SECOND
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
BETWEEN
JAKKS
PACIFIC, INC.
AND
STEPHEN
G. BERMAN
DATED
NOVEMBER 11, 2010
SECOND
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”), dated November 11,
2010, by and between Stephen G. Berman (“Executive”) and JAKKS Pacific, Inc., a
Delaware corporation (“JAKKS” or the “Company”).
WITNESSETH:
WHEREAS,
Executive and the
Company entered into an Employment Agreement dated as of July 1, 1999,
amended
as of
February 7, 2000, and further amended and restated by an agreement dated March
26, 2003 and as of January 1, 2003 (such Employment Agreement, as amended and
restated, is referred to as the “2003 Employment Agreement”); and
WHEREAS,
Executive and the
Company desire to further amend and restate the terms of the 2003 Employment
Agreement to provide for Executive’s continued employment by the Company on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE,
in
consideration of the mutual promises, representations and warranties set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1.
Offices
and Duties
. The Company hereby employs Executive during the Term (as
hereinafter defined) to serve as the Company’s Chief Executive Officer and
President and to perform such executive and supervisory duties on behalf of the
Company as the Company’s Board of Directors may from time to time reasonably
direct. The Company’s Board of Directors shall elect Executive to serve as the
Company’s Chief Executive Officer and President, and may elect or designate
Executive to serve in such other corporate offices of the Company or a
subsidiary of the Company as the Company’s Board of Directors from time to time
may deem necessary, proper or advisable. Executive hereby accepts such
employment and agrees that throughout the Term he shall faithfully, diligently
and to the best of his ability, in furtherance of the business of the Company,
perform the duties assigned to him or incidental to the offices assumed by him
pursuant to this Section. Executive shall devote substantially all of his
business time and attention to the business and affairs of the Company, but
Executive shall not be required to devote any minimum amount of time or report
or perform his duties hereunder on a fixed or periodic basis, and, subject to
Sections 9 and 10, Executive may engage or participate in such other activities
incidental to his investment in any other business venture or enterprise as do
not materially interfere with or compromise his ability to perform his duties
hereunder. Executive shall at all times be subject to the direction
and control of the Company’s Board of Directors, and observe and comply with
such rules, regulations, policies and practices as the Company’s Board of
Directors may from time to time establish. Executive shall inform the
Company’s Board of Directors prior to accepting election to the board of
directors or board of managers of any other entity, and shall decline to accept
such election if the Board of Directors reasonably objects to his service on
such other board of directors. The Board of Directors hereby consents to
Executive’s service on the boards of directors of Specialty Merchandising
Corporation and Simon Equity Partners, both of which are privately held
entities.
2.
Term
. The term of this
Agreement shall commence as of the date hereof and the term of this Agreement
and Executive’s employment hereunder shall end on December 31, 2015, subject to
earlier termination upon the terms and conditions provided elsewhere herein (the
“Term”). As used herein, “Termination Date” means the last day of the
Term.
3.
Compensation
.
a.
Base
Salary
. As compensation for his services hereunder, the
Company shall pay to Executive a base salary in 2010 at the annual rate of
$1,115,000 and for the 2011 calendar year at the annual rate of $1,140,000 per
annum, and for each subsequent calendar year during the Term at an annual rate
to be determined by the Compensation Committee of the Company’s Board of
Directors (the “Compensation Committee”), but that is at least $25,000 more than
the annual rate in the immediately preceding calendar year (the “Base
Salary”). The Base Salary shall be paid to Executive in substantially
equal installments in accordance with the Company’s payroll practices, subject
to any required tax withholding.
b.
Annual Restricted
Stock Awards
.
i.
Subject to the terms (including, without limitation, the availability of
shares reserved for issuance thereunder) of the Company’s 2002 Stock Award and
Incentive Plan (as in effect on the date hereof and as subsequently may be
amended, from time to time, or any successor plan, the “Plan”) and the
applicable restricted stock agreement, which shall be substantially in the form
annexed hereto as
Exhibit
A
(the “Restricted Stock Agreement”), and as additional consideration for
Executive agreeing to amend and restate the terms of his 2003 Employment
Agreement, on January 1, 2011, January 1, 2012, January 1, 2013, January 1, 2014
and January 1, 2015 (each, an “Annual Issuance Date”) the Company shall issue to
Executive a number of shares of restricted common stock of the Company, par
value $.001 per share (the “Restricted Stock”), with a value equal to $500,000
(hereafter, the Restricted Stock issued under this Section 3(b) shall be
referred to as the “Section 3(b) Restricted Stock”). The number of
shares of Section 3(b) Restricted Stock to be issued to Executive on each Annual
Issuance Date shall be determined by dividing $500,000 by the closing price of a
share of the Company’s common stock, par value $.001 per share (the “Common
Stock”), on the first trading date immediately preceding the Annual Issuance
Date.
ii.
The
first vesting date for each $500,000 award of Section 3(b) Restricted Stock
shall occur effective as of the date in the calendar year immediately following
the calendar year (the “EPS Reference Year”) in which the Annual
Issuance Date occurs with respect to such award that it is determined that the
Company’s “Earnings Per Share” (defined below) for the EPS Reference Year is at
least equal to the “Minimum Earnings Per Share” (defined below; such Minimum
Earnings Per Share, the “3% Vesting Condition”). Subject to the satisfaction of
the 3% Vesting Condition, subsequent vesting of each tranche of the Section 3(b)
Restricted Stock awarded for an EPS Reference Year shall occur in accordance
with the vesting schedule annexed as
Exhibit B
.
iii.
For purposes
of this Agreement,
A.
the
term “Earnings Per Share” shall mean the net income per share of the Company’s
common stock, calculated on a fully-diluted basis as determined by the Company’s
then current auditors in accordance with GAAP, and such determination by the
Auditors, absent manifest error, will be conclusive and binding upon the Company
and Executive;
B.
the
term “GAAP” means generally accepted accounting principles, applied on a basis
consistent with past periods;
C.
the
term “Minimum Earnings Per Share” shall mean $1.41 for fiscal year 2011, $1.45
for fiscal year 2012, $1.49 for fiscal year 2013, $1.54 for fiscal year 2014 and
$1.59 for fiscal year 2015; and
D.
the
term “Adjusted Earnings Per Share” means the Earnings Per Share, as adjusted in
the sole discretion of the Compensation Committee to take account of
extraordinary or special items, or as otherwise may be permitted by the
Company’s 2002 Stock Award and Incentive Plan, and such determination by the
Auditors, absent manifest error, as adjusted by the Compensation Committee, will
be conclusive and binding upon the Company and Executive.
c.
2010
Performance Bonus Opportunity
. In addition to the Base Salary,
Executive shall be eligible to receive a performance-based bonus for the
Company’s 2010 fiscal year (the “2010 Bonus”), subject to achievement of the
performance criteria established by the Compensation Committee of the Board of
Directors of the Company on March 31, 2010 set forth on the annexed
Exhibit C
; provided, however,
that it is agreed that the 2010 Bonus shall be payable eighty percent (80%) in
cash and twenty percent (20%) in Restricted Stock; the number of shares of
Restricted Stock shall be determined by dividing twenty percent (20%) of the
amount of the 2010 Bonus by the closing price of a share of Common Stock on the
first trading date immediately preceding the date on which the 2010 Bonus is
determined to have been earned, which shall be not later than twenty-one (21)
business days following the date on which the Auditors’ final report on the
Company’s financial statements for 2010 is issued and delivered to the Company
and in any event not later than April 30, 2011 (the “2010 Award
Date”). The Company shall pay the cash portion and issue the
Restricted Stock portion of the 2010 Bonus (if any) to Executive, subject to any
required tax withholding, by the 2010 Award Date. Such Restricted
Stock shall be issued subject to the Plan (including, without limitation, the
availability of shares reserved for issuance thereunder) and the applicable
Restricted Stock Agreement, and shall vest in six (6) equal annual installments
equal to 14.5% of the total number of shares of Restricted Stock awarded as part
of the 2010 Bonus (rounded to the nearest whole number of shares) and one final
installment equal to 13% of the total number of shares of Restricted Stock
awarded as part of the 2010 Bonus, the first installment of which shall vest on
the 2010 Award Date and thereafter on January 1 in each subsequent year until
the seventh and final vesting date on January 1, 2017. For the avoidance of
doubt, the 2010 Bonus shall be in addition to, and not in lieu of, the 120,000
shares of Restricted Stock issued to Executive on January 1, 2010 pursuant to
Section 3(a)(ii) of the 2003 Employment Agreement, and such shares shall vest in
full on January 1, 2011 in accordance with the terms of the 2003 Employment
Agreement (which, for solely this purpose, are incorporated herein by
reference).
d.
Subsequent Annual
Performance Bonus Opportunities
. In addition to the Base
Salary and Section 3(b) Restricted Stock compensation, Executive shall be
eligible to receive as compensation for performance during fiscal years 2011,
2012, 2013, 2014 and 2015, a performance-based bonus award equal to up to 300%
of Executive’s Base Salary for the applicable fiscal year (hereafter, such bonus
for 2011, 2012, 2013, 2014 and 2015 is referred to as an “Annual Performance
Bonus,” which, together with the Section 3(b) Restricted Stock and the 2010
Bonus, is referred to herein collectively as the “Bonus”), as further provided
below in this Section 3(d).
i.
The
award of the Annual Performance Bonus for fiscal years 2011 through 2015 shall
be determined by two different set of criteria, one set of criteria (the “Base
Bonus Criteria”) to be used to establish Executive’s eligibility to receive that
portion of the Annual Performance Bonus equal to a maximum of 200% of
Executive’s Base Salary for that fiscal year (the “Base Annual Performance
Bonus”) and a second set of criteria (the “Additional Bonus Criteria”) to be
used to establish Executive’s eligibility to receive that portion of the Annual
Performance Bonus equal to a maximum of an additional 100% of Executive’s Base
Salary for that fiscal year (the “Additional Annual Performance
Bonus”).
ii.
