Tandy Brands
Accessories Industries, Inc.—2006 Performance Unit Award
Agreement
This award
agreement (“Award Agreement”) outlines and describes
the Performance Unit Program (“Program”) which is
governed by the Tandy Brand Accessories, Inc. 2002 Omnibus
Incentive Plan (the “Plan”). This Award Agreement,
together with the Plan, govern the rights under the Program with
respect to the performance-based units (the “Performance
Unit”) Awards granted under this Award Agreement, and set
forth all of the conditions and limitations affecting such rights.
Terms used in this Award Agreement that are defined in the Plan
shall have the meanings ascribed to them in the Plan. If there is
any inconsistency between the terms of this Award Agreement and the
terms of the Plan, the Plan’s terms shall supersede and
replace the conflicting terms of this Award Agreement. For purposes
of this Award Agreement, “Tandy Brands” means the
Company, its affiliates, and/or its subsidiaries.
Overview of
Awards and Program Provisions
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1.
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Performance Units
Granted:
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2.
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Date of Grant:
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3.
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Performance Cycle.
The Performance Cycle
commences on
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4.
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Performance Unit
. Each Performance Unit
shall be payable in shares of Common Stock of the Company. On any
day, the value of a Performance Unit shall equal the Fair Market
Value of the shares of Common Stock of the Company underlying the
Performance Unit. As of the date of grant, the Award Value of the
Performance Units is zero.
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5.
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Performance Measure — Return
on Non-Cash Assets. Return on Non-Cash Assets, or
“RONCA,” shall be determined by dividing Net Income
After Taxes by Non-Cash Assets. “Net Income After
Taxes” shall equal the average of the net income after taxes
for each twelve-month period, which shall begin each
and end on the following
, in the Performance Cycle. “Non-Cash Assets” shall
mean the average of the Total Assets minus Cash, Goodwill,
Intangibles and Related Amortization, for each twelve-month period,
as described above, during the Performance Cycle. All amounts
necessary to calculate RONCA shall be determined in accordance with
Generally Accepted Accounting Principles and, to the extent
possible, based on disclosures in Tandy Brands’ Financial
Statements, and shall be adjusted to exclude, as applicable, the
following possible actions or effects: (i) the cumulative
effect of a change in accounting principle(s) during the relevant
periods; (ii) the cumulative effect of a change in tax law(s)
during the relevant periods; (iii) extraordinary items; and
(iv) realized capital gains or losses.
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6.
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Amount of Performance Unit Award
Earned: If
not previously forfeited, on ___, a participating executive shall
vest in and have a non-forfeitable right to that percentage of the
Performance Units, as described above, corresponding to the RONCA
Target achieved, as set forth in the table below, rounded up to the
next whole share in each such case.
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Performance
Units
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RONCA Target
Achieved
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Which
Shall Vest
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150
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%
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125
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%
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100
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%
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75
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%
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50
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%
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0
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%
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The percentage
of the Performance Units which shall vest if Tandy Brands achieves
a (i) RONCA of more than ___% but less than ___%,
(ii) RONCA of more than ___% but less than ___%,
(iii) RONCA of more than ___% but less than ___%, or
(iv) RONCA of more than ___% but less than ___% shall be
determined by the Committee using a straight line connecting ___%
and ___%, another straight line connecting ___% and ___%, another
straight line connecting ___% and ___%, and another straight line
connecting ___% and ___%, so that the Performance Units which will
vest is interpolated to the actual RONCA achieved.
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7.
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Settlement of Award:
Tandy Brands shall issue
to the executive the shares of Common Stock underlying the
Performance Units which vest pursuant to Section 6 of this
Award Agreement, subject to adjustment in accordance with
Section 14 of this Award Agreement, as provided in
Section 9 of this Award Agreement. Evidence of the issuance of
the shares of Common Stock pursuant to this Award Agreement may be
accomplished in such manner as the Company or its authorized
representatives shall deem appropriate including, without
limitation, electronic registration, book-entry registration or
issuance of a certificate or certificates in the name of Employee
or in the name of such other party or parties as the Company and
its authorized representatives shall deem appropriate.
