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THE GYMBOREE CORPORATION
MANAGEMENT CHANGE OF CONTROL PLAN
Amended and Restated
Effective April 1, 2008
ARTICLE I
PURPOSE, ESTABLISHMENT AND APPLICABILITY OF
PLAN
1.
Purposes .
It is expected that the Company from time to time will consider the
possibility of a Change of Control. The Board recognizes that such
consideration can be a distraction to key Employees and can cause
such Employees to consider alternative employment opportunities.
The Board has determined that it is in the best interests of the
Company and its stockholders to assure that the Company will have
the continuous dedication and objectivity of these Employees,
notwithstanding the possibility, threat or occurrence of a Change
of Control. The Board believes that it is in the best interests of
the Company and its stockholders to provide these Employees with
certain severance benefits upon termination of employment following
a Change of Control. Such benefits provide these Employees an
incentive to remain with the Company, notwithstanding the
possibility or occurrence of a Change of Control, and to maximize
the value of the Company upon a Change of Control for the benefit
of its stockholders.
2.
Establishment of Plan .
As of the Effective Date, the Company hereby establishes the Plan,
as set forth in this document.
3.
Applicability of Plan .
Subject to the terms of this Plan, the benefits provided by this
Plan shall be available to those Employees who, on or after the
Effective Date, receive a Notice of Participation.
4.
Contractual Right to Benefits .
This Plan and the Notice of Participation establish and vest in
each Participant a contractual right to the benefits to which he or
she is entitled pursuant to the terms and conditions thereof,
enforceable by the Participant against the Company.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
Whenever
used in this Plan, the following terms shall have the meanings
set forth below.
1.
Annual Compensation .
“Annual Compensation” shall mean an amount equal to the
sum of (i) the Participant’s gross annual base salary,
exclusive of bonuses, other incentive pay, commissions and all
other pay or expense types, as in effect immediately preceding the
Change of Control, and (ii) the Participant’s Average Annual
Bonus.
2.
Average Annual Bonus .
“Average Annual Bonus" shall mean the average bonus payments
received by the Participant under the Company’s incentive
cash bonus and variable cash compensation programs as in effect on
the date of a Change of Control (or any predecessor or successor
programs) for the three most recent consecutive and complete fiscal
years of the Company prior to the fiscal year in which the Change
of Control occurs. For purposes of calculating a
Participant’s Average Annual Bonus, the following rules shall
apply:
(i)
In
the event a Participant was not eligible to participate in
such bonus and variable compensation programs for the entire
three year period, the Average Annual Bonus shall be
calculated based upon the Participant’s actual period of
eligibility; and
(ii)
In
the event a Participant first became eligible to participate
in such bonus and variable compensation programs in the fiscal
year in which the Change of Control occurs, the
Participant’s Average Annual Bonus shall be based on his
or her targeted bonus and variable compensation amounts as in
effect immediately prior to such Change of
Control.
3.
Board .
“Board” shall mean the Board of Directors of the
Company.
4.
Cause .
“Cause” shall mean (i) any act of personal dishonesty
taken by the Participant in connection with his or her
responsibilities as an Employee and intended to result in
substantial personal enrichment of the Participant, (ii) the
Participant’s conviction of a felony that is injurious to the
Company, (iii) a willful act by the Participant which constitutes
gross misconduct and which is injurious to the Company, (iv)
continued substantial violations by the Participant of the
Participant’s employment duties which are demonstrably
willful and deliberate on the Participant’s part after there
has been delivered to the Participant a written demand for
performance from the Company which specifically sets forth the
factual basis for the Company’s belief that the Participant
has not substantially performed his duties or (v) any act that
would constitute a material violation of the standards set forth in
this Plan, including, without limitation, the standards of Article
VI.
5.
Change of Control .
“Change of Control” shall mean the occurrence of any of
the following events.