It
is agreed that the 2011 Base Bonus Criteria are set forth on
Exhibit D
and the 2011 Base
Annual Performance Bonus shall be in the amount of (i) the percentage set forth
on the table annexed at
Exhibit
D
that
corresponds to the
Company’s 2011 Adjusted EPS, as defined in
Exhibit D
,
multiplied by
(ii)
Executive’s Base Salary for calendar year 2011 (i.e.,
$1,140,000).
iii.
The Base
Bonus Criteria for fiscal years after 2011 shall be measured by the level of the
Company’s Adjusted Earnings Per Share growth over the preceding fiscal year and
the levels of increase in Adjusted Earnings Per Share for the fiscal year for
which the Base Bonus Criteria are established and the corresponding percentage
of Base Salary figures (which shall in any event provide for a Base Annual
Performance Bonus of up to 200% of Executive’s Base Salary), which shall be
established by the Compensation Committee in the exercise of its discretion, to
determine the amount of the Base Annual Performance Bonus for such fiscal
year. The Compensation Committee may, but shall have no obligation
to, continue using the same percentage increases in Adjusted Earnings Per Share
and corresponding percentage of salary figures as set forth on
Exhibit D
in determining the
criteria for Executive’s Base Annual Performance Bonus for 2012, 2013, 2014 and
2015. The Base Salary used to determine the amount of the Base Annual
Performance Bonus shall be the Base Salary in effect during the fiscal year for
which the Base Annual Performance Bonus is being determined. The Base Bonus
Criteria for any fiscal year after 2011 shall be established by the Compensation
Committee before the end of the Company’s first fiscal quarter in such fiscal
year.
iv.
A
portion of the Base Annual Performance Bonus shall be paid in Restricted Stock
as set forth on
Exhibit
E
, and the balance shall be paid in cash. The number of shares
of Restricted Stock shall be determined by dividing the Restricted Stock portion
of the Base Annual Performance Bonus by the closing price of a share of the
Common Stock on the first trading date immediately preceding the date on which
the Base Annual Performance Bonus is determined to have been
earned. The Company shall pay the cash portion and issue the
Restricted Stock portion of the Base Annual Performance Bonus to Executive,
subject to any required tax withholding, not later than twenty-one (21) business
days following the date on which the Auditors’ final report on the Company’s
financial statements for the fiscal year for which the Base Annual Performance
Bonus is awarded is issued and delivered to the Company and in any event not
later than April 30 in the calendar year following such fiscal year (the “Base
Annual Performance Bonus Award Date”). Such Restricted Stock shall be
issued subject to the Plan (including, without limitation, the availability of
shares reserved for issuance thereunder) and the applicable Restricted Stock
Agreement, and shall vest in equal annual installments, the first installment of
which shall vest on the Base Annual Performance Bonus Award Date and thereafter
on January 1 in each subsequent year until the final vesting date on January 1,
2017, notwithstanding that this Agreement shall have earlier expired or
terminated, but subject to Section 17.
v.
The
Additional Annual Performance Bonus shall be payable entirely in Restricted
Stock. The Additional Bonus Criteria and vesting conditions and
schedules for each annual tranche for award of the Additional Annual Performance
Bonus shall be established by the Compensation Committee before the end of the
Company’s first fiscal quarter in 2011 and each subsequent fiscal year during
the Term. The Compensation Committee may, but shall have no
obligation to, use performance criteria such as growth in net sales with minimum
gross profit and net profit margins, return on invested capital, growth in free
cash flow and total shareholder return (and any combination of such or other
criteria) for determining the Additional Bonus Criteria, and in determining the
vesting dates for Restricted Stock issued for the Additional Annual Performance
Bonus, the Compensation Committee may, but shall have no obligation to, use the
vesting schedules with respect to the Restricted Stock awarded as part of the
Base Annual Performance Bonus. Each additional Annual Performance
Bonus shall be paid on or before the April 30 following the fiscal year for
which it is earned.
e.
Right to Voting and
Dividends
. Executive shall not have the right to vote or receive
dividends (whether in cash, stock or any other form) on shares of Restricted
Stock issued under this Agreement until the date of vesting of such
shares. The number of shares of Restricted Stock issued to Executive
under this Agreement shall be adjusted to take account of any stock split,
change in capitalization or other similar capital event in which the Company’s
stockholders participate generally in respect of all shares of common stock of
the Company, $.001 per share, from and after the date of issuance of the
Restricted Stock issued under this Agreement, the number and class of shares of
Restricted Stock or other securities that Executive shall be entitled to, and
shall hold, pursuant to this Agreement shall be appropriately adjusted or
changed to reflect such capital event or change in capitalization.
f.
Obligation to Keep
Sufficient Shares
. The Company shall use its reasonable best
efforts to ensure a sufficient number of shares of Common Stock remain available
for issuance under the Plan at all times to satisfy its obligations to issue
Restricted Stock to Executive pursuant to this Agreement. In the event that
there are insufficient shares available under the Plan to permit a specific
issuance of Restricted Stock to Executive, then the Company shall take all
necessary action to amend the Plan or adopt an additional or successor plan
(including, without limitation, seeking stockholder approval with respect
thereto) as promptly as practicable. Immediately following the adoption of such
amendment or additional or successor plan, the Company shall issue to Executive
the number of shares of Restricted Stock to which Executive is entitled and was
not previously issued, and shall pay to Executive, in cash, any amounts which
Executive would have received in respect of such shares of Restricted Stock had
such shares been issued to Executive on the date or dates prescribed
herein.
g.
No Trust
Fund
. Nothing contained herein and no action taken in respect
of any Bonus (or otherwise in respect of Sections 3(b), 3(c) or 3(d)) shall
create or be construed to create a trust of any kind. All Bonuses
under Sections 3(b), 3(c) or 3(d) and all other compensation to Executive shall
be paid from general funds of the Company, and no special or separate fund shall
be established, and no segregation of assets shall be made, to assure payment of
any Bonus hereunder.
h.
Minimum Stock Ownership
Requirements
. As further consideration for the Company’s
agreement to award the Section 3(b) Restricted Stock and provide Executive the
opportunity to earn the Annual Performance Bonus, Executive agrees
that, in addition to the restrictions currently in effect with respect to his
right to sell certain of his shares of Restricted Stock as described in the
Company’s Proxy Statement for the 2010 Annual Meeting of Stockholders held on
October 1, 2010, he shall during the Term not sell or otherwise transfer shares
of Common Stock issued to him pursuant to this Agreement or the 2003 Employment
Agreement (the “Employment Agreement Stock”) if the Value (determined in the
manner set forth below in this subparagraph) of all of the shares of Common
Stock owned by Executive and any other trust or other entity over which
Executive exercises control (including, but not limited to, the Employment
Agreement Stock) is less than three (3) times his Base Salary. The
“Value” of the Common Stock at any time shall be calculated as (x) the number of
all shares of Common Stock held by Executive at such time, multiplied by (y) a
price per share of Common Stock, determined on the most recent date that
Executive’s Base Salary increased, calculated as the weighted average of the
closing price (giving effect to changes in the number of shares of Common Stock
outstanding on such dates) of the Common Stock on the last trading day of each
financial quarter in the immediately prior fiscal year of the Company, which
Value shall remain the reference Value until the next increase in Executive’s
Base Salary. In calculating the Value of the Employment Agreement
Stock, unvested Restricted Stock and unexercised options shall not be included
in the Value.
i.
Payment of Withholding
Tax
. Executive may request that he be permitted to sell or
otherwise dispose of shares of Restricted Stock or other shares of Common Stock
granted as part of any performance based award (collectively, the “Award
Shares”) to the Company (including but not limited to by reducing the amount of
shares of Restricted Stock that vest) for the purpose of satisfying any
withholding or other tax incurred by Executive as a result of the issuance of
Award Shares (“Withholding Tax”), and the Compensation Committee shall determine
in its discretion whether the Company will purchase or accept such
shares. If and to the extent that the Company declines such request,
and requires that the Withholding Tax be paid in cash, then Executive may sell,
free of the restrictions in Section 3(h) above, that number of Award Shares
equal to the Withholding Tax not satisfied through the sale or disposition of
Award Shares pursuant to the first sentence of this paragraph, determined as of
the date that Executive’s right to such Award Shares is included in Executive’s
income for income tax purposes.
j.
Adjustments for Subsequent
Financial Statement Changes
. To the extent permitted under
applicable law without the imposition of excise taxes, if following the issuance
of any Restricted Stock on account of an Annual Performance Bonus or payment of
any cash or other bonus, an adjustment is subsequently made to the financial
statement or statements of the Company that would have changed the satisfaction
of any condition for the determination of a bonus payment made to Executive or
the issuance or vesting of any such shares of Restricted Stock or payment of the
cash portion of any bonus, the Compensation Committee shall determine in its
reasonable discretion whether any modification or adjustment is required to said
bonus payment previously made, or in the vesting of the Restricted Stock so
affected, and the Company shall promptly give written notice to Executive of any
change proposed to be made, setting forth in reasonable detail therein the
amount of and basis for such change, and if such Restricted Stock has been sold,
whether Executive should be required to pay to the Company the net proceeds
received by Executive from the sale of such Restricted Stock. If such
change approved by the Compensation Committee involves an increase to a bonus
payment, the Company shall pay such increase to Executive concurrently with the
delivery of such notice; and if such change approved by the Compensation
Committee involves a decrease to any such bonus payment, Executive shall repay
the amount of such decrease to the Company promptly, and in any event within
sixty (60) days after receipt of such notice. In addition, and notwithstanding
any provision in this Agreement to the contrary, payment and issuance of the
cash, stock and any other bonuses received by Executive under this Agreement,
and any other payments and benefits which Executive receives pursuant to a
Company plan or other arrangement, subject to compliance with all applicable
laws, shall be subject to refund and return to the extent necessary to comply
with the requirements of the 2010 Dodd-Frank Wall Street Reform and Consumer
Protection Act or any rule or regulation of the United States Securities and
Exchange Commission. The provisions of this paragraph shall survive
termination of this Agreement.
k.
