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<P style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, Times, serif"><B>UNITED STATES</B></FONT></P>
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<P id=PARA3 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, Times, serif"><B>SECURITIES AND EXCHANGE COMMISSION</B></FONT></P>
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<P id=PARA5 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Washington D.C. 20549</B></FONT></P>
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<P id=PARA7 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, Times, serif"><B>FORM 8-K</B></FONT></P>
<P id=PARA10 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA9 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, Times, serif">Current Report</FONT></P>
<P id=PARA11 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, Times, serif">Pursuant to Section 13 or 15(d) of the</FONT></P>
<P id=PARA12 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, Times, serif">Securities Exchange Act of 1934</FONT></P>
<P id=PARA14 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA13 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Date of Report (Date of earliest event reported): September 29, 2015</FONT></P>
<P id=PARA16 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA15 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U><B>ETHAN ALLEN INTERIORS INC.</B></U></FONT></P>
<P id=PARA17 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(Exact name of registrant as specified in its charter)</FONT></P>
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<P id=PARA19 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U><B>Delaware</B></U></FONT></P></TD>
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<P id=PARA20 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U><B>1-11692</B></U></FONT></P></TD>
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<P id=PARA21 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U><B>06-1275288</B></U></FONT></P></TD></TR>
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<P id=PARA22 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(State or other jurisdiction of incorporation)</FONT></P></TD>
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<P id=PARA23 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(Commission File Number)</FONT></P></TD>
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<P id=PARA24 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(I.R.S. Employer Identification No.)</FONT></P></TD></TR></TABLE>
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<P id=PARA27 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Ethan Allen Drive</B></FONT></P>
<P id=PARA28 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U><B>Danbury, CT</B></U></FONT></P></TD>
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<P id=PARA30 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U><B>06811</B></U></FONT></P></TD></TR>
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<P id=PARA31 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(Address of principal executive offices)</FONT></P></TD>
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<P id=PARA34 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA35 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Registrant&#8217;s telephone number, including area code:</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"> </FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>(203) 743-8000</B></FONT></P>
<P id=PARA37 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA36 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Not Applicable&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></U></FONT></P>
<P id=PARA38 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(Former name or former address, if changed since last report)</FONT></P>
<P id=PARA39 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA40 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 36pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):</FONT></P>
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<P id=PARA41 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#9744;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"> Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</FONT></P>
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<P id=PARA52.2 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"></FONT></P>
<P id=PARA55 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>INFORMATION TO BE INCLUDED IN REPORT</B></FONT></P>
<P id=PARA56 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA248 style="MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; MARGIN-TOP: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Item 5.02&nbsp;&nbsp;&nbsp;&nbsp; </B></FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Compensatory Arrangements of Certain Officers.</B></FONT></P>
<P id=PARA60 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U><B></B></U></FONT>&nbsp;</P>
<P style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U><B>Appointment of New Director</B></U><U><B>&nbsp;</B></U></FONT></P>
<P id=PARA61 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA62 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">On September 30, 2015, the Board of Directors of Ethan Allen Interiors Inc.&#8217;s (the &#8220;Company&#8221;) issued a press release announcing the election of Tara I. Stacom, 57, as an independent director of the Company. The Company will also nominate Ms. Stacom as an independent director at the Company&#39;s upcoming annual meeting of stockholders. Ms. Stacom has served as an Executive Vice Chairman at Cushman &amp; Wakefield, a worldwide commercial real estate firm since 2013, and has served in various capacities at Cushman &amp; Wakefield since 1981. Ms. Stacom will receive a standard director compensation package that has been described in the Company&#8217;s form DEF 14A filed with the SEC on October 8, 2014 under the section entitled &#8220;Director Compensation&#8221;, and is incorporated herein by reference into this item 5.02.</FONT></P>
