Change in Control Agreement

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of May 15, 2006, by and between ENESCO GROUP, INC. (the “Company”), and BASIL ELLIOTT (“Executive”).

RECITALS

WHEREAS, the Company is engaged in a business which, among other things, produces fine gifts, collectibles, and home decor accessories; and

WHEREAS, the parties acknowledge that the Executive’s abilities and services are unique and essential to the prospects of the Company; and

WHEREAS, the Company desires to employ the Executive as President and Chief Executive Officer of the Company, and the Executive desires to be so employed, pursuant to the terms and conditions of this Agreement.

NOW THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the parties hereto acknowledge and agree as follows:

PART ONE

NATURE AND TERM OF EMPLOYMENT

1.01 Employment. The Company hereby agrees to employ the Executive, and the Executive hereby accepts such employment, as the President and Chief Executive Officer of the Company.

1.02 Term. Unless earlier terminated or unless extended pursuant to the provisions hereof, the term of this Agreement shall begin as of May 15, 2006 (the “Start Date”) and shall continue through December 31, 2007. The term of this Agreement may be extended for additional one (1) year periods by further written agreement of the parties. The period during which this Agreement remains in effect is hereinafter referred to as the “Term”.

1.03 Duties and Authority. The duties and authority of the Executive shall be as determined by the Board of Directors of the Company (the “Board”) and shall be comparable to the executive duties and authority of presidents and chief executive officers of similar businesses of similar size in the United States. Executive will devote substantially all of his business time to the Company. Executive may participate in civic, charitable or industry organizations, may fulfill speaking engagements, and may manage Executive’s personal investments, provided that such activities do not materially interfere with his duties to the Company, and provided further that service on boards of organizations other than the Company shall be limited to organizations that do not compete with the Company and shall be limited to two for-profit companies and two not-for-profit organizations.

1.04 Place of Performance. Except as otherwise agreed by Executive and the Company, Executive shall be located at, and shall perform his duties from, the Company’s Chicago, Illinois area corporate offices or from the Company’s facilities in Mississauga, Canada, subject to reasonable travel necessary to perform Executive’s duties.

PART TWO

COMPENSATION AND BENEFITS

2.01 Base Annual Salary. For the services rendered by Executive while employed by the Company, the Company shall pay the Executive at an initial annual base salary rate of $400,000 (USD) (as the same may be increased from time to time, the “Base Annual Salary”). At least annually, beginning in 2008, Executive’s Base Annual Salary shall be reviewed and shall be subject to increase by the Board of Directors in its discretion at the time executive officer compensation is reviewed, normally March of each year. Any increase shall be paid retroactively to January of such year. The Base Annual Salary shall be payable to Executive in substantially equal installments in accordance with the Company’s regular payroll practices, but shall be paid to Executive in Canadian dollars, with the currency exchange rate being adjusted at the end of each fiscal quarter of the Company and remaining in effect for the subsequent fiscal quarter.

2.02 Bonuses.

(a) Executive shall be entitled to receive an annual cash bonus for the achievement of performance goals previously approved by the Board of Directors. Such performance goals will be mutually developed in advance by the Board and Executive. The target bonus opportunity payable to Executive in the event of achievement of the applicable performance goals (the “Target Bonus”) shall be the greater of 60% of Base Annual Salary or the percentage of Base Annual Salary established for Executive for the particular year under the Company’s Management Incentive Program (or any successor plan, program or policy howsoever named); provided, however, that Executive’s Target Bonus for 2006 shall be 100% of the base salary earned by Executive from the Start Date through December 31, 2006. Payment of any such bonus to Executive will occur when bonuses are normally paid by the Company.

(b) For 2006, Executive shall also continue to participate in the N.C. Cameron Management Incentive Plan, with a bonus potential of 50% of Executive’s 2006 Canadian base earnings rate for his ongoing responsibilities associated with N.C. Cameron.

(c) Executive shall also be eligible for the following special performance bonuses:

(i) Amount equal to 25% of Base Annual Salary if short-term financing for the Company, reasonably satisfactory to the Board, is in place by August 1, 2006, to be paid by August 31, 2006;

(ii) Amount equal to 25% of Base Annual Salary if long-term financing for the Company, reasonably satisfactory to the Board, is in place by November 15, 2006, to be paid by December 15, 2006;

(iii) Amount equal to 25% of Base Annual Salary if the Company achieves its quarterly performance targets under the new financing arrangements through December 31, 2006, to be paid within ten (10) days after the auditors for the Company have confirmed achievement of the targets; and

(iv) Amount equal to 25% of Base Annual Salary if the Company achieves its performance targets for the first half of 2007, to be paid within ten (10) days after the auditors for the Company have confirmed achievement of the targets.