Additional
Compensation
. The Compensation Committee may, from time to
time, award such additional compensation to Executive, in cash, shares of stock,
options to acquire shares of stock or other equity-based awards, or in property
and in addition to the Restricted Stock and Bonus compensation set forth in
Section 3(b), Section 3(c) and Section 3(d) of this Agreement, as the
Compensation Committee may determine in its sole discretion to be appropriate
based on business criteria established or determined by the Compensation
Committee, including economic and business conditions affecting the Company and
Executive’s personal performance. Such additional compensation may be
awarded in accordance with the Plan or as otherwise determined by the
Compensation Committee.
l.
Insurance
. At
Executive’s request, the Company shall use its best efforts to procure major
medical, hospitalization, dental and disability insurance for the benefit of
Executive and life insurance in the amount of $1,500,000 in favor of such
beneficiary or beneficiaries as Executive may from time to time designate, and
the Company shall pay all premiums and any other costs or expenses incurred to
maintain such policies in effect during the Term.
m.
Other Employee Benefit
Plans
. In addition to Executive’s Base Salary and other
compensation provided herein, Executive shall be entitled to participate, to the
extent he is eligible under the terms and conditions thereof, in any pension,
retirement, insurance, medical service or other employee benefit plan generally
available to the executive officers of the Company, and to receive any other
benefits or perquisites generally available to the executive officers of the
Company pursuant to any employment policy or practice, which may be in effect
from time to time during the Term (it being understood however that Executive’s
right to equity based and bonus compensation shall de determined solely by the
provisions of Sections 3(b), 3(c), 3(d) and 3(k) of this
Agreement. Except as otherwise expressly provided herein, the Company
shall be under no obligation hereunder to institute or to continue any such
employee benefit plan or employment policy or practice.
n.
No Compensation for Serving
in Other Offices
. During the Term, Executive shall not be
entitled to additional compensation for serving in any office of the Company (or
any subsidiary or Affiliate thereof) to which he is elected or
appointed.
4.
Expense
Reimbursements
.
a.
The Company shall pay directly, or advance
funds to Executive or reimburse Executive for, all expenses reasonably incurred
by him in connection with the performance of his duties hereunder and the
business of the Company, upon the submission to the Company of itemized expense
reports, receipts or vouchers in accordance with its then customary policies and
practices.
b.
During the Term, the Company shall provide to
Executive a suitable automobile or other vehicle for his exclusive use and the
Company shall pay the entire cost of leasing and maintaining such vehicle,
including, without limitation, lease payments, insurance premiums, repair
charges, and maintenance and operating expenses.
5.
Location.
Except
for routine travel and temporary accommodations reasonably required to perform
his services hereunder, Executive shall not be required to perform his services
hereunder at any location other than the principal executive office of the
Company, which office shall be located throughout the Term at its location on
the date hereof, or, if relocated, at a location within a distance of thirty
(30) miles from its location on the date hereof, or at such other office or site
to which Executive may, in his sole discretion, consent; nor shall he be
required to relocate his principal residence to, or otherwise to reside at, any
location specified by the Company.
6.
Office
. During the Term, the
Company shall provide Executive with suitable office space, furnishings and
equipment, secretarial and clerical services and such other facilities and
office support as Executive may reasonably request.
7.
Vacation
. Executive shall be
entitled to four weeks paid vacation during each year of his employment
hereunder, such vacation to be taken at such time or times as shall be agreed
upon by Executive and the Company. Vacation time shall be cumulative from year
to year, except that Executive shall not be entitled to take more than eight
weeks vacation during any consecutive 12-month period during the
Term.
8.
Key-Man
Insurance
. The Company shall have the right from time to time
to purchase, increase, modify or terminate insurance policies on the life of
Executive for the benefit of the Company in such amounts as the Company may
determine in its sole discretion. In connection therewith, Executive shall, at
such time or times and at such place or places as the Company may reasonably
direct, submit himself to such physical examinations and execute and deliver
such documents as the Company may deem necessary or appropriate.
9.
Confidential
Information
.
a.
Executive shall, during the Term and for a
period of five (5) years thereafter, hold in a fiduciary capacity for the
benefit of the Company all confidential or proprietary information relating to
or concerned with the Company and its affiliates or their products, prospective
products, operations, business and affairs (“Confidential Information”), and he
shall not, at any time hereafter, use or disclose any Confidential Information
to any Person other than to the Company or its designees or except as may
otherwise be required in connection with the business and affairs of the
Company, and in furtherance of the foregoing Executive agrees that:
i.
Executive
will receive, maintain and hold Confidential Information in strict confidence
and will use the same level of care in safeguarding it that he uses with his own
confidential material of a similar nature;
ii.
Executive
will take all such steps as may be reasonably necessary to prevent the
disclosure of Confidential Information; and
iii.
Executive
will not utilize Confidential Information without first having obtained the
Company’s written consent to such utilization.
b.
The
commitments set forth in Section 9(a) shall not extend to any portion of
Confidential Information that is generally available to the public or that,
hereafter, through no act or omission on the part of Executive in violation of
his obligations under this Agreement becomes information generally available to
the public.
c.
At any time upon written request by the
Company (i) the Confidential Information, including any copies, shall be
returned to the Company, and (ii) all documents, drawings, specifications,
computer software, and any other material whatsoever in the possession of
Executive that relates to such Confidential Information, including all copies
and/or any other form of reproduction and/or description thereof made by
Executive shall, at the Company’s option, be returned to the Company or
destroyed.
d.
In the event that Executive becomes legally
compelled (by deposition, interrogatory, request of documents, subpoena, civil
investigative demand or similar process) to disclose any of the Confidential
Information, Executive shall provide the Company with prompt prior written
notice of such requirement so that it may seek a protective order or other
appropriate remedy and/or waive compliance with the terms of this
Agreement. In the event that such protective order or other remedy is
not obtained, or the Company waives compliance with the provisions hereof,
Executive agrees to furnish only such portion of the Confidential Information
that is legally required to be furnished as determined by Executive’s outside
counsel in a written opinion letter.
10.
Intellectual
Property
. Subject to Sections 2870 and 2871 of the California
Labor Code, Executive and the Company agree to the following:
a.
Any patent, claim of copyright, trademark, trade name,
brand name, service mark, logo, symbol, trade dress or design, or representation
or expression of any thereof, or registration or application for registration
thereof, or any other trade secret, system, idea, invention, design, system,
procedure, improvement, technical information, know-how, development, discovery,
proprietary right or intellectual property developed, conceived of, invented or
otherwise produced by Executive, alone or with others in connection with the
design, manufacture and marketing of the products of the Company and
its affiliates, or conceived, developed, created or made by Executive, alone or
with others, during the Term and applicable to the business of the Company or
its affiliates, whether or not patentable or registrable (collectively referred
to as “Trade Rights”) shall become the sole and exclusive property of the
Company.
b.
Executive shall disclose all Trade Rights promptly
and completely to the Company and shall, during the Term or thereafter, (i)
execute all documents requested by the Company for vesting in the Company the
entire right, title and interest in and to the same, (ii) execute all documents
requested by the Company for filing and procuring such applications for patents,
trademarks, service marks or copyrights as the Company, in its sole discretion,
may desire to prosecute, and (iii) give the Company all assistance it may
reasonably require, including the giving of testimony in any Proceeding (as
hereinafter defined), in order to obtain, maintain and protect the Company’s
right therein and thereto; provided that the Company shall bear the entire cost
and expense of such assistance, including without limitation paying Executive
reasonable compensation for any time or effort expended by Executive in
connection with such assistance after the Termination Date. In
furtherance of the foregoing, Executive acknowledges and agrees that for all
purposes of U.S. and foreign copyright laws, the Trade Rights and any
inventions, discoveries, enhancements or improvements to any tangible or
intangible property, resulting from the services performed by Employee for
Company or its affiliates (for the purposes of this paragraph all of the
foregoing is collectively referred to as the “Work”), and any and all elements
thereof, shall be deemed to constitute “works for hire” belonging to Company
within the meaning of Title 17, United States Code, Section 101, and any
comparable provisions of the law of any other jurisdiction, such that all right,
title and interest therein, including, without limitation, copyrights and
exclusive rights under copyright, vest in Company. Executive hereby
transfers and conveys to the Company the exclusive, world-wide, royalty-free,
paid-up right to exploit, use, develop, license, and sell products and services
relating to or derived from the Work; and the exclusive right, title and
interest in and to all inventions, improvements, patent applications and letters
patent, “know-how,” and all intellectual property and other rights, tangible or
intangible, which relate to or are based upon or derived from the Work; and to
all information, documents, and specifications that relate to the
Work. If the Work or any of the elements thereof is deemed not to be
“works for hire” within the meaning of Title 17, United States Code, Section
101, then Executive hereby assigns and transfers to the Company all right, title
and interest in and to the Work, including rights throughout the world for good
and valuable consideration, receipt of which Employee hereby
acknowledges. For the sole and exclusive purpose of perfecting and
documenting such limited assignment and transfer, Employee hereby grants to the
Company an irrevocable power of attorney.
c.
Exception to
Assignments
. California Labor Code § 2870 provides that
Executive is not required to assign to the Company any of his rights in any
inventions that he develops entirely on his own time without using the Company’s
equipment, supplies, facilities, or trade secret information, except for
inventions that either: (i) relate, at the time the Invention is conceived or
reduced to practice, to the Company’s business or the Company’s actual or
demonstrably anticipated research or development; or (ii) result from any of my
work performed for the Company. Executive shall advise the Company,
promptly in writing of any inventions that he believes meet such provisions and
should therefore not be assigned to the Company and are not otherwise disclosed
on an exhibit to this Agreement.