<P id=PARA63 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA64 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. </FONT></P>
<P id=PARA65 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA66 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U><B>Approval of </B></U><U><B>2015 Employment</B></U><U><B> Agreement </B></U></FONT></P>
<P id=PARA67 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA68 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">As of September 29, 2015, the Company&#8217;s Compensation Committee approved and the independent members of the Company&#39;s Board of Directors ratified, subject to Stockholder approval of the incentive components at the 2015 annual meeting, the terms of the a new employment agreement, dated as of October 1, 2015 and effective as of July 1, 2015, between the Company and Mr. Kathwari (the "2015 Employment Agreement"). Pursuant to the 2015 Employment Agreement the Company agreed to continue to employ Mr. Kathwari and Mr. Kathwari agreed to remain as Chairman, President and Principal Executive Officer of the Company and Ethan Allen Global, Inc., for a period of approximately five years, with two automatic one-year extensions commencing on each of July 1, 2021 and July 1, 2022 (each a &#8220;New Anniversary Date&#8221;) unless notice of non-renewal is given by either Mr. Kathwari or the Company, not later than nine (9) months prior to a New Anniversary Date. Pursuant to the terms of the 2015 Employment Agreement, Mr. Kathwari will continue to receive the current base salary of $1,150,050 per year throughout the term of the 2015 Employment Agreement.</FONT></P>
<P id=PARA69 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA70 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Under the terms of the 2015 Employment Agreement, Mr.&nbsp;Kathwari will be entitled to an annual incentive bonus based upon the Company&#39;s Adjusted Operating Income, as defined herein. For purposes of computing Mr. Kathwari&#39;s annual incentive bonus, the Adjusted Operating Income for each fiscal year is defined as the consolidated operating income of the Company as set forth in the Company&#39;s audited consolidated financial statement as of June&nbsp;30<SUP style="vertical-align: baseline; position: relative; bottom:.33em;">th</SUP> of each fiscal year as adjusted by adding thereto the charges, expenses or accruals, if any, charged against such operating income for (1)&nbsp;non-recurring, extraordinary or unusual events, (2)&nbsp;annual bonuses, both incentive and discretionary, to officers and managers, including the annual incentive bonus, (3)&nbsp;share-based compensation expense recognized in accordance with ASC 718, or otherwise, including in respect of the issuance to the Company&#39;s executives, managers, employees, dealers and other business associates of capital stock of the Company, or the issuance or exercise to or by such persons of options, warrants or other rights to acquire capital stock of the Company, stock appreciation rights of the Company or similar equity equivalents, including in respect of restricted stock awards, performance-based stock awards and stock options contemplated by the 2015 Employment Agreement and prior employment agreements between the Company and Mr.&nbsp;Kathwari, and (4)&nbsp;any increased depreciation, amortization or other charges resulting from purchase accounting adjustments by virtue of acquisitions or business combinations by the Company, Ethan Allen Global, Inc. or any affiliate of the Company (provided, however, that no such adjustments will be made under this clause&nbsp;(4) with respect to acquisitions occurring prior to the effective date of the 2015 Employment Agreement). </FONT></P>
<P id=PARA71 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA72 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">For purposes of Mr.&nbsp;Kathwari&#39;s annual incentive bonus for each fiscal year, the Compensation Committee of the Board of Directors, subject to review and ratification by the Board of Directors, will set and establish the target and goal (the "AIB Annual Target") for Adjusted Operating Income for such fiscal year within 90 days following the commencement of that fiscal year, provided, that if the Compensation Committee, subject to review and ratification of the Board of Directors, does not set and establish the AIB Annual Target for any fiscal year for any reason or no reason, then the AIB Annual Target for that fiscal year will automatically be set and established as a five percent (5%) increase and improvement in Adjusted Operating Income as compared to the actual Adjusted Operating Income for the immediately preceding fiscal year. Mr.&nbsp;Kathwari&#39;s annual incentive bonus for a given fiscal year will be determined by reference to the achievement of the Company of its Adjusted Operating Income for that fiscal year measured against the AIB Annual Target for that fiscal year as follows: </FONT></P>
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<TD style="WIDTH: 25.9%; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid">
<P id=PARA76 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Adjusted Operating </B></FONT></P>