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In
the event the shares of Common Stock issued pursuant to this Award
Agreement remain subject to any additional restrictions, the
Company and its authorized representatives shall ensure that the
executive is prohibited from entering into any transaction, which
would violate any such restrictions, until such restrictions
lapse.
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8.
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Eligibility for Earned Performance
Units: A
Tandy Brands executive will vest in Performance Units pursuant to
Section 6 of this Award Agreement only if:
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(a)
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The
executive was nominated and approved as a participant for the
Performance Cycle; and
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(A) continues to
be employed by Tandy Brands through the end of the Performance
Cycle;
(B) experiences a
Termination of Service during the Performance Cycle due to death,
Total and Permanent Disability or Retirement (for the purposes of
this Agreement, “Retirement” shall mean any Termination
of Service solely due to retirement upon attainment of age 65, or
permitted Early Retirement as determined by the Committee. Early
Retirement shall mean a person’s Termination of Service with
the Company: (i) after attainment of age 55, but before attainment
of age 65; and (ii) after completion of 15 years of
service); or
(C) experiences a
Termination of Service by the Company without Cause or by the
executive for Good Reason (for the purposes of this Agreement, Good
Reason shall mean, Good Reason (i) as that term may be defined
in any written employment agreement between an executive and Tandy
Brands which may at any time be in effect, or (ii) in the
absence of such a definition in a then-effective written employment
agreement (in the determination of the Committee), any material
breach of this Award Agreement by the Company or any successor
thereto. For the purposes of this Agreement, Cause shall mean
(i) cause as that term may be defined in any written
employment agreement between a participant and the company or a
subsidiary which may at any time be in effect, (ii) in the
absence of such a definition in a then-effective written employment
agreement (in the determination of the Committee), that the
executive committed: (X) an intentional act of fraud,
embezzlement or theft in connection with the executive’s
duties or in the course of their employment with the Company;
(Y) intentional wrongful damage to property of the Company; or
(Z) intentional wrongful disclosure of confidential information of
the Company. For purposes of this Agreement, no act, or failure to
act, on their part shall be deemed “intentional” if it
was due primarily to an error in judgment, but shall be deemed
“intentional” only if done, or omitted to be done, by
the executive not in good faith and without reasonable belief that
the executive’s action or omission was in the best interest
of the Company. Notwithstanding the foregoing, the executive shall
not be deemed to have been terminated for “Cause”
hereunder unless and until there shall have been delivered to the
executive a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters (3/4) of the Board then in
office at a meeting of the Board called; or
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(ii) There is a Change of Control of the Company during the
Performance Cycle.
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If an executive
experiences a Termination of Service due to death, Total and
Permanent Disability, Retirement or Early Retirement during the
Performance Cycle, the executive shall be eligible to vest in a
fraction of the number of Performance Units in which he/she may
have otherwise vested under Section 6 of this Award Agreement
for the Performance Cycle had he/she remained employed until the
end of the Performance Cycle. The fraction of the number of
Performance Units in which the executive will vest in connection
with the executive’s Termination of Service due to death,
Total and Permanent Disability, Retirement or Early Retirement will
be determined using a numerator which equals the number of complete
calendar months that have elapsed since the beginning of the
Performance Cycle through the month of the executive’s
Termination of Service, as determined below, and a denominator
which is equal to
the number of
months in the Performance Cycle. The month of the executive’s
Termination of Service will be considered a complete month for
purposes of inclusion in the numerator if the executive’s
Termination of Service a result of the executive’s death,
Total and Permanent Disability or Retirement or Early Retirement
occurs on or after the 15th day of such month. If the
executive’s Termination of Service as a result of the
executive’s death, Total and Permanent Disability or
Retirement or Early Retirement occurs before the 15th day of such
month, the month in which the executive’s Termination of
Service occurs will not be considered a complete month for purposes
of the numerator. In the event such pro-ration results in the
executive vesting in a fractional number of Performance Units, the
number of Performance Units in which the executive will vest will
be rounded up to the nearest whole number. Except as
otherwise
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