11.
Restrictive
Covenant
.
a.
During the Term, and if Executive’s employment
terminates because he is discharged by the Company as a result of the occurrence
of a “For Cause Event” pursuant to Section 13 of this Agreement or he
voluntarily resigns other than for the reasons set forth in Section 14 of this
Agreement, for a further period of one year thereafter, Executive shall not,
directly or indirectly, for himself or on behalf of any other Person, contact
any Person who at the time shall have been within the preceding 12-month period
an employee of the Company (or any subsidiary thereof), for the purpose of
enticing away such Person from the employ of the Company (or any subsidiary
thereof), and shall not conduct activities that constitute raiding of the
Company’s employees for employment by himself or another
Person.
b.
Executive acknowledges that the provisions
of this Section 11, and the period of time, geographic area and scope and type
of restrictions on his activities set forth herein, are reasonable and necessary
for the protection of the Company. Executive acknowledges that
Executive’s position as a key executive of the Company since its formation,
including services as Chief Executive Officer since April 1, 2010, and prior to
such date as President, Chief Operating Officer, Co-Chief Executive Officer, and
Secretary with responsibility for the management of the operations of the
Company and its subsidiaries and the hiring of the Company’s employees and the
key employees of its subsidiaries has required and will require the performance
of services which are special, unique, extraordinary and of an intellectual
character, and have placed and will continue to place him in a position of
confidence and trust with Company and its subsidiaries and their respective
employees. Executive also acknowledges that Company’s business is
conducted and its customers and prospective customers are located in the United
States, Canada, Europe, Hong Kong, the People’s Republic of China, and
throughout the world and that, therefore, it is impossible to place a geographic
limitation upon the scope of the restrictive covenants contained in this Section
11. Executive acknowledges that the type and periods of
restriction imposed in Section 11 are fair and reasonable and are reasonably
required for the protection of Company and the goodwill, business and assets of
Company and its affiliates. If any of the provisions of this Section
11 relating to time, geographical area, or scope are deemed by a court of
competent jurisdiction to be overly broad or for any other reason unenforceable,
the parties agree that such restrictions herein as to time, geographical area,
or scope shall be reduced to such time, geographical area, or scope as such
court shall hold to be reasonable and legally enforceable. In
addition, if any court or arbitrator determines that any of the restrictive
covenants contained in this Section 11, or any part thereof, is invalid or
unenforceable, the remainder of the restrictive covenants shall not thereby be
affected and shall be given full effect without regard to the invalid
portions.
c.
Executive acknowledges that a breach of the
provisions of this Section 11 or Section 9 or Section 10 of this Agreement would
irreparably damage Company, and that once such a breach has occurred there may
be no accurate way of determining the amount of damage or loss suffered by
Company. Executive therefore agrees that Company may seek enforcement
of the terms of this Section 11 or Sections 9 and 10 through preliminary or
final injunctive relief or other equitable remedy in court without the
requirement to post a bond or other security.
12.
Termination Upon Death or
Disability
. Executive’s employment hereunder shall terminate immediately
upon his death. In the event that Executive is unable to perform his
duties hereunder by reason of any disability or incapacity (due to any physical
or mental injury, illness or defect) for an aggregate of 180 days in any
consecutive 12-month period, the Company shall have the right to terminate
Executive’s employment hereunder within 60 days after the 180th day of his
disability or incapacity by giving Executive notice to such effect at least 30
days prior to the date of termination set forth in such notice, and on such date
such employment shall terminate.
13.
Termination for
Cause
.
a.
In
addition to any other rights or remedies provided by law or in this Agreement,
the Company may terminate Executive’s employment under this Agreement
if:
i.
Executive
is convicted of, or enters a plea of guilty or nolo contendere (which plea is
not withdrawn prior to its approval by the court) to, a felony offense and
either Executive fails to perfect an appeal of such conviction prior to the
expiration of the maximum period of time within which, under applicable law or
rules of court, such appeal may be perfected or, if Executive does perfect such
an appeal, his conviction of a felony offense is sustained on appeal;
or
ii.
the
Company’s Board of Directors determines, after due inquiry, based on convincing
evidence, that Executive has:
A.
committed
fraud against, or embezzled or misappropriated funds or other assets of, the
Company (or any subsidiary thereof);
B.
violated,
or caused the Company (or any subsidiary thereof) or any officer, employee or
other agent thereof, or any other Person to violate, any material law, rule,
regulation or ordinance, or any material written policy, rule or directive of
the Company or the Company’s Board of Directors;
C.
willfully,
or because of gross or persistent inaction, (a) failed properly to perform his
duties hereunder or (b) acted in a manner detrimental to, or adverse to
the interests of, the Company; or
D.
violated,
or failed to perform or satisfy any material covenant, condition
or obligation required to be performed or satisfied by Executive
hereunder; and that, in the case of any violation or failure referred to in
clause (B), (C) or (D) of this paragraph (ii) of Section 13(a), such violation
or failure has caused, or is reasonably likely to cause, the Company to suffer
or incur a substantial casualty, loss, penalty, expense or other liability or
cost.
b.
The
Company may effect such termination as to the occurrence of any act or event
described in clauses (A) to (D) of paragraph 13(a)(ii) hereof (each, a “For
Cause Event”) by giving Executive notice to such effect, setting forth in
reasonable detail the factual basis for such termination, at least ten days
prior to the date of termination set forth therein; provided, however, that
Executive may avoid such termination if Executive, prior to the date of
termination set forth in such notice, cures to the reasonable satisfaction of
the Company’s Board of Directors the factual basis for termination set forth
therein or otherwise provides the Board of Directors with information reasonably
sufficient for the Board to determine that the termination should not be
effected.
c.
In
making any determination pursuant to Section 13(a) as to the occurrence of a For
Cause Event, each of the following shall constitute convincing evidence of such
occurrence:
i.
if
Executive is made a party to, or target of, any Proceeding arising under or
relating to any For Cause Event, Executive’s failure to defend against such
Proceeding or to answer any complaint filed against him therein, or to deny any
claim, charge, averment, or allegation thereof asserting or based upon the
occurrence of a For Cause Event;
ii.
any
judgment, award, order, decree or other adjudication or ruling in any such
Proceeding finding or based upon the occurrence of a For Cause Event (that is
not reversed or vacated on appeal); or
iii.
any
settlement or compromise of, or consent decree issued in, any such Proceeding in
which Executive expressly admits the occurrence of a For Cause
Event;
provided
that none of the foregoing shall be dispositive or create an irrebuttable
presumption of the occurrence of such For Cause Event; and provided further that
the Company’s Board of Directors may rely on any other factor or event as
convincing evidence of the occurrence of a For Cause Event.
d.
In
determining and assessing the detrimental effect of any For Cause Event on the
Company and whether such For Cause Event warrants the termination of Executive’s
employment hereunder, the Company’s Board of Directors shall take the following
factors, to the extent applicable and material, into account:
i.
whether
the Company’s Board of Directors directed or authorized Executive to take, or to
omit to take, any action involved in such For Cause Event, or approved,
consented to or acquiesced in his taking or omitting to take such
action;
ii.
any
award of damages, penalty or other sanction, remedy or relief granted or imposed
in any Proceeding based upon or relating to such For Cause Event, and whether
such sanction, remedy or relief is sufficient to recompense the Company or any
other injured Person, or to prevent or to deter the recurrence of such For Cause
Event;
iii.
whether
any lesser sanction would be appropriate and effective; and
iv.
any
adverse effect that the loss of Executive’s services would have, or be
reasonably likely to have, upon the Company.
14.
Termination by Executive for “Good
Reason”
. In addition to any other rights or remedies provided by law or
in this Agreement, Executive may terminate his employment
hereunder:
a.
if
(i) the Company violates, or fails to perform or satisfy any material covenant,
condition or obligation required to be performed or satisfied by it hereunder
(which includes, but is not limited to, any payment required to be made to
Executive under this Agreement or relocation of the Company’s office in
violation of the provisions of Section 5), or (ii) as a result of any action or
failure to act by the Company, there is a material change in Executive’s
title(s) or the nature or scope of the duties, obligations, rights or powers of
Executive’s employment (each of the events specified in clauses (i) and (ii), a
“Good Reason Event”), by giving the Company notice to such effect, setting forth
in reasonable detail the factual basis for such termination, no later than
thirty (30) days after the occurrence of such Good Reason Event, which
termination notice shall specify an effective date of termination at least sixty
(60) days but in no event later than ninety (90) days after the date of such
notice; provided, however, that the Company may avoid such termination if it,
prior to the effective date of termination set forth in such notice, cures or
explains to the reasonable satisfaction of Executive the factual basis for
termination set forth therein, which termination notice shall specify an
effective date of termination at least sixty (60) days but in no event later
than ninety (90) days after receipt of the notice from Executive.
b.
if
a Change of Control (as hereinafter defined) occurs during the Term, and a Good
Reason Event occurs within the one year period following the Change of Control,
by giving the Company notice of intent to terminate at any time within thirty
(30) days after the occurrence of such Good Reason Event, setting forth the
events or circumstances constituting such Change of Control and the Good Reason
Event, which termination notice shall specify an effective date of termination
at least ten (10) days but in no event later than thirty (30) days after receipt
of the notice from Executive.
15.
Compensation upon
Termination
. Notwithstanding anything contained herein to the
contrary, and in addition to Executive’s rights under Section 17:
a.