<P style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Income Achievement <BR>Level</B></FONT></P></TD>
<TD style="WIDTH: 1.2%; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid">&nbsp; </TD>
<TD style="WIDTH: 23.9%; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid">
<P id=PARA77 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Performance <BR>(as Percentage of AIB </B></FONT></P>
<P style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Annual Target)</B></FONT></P></TD>
<TD style="WIDTH: 0.3%; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid">&nbsp; </TD>
<TD style="WIDTH: 26.8%; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid">
<P id=PARA78 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Payout <BR>(as Percentage of<BR>Base Salary)</B></FONT></P></TD>
<TD style="WIDTH: 0.6%; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid">&nbsp; </TD>
<TD style="WIDTH: 21.3%; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid">
<P id=PARA79 style="TEXT-ALIGN: center; MARGIN: 0pt 0.35pt 0pt 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Annual Incentive </B></FONT></P>
<P style="TEXT-ALIGN: center; MARGIN: 0pt 0.35pt 0pt 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Bonus Amount</B></FONT></P></TD></TR>
<TR style="BACKGROUND-COLOR: #cceeff">
<TD style="WIDTH: 25.9%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #cceeff">
<P id=PARA80 style="TEXT-ALIGN: center; MARGIN: 0pt 0pt 0pt 6.2pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Minimum Threshold</FONT></P></TD>
<TD style="WIDTH: 1.2%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #cceeff">&nbsp; </TD>
<TD style="WIDTH: 23.9%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #cceeff">
<P id=PARA81 style="TEXT-ALIGN: center; MARGIN: 0pt 0pt 0pt 3.55pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">80-85%</FONT></P></TD>
<TD style="WIDTH: 0.3%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #cceeff">
<P id=PARA82 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#61589;</FONT></P></TD>
<TD style="WIDTH: 26.8%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #cceeff">
<P id=PARA83 style="TEXT-ALIGN: center; MARGIN: 0pt 0pt 0pt 3.85pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">33%</FONT></P></TD>
<TD style="WIDTH: 0.6%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #cceeff">&nbsp; </TD>
<TD style="WIDTH: 21.3%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #cceeff">
<P id=PARA84 style="TEXT-ALIGN: center; MARGIN: 0pt 0pt 0pt 4.05pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">$375,000</FONT></P></TD></TR>
<TR style="BACKGROUND-COLOR: #ffffff">
<TD style="WIDTH: 25.9%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ffffff">
<P id=PARA85 style="TEXT-ALIGN: center; MARGIN: 0pt 0pt 0pt 6.2pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">AIB Annual Target</FONT></P></TD>
<TD style="WIDTH: 1.2%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #ffffff">&nbsp; </TD>
<TD style="WIDTH: 23.9%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ffffff">
<P id=PARA86 style="TEXT-ALIGN: center; MARGIN: 0pt 0pt 0pt 3.55pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">100%</FONT></P></TD>
<TD style="WIDTH: 0.3%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #ffffff">
<P id=PARA87 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#61589;</FONT></P></TD>
<TD style="WIDTH: 26.8%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ffffff">
<P id=PARA88 style="TEXT-ALIGN: center; MARGIN: 0pt 0pt 0pt 3.85pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">65%</FONT></P></TD>
<TD style="WIDTH: 0.6%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #ffffff">&nbsp; </TD>
<TD style="WIDTH: 21.3%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ffffff">
<P id=PARA89 style="TEXT-ALIGN: center; MARGIN: 0pt 0pt 0pt 4.05pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">$750,000</FONT></P></TD></TR>
<TR style="BACKGROUND-COLOR: #cceeff">
<TD style="WIDTH: 25.9%; VERTICAL-ALIGN: middle; BACKGROUND-COLOR: #cceeff">
<P id=PARA90 style="TEXT-ALIGN: center; MARGIN: 0pt 0pt 0pt 6.2pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Maximum</FONT></P></TD>
<TD style="WIDTH: 1.2%; VERTICAL-ALIGN: middle; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #cceeff">&nbsp; </TD>
<TD style="WIDTH: 23.9%; VERTICAL-ALIGN: middle; BACKGROUND-COLOR: #cceeff">
<P id=PARA91 style="TEXT-ALIGN: center; MARGIN: 0pt 0pt 0pt 3.55pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">120-130%</FONT></P></TD>
<TD style="WIDTH: 0.3%; VERTICAL-ALIGN: middle; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #cceeff">
<P id=PARA92 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#61589;</FONT></P></TD>
<TD style="WIDTH: 26.8%; VERTICAL-ALIGN: middle; BACKGROUND-COLOR: #cceeff">
<P id=PARA93 style="TEXT-ALIGN: center; MARGIN: 0pt 0pt 0pt 3.6pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">148% (i.e., above target bonus)</FONT></P></TD>
<TD style="WIDTH: 0.6%; VERTICAL-ALIGN: middle; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #cceeff">&nbsp; </TD>
<TD style="WIDTH: 21.3%; VERTICAL-ALIGN: middle; BACKGROUND-COLOR: #cceeff">
<P id=PARA94 style="TEXT-ALIGN: center; MARGIN: 0pt 0pt 0pt 4.05pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">$1,700,000</FONT></P></TD></TR></TABLE>
<P id=PARA96 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"></FONT>&nbsp;</P>