(i)
Any
“person” (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended)
becomes the “beneficial owner” (as defined in Rule
13d-3 under said Act), directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the
total voting power represented by the Company’s then
outstanding voting securities; or
(ii)
A
change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of
the directors are Incumbent Directors. “Incumbent
Directors” shall mean directors who either (A) are
directors of the Company as of the date hereof, or (B) are
elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but
shall not include an individual whose election or nomination
is in connection with an actual or threatened proxy contest
relating to the election of directors to the Company);
or
(iii)
The
consummation of a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than fifty
percent (50%) of the total voting power represented by the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
or
(iv)
The
consummation of the sale or disposition by the Company of all
or substantially all of the Company’s
assets.
6.
COBRA Premiums Continuation Period .
“COBRA Premiums
Continuation Period”
shall mean the period set forth in a Participant’s Notice of
Participation, which period immediately follows the Participant's
Involuntary Termination.
7.
Code .
“Code” shall mean the Internal Revenue Code of 1986, as
amended.
8.
Company .
“Company” shall mean The Gymboree Corporation, any
subsidiary corporations, any successor entities as provided in
Article VIII hereof, and any parent or subsidiaries of such
successor entities.
9.
Company-Paid Coverage .
“Company-Paid Coverage” shall mean the benefits
coverage described in Article IV hereof.
10.
Disability .
“Disability” shall mean that the Participant has been
unable to perform his or her duties as an Employee as the result of
incapacity due to physical or mental illness, and the Participant
is found to be disabled within the meaning of the Company’s
long-term disability plan.
11.
Effective Date .
“Effective Date” for purposes of this most recent
amendment and restatement of this Plan shall mean April 1,
2008.
12.
Employee .
“Employee” shall mean an employee of the
Company.
13.
ERISA .
“ERISA” shall mean the Employee Retirement Income
Security Act of 1974, as amended.
14.
"
Good Reason "
means any of the following which occur without the
Participant’s express written consent: (i) the material
reduction of the Participant’s authority, duties or
responsibilities relative to the Participant’s authority,
duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a significant reduction in
authority, duties or responsibilities solely by virtue of the
Company being acquired and made part of a larger entity (as
example, when the Chief Financial Officer of The Gymboree
Corporation remains as such following a Change of Control and is
not made the Chief Financial Officer of the acquiring corporation)
shall not constitute Good Reason, (ii) a material reduction by the
Company in the annual base salary relative to the annual base
salary in effect immediately prior to such reduction; or (iii) a
material change in Participant's geographic work location from the
location of Participant’s then current position.
15.
Involuntary Termination .
“Involuntary Termination” shall mean (i) a termination
of a Participant's employment by the Company other than for Cause,
(ii) a termination of a Participant's employment by the Participant
for Good Reason.
16.
Notice of Participation .
“Notice of Participation” shall mean an individualized
written notice of participation in this Plan from an authorized
officer of the Company.
17.
Participant .
“Participant” shall mean an individual who meets the
eligibility requirements of Article III.
18.
Plan .
“Plan” shall mean this The Gymboree Corporation
Management Change of Control Plan.
19.
Plan Administrator .
“Plan Administrator” shall mean the Board of Directors
of the Company, or its committee or designee, as shall be
responsible for administering this Plan.
20.
Pro-Rated Bonus Amount .
“Pro-Rated Bonus Amount” shall mean a pro-rated portion
of the Participant’s quarterly and annual bonus and variable
compensation calculated as of the Change of Control date, as
follows:
(i)
In
the case of quarterly bonus or variable compensation paid or
payable to the Participant with respect to the fiscal quarter
of the Company completed immediately prior to the fiscal
quarter in which the Change of Control occurs, pro-rated by
multiplying such amount by a fraction, the numerator of which
is the number of days during the fiscal quarter in which the
Change of Control occurs prior to the occurrence of the Change
of Control, and the denominator of which shall be ninety-one
and one quarter; and
(ii)
In
the case of annual bonus or variable compensation, the portion
shall be the amount of annual bonus or variable compensation
payable to the Participant under the Company’s annual
bonus or variable compensation program in effect as of the
Change of Control date, based on year-to-date financial
performance of the Company for the period ended immediately
prior to the Change of Control. For this purpose, the
performance measures for such fiscal year shall be adjusted,
as appropriate, to take into account the shortened performance
period. The amount so determined shall be pro-rated by
multiplying such amount by a fraction, the numerator of which
is the number of days during such fiscal year prior to the
occurrence of the Change of Control, and the denominator of
which shall be three hundred and sixty-five.