Termination by Company Upon
Executive’s Death or Disability
. If Executive’s employment is
terminated pursuant to Section 12, Executive shall be entitled to receive (i)
any Base Salary amounts accrued and unpaid to and including the Termination
Date, (ii) any Bonus amounts earned by Executive in respect of any completed
fiscal year that remain unpaid, and (iii) any expense reimbursement due to him
pursuant to Section 4 in respect of his employment prior to the Termination
Date, payable as provided in Section 15(e), and no Bonus compensation shall be
paid with respect to the fiscal year in which the Termination Date
occurs.
b.
Termination by Company for
Cause
. If Executive’s employment is terminated as the result
of the occurrence of a For Cause Event pursuant to Section 13, from and after
the Termination Date, the Company shall have no further obligation to Executive
hereunder, including, without limitation, any obligation pursuant to Section 17,
except for the payment to Executive of (i) any Base Salary amounts accrued and
unpaid to and including the Termination Date, and (ii) any expense reimbursement
due to him pursuant to Section 4 in respect of his employment prior to the
Termination Date, payable as provided in Section 15(e), and no Bonus
compensation shall be paid with respect to the fiscal year in which the
Termination Date occurs or any completed fiscal year that has not been
determined to have been earned or remains unpaid (including but not limited to
any unvested shares of Restricted Stock issued to Executive.)
c.
Termination by Executive for
Good Reason (Other than Upon a Change of Control) or by Company Other than For
Cause
. If Executive’s employment is terminated by Executive pursuant to
Section 14(a
)
as a
result of the occurrence of a Good Reason Event or by the Company other than as
a result of the occurrence of a For Cause Event, Executive shall be entitled to
receive (i) any Base Salary amounts accrued and unpaid to and including the
Termination Date, (ii) any Bonus amounts earned by Executive in respect of any
completed fiscal year that remain unpaid, (iii) any expense reimbursement due to
him pursuant to Section 4 in respect of his employment prior to the Termination
Date, (iv) an amount, in cash, equal to the amount of Base Salary payable for
the balance of the calendar year from and after the Termination Date that
remains unpaid, plus the product of (A) his Base Salary in effect on the
Termination Date, and (B) the number of full calendar years remaining in the
balance of the Term after the Termination Date through December 31, 2015, and
(v) continued major medical, hospitalization, and dental insurance providing
coverage at least as favorable to Executive as that in effect on the Termination
Date through December 31, 2015. The payments required under
clauses (i) through (iv) of this Section 15(c) shall be payable as provided in
Section 15(e).
d.
Termination
by Executive Upon a Change in Control
. If Executive’s employment is
terminated pursuant to Section 14(b), Executive shall be entitled to receive (i)
any Base Salary amounts accrued and unpaid to and including the Termination
Date, (ii) any Bonus amounts earned by Executive in respect of any completed
fiscal year that remain unpaid, (iii) any expense reimbursement due to him
pursuant to Section 4 in respect of his employment prior to the Termination
Date, and (iv) upon the terms and subject to the conditions set forth in Section
16, the
Parachute Amount (as hereinafter defined), payable as provided in Section
15(e).
e.
Except
for the continuation of insurance coverages and subject to Section 18, any
amount payable to Executive upon termination of his employment under this
Agreement shall be paid promptly, and in any event within thirty (30) days,
after the Termination Date. If Executive shall die prior to
Executive’s receipt of all payments required under this Agreement, the Company
shall pay Executive’s designated beneficiary or, if there is no designated
beneficiary, his estate all such amounts that would have otherwise been payable
to Executive under this Agreement as of the date of his death.
f.
Executive shall have no obligation hereunder to seek or
to accept any other employment after the Termination Date or otherwise to
mitigate the payments required to be made by this Section.
16.
Change of
Control
.
a.
For
the purposes of this Section 16:
i.
The
“Act” is the Securities Exchange Act of 1934, as amended.
ii.
A
“person” includes a “group” within the meaning of Section 13(d)(3) of the
Act.
iii.
“Control”
is used herein as defined in Rule 12b-2 under the Act.
iv.
“Beneficially
owns” and “acquisition” are used herein as defined in Rules 13d-3 and 13d-5,
respectively, under the Act.
v.
“Non-Affiliated
Person” means any person, other than Executive, an employee stock ownership
trust of the Company (or any trustee thereof for the benefit of such trust), or
any person controlled by Executive, the Company or such a trust.
vi.
“Voting
Securities” includes Common Stock and any other securities of the Company that
ordinarily entitle the holders thereof to vote, together with the holders of
Common Stock or as a separate class, with respect to matters submitted to a vote
of the holders of Common Stock, but securities of the Company as to which the
consent of the holders thereof is required by applicable law or the terms of
such securities only with respect to certain specified transactions or other
matters, or the holders of which are entitled to vote only upon the occurrence
of certain specified events (such as default in the payment of a mandatory
dividend on preferred stock or a scheduled installment of principal or interest
of any debt security), shall not be Voting Securities.
vii.
“Right”
means any option, warrant or other right to acquire any Voting Security (other
than such a right of conversion or exchange included in a Voting
Security).
viii.
The “Code” is
the Internal Revenue Code of 1986, as amended.
ix.
“Base
amount,” “present value” and “parachute payment” are used herein as defined in
Section 280G of the Code.
b.
A
“Change of Control” occurs when:
A.
a
Non-Affiliated Person acquires control of the Company;
B.
upon
an acquisition of Voting Securities or Rights by a Non- Affiliated Person or any
change in the number or voting power of outstanding Voting Securities, such
Non-Affiliated Person beneficially owns Voting Securities or Rights entitling
such person to cast a number of votes (determined in accordance with Section
16(g)) equal to or greater than 25% of the sum of (A) the number of votes that
may be cast by all other holders of outstanding Voting Securities and (B) the
number of votes that may be cast by such Non-Affiliated Person (determined in
accordance with Section 16(g)); or
C.
upon
any change in the membership of the Company’s Board of Directors, a majority of
the directors are persons who are not nominated or appointed by the Company’s
Board of Directors as constituted prior to such change.
c.
The
“Parachute Amount” to which Executive shall be entitled pursuant to Section
15(c) shall equal 2.99 times Executive’s base amount.
d.
It
is intended that the present value of any payments or benefits to Executive,
whether hereunder or otherwise, that are includable in the computation of
parachute payments shall not exceed 2.99 times the base amount. Accordingly, if
Executive receives any payment or benefit from the Company prior to payment of
the Parachute Amount which, when added to the Parachute Amount, would subject
any of the payments or benefits to Executive to the excise tax imposed by
Section 4999 of the Code, the Parachute Amount shall be reduced by the least
amount necessary to avoid such tax. The Company shall have no obligation
hereunder to make any payment or provide any benefit to Executive after the
payment of the Parachute Amount which would subject any of such payments or
benefits to the excise tax imposed by Section 4999 of the Code.
e.
Any
other provision hereof notwithstanding, Executive may, prior to his receipt of
the Parachute Amount pursuant to Section 15(c), waive the payment thereof, or,
after his receipt of the Parachute Amount thereunder, treat some or all of such
amount as a loan from the Company which Executive shall repay to the Company
within 180 days after the receipt thereof, together with interest thereon at the
rate provided in Section 7872 of the Code, in either case, by giving the Company
notice to such effect.
f.
Any
determination of the base amount, the Parachute Amount, any liability for excise
tax under Section 4999 of the Code or other matter required to be made pursuant
to this Section 18, shall be made by the Company’s regularly-engaged independent
certified public accountants, whose determination shall be conclusive and
binding upon the Company and Executive; provided that such accountants shall
give to Executive, on or before the date on which payment of the Parachute
Amount or any later payment or benefit would be made, a notice setting forth in
reasonable detail such determination and the basis therefor, and stating
expressly that Executive is entitled to rely thereon.
g.
The
number of votes that may be cast by holders of Voting Securities or Rights upon
the issuance or grant thereof shall be deemed to be the largest number of votes
that may be cast by the holders of such securities or the holders of any other
Voting Securities into which such Voting Securities or Rights are convertible or
for which they are exchangeable or exercisable, determined as though such Voting
Securities or Rights were immediately convertible, exchangeable or exercisable
and without regard to any anti-dilution or other adjustments provided for
therein.
17.
Other Termination Provisions
.
In addition to Executive’s rights under Section 15:
a.
If
his employment is terminated by Executive pursuant to Section 14(a) or by the
Company other than as the result of the occurrence of a For Cause Event pursuant
to Section 13, all shares of Restricted Stock issued to Executive that have not
yet fully vested prior to the Termination Date shall immediately
vest.
b.
Upon
request by Executive, on the Termination Date or as soon as practicable
thereafter, the Company shall assign to Executive, and Executive shall assume,
the lease relating to any automobile or other vehicle that the Company provides
for his use on the Termination Date pursuant to Section 4(b) (other than an
automobile or other vehicle owned or leased by Executive), if and to the extent
assignable under the terms and conditions thereof, and thereafter Executive
shall be liable for, and the Company shall be relieved of all liability for, any
amount or other obligation required to be paid or performed thereunder in
respect of any period commencing after the date of assignment.
c.
Throughout
the 10-year period following the Termination Date, the Company shall indemnify
Executive, and hold him harmless from, any loss, damages, liability, obligation
or expense that he may suffer or incur in connection with any claim made or
Proceeding commenced during such period relating to his service as a director,
officer, employee or agent of the Company (or any subsidiary thereof) to the
same extent and in same manner as the Company shall be obligated so to indemnify
Executive immediately prior to the Termination Date; provided that, if during
such 10-year period the Company adopts or assumes any indemnification policy or
practice with respect to its directors, officers, employees or agents that is
more favorable than that in effect on the Termination Date, Executive shall be
entitled to such more favorable indemnification.
d.
Throughout
the 10-year period following the Termination Date, the Company shall maintain
for the benefit of Executive directors’ and officers’ liability insurance (on a
“claims made” basis) providing coverage at least as favorable to Executive
(including with respect to limits of liability, exclusions, and deductible and
retention amounts) as that in effect on the Termination Date.