<P style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Mr. Kathwari will only be entitled to receive the annual incentive bonus with respect to a fiscal year if and to the extent the Adjusted Operating Income performance targets and goals are achieved. For the avoidance of doubt, Mr. Kathwari shall not be entitled to earn or receive an annual incentive bonus for a fiscal year where the actual Adjusted Operating Income Achievement Level is less than 80% of the AIB Annual Target for such fiscal year (but the failure to earn and receive an annual incentive bonus for any fiscal year will not affect the right to receive an annual incentive bonus earned for a subsequent fiscal year).</FONT></P>
<P id=PARA97 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA98 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">If the Adjusted Operating Income for a fiscal year is between the Minimum Threshold and the AIB Annual Target, or the AIB Annual Target and the Maximum, the specific amount of the annual incentive bonus for that fiscal year will be linearly interpolated on a straight line basis based on actual performance (as a percentage of the AIB Annual Target), interpolated linearly either between the Minimum Threshold and the AIB Annual Target or between the AIB Annual Target and the Maximum, respectively, and then utilizing that same percentile for the determination of the annual incentive bonus, interpolated linearly either between the Minimum Threshold and the AIB Annual Target or between the AIB Annual Target and the Maximum, respectively.</FONT></P>
<P id=PARA99 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA100 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">If the Company effects a major acquisition which acquisition constitutes a change of ownership or control of the Company within the meaning of Treas. Reg. Section 1.162-27(e)(2)(v) during any fiscal year, Mr. Kathwari and the Company shall negotiate in good faith an appropriate revision to the threshold amount to implement the purpose of the annual incentive bonus such that the annual incentive bonus may be payable even if the threshold amount is not achieved with respect to such fiscal year. </FONT></P>
<P id=PARA101 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA102 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Mr. Kathwari&#39;s right to receive (or retain) any annual incentive bonus will be subject to "clawback" or similar obligations set forth in Company policies duly approved by the Board of Directors and required by applicable laws and regulations (including by any securities exchange) from time to time and applicable to the Company and Mr. Kathwari.</FONT></P>
<P id=PARA103 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA104 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Performance-Based Restricted Stock Units</B>&nbsp;</FONT></P>
<P id=PARA105 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA106 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Under the terms of the 2015 Employment Agreement, Mr.&nbsp;Kathwari will also be entitled to performance-based restricted stock units ("Performance Units") providing a contingent right to receive shares of the Company&#39;s common stock, , par value $.01 per share ("Common Stock"), conditioned upon the Company&#39;s achievement of certain performance targets and goals, and subject to the terms of the 2015 Employment Agreement and a separate performance&#8211;based stock unit agreement (the &#8220;Performance-Based Stock Unit Agreement&#8221;) to be executed by Mr. Kathwari and the Company. </FONT></P>
<P id=PARA107 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA108 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Each fiscal year during the term of Mr. Kathwari&#39;s employment under the 2015 Employment Agreement, Mr. Kathwari shall be granted Performance Units entitling Mr. Kathwari to earn 0 to 81,250 shares of the Common Stock, with each such grant to be made within ninety (90) days of the beginning of each fiscal year and earning of such shares of Common Stock to be contingent upon the performance of the Company in accordance with the 2015 Employment Agreement and the applicable performance&#8211;based stock unit agreement, such that Performance Units in relation to up to 406,250 shares of Common Stock could be earned during the full term of Mr. Kathwari&#39;s employment under the 2015 Employment Agreement.</FONT></P>
<P id=PARA109 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA110 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">The number of shares of Common Stock issuable in respect of each Performance Unit as of the date of the 2015 Employment Agreement is one share and the aggregate number of shares of Common Stock issuable with respect to a grant of Performance Units under the 2015 Employment Agreement for any fiscal year is specified as of the date of the 2015 Employment Agreement. Such number or numbers of shares shall be adjusted for stock splits, stock dividends, reclassifications, recapitalizations and similar events in respect of the Common Stock occurring after the date of the 2015 Employment Agreement.</FONT></P>
<P id=PARA111 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></P>
<DIV id=PGBK250  style="WIDTH: 100%; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=PGFTR250  style="WIDTH: 100%; TEXT-ALIGN: center">&nbsp;</DIV>
<DIV id=PGNUM250  style="FONT-SIZE: 10pt; WIDTH: 100%; TEXT-ALIGN: center">&nbsp;</DIV>
<HR style="HEIGHT: 2px; WIDTH: 100%; PAGE-BREAK-AFTER: always; COLOR: #000000" noShade>

<DIV id=PGHDR250  style="WIDTH: 100%; TEXT-ALIGN: left">&nbsp;</DIV></DIV>
<P id=PARA250.2 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></P>