21.
Severance Payment .
“Severance Payment” shall mean the payment of severance
compensation as provided in Article IV hereof.
22.
Severance Payment Percentage .
“Severance Payment Percentage’ shall mean for each
Participant, the Severance Payment Percentage set forth in such
Participant’s Notice of Participation.
ARTICLE III
ELIGIBILITY
1.
Waiver . As a condition of receiving benefits under this
Plan, an Employee must sign a general waiver and release on a form
provided by the Company.
2.
Participation in Plan .
Each Employee who is designated by the Board and who signs and
returns to the Company a Notice of Participation within the time
set forth in such Notice shall be a Participant in this Plan. A
Participant shall cease to be a Participant in this Plan (i) upon
ceasing to be an Employee, or (ii) upon receiving written notice
from this Plan Administrator prior to a Change of Control that the
Participant is no longer eligible to participate in this Plan,
unless in either case such Participant is then entitled to benefits
hereunder. A Participant entitled to benefits hereunder shall
remain a Participant in this Plan until the full amount of the
benefits has been delivered to the Participant.
ARTICLE IV
SEVERANCE BENEFITS
1.
Termination Following A Change of Control .
If a Participant’s employment terminated during the period
following a Change of Control that is equal to the same number of
months as set forth in the Participant's COBRA Premiums
Continuation Period, then, subject to Articles V and VI hereof, the
Participant shall be entitled to receive severance benefits as
follows:
(a)
Severance Pay Upon an Involuntary Termination
.
If the Participant’s employment with the Company terminates
as a result of Involuntary Termination, the Participant shall be
entitled to receive a Severance Payment equal to the sum of (i) the
product obtained by multiplying the Participant’s Severance
Payment Percentage times the Participant’s Annual
Compensation, plus (ii) the Participant’s Pro-Rated Bonus
Amount. Any such Severance Payment shall be paid in cash by the
Company to the Participant in a single lump sum payment, less
applicable tax withholding, within ten (10) business days of the
Participant’s termination date, and shall be in lieu of any
other severance or severance-type benefits to which the Participant
may be entitled under any other Company-sponsored plan, practice or
arrangement or agreement between the Company and the
Participant.
EXAMPLE
: A
Change of Control is consummated on June 15, 2008. Participant is
Involuntarily Terminated as of July 1, 2008. Participant’s
Annual Compensation is $150,000. The Severance Payment Percentage
set forth in the Participant’s Notice of Participation is
100%. The Participant’s Pro-Rated Bonus Amount for the 2008
fiscal year is $10,000. The Participant is entitled to a Severance
Payment equal to (i) 100% x $150,000, plus (ii) 10,000, for a total
Severance Payment equal to $160,000.
(b)
Employee Benefits Upon an Involuntary Termination
.
The Company shall continue to provide the Participant with medical,
dental, vision, disability and life insurance coverage to the
extent provided in the respective governing documents for each such
employee benefit, including but not limited to continuation
coverage pursuant to Title X of the Consolidated Budget
Reconciliation Act of 1985 (“COBRA”). To the extent the
Participant properly elects COBRA continuation coverage, the
Company shall reimburse the Participant for the full cost of the
premiums due for such coverage for a period that ends on the
earliest to occur of (i) expiration or early termination of COBRA
continuation coverage in accordance with the requirements of COBRA,
and (ii) the Participant's COBRA Premiums Continuation Period. In
the event the Company’s payment obligations end based on
clause (ii) of the foregoing sentence, the Participant shall be
responsible for properly paying the full cost of the premiums due
for any future COBRA continuation coverage to which he or she is
then entitled.
2.
Voluntary Resignation: Termination For Cause
. If the Participant’s employment terminates by reason of the
Participant’s vol
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