EXHIBIT 10.74
RUSS BERRIE AND COMPANY,
INC.
CHANGE IN CONTROL SEVERANCE
PLAN
The purpose of this Change in
Control Severance Plan (the “Plan”) is to enable Russ
Berrie and Company, Inc., a New Jersey corporation (the
“Company”), to offer a form of income protection to
“Participants” (as defined in Section 7.5 below) in the
event their employment with the Company terminates under certain
circumstances due to a “Change in Control” (as defined
in Section 7.2 below).
ARTICLE I:
BENEFITS
1.1
Eligibility for Benefits;
Benefits; Payment; and Rights of Participants
.
(a)
If a Participant’s employment
with the Company is terminated by the Company without
“Cause” (as defined in Section 7.1 below) or by the
Participant for “Good Reason” (as defined in Section
7.4 below) (each, a “Qualifying Termination”) during
the period commencing six months prior to and ending two years
after a Change in Control, such Participant shall be paid the
applicable “Severance Benefit” (as defined below) and
shall receive the additional benefits described in this Article I.
The term “Severance Benefit” shall mean:
(i)
if the Qualifying Termination occurs
during the six-month period preceding or the one-year period
following the Change in Control, an amount equal to 150% of the
Participant’s “Current Total Annual Compensation”
(as defined in Section 7.3 below); and
(ii)
if the Qualifying Termination occurs
during the second year after the Change in Control, an amount equal
to 75% of the Participant’s Current Total Annual
Compensation.
(b)
Any Participant entitled to a
Severance Benefit (in accordance with Section 1.1(a) above) shall
receive his Severance Benefit in the form of a lump-sum payment
within 30 business days after his employment with the Company
terminates or the Change in Control occurs, whichever is later, or
at such earlier time as required by applicable law.
1.2
Additional Benefits
. A Participant entitled to receive
a Severance Benefit shall also receive the following additional
benefits:
(a)
The Company shall cause options to
purchase Company stock (“Stock Options”) held by a
Participant that are not fully vested and exercisable on the date
of the Qualifying Termination to:
(i)
if the Qualifying Termination occurs
during the six months preceding or the first year following the
Change in Control, become
fully vested and exercisable as of
the date of such Qualifying Termination (or, if later, as of the
date on which the Change in Control occurred); and
(ii)
if the Qualifying Termination occurs
during the second year following the Change in Control, become
fully vested and exercisable as of the date of such Qualifying
Termination as to those Stock Options that would otherwise have
vested within one year after the Qualifying Termination.
(b)
The Company shall cause unvested
restricted shares of Company stock (the “Restricted
Shares”) held by a Participant on the date of the Qualifying
Termination to:
(i)
if the Qualifying Termination occurs
during the six months preceding or the first year following the
Change in Control, become fully vested as of the date of such
Qualifying Termination (or, if later, as of the date on which the
Change in Control occurred) as to those Restricted Shares for which
the vesting restrictions would otherwise have lapsed within one
year after the Qualifying Termination; and
(ii)
if the Qualifying Termination occurs
during the second year after the Change in Control, become fully
vested as of the date of such Qualifying Termination as to those
Restricted Shares for which the vesting restrictions otherwise
would have lapsed within six months after the Qualifying
Termination.
(c)
The Company shall for a period of 18
months (in the case of a Qualifying Termination to which Section
1.1(a)(i) applies) or one year (in the case of a Qualifying
Termination to which Section 1.1(a)(ii) applies) following the
Qualifying Termination continue to provide to the Participant (i)
use of an automobile or payment of an automobile allowance in an
amount sufficient to compensate the Participant to substantially
the same extent as if the Company continued to provide the
automobile and (ii) medical and other insurance benefits, in each
case to the extent and on substantially the same basis as provided
immediately prior to the Qualifying Termination (disregarding any
reduction described in clause (B) of the definition of Good
Reason).
1.3
Reduction of Payments
. If a Participant’s receipt
of any payment and/or non-monetary benefit under this Plan
(including, without limitation, the accelerated vesting of Stock
Options and/or Restricted Shares) (collectively, the “Plan
Payments”) would cause him or her to become subject to the
excise tax imposed under Section 4999 of the Internal Revenue Code
of 1986, as amended (the “Code”), the Company shall
reduce his or her Plan Payments to the extent necessary to avoid
the application of such excise tax if (i) the required reduction
does not exceed 10% of the aggregate amount of the Plan Payments
and (ii) as a result of such reduction, the net benefits to the
Participant of the Plan Payments as so reduced (after payment of
applicable
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income taxes) exceeds the net
benefit to the Participant of the Plan Payments without such
reduction (after payment of applicable income taxes and excise
taxes). If a reduction in Plan Payments to a Participant in the
amount permitted by clause (i) is insufficient to avoid the
application of such excise tax, then the provisions of
“Exhibit A,” attached hereto and incorporated herein,
shall apply to that Participant.
1.4
Rights of Participants
. Nothing contained herein shall be
held or construed to create any liability or obligation on the
Company to retain any Participant in its service or in a corporate
officer position. All Participants shall remain subject to
discharge or discipline to the same extent as if the Plan did not
exist.
ARTICLE II:
FUNDING
2.1
Funding . The Plan shall be funded out of the general
assets of the Company as and when benefits are payable under the
Plan. All Participants shall be solely general creditors of the
Company.