If a Change of Control of a type described in parts (a) or (b) of Section 2.03, below, occurs before the respective date(s) for completing the performance required to earn any one or more of the bonuses described in paragraphs (ii), (iii) or (iv), above, then Executive shall receive, in lieu of whichever of those bonuses Executive has not had a complete opportunity to earn, an amount equal to that bonus or those bonuses. (For example, if the December 31, 2006 targets are not met and a qualifying Change of Control occurs in March, 2007, the bonus payable under this paragraph will be an amount equal to 25% of Base Annual Salary.)

2.03 Change of Control. “Change of Control” shall mean any of the following, whether in a single transaction or a series of related transactions: (a) any sale or other disposition of the capital stock of the Company, or the merger or consolidation of the Company, resulting, directly or indirectly, in greater than fifty percent (50%) of the issued and outstanding capital stock of the Company (or of a successor by merger or consolidation) being owned, in the aggregate, by persons other than the persons who are shareholders of the Company as of the Start Date; or (b) the sale or other disposition of all or substantially all of the Company’s assets; or (c) a re-capitalization, leveraged re-capitalization, or any combination of a partial sale and redemption by the Company of the capital stock of the Company resulting, directly or indirectly, in greater than fifty percent (50%) of the issued and outstanding capital stock of the Company being owned, in the aggregate, by persons other than the person who are shareholders of the Company as of the Start Date; or (d) removal, prior to the end of their terms, of fifty percent (50%) or more of the directors on the Board of Directors as of the Start Date. For purposes of part (d), above, “removal” of a director shall mean involuntary termination of service as a result of action by the Board of Directors, the shareholders of the Company, or a court.

2.04 Equity Grants. Executive shall be granted 50,000 restricted shares vesting one-third on May 15, 2007, one-third on May 15, 2008 and one-third on May 15, 2009; provided, however, that any otherwise unvested portion of the shares shall vest immediately upon the occurrence of a Change of Control, as defined in Section 2.03, above. Each year, the Board shall consider the issuance of additional option and restricted share grants to Executive.

2.05 General Employee Benefits. Executive shall be entitled to begin immediate participation in Company’s current and future general benefits plans/programs/policies, including without limitation health insurance for Executive and Executive’s immediate family (to the extent necessary to supplement the health coverage under Section 2.06(f), below), to the extent maintained by the Company for salaried employees generally, provided that the Executive (or, as applicable, Executive’s immediate family member) is eligible for participation under the terms of such plans, programs and arrangements.

2.06 Other Executive Benefits. Executive also shall be entitled to:

(a) participation in all current and future executive benefits plans, programs, policies and perquisites on a basis no less favorable than any other senior executive of the Company;

(b) five (5) weeks paid vacation, subject to the normal policy of the Company regarding forfeiture of unused vacation; provided, however, that the Company will pay Executive (at his Base Annual Salary rate) for up to two (2) weeks of unused vacation per year;

(c) an automobile allowance of $2,100.00 (CAD) per month for Executive’s automobile in Canada;

(d) payment by the Company for legal fees reasonably incurred by Executive in having this Agreement reviewed and in obtaining any necessary authorization to work in the United States;

(e) all costs associated with an executive annual physical at a medical facility mutually agreed upon;

(f) health coverage for Executive and his immediate family in the Ontario Health Insurance Plan in connection with Executive’s continued relationship with N.C. Cameron;

(g) supplemental health and accident insurance, which is acceptable to Executive, for Executive and his immediate family during business and personal travel outside Canada; and

(h) tax preparation services (not from KPMG or any other current service provider to the Company) from a major recognized accounting firm selected by Executive.

2.07 Expenses. Executive shall be reimbursed for all reasonable out-of-pocket expenses incurred in the performance of his duties, consistent with the general policies of the Company, including but not limited to Blackberry, cell phone, and customer/business entertainment. In addition, during the Term, it is understood that the Executive will maintain his primary residence in Canada and commute to the Company’s headquarters. The Company will provide the following living expenses to facilitate those arrangements:

(a) The Company will make all necessary payments, including but not limited to rent, utilities, internet and telephone services, for the Executive’s Chicago area residence. The lease, or a like accommodation, will be renewed as necessary to accommodate the Executive’s commute from Canada, or the Company will provide an equivalent residence mutually agreeable to Executive and Company.

(b) The Company will make all payments on the Executive’s automobile, which is leased in Illinois, and on an automobile insurance policy covering the leased vehicle that is acceptable to Executive.