18. Compliance
with Code Section 409A.
a.
Unless
otherwise expressly provided in this Agreement, any payment of compensation by
the Company to Executive, whether pursuant to this Agreement or otherwise, shall
be made within two and one-half months (2½ months) after the end of the later of
the calendar year or the Company’s fiscal year in which Executive’s right to
such payment vests (i.e., is not subject to a substantial risk of forfeiture for
purposes of Code Section 409A (“Code Section 409A”)). Such amounts
shall not be subject to the requirements of subsection (b) below applicable to
“nonqualified deferred compensation.”
b.
All
payments of “nonqualified deferred compensation” (within the meaning of Code
Section 409A) are intended to comply with the requirements of Code Section 409A,
and shall be interpreted in accordance therewith. Neither party
individually or in combination may accelerate, offset or assign any such
deferred payment, except in compliance with Code Section 409A. No
amount shall be paid prior to the earliest date on which it is permitted to be
paid under Code Section 409A and Executive shall have no discretion with respect
to the timing of payments except as permitted under Code Section 409A. In the
event that Executive is determined to be a “Specified Employee” (as defined in
and determined in accordance with Code Section 409A) of the Company at a time
when its stock is deemed to be publicly traded on an established securities
market, payments determined to be “nonqualified deferred compensation” payable
by reason of “Separation from Service” (as defined in Code Section 409A) shall
be paid no earlier than (i) the first day of the seventh (7th) calendar month
commencing after such termination of employment, or (ii) Executive’s death,
consistent with and to the extent necessary to meet the requirements of Code
Section 409A without the imposition of excise taxes. Any payment
delayed by reason of the prior sentence shall be paid in a single lump sum on
the earliest date permitted under Code Section 409A in order to catch up to the
original payment schedule, with interest on such delayed amount equal to the
short-term federal rate applicable under Section 7872(f)(2)(A) of the Code for
the month in which occurs Executive’s Separation from
Service. Thereafter, Executive shall receive any remaining benefits
as if there had not been an earlier delay.
c.
For
purposes of this Agreement, termination of employment shall be deemed to occur
only upon “Separation from Service” as such term is defined in Code Section
409A. Each payment and each installment of any bonus or severance
payments provided for under this Agreement shall be treated as a separate
payment for purposes of application of Code Section 409A. Subsection (b) above
shall not apply to that portion of any amounts payable upon termination of
employment which shall qualify as “involuntary severance” under Code Section
409A because such amount (i) does not exceed the lesser of (1) two hundred
percent (200%) of Executive’s annualized compensation from the Company for the
calendar year immediately preceding the calendar year during which the
termination of employment occurs, or (2) two hundred percent (200%) of the
annual limitation amount under Section 401(a)(17) of the Code (the maximum
amount of compensation that may be taken into account for purposes of a
tax-qualified retirement plan) for the calendar year during which termination of
employment occurs, and (ii) is paid no later then the end of the second (2
nd
)
calendar year commencing after termination of employment.
d.
All
benefit plans, programs and policies sponsored by the Company are intended to
comply with all requirements of Code Section 409A or to be structured so as to
be exempt from the application of Code Section 409A. All expense
reimbursement or in-kind benefits subject to Code Section 409A which are
provided under this Agreement or, unless otherwise specified in writing, under
any Company program or policy, shall be subject to the following rules: (i) the
amount of expenses eligible for reimbursement or in-kind benefits provided
during one calendar year may not affect the benefits provided during any other
year; (ii) reimbursements shall be paid no later than the end of the calendar
year following the year in which Executive incurs such expenses, and Executive
shall take all actions necessary to claim all such reimbursements on a timely
basis to permit the Company to make all such reimbursement payments prior to the
end of said period, and (iii) the right to reimbursement or in-kind benefits
shall not be subject to liquidation or exchange for another
benefit.
19.
Limitation of Authority
.
Except as expressly provided herein, no provision hereof shall be deemed to
authorize or empower either party hereto to act on behalf of, obligate or bind
the other party hereto.
20.
Notices
. Any notice or demand
required or permitted to be given or made hereunder to or upon either party
hereto shall be deemed to have been duly given or made for all purposes if (a)
in writing and sent by (i) messenger or an overnight courier service against
receipt, or (ii) certified or registered mail, postage paid, return receipt
requested, or (b) sent by telegram, telecopy, telex, e-mail or similar
electronic means, provided that a written copy thereof is sent on the same day
by postage-paid first-class mail, to such party at the following
address:
|
to
Executive at:
|
|
|
|
|
|
|
|
|
|
|
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with
a copy to:
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Loeb
& Loeb LLP
|
|
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10100
Santa Monica Blvd., Suite 2200
|
|
|
Los
Angeles, California 90067
|
|
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Attn:
Gerald M. Chizever, Esq.
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|
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to
the Company at:
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22619
Pacific Coast Highway
|
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Malibu,
California 90265
|
|
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Attn:
Chairman (if a Chairman has been elected) or Chief Financial
Officer
|
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with
a copy to:
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Feder
Kaszovitz LLP
|
|
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845
Third Avenue
|
|
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New
York, New York 10022-6601
|
|
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Attn:
Geoffrey Bass, Esq.
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or such
other address as either party hereto may at any time, or from time to time,
direct by notice given to the other party in accordance with this Section. The
date of giving or making of any such notice or demand shall be, in the case of
clause (a) (i), the date of the receipt; in the case of clause (a) (ii), five
business days after such notice or demand is sent; and, in the case of clause
(b), the business day next following the date such notice or demand is
sent.
21.
Amendment
. Except
as otherwise provided herein, no amendment of this Agreement shall be valid or
effective, unless in writing and signed by or on behalf of the parties
hereto.
22.
Waiver
. No course
of dealing or omission or delay on the part of either party hereto in asserting
or exercising any right hereunder shall constitute or operate as a waiver of any
such right. No waiver of any provision hereof shall be effective, unless in
writing and signed by or on behalf of the party to be charged therewith. No
waiver shall be deemed a continuing waiver or waiver in respect of any other or
subsequent breach or default, unless expressly so stated in
writing.
23.
Governing Law
. This
Agreement shall be governed by, and interpreted and enforced in accordance with,
the laws of the State of California without regard to principles of choice of
law or conflict of laws.
24.
Jurisdiction
. Each
of the parties hereto hereby irrevocably consents and submits to the
jurisdiction of the courts of the State of California and the United States
District Court for the Central District of California in connection with any
suit, action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby, waives any objection to venue in the County of
Los Angeles, State of California, or such District, and agrees that service of
any summons, complaint, notice or other process relating to such Proceeding may
be effected in the manner provided by clause (a) (ii) of Section 20 of this
Agreement.
25.
Remedies
. In the
event of any actual or prospective breach or default by either party hereto, the
other party shall be entitled to equitable relief, including remedies in the
nature of rescission, injunction and specific performance. All remedies
hereunder are cumulative and not exclusive, and nothing herein shall be deemed
to prohibit or limit either party from pursuing any other remedy or relief
available at law or in equity for such actual or prospective breach or default,
including the recovery of damages.
26.
Severability
. The
provisions hereof are severable and in the event that any provision of this
Agreement shall be determined to be invalid or unenforceable in any respect by a
court of competent jurisdiction, the remaining provisions hereof shall not be
affected, but shall, subject to the discretion of such court, remain in full
force and effect, and any invalid or unenforceable provision shall be deemed,
without further action on the part of the parties hereto, amended and limited to
the extent necessary to render the same valid and enforceable.
27.
Counterparts
. This Agreement
may be executed in counterparts, each of which shall be deemed an original and
which together shall constitute one and the same agreement.
28.
Assignment
. This Agreement,
and each right, interest and obligation hereunder, may not be assigned by either
party hereto without the prior written consent of the other party hereto, and
any purported assignment without such consent shall be void and without effect,
except that this Agreement shall be assigned to, and assumed by, any Person with
or into which the Company merges or consolidates, or which acquires all or
substantially all of its assets, or which otherwise succeeds to and continues
the Company’s business substantially as an entirety. Except as otherwise
expressly provided herein or required by law, Executive shall not have any power
of anticipation, assignment or alienation of any payments required to be made to
him hereunder, and no other Person may acquire any right or interest in any
thereof by reason of any purported sale, assignment or other disposition
thereof, whether voluntary or involuntary, any claim in a bankruptcy or other
insolvency Proceeding against Executive, or any other ruling, judgment, order,
writ or decree.
29.
Survival
. The
provisions of this Agreement which by their terms are or become effective
following termination of this Agreement, including but not limited to the
provisions of Section 9, 10, 11, 14, 15, 16, 17, 18, 20, 22, 23, 24, and 25
shall survive the termination of this Agreement.
30.
Binding
Effect
. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement is not intended, and shall not be deemed, to create or
confer any right or interest for the benefit of any Person not a party
hereto.
31.
Titles and
Captions
. The titles and captions of the Articles and Sections
of this Agreement are for convenience of reference only and do not in any way
define or interpret the intent of the parties or modify or otherwise affect any
of the provisions hereof.
32.
Grammatical
Conventions
. Whenever the context so requires, each pronoun or
verb used herein shall be construed in the singular or the plural sense and each
capitalized term defined herein and each pronoun used herein shall be construed
in the masculine, feminine or neuter sense.
33.
References
. The
terms “herein,” “hereto,” “hereof,” “hereby,” and “hereunder,” and other terms
of similar import, refer to this Agreement as a whole, and not to any Article,
Section or other part hereof.
34.
No Presumptions
. Each party
hereto acknowledges that it has had an opportunity to consult with counsel and
has participated in the preparation of this Agreement. No party hereto is
entitled to any presumption with respect to the interpretation of any provision
hereof or the resolution of any alleged ambiguity herein based on any claim that
the other party hereto drafted or controlled the drafting of this
Agreement.