<P id=PARA112 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">For purposes of the Performance Units to be granted for each fiscal year, the Compensation Committee, subject to review and ratification by the Board of Directors, will set and establish the target and goal (the "PSU Annual Target") for Adjusted Operating Income Per Share (as defined below) for such fiscal year and for each of the two immediately following fiscal years (for a total of three fiscal years) within 90 days following the commencement of that initial fiscal year, provided, that if the Compensation Committee, subject to review and ratification of the Board of Directors, does not establish the PSU Annual Target for any of such fiscal years for any reason or no reason, the PSU Annual Target will automatically be established for each such fiscal year as a five percent (5%) increase and improvement in actual Adjusted Operating Income Per Share as compared to the Adjusted Operating Income Per Share for the immediately preceding year (assuming no change in the number of outstanding shares of Common Stock on a diluted weighted average common share basis as set forth in the Company&#39;s audited consolidated financial statements). If there has been a change in such number, the PSU Annual Target and such Actual Adjusted Operating Income Per Share will be correspondingly adjusted by the Compensation Committee. Pursuant to the 2015 Employment Agreement, "Adjusted Operating Income Per Share" means the Adjusted Operating Income divided by the number of outstanding shares of the Company&#8217;s Common Stock on a diluted weighted average common share basis as reflected in the Company&#39;s audited consolidated financial statements.</FONT></P>
<P id=PARA113 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA114 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">For each grant of Performance Units, the amount of the grant that will be earned and paid will be determined by reference to the achievement of the Company of the PSU Annual Target for each of the two initial fiscal years (on a cumulative basis) and the three fiscal years (on a cumulative basis) applicable to such grant.</FONT></P>
<P id=PARA115 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA116 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Performance Units Earned</B></FONT></P>
<P id=PARA117 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<TABLE id=TBL137  style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman, Times, serif; BORDER-RIGHT: #000000 1px solid; WIDTH: 83.6%; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; TEXT-INDENT: 0px" cellSpacing=0 cellPadding=0 align=center border=0>

<TR>
<TD style="WIDTH: 23.5%; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid">
<P id=PARA118 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Adjusted Operating </B></FONT></P>
<P style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Income Per Share </B></FONT></P>
<P style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Achievement Level</B></FONT></P></TD>
<TD style="WIDTH: 1.8%; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid">&nbsp; </TD>
<TD style="WIDTH: 25.7%; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid">
<P id=PARA119 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Performance as </B></FONT></P>
<P style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Percentage of </B></FONT></P>
<P style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Cumulative PSU </B></FONT></P>
<P style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Annual Target for </B></FONT></P>
<P style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Applicable Two or </B></FONT></P>
<P style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Three Year Period</B></FONT></P></TD>
<TD style="WIDTH: 0.3%; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid">&nbsp; </TD>
<TD style="WIDTH: 24.3%; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid">
<P id=PARA120 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Percentage of Units </B></FONT></P>
<P style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Earned (Per Grant)</B></FONT></P></TD>
<TD style="WIDTH: 0.9%; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid">&nbsp; </TD>
<TD style="WIDTH: 23.5%; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid">
<P id=PARA121 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Number of Earned </B></FONT></P>
<P style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Units (Per Grant)</B></FONT></P></TD></TR>
<TR style="BACKGROUND-COLOR: #cceeff">
<TD style="WIDTH: 23.5%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #cceeff">
<P id=PARA122 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Threshold</FONT></P></TD>
<TD style="WIDTH: 1.8%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #cceeff">&nbsp; </TD>
<TD style="WIDTH: 25.7%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #cceeff">
<P id=PARA123 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">80-85%</FONT></P></TD>
<TD style="WIDTH: 0.3%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #cceeff">
<P id=PARA124 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#61589;</FONT></P></TD>
<TD style="WIDTH: 24.3%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #cceeff">
<P id=PARA125 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">50%</FONT></P></TD>
<TD style="WIDTH: 0.9%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #cceeff">&nbsp; </TD>
<TD style="WIDTH: 23.5%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #cceeff">
<P id=PARA126 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">32,500</FONT></P></TD></TR>
<TR style="BACKGROUND-COLOR: #ffffff">
<TD style="WIDTH: 23.5%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ffffff">
<P id=PARA127 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Target</FONT></P></TD>