(c) The Company will pay for Executive’s travel expenses associated with his commute to/from Ontario, including but not limited to the following:

(i) Air travel between Toronto, Ontario and Chicago, Illinois; business travel on flight legs scheduled for more than three hours’ duration will be in the less expensive of business or first class; other flights will be in coach class;

(ii) The less expensive of (A) taxi or limousine service to/from airports or (B) reimbursement for parking at airports;

(iii) Air travel for Executive’s spouse and children between Toronto, Ontario and Chicago, Illinois one time per month and more often with approval from the Board of Directors; and

(iv) Other reasonable, out-of-pocket expenses to the extent such expenses are substantiated in writing.

(d) To the extent that expense payments under this Section 2.07 are taxable to Executive, the Company shall pay Executive for each year an additional amount to cover Executive’s taxes on such expenses and on any such tax gross-up payment.

PART THREE

NONCOMPETITION AND CONFIDENTIALITY

3.01 Noncompetition. In consideration of Executive’s employment hereunder, Executive hereby agrees that during the initial or any renewal term of the Agreement and for a period of one year thereafter, he will not, singly, jointly, or as a member, employee, or agent of any partnership or as an officer, agent, employee, director or stockholder, or inventor of any other corporation or entity, or in any other capacity, directly or indirectly:

(i) own, manage, operate, participate in, perform services for or otherwise carry on, assist or be connected with a Competing Business doing business anywhere within the respective territories in which the Company’s business is then carried on (provided that the foregoing shall not apply to any corporation, partnership or other entity in which Executive (and/or his spouse and/or children) only owns an ownership interest of one percent (1%) or less and exercises not more than one percent (1%) of the voting control);

(ii) solicit or contact (or assist in any solicitation or contact of) any customer of the Company with a view toward inducing the purchase of a Competing Product or otherwise diverting business from the Company;

(iii) induce or attempt to persuade any employee or agent of the Company to terminate such employment or agency relationship or violate the terms of any agreement with the Company; or

(iv) induce or attempt to persuade any customer or supplier of the Company to terminate or materially change such relationship.

For purposes of this Agreement:

Competing Products” means products, processes or services of any person or organization other than the Company, in existence or under development, which are substantially the same as or which perform the same function or otherwise compete with any products, processes, or services developed, manufactured or sold by the Company during the time of the Executive’s employment with the Company or about which Executive acquires Confidential Information through his relationship with the Company, including, but not limited to, the creation, manufacturing, marketing and distribution of giftware, collectibles and home decor product.

Competing Business” means any person or organization engaged in, or planning to become engaged in, research, development, production, distribution, marketing, providing or selling of a Competing Product.

3.02 Confidentiality. Executive acknowledges that preservation of a continuing business relationship between the Company and its subsidiaries and its respective customers, representatives and employees is of critical importance to the continued business success of the Company, that it is the policy of the Company and its subsidiaries to guard as confidential the Confidential Information defined below, and that as Chief Executive Officer Executive will acquire Confidential Information and personal relationships with customers and prospective customers, which relationships may constitute the Company’s primary relationships with such customers and prospective customers. In view of the foregoing, Executive agrees that, except as required in or the performance of his duties under this Agreement, he will not during the initial or any renewal term of the Agreement and thereafter, without the prior written consent of the Company, use for the benefit of himself or any third party or disclose to any third party any Confidential Information. Executive further agrees that if his employment by the Company is terminated for any reason, he will not take with his but will leave with the Company all records and papers and all matter of whatever nature which contains Confidential Information. For purposes of this Agreement, “Confidential Information” means any information, including any plan, drawing, specification, pattern, procedure, design, device, list or compilation, which relates to the present or planned business of the Company which has not been disclosed publicly by authorized representatives of the Company. Confidential Information may include, for example, inventions, marketing and sales plans or programs; customer and supplier information and lists; financial data; purchasing and pricing information; product engineering information; technological know-how; designs, plans or specifications regarding products and materials; manufacturing processes and techniques; regulatory approval strategies; computer programs, data, formulae and compositions; service techniques and protocols; and new product strategies, plans and designs. Confidential Information also includes all information received by Company under an obligation to a third party.

PART FOUR

TERMINATION

4.01 Death or Disability. Upon the death or Disability of the Executive this Agreement shall automatically terminate. For the purposes of this Agreement, “Disability” is defined as the inability of the Executive to perform his material duties for the eligibility waiting period under the terms of Company’s long-term disability insurance policy.