35.
Certain
Definitions
. As used herein:
i.
“Person”
includes without limitation a natural person, corporation, joint stock company,
limited liability company, partnership, joint venture, association, trust,
government or governmental authority, agency or instrumentality, or any group of
the foregoing acting in concert.
ii.
A
“Proceeding” is any suit, action, arbitration, audit, investigation or other
proceeding before or by any court, magistrate, arbitration panel or other
tribunal, or any governmental agency, authority or instrumentality of competent
jurisdiction.
36.
Entire
Agreement
. This Agreement embodies the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes any
prior agreement, commitment or arrangement relating hereto, including, without
limitation, the 2003 Employment Agreement, which shall terminate,
notwithstanding any contrary provision thereof, immediately upon the
commencement of the Term, except that each party thereto shall (a) remain
required to perform any act and to satisfy any obligation or condition that such
party is required to perform or satisfy thereunder with respect to any event
occurring or circumstance existing during the term thereof (including without
limitation the payment or delivery to Executive of any compensation,
reimbursable expense or employee benefit or perquisite to which he may be
entitled, but which has not yet been paid to him, on account of his employment
thereunder) that has not been so performed or satisfied, and (b) retain its
right thereunder to assert or to allege any claim or cause of action relating to
or based upon, or otherwise to enforce, any provision thereof with respect to
any event occurring or circumstance existing during the term
thereof.
BALANCE
OF THIS PAGE DELIBERATELY LEFT BLANK
SIGNATURE
PAGE FOLLOWS
IN WITNESS WHEREOF, the undersigned
have duly executed this Agreement as of the day and year first above
written.
|
THE
COMPANY:
|
|
|
|
JAKKS
PACIFIC, INC.
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
Name:
|
Joel M. Bennett
|
|
|
|
|
|
|
Title:
|
Executive Vice President and Chief Financial
Officer
|
|
EXECUTIVE:
|
|
|
|
|
|
|
|
|
Stephen
G. Berman
|
|
EXHIBIT
A
FORM
OF RESTRICTED STOCK AGREEMENT
(attached)
EXHIBIT
A
To
2010
Employment Agreement between
Stephen
Berman and JAKKS Pacific, Inc.
Restricted
Stock Award Agreement
Under
the
JAKKS
Pacific, Inc.
2002
Stock Award and Incentive Plan
This
RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”) is entered into on
___________, 201___ by and between Stephen G. Berman (the "Executive") and JAKKS
Pacific, Inc., a Delaware corporation (the “Company”).
WITNESSETH:
WHEREAS,
the Company and the Executive are parties to that certain Second Amended and
Restated 2010 Employment Agreement, dated November ___ , 2010 (the "2010
Employment Agreement"); and
WHEREAS,
the terms and conditions of the 2010 Employment Agreement call for the Company
to grant the Executive certain shares of Restricted Stock (as defined below) in
consideration for the Executive agreeing to enter into the 2010 Employment
Agreement; and
WHEREAS,
pursuant to the Company’s 2002 Stock Award and Incentive Plan (the “Plan”), the
Company’s Board or its Compensation Committee (the “Compensation Committee”) has
approved, in accordance with the terms of the 2010 Employment Agreement, the
grant to the Executive of Restricted Stock set forth herein, subject to the
terms and conditions of this Agreement.
AWARD
OF RESTRICTED STOCK
The
Company hereby grants to the Executive an award of __________
s
hares of restricted common
stock of the Company, par value $.001 per share (the “Restricted Stock”),
subject to, and in accordance with, the restrictions, terms, and conditions set
forth in this Agreement. The grant date of this award of
Restricted Stock is _________, 201___ (the “Grant Date”).
This
Agreement shall be construed in accordance with, and subject to, the provisions
of the Plan (the provisions of which are incorporated herein by reference) and,
except as otherwise expressly set forth herein, the capitalized terms used in
this Agreement shall have the same definitions as set forth in the Plan and the
2010 Employment Agreement.
RESTRICTIONS
Subject
to Sections 2.2 and 3.2 below, and provided in all instances that the
Executive’s employment with the Company has not been terminated for cause by the
Company in accordance with the provisions of the 2010 Employment Agreement prior
to January 1, ________ (the “Final Vesting Date”, that number of shares of
Restricted Stock set forth below shall vest on each of the dates set forth below
(the “Vesting Date”) such that on each Vesting Date such number of shares of
Restricted Stock shall be fully vested
1
:
|
Vesting Date
|
|
Number of Shares that
Vest
|
|
|
|
|
|
|
|
|
None of
the Restricted Stock may be sold, assigned, transferred, pledged, or otherwise
encumbered prior to each Vesting Date, and thereafter the Restricted Stock shall
not be sold, assigned transferred, pledged, or otherwise encumbered except in
accordance with the minimum stock holding requirements provided for in Section
3(h) of the 2010 Employment Agreement.
[Insert for Shares issued under
Section 3(b) of the 2010 Employment Agreement:]
Notwithstanding the
Vesting Dates set forth in Section 2.1 above, and in order for the Company to
preserve the deductibility under Section 162(m) of the Code of the grant of
Restricted Stock provided hereby, as a condition precedent to the effectiveness
of the above-described vesting schedule, the 3% Vesting Condition (defined in
Section 3(b) of the 2010 Employment Agreement) must be satisfied. In
the event the 3% Vesting Condition is not satisfied, (i) the grant of Restricted
Stock pursuant to this Agreement shall be null and void, (ii) the Executive
shall forfeit any right to receive any Restricted Stock, (iii) any entries on
the stock books and ledgers of the Company with respect to the shares of
Restricted Stock shall be cancelled, and (iv) the Restricted Stock shall become
authorized but unissued shares of the Company's common stock, par value $.001
per share (the "Common Stock").
The
Restricted Stock may not be sold, assigned, transferred, pledged, or otherwise
encumbered prior to the date, if ever, that the Restricted Stock becomes vested
in accordance with the terms of this Agreement.
1
Vesting
Schedule to be in accordance with relevant provisions of Section 3 of the 2010
Employment Agreement
STOCK;
DIVIDENDS; VOTING
The stock
certificate(s) evidencing the Restricted Stock shall be registered on the
Company's books in the name of the Executive as of the Grant Date. The Company
may issue stock certificates or otherwise evidence the Executive’s interest by
using a book entry account. The Company may, in its sole discretion,
maintain physical possession or custody of such stock certificates until such
time as the shares of Restricted Stock are free of the restrictions contained in
Article 2. The Company reserves the right to place a legend on the
stock certificate(s) restricting the transferability of such certificates and
referring to the terms and conditions (including forfeiture) of this Agreement
and the Plan.
During
the period the Restricted Stock is not vested, Executive shall not have the
right to vote or receive dividends (whether in cash, stock or any other form) on
shares of Restricted Stock issued under this Agreement until the date of vesting
of such shares.
In the
event of a stock split, change in capitalization or other similar capital event
in which the Company’s stockholders participate generally in respect of all
shares of common stock of the Company, par value $.001 per share, from and after
the date of issuance of the Restricted Stock, the number and class of shares of
Restricted Stock or other securities that the Executive shall be entitled to,
and shall hold, pursuant to this Agreement shall be appropriately adjusted or
changed to reflect such change in capitalization, provided that any such
additional shares of Restricted Stock or different shares or securities shall
remain subject to the restrictions contained in this Agreement.
The
Executive represents and warrants that he is acquiring the Restricted Stock for
investment purposes only, and not with a view to distribution
thereof. The Executive is aware that the Restricted Stock may not be
registered under the federal or any state securities laws and that, in addition
to the other restrictions on the shares of Restricted Stock, the Restricted
Stock will not be able to be transferred unless an exemption from registration
is available or the Restricted Stock becomes registered. By making
this award of Restricted Stock, the Company is not undertaking any obligation to
register the Restricted Stock under any federal or state securities
laws.
NO
RIGHT TO CONTINUED SERVICE AS AN EXECUTIVE
Nothing
in this Agreement or the Plan shall be interpreted or construed to confer upon
the Executive any right with respect to continuance as an employee of the
Company or any subsidiary of the Company, nor shall this Agreement or the Plan
interfere in any way with the right of the Company or a subsidiary of the
Company or their respective stockholders to terminate the Executive’s service as
a director at any time.
TAXES
AND WITHHOLDING
The
Executive shall be responsible for all federal, state, and local income taxes
payable with respect to this award of Restricted Stock. The Executive
shall have the right to make such elections under the Code as are available in
connection with this award of Restricted Stock. The Company and the
Executive agree to report the value of the Restricted Stock in a consistent
manner for federal income tax purposes. The Company shall have the
right to retain and withhold from any payment of Restricted Stock the amount of
taxes (if any) required by any government to be withheld or otherwise deducted
and paid with respect to such payment. At its discretion, the Company
may require the Executive to reimburse the Company for any such taxes required
to be withheld and may withhold any distribution in whole or in part until the
Company is so reimbursed. In lieu thereof, the Company shall have the
right to withhold from any other cash amounts due to the Executive an amount
equal to such taxes required to be withheld or withhold and cancel (in whole or
in part) a number of shares of Restricted Stock having a market value not less
than the amount of such taxes.
EXECUTIVE
BOUND BY THE PLAN
The
Executive hereby acknowledges receipt of a copy of the Plan and agrees to be
bound by all the terms and provisions thereof.
MODIFICATION
OF AGREEMENT
This
Agreement may be modified, amended, suspended, or terminated, or any of the
terms or conditions hereof waived, only by a written instrument executed by the
parties hereto.
SEVERABILITY
Should
any provision of this Agreement be held by a court of competent jurisdiction to
be unenforceable or invalid for any reason, the remaining provisions of this
Agreement shall not be affected by such holding and shall continue in full force
in accordance with their terms.