<TD style="WIDTH: 1.8%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #ffffff">&nbsp; </TD>
<TD style="WIDTH: 25.7%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ffffff">
<P id=PARA128 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">100%</FONT></P></TD>
<TD style="WIDTH: 0.3%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #ffffff">
<P id=PARA129 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#61589;</FONT></P></TD>
<TD style="WIDTH: 24.3%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ffffff">
<P id=PARA130 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">100%</FONT></P></TD>
<TD style="WIDTH: 0.9%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #ffffff">&nbsp; </TD>
<TD style="WIDTH: 23.5%; VERTICAL-ALIGN: middle; BORDER-BOTTOM: #000000 1px solid; BACKGROUND-COLOR: #ffffff">
<P id=PARA131 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">65,000</FONT></P></TD></TR>
<TR style="BACKGROUND-COLOR: #cceeff">
<TD style="WIDTH: 23.5%; VERTICAL-ALIGN: middle; BACKGROUND-COLOR: #cceeff">
<P id=PARA132 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Maximum</FONT></P></TD>
<TD style="WIDTH: 1.8%; VERTICAL-ALIGN: middle; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #cceeff">&nbsp; </TD>
<TD style="WIDTH: 25.7%; VERTICAL-ALIGN: middle; BACKGROUND-COLOR: #cceeff">
<P id=PARA133 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">115-120%</FONT></P></TD>
<TD style="WIDTH: 0.3%; VERTICAL-ALIGN: middle; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #cceeff">
<P id=PARA134 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#61589;</FONT></P></TD>
<TD style="WIDTH: 24.3%; VERTICAL-ALIGN: middle; BACKGROUND-COLOR: #cceeff">
<P id=PARA135 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">125% (i.e., more than target award)</FONT></P></TD>
<TD style="WIDTH: 0.9%; VERTICAL-ALIGN: middle; BORDER-LEFT: #000000 1px solid; BACKGROUND-COLOR: #cceeff">&nbsp; </TD>
<TD style="WIDTH: 23.5%; VERTICAL-ALIGN: middle; BACKGROUND-COLOR: #cceeff">
<P id=PARA136 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">81,250</FONT></P></TD></TR></TABLE>
<P id=PARA138 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"></FONT>&nbsp;</P>
<P style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Performance Units for each grant may be earned over either a two fiscal year or three fiscal year period. Accordingly, if Performance Units with respect to a grant are earned in the first two fiscal years in relation to such grant, then those Performance Units shall be paid. If all of the Performance Units with respect to a grant are earned during such two fiscal years, then no additional Performance Units in relation to that grant shall be earned in the third fiscal year. If less than all of the Performance Units with respect to a grant are earned in the first two fiscal years in relation to that grant (due to shortfalls or otherwise), then any unearned Performance Units in relation to such grant shall be earned in the third fiscal year in relation to that grant to the extent that the number of Performance Units earned during the three fiscal years in relation to such grant exceeds the number of Performance Units earned in relation to such two fiscal years. For illustrative purposes only, if as a result of the Company&#39;s cumulative performance for the first two fiscal years, Mr. Kathwari would earn 65,000 Performance Units (each of which would represent one share of Common Stock (unless adjusted pursuant to the 2015 Employment Agreement, the applicable performance-based stock unit agreement and the Option Plan) and would be paid by issuance of such Common Stock after such results are certified by the Compensation Committee) and, as a result of the Company&#39;s cumulative performance for the first three fiscal years, Mr. Kathwari would earn 70,000 Performance Units, then Mr. Kathwari would earn an additional 5,000 Performance Units for fiscal year three (which would be similarly paid). </FONT></P>
<P id=PARA139 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA140 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">If the Adjusted Operating Income Per Share for an applicable two or three fiscal year period is between the Minimum Threshold and the PSU Annual Target, or the PSU Annual Target and the Maximum, the specific amount of the Performance Units earned in relation to a grant for that period will be linearly interpolated on a straight-line basis based on actual performance (as a percentage of PSU Annual Target), interpolated linearly either between the Minimum Threshold and the PSU Annual Target or between the PSU Annual Target and the Maximum, respectively, and then utilizing that same percentile for the determination of the number of Performance Units earned, interpolated linearly either between the Minimum Threshold and the PSU Annual Target or between the PSU Annual Target and the Maximum, respectively.</FONT></P>
<P id=PARA141 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA142 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">If the Company effects a major acquisition which constitutes a change of ownership or control of the Company within the meaning of Treas. Reg. Section 1.162-27(e)(2)(v) during any fiscal year, Mr. Kathwari and the Company shall negotiate in good faith an appropriate revision to the threshold amounts set forth above to implement the purpose of the Performance Units such that the Performance Units may be payable even if the threshold amounts are not achieved with respect to such fiscal year. </FONT></P>
<P id=PARA143 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></P>
<DIV id=PGBK251  style="WIDTH: 100%; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=PGFTR251  style="WIDTH: 100%; TEXT-ALIGN: center">&nbsp;</DIV>