4.02 Termination by Company. Company may terminate this Agreement for “Cause” immediately upon written notice to the Executive. Company may terminate this Agreement without “Cause” with three (3) days written notice to Executive. For the purposes of this Agreement, “Cause” shall be deemed to exist if Executive: (i) is convicted of, or pleads guilty or no contest to, a felony; (ii) engages in conduct that constitutes fraud, gross negligence or gross misconduct that results in material harm to the Company; (iii) materially breaches the terms of this Agreement, which breach is not cured within thirty (30) days after written notice to Executive; (iv) engages in intentional and willful misconduct that could subject the Company to criminal or civil liability; (v) disregards Company policies and procedures in a material way. However, any termination of this Agreement by the Company within one (1) year after a Change of Control, as defined in Section 2.03, above, shall be treated as a termination without “Cause.”

4.03 Termination by Executive. Executive may terminate this Agreement by giving the Company sixty (60) days advance written notice. Executive may terminate this Agreement for “Good Reason” with 30 days written notice to the Company. For purposes of this Agreement, “Good Reason” shall be deemed to exist if the Company: (i) materially breaches the terms of this Agreement, which breach is not cured within thirty (30) days after written notice to the Company; (ii) without Executive’s consent, diminishes Executive’s title, reporting relationship, material duties or authority, assigns duties that are materially inconsistent with Executive’s duties as of the Start Date, requires that Executive relocate his principal residence, fails to retain Executive as a member of the Board after election, or reduces Executive’s salary. In addition, any termination by Executive within ninety (90) days after a Change of Control, as defined in Section 2.03, above, shall be treated as a termination for “Good Reason.”

4.04 Payments on Termination.

(aGeneral. Upon any termination of this Agreement in accordance with this Part Four, Executive shall receive: (i) Base Annual Salary through the termination date; (ii) the balance of any earned but as yet unpaid annual cash bonus or other incentive award for a prior year; (iii) accrued but unused vacation; (iv) vested benefits under Company benefit plans; and (v) benefit continuation/conversion rights as provided under Company benefit plans.

(b) Death or Disability. In the event that termination of this Agreement results from Executive’s death or Disability, in addition to the foregoing general payments, Executive shall receive an amount equal to the Target Bonus for the year in which the termination occurs.

(c) Termination by Company Without Cause or Resignation by Executive For Good Reason. In the event that termination of this Agreement is by the Company without “Cause” or by Executive for “Good Reason,” in addition to the foregoing general payments, Executive shall receive (i) continuation of Base Annual Salary for three (3) years following the termination, at the rate in effect prior to the termination, payable in substantially equal monthly installments; (ii) medical insurance benefits for Executive and his eligible dependents for three (3) years, at active employee contribution rates, and (iii) executive level career transition assistance services by a firm mutually agreed upon However, in the event of a liquidation of the Company or any major restructuring of its operations, the balance of the severance compensation described above shall be promptly paid to Executive in a lump sum.

PART FIVE

MISCELLANEOUS

5.01 Assignment. The Executive and Company acknowledge and agree that the covenants, terms and provisions contained in this Agreement constitute a personal employment contract and the rights and duties of the parties hereunder cannot be transferred, sold, assigned, pledged or hypothecated.

5.02 Entire Agreement. This Agreement contains the entire agreement between the parties relating to the subject matter hereof and shall not be modified except in writing by the parties hereto. Furthermore, the parties hereto specifically agree that all prior agreements, whether written or oral, relating to the Executive’s employment by the Company shall be of no further force or effect from and after the date hereof.

5.03 Severability. If any phrase, clause or provision of this Agreement is declared invalid or unenforceable by a court or arbitrator of competent jurisdiction, such phrase, clause or provision shall be deemed severed from this Agreement, but will not affect any other provisions of this Agreement, which shall otherwise remain in full force and effect. If any restriction or limitation in this Agreement is deemed to be unreasonable, onerous and unduly restrictive by a court or arbitrator of competent jurisdiction, it shall not be stricken in its entirety and held totally void and unenforceable, but shall remain effective to the maximum extent permissible under applicable law.

5.04 Notices. Any notice, request or other communication required to be given pursuant to the provisions hereof shall be in writing and shall be deemed to have been given when delivered in person or three (3) days after being deposited in the United States mail, certified or registered, postage prepaid, return receipt requested and addressed to the party at its or his last known address. The address of any party may be changed by written notice to the other party duly served in accordance herewith.

5.05 Amendment or Waiver. No amendment, modification or waiver of any term, condition, right or remedy hereunder shall be effective for any purpose unless specifically set forth in a writing signed by the party to be bound thereby. The waiver by the Company or Executive of any breach of any term or condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof.

