit the employment or services of, or hire, any such employee whose employment with the Company or its Affiliates terminated coincident with, or within twelve (12) months prior to or after the termination of Participant's employment with the Company and its Affiliates;

 

iii. directly or indirectly, solicit to cease to work with the Company or its Affiliates any consultant then under contract with the Company or its Affiliates.

 

b. It shall be expressly understood and agreed that although the Participant and the Company consider the restrictions contained in this Section 7 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or any other restriction contained in this LTIP is an unenforceable restriction against the Participant, the provisions of this LTIP shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this LTIP is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

 

8. Specific Performance

Each Participant shall acknowledge and agree that the Company's remedies at law for a breach or threatened breach of any of the provisions of Section 7 would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, the Participant shall agree that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this LTIP and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.

 

9. Adjustments 

Adjustments Upon Certain Events. Subject to the terms of the 2012 Plan, in the event of any change in the outstanding Shares by reason of any Share dividend or split, reorganization, recapitalization, merger, consolidation, amalgamation, spin-off or combination transaction or exchange of Shares or other similar events (collectively, an "Adjustment Event"), the Committee shall, in its sole discretion, make an appropriate and equitable adjustment in the number of Phantom Shares subject to awards granted under this LTIP to reflect such Adjustment Event. Any such adjustment made by the Committee shall be final and binding upon the Participant, the Company and all other interested persons.

 

10. Amendments 

The Committee may amend, alter or discontinue the LTIP at any time, provided that no such amendment, alteration or discontinuation shall be made that would materially adversely affect the rights of a Participant with respect to a previously granted award hereunder without such Participant’s consent.

 

 

1 Based on March 18, 2019 closing share price of $0.58.

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