<DIV id=PGNUM251  style="FONT-SIZE: 10pt; WIDTH: 100%; TEXT-ALIGN: center">&nbsp;</DIV>
<HR style="HEIGHT: 2px; WIDTH: 100%; PAGE-BREAK-AFTER: always; COLOR: #000000" noShade>

<DIV id=PGHDR251  style="WIDTH: 100%; TEXT-ALIGN: left">&nbsp;</DIV></DIV>
<P id=PARA251.2 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></P>
<P id=PARA144 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Mr. Kathwari&#8217;s right to receive (or retain) any Performance Units or benefits for Performance Units is conditional upon the achievement of the PSU Annual Targets. </FONT></P>
<P id=PARA145 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA146 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Moreover, Mr. Kathwari&#39;s right to receive (or retain) any Performance Units or benefits of the Performance Units will be subject to "clawback" or similar obligations set forth in Company&#39;s policies duly approved by the Board and required by applicable laws and regulations (including by any securities exchange) from time to time and applicable to the Company and Mr. Kathwari, and furthermore, will be subject to retention and restriction on sale, hedging, transfer or similar obligations in relation to Company executives set forth in Company policies duly approved by the Board.</FONT></P>
<P id=PARA147 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA148 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">In the event Mr. Kathwari&#8217;s employment with the Company is terminated by reason of death or disability, he (or his estate) will receive salary continuation for twelve (12) months, an annual incentive bonus in respect of the full fiscal year in which the date of termination occurs, accelerated vesting of all restricted stock and options awarded and granted under the 2015 Employment Agreement, deferred compensation, life and disability insurance premiums, expense reimbursement and such other and customary benefits as the Company provides to its employees.</FONT></P>
<P id=PARA149 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA150 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">If Mr. Kathwari&#8217;s employment is terminated by the Company without &#8220;cause&#8221;, or by Mr. Kathwari &#8220;for good reason&#8221; he will receive salary continuation for twenty-four (24) months and a severance payment not to exceed $2 million dollars, one additional year of vesting, for all outstanding stock options or restricted stock awards granted pursuant to the 2015 Employment Agreement, life and disability insurance premiums, and health and welfare benefits. Mr. Kathwari will also be subject to a twenty-four (24) month &#8220;non-compete&#8221; restrictive covenant. </FONT></P>
<P id=PARA151 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA152 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">If Mr. Kathwari&#8217;s employment is terminated as a result of a change in control, he will receive salary continuation for twenty-four (24) months plus a severance payment not to exceed $2 million dollars, immediate vesting of all outstanding stock options or restricted stock awards granted pursuant to the 2015 Employment Agreement, life and disability premiums, and health and welfare benefits. Mr. Kathwari will also be subject to a twenty-four (24) month &#8220;non compete&#8221; restrictive covenant granted by Mr. Kathwari for the benefit of the Company. If the payments described in this paragraph would constitute a &#8220;parachute payment&#8221; under Section 280G of the Internal Revenue Code (the &#8220;Code&#8221;) and subject Mr. Kathwari to an excise tax under Section 4999 of the Code, the payments will be reduced to the extent necessary such that Mr. Kathwari will not be subject to an excise tax. However, such payments will not be reduced if, without the reduction, Mr. Kathwari would be entitled to receive and retain, on a net after-tax basis, a greater amount than he would be entitled to receive and retain after such reduction.</FONT></P>
<P id=PARA153 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA154 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">If Mr. Kathwari&#8217;s employment is terminated for &#8220;cause&#8221;, Mr. Kathwari will receive, in addition to payment of all compensation due or unreimbursed expenses as of the date of termination, deferred compensation in accordance with the terms of the applicable arrangement, as well as payment of life and disability insurance premiums and such other and customary benefits as the Company provides to its employees.</FONT></P>
<P id=PARA155 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA156 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">If Mr. Kathwari&#8217;s employment is terminated as a result of retirement by Mr. Kathwari, he will receive his salary to the date of termination plus a prorated annual incentive bonus in respect of the fiscal year in which the date of termination occurs. There is no accelerated vesting of any restricted stock or options and any unvested equity awards will be forfeited. He will receive deferred compensation in accordance with the terms of the applicable arrangement, as well as payment of life and disability insurance premiums, health and welfare benefits, and such other and customary benefits as the Company provides for its employees.</FONT></P>
<P id=PARA157 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA158 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">The foregoing description of the Employment Agreement and the Performance-Based Stock Unit Agreement are qualified in their entirety by reference to such agreements, which are filed as Exhibit 10.1 and Exhibit 10.2 to this Form 8-K, and are incorporated herein by reference.</FONT></P>