GOVERNING
LAW
The
validity, interpretation, construction, and performance of this Agreement shall
be governed by the laws of the State of Delaware without giving effect to the
conflicts of laws principles thereof.
SUCCESSORS
IN INTEREST
This
Agreement shall inure to the benefit of, and be binding upon, the Company and
its successors and assigns, whether by merger, consolidation, reorganization,
sale of assets, or otherwise. This Agreement shall inure to the
benefit of the Executive’s legal representatives. All obligations
imposed upon the Executive and all rights granted to the Company under this
Agreement shall be final, binding, and conclusive upon the Executive’s heirs,
executors, administrators, and successors.
RESOLUTION
OF DISPUTES
Any
dispute or disagreement which may arise under, or as a result of, or in any way
relate to the interpretation, construction, or application of this Agreement
shall be determined by the Board. Any determination made hereunder shall be
final, binding, and conclusive on the Executive and the Company for all
purposes.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
|
JAKKS
PACIFIC, INC.
|
|
EXECUTIVE
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
Stephen
G. Berman
|
|
|
Title:
|
|
|
|
EXHIBIT
B
VESTING
SCHEDULE FOR SHARES OF RESTRICTED STOCK ISSUED UNDER SECTION 3(b)
|
Dollar Value
of Shares
Issued
|
|
Issuance
Date
|
|
First Vesting Date
|
|
% of
Shares
Vesting
on First
Vesting
Date
|
|
|
Second
Vesting
Date
2
|
|
% of
Shares
Vesting
on
Second
Vesting
Date
|
|
|
Third
Vesting
Date
|
|
% of
Shares
Vesting
on
Third
Vesting
Date
|
|
|
Fourth
Vesting
Date
|
|
|
% of
Shares
Vesting
on
Fourth
Vesting
Date
|
|
|
Fifth
Vesting
Date
|
|
|
% of
Shares
Vesting
on Fifth
Vesting
Date
|
|
|
Sixth
Vesting
Date
|
|
|
% of Shares
Vesting on
Sixth
Vesting
Date
|
|
|
$500,000.00
|
|
Jan 1,
2011
|
|
Date
in 2012 as of which the 3% Vesting Condition is determined to have been
satisfied
|
|
|
16⅔
|
%
|
|
Jan
1, 2013
|
|
|
16⅔
|
%
|
|
Jan
1, 2014
|
|
|
16⅔
|
%
|
|
Jan
1, 2015
|
|
|
|
16⅔
|
%
|
|
Jan
1, 2016
|
|
|
|
16⅔
|
%
|
|
Jan
1, 2017
|
|
|
|
16⅔
|
%
|
|
$500,000.00
|
|
Jan 1, 2012
|
|
Date
in 2013 as of which the 3% Vesting Condition is determined to have been
satisfied
|
|
|
20
|
%
|
|
Jan
1, 2014
|
|
|
20
|
%
|
|
Jan
1, 2015
|
|
|
20
|
%
|
|
Jan
1, 2016
|
|
|
|
20
|
%
|
|
Jan
1, 2017
|
|
|
|
20
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$500,000.00
|
|
Jan 1,
2013
|
|
Date
in 2014 as of which the 3% Vesting Condition is determined to have been
satisfied
|
|
|
25
|
%
|
|
Jan
1, 2015
|
|
|
25
|
%
|
|
Jan
1, 2016
|
|
|
25
|
%
|
|
Jan
1, 2017
|
|
|
|
25
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$500,000.00
|
|
Jan 1, 2014
|
|
Date
in 2015 as of which the 3% Vesting Condition is determined to have been
satisfied
|
|
|
33⅓
|
%
|
|
Jan
1, 2016
|
|
|
33⅓
|
%
|
|
Jan
1, 2017
|
|
|
33⅓
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$500,000.00
|
|
Jan 1,
2015
|
|
Date
in 2016 as of which the 3% Vesting Condition is determined to have been
satisfied
|
|
|
50
|
%
|
|
Jan
1,
2017
|
|
|
50
|
%
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
2
This
schedule assumes that for each issuance of Section 3(b) Restricted Stock, the 3%
Vesting Condition is satisfied as of the first possible vesting
date.
EXHIBIT
C
2010
BONUS TARGETS
On March
31, 2010, the Compensation Committee adopted the following 2010 Adjusted EPS
(defined below) targets for determining the bonus for Executive for fiscal 2010.
Executive’s 2010 Bonus shall be equal to the percentage of his Base Salary for
2010 set forth in the table below that corresponds to the Company’s actual 2010
Adjusted EPS:
|
Minimum Adjusted
2010 EPS ($) at
which
Corresponding
Bonus Level is
Earned
|
|
Bonus
(% of Base
Salary)
|
|
|
1.17
|
|
|
20
|
%
|
|
|
|
|
|
|
|
1.20
|
|
|
30
|
%
|
|
|
|
|
|
|
|
1.23
|
|
|
40
|
%
|
|
|
|
|
|
|
|
1.26
|
|
|
50
|
%
|
|
|
|
|
|
|
|
1.30
|
|
|
75
|
%
|
|
|
|
|
|
|
|
1.33
|
|
|
100
|
%
|
|
|
|
|
|
|
|
1.36
|
|
|
130
|
%
|
|
|
|
|
|
|
|
1.39
|
|
|
150
|
%
|
|
|
|
|
|
|
|
1.42
|
|
|
160
|
%
|
|
|
|
|
|
|
|
1.46
|
|
|
180
|
%
|
|
|
|
|
|
|
|
1.50
|
|
|
200
|
%
|
The term
“2010 Adjusted EPS” means the Adjusted Earnings Per Share for the 2010 fiscal
year of the Company. The 2010 Adjusted EPS targets set forth in the table above
assume that the minimum aggregate bonuses in cash, shares of stock, options or
other equity awards awarded to employees other than Executive will equal at
least $1,200,000 in calculating the $1.17 2010 Adjusted EPS target and at least
$2,000,000 in calculating the 2010 Adjusted EPS growth targets that equal or
exceed $1.33. The Compensation Committee reserves the right to modify the 2010
Adjusted EPS targets and corresponding bonus amounts in the exercise of its
discretion to take account of any new acquisitions that are concluded in 2010,
changes in the outstanding shares used to calculate the 2010 Adjusted EPS
resulting from stock repurchases by the Company and redemption of the Company’s
senior convertible notes due in 2023, the amount of bonuses awarded to
employees, or as otherwise determined by the Compensation
Committee.
EXHIBIT
D
BASE
BONUS CRITERIA FOR 2011
Executive’s
2011 Base Annual Performance Bonus shall be calculated as Executive’s Base
Salary for 2011 (i.e., $1,140,000), multiplied by the percentage of Base Salary
set forth in the table below that corresponds to the Company’s actual 2011
Adjusted EPS (defined below):
|
2011 Adjusted EPS
($)
|
|
Bonus
(% of Base Salary)
|
|
|
Less
than 1.37
|
|
|
0
|
%
|
|
|
|
|
|
|
|
1.37
|
|
|
20
|
%
|
|
|
|
|
|
|
|
1.40
|
|
|
30
|
%
|
|
|
|
|
|
|
|
1.44
|
|
|
40
|
%
|
|
|
|
|
|
|
|
1.48
|
|
|
50
|
%
|
|
|
|
|
|
|
|
1.52
|
|
|
75
|
%
|
|
|
|
|
|
|
|
1.56
|
|
|
100
|
%
|
|
|
|
|
|
|
|
1.60
|
|
|
130
|
%
|
|
|
|
|
|
|
|
1.64
|
|
|
150
|
%
|
|
|
|
|
|
|
|
1.70
|
|
|
160
|
%
|
|
|
|
|
|
|
|
1.74
|
|
|
180
|
%
|
|
|
|
|
|
|
|
1.78
|
|
|
200
|
%
|
The
foregoing targets shall be adjusted so that the initial target under which
Executive can earn a bonus equal to 20% of Base Salary (the “Initial EPS
Target”) is the greater of $1.37 and the amount that is 3% higher than Adjusted
Earnings Per Share for the 2010 fiscal year of the Company, and each subsequent
tranche shall be adjusted accordingly so that the maximum bonus, equal to 200%
of Executive’s 2011 Base Salary, is earned if 2011 Adjusted EPS is 30% higher
than the Initial EPS Target.
The term
“2011 Adjusted EPS” means the Adjusted Earnings Per Share for the 2011 fiscal
year of the Company. The Compensation Committee also reserves the right to
modify the bonus targets and corresponding percentage of Executive’s Base Salary
(subject to Section 3(e)(i) of the Agreement) in the exercise of its discretion
to take account of any new acquisitions concluded in 2010 and 2011, changes in
the outstanding shares used to calculate the 2011 Adjusted EPS resulting from
stock repurchases by the Company, the amount of bonuses awarded to employees, or
as otherwise determined by the Compensation Committee in its
discretion.
EXHIBIT
E
PERCENTAGES
OF
BASE
ANNUAL PERFORMANCE BONUS
PAYABLE
IN RESTRICTED STOCK AND CASH
|
Fiscal Year for
which Base Annual
Performance Bonus
is Awarded
|
|
Percentage of
Base Annual
Performance
Bonus Payable in
Restricted Stock
|
|
|
Percentage of Base
Annual
Performance
Bonus Payable in
Cash
|
|
|
2011
|
|
|
25
|
%
|
|
|
75
|
%
|
|
2012
|
|
|
40
|
%
|
|
|
60
|
%
|
|
2013
|
|
|
40
|
%
|
|
|
60
|
%
|
|
2014
|
|
|
40
|
%
|
|
|
60
|
%
|
|
2015
|
|
|
20
|
%
|
|
|
80
|
%
|