Tandy Brands Accessories, Inc.—2006
Performance Unit Award Agreement
This award
agreement (“Award Agreement”) sets forth the terms and
conditions of the 2006 Performance Unit Program (the
“Program”) which is governed by the Tandy Brands
Accessories, Inc. 2002 Omnibus 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: [number of units] granted to [name
of participant] (the “Participant”)
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2.
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Date of Grant:
November 1,
2006
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3.
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Performance Cycle.
The Performance Cycle
commences on July 1, 2006, and ends on June 30,
2009.
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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 or net loss
after taxes for each twelve-month period (or relevant portion
thereof), which shall begin each July 1 and end on the following
June 30, in the Performance Cycle. “Non-Cash
Assets” shall mean the average of the total assets minus cash
and cash equivalents, goodwill and related amortization, and
intangibles and related amortization measured as of (i) the
last business day preceding the date the Performance Cycle
commences, and (ii) as of the last business day of each
twelve-month (or relevant portion) period of the Performance Cycle.
“Intangibles” are those assets for which the accounting
is specified by Statement of Financial Accounting Standards
No. 142, “Goodwill and Other Intangible Assets.”
All amounts necessary to calculate RONCA shall be determined in
accordance with generally accepted accounting principles in the
United States and, to the extent possible, based on disclosures in
the Company’s consolidated financial statements.
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With respect to the calculation of
Net Income, the Company’s consolidated financial statements
shall be adjusted to exclude, as applicable, the following possible
actions or effects: (i) the cumulative effect(s) of changes in
accounting principles during the relevant periods; (ii)
extraordinary items; and (iii) realized capital gains or
losses. With respect to the calculation of Non-Cash Assets, the
Committee shall determine if the Company’s consolidated
financial statements shall be adjusted for the possible actions or
effects enumerated in the preceding sentence and, if they are to be
adjusted, the manner in which the adjustment is to be
calculated.
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6.
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Amount of Performance Unit Award
Earned: If
not previously forfeited, on June 30, 2009, the Participant
shall vest in and have a nonforfeitable 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
Which Shall Vest
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150%
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125%
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100%
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75%
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50%
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0%
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The
percentage of the Performance Units which shall vest if the Company
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:
The Company shall issue
to the Participant 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 the
Participant 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
Participant 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
Participant 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
Participant was nominated and approved as a participant for the
Performance Cycle; and
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(b)
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(i) The Participant:
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(A) continues to be employed by the Company
or a subsidiary through the end of the Performance Cycle;
or
(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 Participant 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 the Participant and the Company or a
subsidiary 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 the 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
Participant committed: (X) an intentional act of fraud,
embezzlement or theft in connection with the Participant’s
duties or in the course of their employment with the Company or a
subsidiary; (Y) intentional wrongful damage to property of the
Company; or (Z) intentional wrongful disclosure of
confidential information of the Company or a subsidiary. 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 Participant not in good faith and without reasonable belief
that the Participant’s action or omission was in the best
interest of the Company. Notwithstanding the foregoing, the
Participant shall not be deemed to have been terminated for
“Cause” hereunder unless and until there shall have
been delivered to the Participant 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
the Participant experiences a Termination of Service due to death,
Total and Permanent Disability, Retirement or Early Retirement
during the Performance Cycle, the Participant shall be eligible to
vest in a fraction of the number of Performance Units in which
he/she may have
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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 Participant will vest in connection with the
Participant’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 Participant’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 Participant’s Termination of Service will be
considered a complete month for purposes of inclusion in the
numerator if the Participant’s Termination of Service as a
result of the Participant’s death, Total and Permanent
Disability or Retirement or Early Retirement occurs on or after the
15th day of such month. If the Participant’s Termination of
Service as a result of the Participant’s death,
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