5.06 Indemnification.

(a) Notwithstanding, and in addition to, any other obligation of the Company under the terms of this Agreement, the Company’s By-Laws and/or applicable law, the Company shall, to the fullest extent permitted by applicable law, indemnify and hold Executive harmless from and against any and all liability and loss (including but not limited to legal and other expenses, costs, judgments, fines, penalties and amounts paid in settlement) suffered or incurred by reason of Executive being a party to any action, suit, proceeding or inquiry, whether civil, criminal, administrative, regulatory or investigative by reason of the fact that he is or was serving in the capacities described in this Agreement (a “Proceeding”); provided that there is not an adjudicated Proceeding finding, or an admission by Executive, that Executive engaged in criminal conduct, fraud or recklessness.

(b) Upon written request of Executive, the Company shall pay or reimburse the reasonable legal and other expenses and costs incurred by him in defending any Proceeding in advance of its final disposition. Such amounts must be paid by the Company within thirty (30) days of receipt of a written request. Executive agrees to repay the Company for all amounts so advanced pursuant to this Agreement if it should be ultimately determined by a court that Executive is not entitled to be indemnified.

(c) If a claim by Executive for indemnification or payment of expenses is not paid within sixty (60) days after a written claim therfor has been received by the Company, Executive may immediately file suit to recover the unpaid amount of such a claim. In any such action the Company shall have the burden of proving that Executive was not entitled to the requested indemnification or payment of legal or other expenses under applicable law.

5.07 Directors and Officers Liability Insurance. The Company shall maintain a commercially reasonable amount of directors and officers liability insurance coverage (“D&O Coverage) which shall cover Executive and shall be effective during Executive’s employment and for five (5) years thereafter. While Executive is employed by the Company and for a period of five (5) years after the termination of this Agreement, the Company shall, upon Executive’s request, provide (a) proof that the Company has obtained a commercially reasonable amount of D&O Coverage, along with copies of all policies and (b) within a reasonable time after any claim is made relating to the Company’s D&O Coverage, copies of and reasonable information concerning all claims.

5.08 Governing Law. This Agreement and the enforcement thereof shall be governed and controlled in all respects by the internal laws of the State of Illinois, without application of choice of law principles.

5.09 Litigation Expenses. In the event of litigation regarding the rights and obligations of the parties under this Agreement, the litigation costs and expenses (including reasonable attorneys’ fees and expenses) of the party that prevails, as determined by the courts, shall be paid or reimbursed by the other party.

5.10 Review by Canadian Counsel. This Agreement shall be subject to review by Canadian legal counsel for Executive in order to determine whether any changes are necessary in order to preserve the rights under Canadian employment law that Executive has earned through his many years of service to N.C. Cameron. The Company agrees to make any such changes which do not materially alter the economic substance of this Agreement and which are requested by Executive not later than November 15, 2006.

5.11 Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, legatees, personal representatives, successors, and permitted assigns.

5.12 Headings/Counterparts. The headings of the parts and sections of this Agreement are inserted for convenience of reference only and shall not be deemed a part of, or affect the construction or interpretation of, any provision hereof. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, and all such counterparts together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

 

EXECUTIVE:

By: /s/ Basil Elliott

 

Basil Elliott

 

COMPANY:

ENESCO GROUP, INC.
By: /s/ Leonard Campanaro

 

Leonard Campanaro
Chairman of the Board

 

 

FORM OF
CHANGE IN CONTROL AGREEMENT

AGREEMENT, effective as of [date] (the “Effective Date”) between Enesco Group, Inc., an Illinois corporation (the “Company”) and [employee] (the “Employee”).

WHEREAS, the Employee was hired by Enesco Group, Inc. (the “Employer”) on [hire date] and is currently serving as its [current title]; and

WHEREAS, the Company’s Board of Directors (the “Board”) believes that it is prudent for the Company to take action to assure that the attention of its key employees and the key employees of its wholly-owned subsidiaries, is focused on their assigned duties during any period of uncertainty surrounding a potential change in control of the Company and to induce them to remain with their employing company;

NOW, THEREFORE, in consideration of the promises, covenants and conditions hereinafter contained, the Company and the Employee agree as follows:

1. Severance Benefit.

(a) Upon the termination of Employee’s employment by the Employer within two years following a “Change in Control” of the Company for any reason other than death, Disability, retirement, termination for Substantial Cause, or voluntary termination without Good Reason, the Company will pay the Employee an amount equal to two times the annual rate of the Employee’s Total Compensation at the time of such termination.

(b) The Employee’s employment is deemed to be terminated following a Change in Control if the Employee’s employment terminates prior to a Change in Control at the direction of a person (as defined in paragraph 4, below) who has entered into an agreement with the Company to effectuate a Change in Control and such employment terminates for any other reason other than death, Disability, retirement, termination for Substantial Cause, or voluntary termination without Good Reason and the circumstances constituting Good Reason occur at the direction of such person.