ARTICLE III: ADMINISTRATION OF
THE PLAN
3.1
Plan Administrator
. The general administration of the
Plan shall be placed with the Compensation Committee of the Board
of Directors of the Company (the “Board”) or an
administrative committee appointed by the Board (the
“Committee”).
3.2
Reimbursement of Expenses of
Committee . The Company
shall pay or reimburse the members of the Committee for all
reasonable expenses incurred in connection with their duties
hereunder.
3.3
Action by the Plan
Committee . Decisions of
the Committee shall be made by a majority of its members attending
a meeting at which a quorum is present (which meeting may be held
telephonically), or by written action in accordance with applicable
law. No member of the Committee may act with respect to a matter
which involves only that member.
3.4
Delegation of
Authority . The Committee
may delegate any and all of its powers and responsibilities
hereunder to other persons by formal resolution filed with and
accepted by the Board. Any such delegation shall not be effective
until it is accepted by the Board and the persons designated and
may be rescinded at any time by written notice from the Committee
to the person to whom the delegation is made.
3.5
Retention of Professional
Assistance . The
Committee may employ such legal counsel, accountants and other
persons as may be required in carrying out its work in connection
with the Plan, and the Company shall pay the fees and expenses of
such persons.
3.6
Accounts and Records
. The Committee shall maintain such
accounts and records regarding the fiscal and other transactions of
the Plan, and such other data as may be required to carry out its
functions under the Plan and to comply with all applicable
laws.
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3.7
Compliance with Applicable
Law . The Company shall
be deemed the administrator of the Plan for the purposes of any
applicable law and shall be responsible for the preparation and
filing of any required returns, reports, statements or other
filings with appropriate governmental agencies. The Company shall
also be responsible for the preparation and delivery of information
to persons entitled to such information under any applicable
law.
3.8
Reimbursement of
Expenses . If any contest
or dispute shall arise under this Plan involving termination of a
Participant’s employment with the Company or involving the
failure or refusal of the Company to perform fully in accordance
with the terms hereof and the Participant prevails on the merits in
such contest or dispute, the Company shall, promptly after the date
a court issues a final order from which no appeal can be taken, or
with respect to which the time period to appeal has expired,
reimburse such Participant for all reasonable legal fees and
expenses, if any, paid by the Participant in connection with such
contest or dispute (together with interest in an amount equal to
the J.P. Morgan Chase Bank prime rate from time to time in effect,
such interest to begin to accrue on the dates Participant actually
paid such fees and expenses through the date of payment
thereof).
ARTICLE IV:
AMENDMENT
4.1
Amendment . The Company reserves the right to amend, in
whole or in part, any or all of the provisions of this Plan by
action of the Board at any time; provided, that, no such
amendment may reduce the benefits and payments due to any
Participant hereunder in the event of a Qualifying
Termination.
ARTICLE V:
SUCCESSORS
5.1
Successors
. The Company shall require any
successor or assignee, whether direct or indirect, by purchase or
otherwise (and whether or not by operation of law), to all or
substantially all the business or assets of the Company, expressly
and unconditionally to assume and agree to perform the
Company’s obligations under this Plan, in the same manner and
to the same extent that the Company would be required to perform if
no such succession or assignment had taken place, provided,
that, no such assumption and agreement shall be required from a
successor or assignee that becomes obligated for the
Company’s obligations hereunder through a merger,
consolidation or otherwise by operation of law. In such event, the
term “Company,” as used in this Plan, shall mean the
Company, as applicable, as hereinbefore defined and any successor
or assignee to the business or assets which by reason hereof
becomes bound by the terms and provisions of this Plan. Any payment
or benefit to which a Participant has become entitled under this
Plan which remains unpaid at the time of such Participant’s
death shall be paid to the estate of such Participant when it
becomes due.
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ARTICLE VI:
MISCELLANEOUS
6.1
No Duty to
Mitigate/Set-off . No
Participant entitled to receive a Severance Benefit shall be
required to seek other employment or to attempt in any way to
reduce any amounts payable to him pursuant to this Plan. The
Severance Benefit payable hereunder shall not be reduced by any
compensation earned by the Participant as a result of employment by
another employer or otherwise. Subject to Section 6.5, the
Company’s obligations to pay the Severance Benefits and to
perform its obligations hereunder shall not be affected by any
circumstances including without limitation, any set off,
counterclaim, recoupment, defense or other right which the Company
may have against the Participant.
6.2
Headings . The headings of the Plan are inserted for
convenience of reference only and shall have no effect upon the
meaning of the provisions hereof.
6.3
Use of Words
. Whenever used in this instrument,
a masculine pronoun shall be deemed to include the masculine and
feminine gender, and a singular word shall be deemed to include the
singular or plural, in all cases where the context so
requires.
6.4
Controlling Law
. The construction and
administration of the Plan shall be governed by the laws of the
State of New York (without reference to rules relating to conflicts
of law).
6.5
Withholding
. The Company shall have the right
to make such provisions as it deems necessary or appropriate to
satisfy any obligations it reasonably believes it may have to
withhold federal, state or local income or other taxes incurred by
reason of payments pursuant to this Plan.
6.6
Severability
. Should any provision of the Plan
be deemed or held to be unlawfu