(c) Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received by an Employee in connection with a Change in Control or the termination of the Employee’s employment (whether pursuant to the terms of this Policy or any other plan, arrangement or agreement with the Company, the Employer, any Person (as defined in Section 8(a) (i) of this Policy) whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (all such payments and benefits, including the severance benefit, being hereinafter called “Total Payments”) would be subject (in whole or in part), to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (the “Excise Tax”), then the severance benefit under this Agreement shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax (after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement) if (i) the net amount of such Total Payments, as so reduced, (and after deduction of the net amount of federal, state and local income tax on such reduced Total Payments) is greater than (ii) the excess of (A) the net amount of such Total Payments, without reduction (but after deduction of the net amount of federal, state and local income tax on such Total Payments), over (B) the amount of Excise Tax to which the Employee would be subject in respect of such Total Payments. For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (A) no portion of the Total Payments, the receipt or enjoyment of which the Employee shall have effectively waived in writing prior to the date of termination of the Employee’s employment, shall be taken into account, (B) no portion of the Total Payments shall be taken into account which in the opinion of tax counsel selected by the Company and reasonably acceptable to the Employee does not constitute a “parachute payment” within the meaning of Section 280G(b) (2) of the Code, (including by reason of Section 280G(b) (4) (A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b) (4) (B) of the Code, in excess of the base amount (within the meaning of Section 280G(b) (3) of the Code) allocable to such reasonable compensation, and (C) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Company in accordance with the principles of Sections 280G(d) (3) and (4) of the Code. Prior to the payment date set forth in subsection 1(a) hereof, the Company shall provide the Employee with its calculation of the amounts referred to in this subsection and such supporting materials as are reasonably necessary for the Employee to evaluate the Company’s calculations. If the Employee objects to the Company’s calculations, the Company shall pay to the Employee such portion of the severance benefit (up to 100% thereof) as the Employee determines is necessary to result in the Employee receiving the greater of clauses (i) and (ii) of this subsection.

2. Payment. The severance benefit shall be payable in a lump sum on or before the date of the Employee’s termination.

3. Term. The term of this Agreement shall be a period beginning on the Effective Date and ending on the first to occur of (i) the Employee’s death, disability, retirement, termination for substantial cause or voluntary termination without good reason; or (ii) three years after written notification by the Company of its intention to terminate. All obligations and rights arising under paragraph 1 at the time of the termination of this Agreement shall survive such termination.

4. Change In Control: Potential Change In Control

(a) As used herein, a “Change in Control” of the Company is defined as a Change in Control of a nature that would, in the opinion of Company counsel, be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); provided that, without limitation, such a Change in Control shall be deemed to have occurred if

(i) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) (other than the Company or any subsidiary of the Company, any trustee or fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company’s then outstanding securities; or

(ii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in Clause (i), (iii) or (iv) of this paragraph) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute a majority thereof; or

(iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) 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), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, at least 75% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person acquires 25% or more of the combined voting power of the Company’s then outstanding securities; or

(iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets.

Notwithstanding the foregoing, no Change in Control of the Company shall be deemed to have occurred with respect to an Employee who is a member of a management group which first announces a proposal which constitutes a Potential Change in Control, unless otherwise determined by a majority of the members of the Board who are not members of such management group.

(b) A “Potential Change in Control” shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied:

(ithe Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

(ii) the Company or any Person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control;

(iii) any Person who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company’s then outstanding securities, increases such Person’s beneficial ownership of such securities by 5% or more over the percentage so owned by such Person on the date hereof; or

 

 

 

 

 

 

 

(iv) the Board adopts a resolution to the effect that, for

 

 

 

 

 

 

 

purposes of this Agreement, a Potential Change in Control has

 

 

 

 

 

5.

 

occurred.
Total Compensation.


 

 


As used herein, “Total
Compensation” means the
Employee’s annual base salary
rate at the time of termination
plus any bonus to which he is
entitled under a management
incentive plan, or any other
bonus plan or policy of the
Employer then in effect. For
purposes of the calculation to
be made under paragraph 1(a)
above, the Employee’s annual
base salary shall be the rate at
the time of termination but not
less than the rate in effect
immediately prior to the Change
in Control, and the bonus shall
be equal to 100% of the target
bonus payable to the Employee
for the year in which his
termination occurs, but not less
than 100% of the target
bonus for the year in which the
Change of Control occurred.

6. Disability. As used herein, “Disability” means a medically determinable physical or mental condition which renders an Employee incapable of performing the work for which he was employed at his normal place of employment for at least six consecutive months. A termination by reason of Disability shall not be effective unless the Employee fails to return to work at his normal place of employment within thirty (30) days after receiving written notice of termination from the Employer.

7. Substantial Cause. As used herein, “Substantial Cause” means (i) the willful and continued failure by an Employee to substantially perform the Employee’s duties with the Employer (other than any such failure resulting from the Employee’s incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a notice of termination for Good Reason by the Employee) after a written demand for substantial performance is delivered to the Employee by the Board, which demand specifically identifies the manner in which the Board believes that the Employee has not substantially performed the Employee’s duties, or (ii) the willful engaging by the Employee in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Employee’s part shall be deemed “willful” unless done, or omitted to be done, by the Employee not in good faith and without reasonable belief that the Employee’s act, or failure to act, was in the best interest of the Company and the Employer.

8. Good Reason. For the purposes of this Agreement, a voluntary termination under any of the following circumstances shall be considered to be for “Good Reason”:

 

(a)

 

assignment to the Employee of duties or title inconsistent with his status as an Officer, or removal of the Employee from involvement in management decision-making functions consistent with his prior experience with the Employer;

 

 

 

(b)

 

failure to continue the Employee’s participation in a management incentive plan or any other bonus plan or policy of the Employer in effect immediately prior to the Change in Control;

 

 

 

(c)

 

failure to pay when due the Employee’s base salary, or any installment of deferred compensation when due, or a reduction in the Employee’s base salary, or a failure to continue in effect for the Employee’s benefit fringe benefits in which he now participates, including retirement plans, health and insurance plans, vacation plans, and automobile programs, or the taking of any action which materially reduces such benefits, provided that, unless such reduction in base salary or failure to continue benefits occurs within two years after a Change in Control, it will not be considered Good Reason if taken in connection with a general reduction applicable to all officers;

 

 

 

(d)

 

assignment of the Employee to any location other than within fifty (50) miles of his present office location; or

 

 

 

(e)

 

a requirement that the Employee travel away from his office location more than 25% of the working days in the year, provided that the Employee may be required to increase his travel by 10% of his working days if the Employee had been travelling more than 15% of his working days at the time of the Change in Control. Working days for these purposes shall exclude vacation days.

 

9. Fringe Benefits. For a period of twenty-four (24) months (the “Extended Period”) following any termination giving rise to benefits under this Agreement, the Employee shall continue to participate fully in those fringe benefits of the Employer in which he is a participant prior to such termination, including the group insurance programs (i.e. medical insurance, including dependent coverage; life insurance; accidental death and dismemberment insurance); provided, however, that if the Employee is barred from participating in a particular plan or arrangement under such program’s terms, the Company shall arrange to provide the Employee for the Extended Period with a substitute benefit substantially equivalent to the affected plan or arrangement. The coverage set forth in the preceding sentence shall be subject only to such periodic review as may be required by the group insurance carrier to determine whether he has become a participant in a comparable program of another employer, in which case continuance or discontinuance of coverage will be determined in accordance with the terms and conditions of the group insurance policy and the benefits payable under this provision will be secondary to the comparable program of the other employer.

All benefits covered by this paragraph 9 shall be provided at no cost to the Employee and are subject to the benefit limitation provision of paragraph 1.

10. Legal Fees. In the event legal fees and expenses must be incurred by the Employee in seeking to obtain or enforce any right or benefit provided by this Agreement, the Company shall reimburse the Employee for such cost, provided, however, that fees and expenses incurred in connection with that portion of a claim that is determined by a court or arbitrator to be frivolous shall not be paid by the Company.
11. Mitigation. Inasmuch as the severance benefit provided for in this Agreement is in recognition of past services rendered to the Employer, the Employee will not be required to mitigate the amount of any payment provided for by this Agreement by seeking other employment nor shall the amount of any payment so provided be reduced by any compensation earned by the Employee as the result of employment by another employer after the date of termination or otherwise.
12. Other Compensation. The lump sum severance benefit payable pursuant to this Agreement shall be in addition to and not in substitution for any amounts of compensation accrued in favor of the Employee up to the date of termination, including a pro-rated portion of any incentive compensation to which he is entitled, based upon the number of days of employment during such year prior to such termination date, and shall also be in addition to and not in substitution for any amount or benefit to which the Employee may otherwise be entitled under any insurance policy, stock option plan or written employment contract between the Employee and the Employer, or any regular or supplemental retirement plan or contract maintained by the Employer on the Employee’s behalf. However, the benefits payable hereunder shall be reduced by any benefit to which the Employee is entitled under the regular severance policy of the Company (or the Employer) or any other severance agreement between the Employee and the Employer.
13. Confidential Information. The Employee agrees that he will not use or disclose to anyone (other than for the benefit of the Employer) either during the term of his employment or at any time thereafter, any confidential information obtained by or made known to him while employed by the Employer. As used herein, “Confidential Information” includes, but is not limited to, trade secrets of the Employer or of any other organization associated or affiliated with or owned by or owning the Employer.

 

14.

 

Covenant Not to Proselyte. For a period of thirty-six (36) months after termination giving rise to benefits under this Agreement, the Employee agrees that he will not attempt, directly or indirectly, to induce any employee of the Employer or an affiliated company to terminate his or her employment with the Employer or such affiliated company.

 

15. Entirety of Agreement and Amendment. This Agreement constitutes the entire Agreement between the parties and no amendment, waiver, alteration or modification of this Agreement shall be valid unless in each instance such amendment, waiver, alteration or modification is agreed to in writing by both parties. Mere delay by the Employee in exercising any rights under this Agreement will in no event be deemed a waiver of such rights. This Agreement supersedes all previous severance agreements that may have been made between the Company or the Employer and the Employee.
16. Notices and Statements. All notices and statements hereunder shall be in writing, and, if directed to the Company, shall be deemed given if deposited postage prepaid in the U.S. Mail or delivered to the Company, Attention: President at 225 Windsor Drive, Itasca, IL 60143, or, if directed to the Employee, shall be deemed given if delivered to him personally or deposited postage prepaid in the U.S. Mail addressed to him at his then current personal residence as it appears on the Company records, or to such other addresses as either party may hereafter designate in writing for the purpose. Written notice of termination of employment by the Employer or the Employee after a Change in Control must specify the provision(s) in the Agreement relied upon and detail the facts and circumstances alleged as the basis for termination of employment. Any such notice shall be effective thirty (30) days after receipt by the appropriate party (except for termination for Substantial Cause).
17. Applicable Law. To the extent permitted by law, this Agreement shall be deemed to have been made in the State of
Illinois, and its validity, construction and performance shall be determined in accordance with the laws of said State of Illinois.
18. Assignment. Neither party may assign this Agreement or any of the rights or duties hereunder, except that the Company may assign any of its rights and duties under this Agreement to (1) a successor or assignee of all or substantially all of the business or assets of the Company, or (2) any corporation with which the Company merges or with which the Company may be consolidated, provided that any such successor or assignee or surviving entity of a merger or consolidation must expressly assume in writing such rights, duties and obligations of the Company, and except further that the rights and obligations of the Employee under this Agreement shall inure to the benefit of and be enforceable by the Employee’s personal or legal representative, executor, etc.
19. Not an Employment Contract. The parties agree that this Agreement is not intended as, and is not, an employment contract with the Company or the Employer. The Employer may terminate the Employee’s employment at any time during the term of this Agreement subject to providing such benefits as may be specified in the Agreement.

20. Arbitration. At the election of either the Company or the Employee, all controversies in connection with, or related to, any alleged breach of this Agreement or any of its provisions requiring ongoing action or interpretation, including, without limitation, injunctive relief, shall be settled by binding arbitration in Chicago, Illinois in accordance with the rules of the American Arbitration Association then in effect. Company or Employee may demand arbitration upon ten (10) days notice to the other. The arbitration panel shall consist of three (3) members, one to be the Employee’s nominee, one to be the Company’s nominee and a third to be selected by the other two. In the event the two arbitrators cannot agree on a third within seven (7) days after the demand for arbitration, the third shall be chosen by the American Arbitration Association in Chicago, Illinois pursuant to its rules and regulations. In the event of the death or incapacity of Employee, his duly authorized executor or representative or its nominee shall be or choose one arbitrator in his stead. Judgment upon any award, including injunctive relief, rendered may be entered in any court having jurisdiction thereof. The fees and expenses of the arbitrators shall be borne by the parties hereto in proportion to the questions answered adversely to their several questions and interpretations, as determined by the arbitrators, and the parties agree that the findings of a majority of such three (3) arbitrators shall be conclusive on them, and their respective heirs, successors and assigns, executors, administrators, and personal representatives.
21. Invalidity of any Provision. If any provision of this Agreement or the application thereof to any party or circumstance is held invalid or unenforceable, in whole or in part, the remaining provisions of this Agreement and the application of such provisions to the other party or circumstances will not be affected thereby, the provisions of this Agreement being severable or modifiable in any such instance.

IN WITNESS WHEREOF, this Agreement has been executed by a duly authorized officer of the Company and by the Employee.

Dated: [date]

ENESCO GROUP, INC.

By:      

[title]

     

[employee]