<P id=PARA159 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA160 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U><B>Adoption of Compensation and Benefit Plans</B></U></FONT></P>
<P id=PARA161 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA162 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">On September 29, 2015, the Company&#8217;s Compensation Committee approved and the independent members of the Company Board of Directors ratified, a Change in Control Severance Plan (CIC Severance Plan). The CIC Severance Plan provides severance pay to key executives of the Company, other than the Chief Executive Officer, in the event the executive&#39;s employment is involuntarily terminated without &#8220;cause,&#8221; or executive voluntarily terminates his/her employment for &#8220;good reason&#8221; within two years after a &#8220;change in control&#8221; of the Company, or is terminated in anticipation of a &#8220;change in control&#8221; of the Company. The CIC Severance Plan provides assurances that the Company will have the continued dedication of, and the availability of objective advice and counsel from, key executives of the Company notwithstanding the possibility, threat or occurrence of a change in control, and promotes the retention and continuity of certain key executives of the Company. </FONT></P>
<P id=PARA163 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></P>
<DIV id=PGBK252  style="WIDTH: 100%; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=PGFTR252  style="WIDTH: 100%; TEXT-ALIGN: center">&nbsp;</DIV>
<DIV id=PGNUM252  style="FONT-SIZE: 10pt; WIDTH: 100%; TEXT-ALIGN: center">&nbsp;</DIV>
<HR style="HEIGHT: 2px; WIDTH: 100%; PAGE-BREAK-AFTER: always; COLOR: #000000" noShade>

<DIV id=PGHDR252  style="WIDTH: 100%; TEXT-ALIGN: left">&nbsp;</DIV></DIV>
<P id=PARA252.2 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></P>
<P id=PARA164 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Following is a summary of several key terms of the CIC Severance Plan: </FONT></P>
<P id=PARA165 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<TABLE id=MTAB167  style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif; WIDTH: 100%; TEXT-INDENT: 0px" cellSpacing=0 cellPadding=0 border=0>

<TR>
<TD style="WIDTH: 18pt">&nbsp;</TD>
<TD style="WIDTH: 18pt; VERTICAL-ALIGN: top">
<P id=PARA168 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left; MARGIN-TOP: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; MARGIN-RIGHT: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#9679;</FONT></P></TD>
<TD style="VERTICAL-ALIGN: top">
<P id=PARA169 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left; MARGIN-TOP: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; MARGIN-RIGHT: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#8220;change in control&#8221; means the first to occur of: (1) the acquisition of 50% or more of the Company&#8217;s then-outstanding shares of common stock or the combined voting power of the Company&#8217;s then-outstanding voting securities; (2) the Company&#8217;s incumbent directors cease to constitute at least a majority of the board of directors of the Company, except in connection with the election of directors approved by a vote of at least a majority of the directors then comprising the incumbent Board of Directors of the Company; (3) consummation of the Company&#8217;s sale in a merger or similar transaction, or sale or other disposition of all or substantially all of the Company&#8217;s assets; or (4) approval by the Company&#8217;s shareholders of the Company&#8217;s complete liquidation or dissolution. </FONT></P></TD></TR></TABLE>
<P id=PARA170 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<TABLE id=MTAB172  style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif; WIDTH: 100%; TEXT-INDENT: 0px" cellSpacing=0 cellPadding=0 border=0>

<TR>
<TD style="WIDTH: 18pt">&nbsp;</TD>
<TD style="WIDTH: 18pt; VERTICAL-ALIGN: top">
<P id=PARA173 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left; MARGIN-TOP: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; MARGIN-RIGHT: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#9679;</FONT></P></TD>
<TD style="VERTICAL-ALIGN: top">
<P id=PARA174 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left; MARGIN-TOP: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; MARGIN-RIGHT: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#8220;cause&#8221; means (1) the participant&#8217;s material misappropriation of the Company&#8217;s funds or property; (2) the participant&#8217;s unreasonable and persistent neglect or refusal to perform his or her duties which is not remedied in a reasonable period of time following notice from the Company; (3) conviction of the participant of a securities law violation; or (4) a finding by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission that the participant has violated any Federal or State securities law or pleading of nolo contendere, or conviction of a felony or pleading of nolo contendere to a felony. </FONT></P></TD></TR></TABLE>
<P id=PARA175 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<TABLE id=MTAB177  style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif; WIDTH: 100%; TEXT-INDENT: 0px" cellSpacing=0 cellPadding=0 border=0>

<TR>
<TD style="WIDTH: 18pt">&nbsp;</TD>
<TD style="WIDTH: 18pt; VERTICAL-ALIGN: top">
<P id=PARA178 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left; MARGIN-TOP: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; MARGIN-RIGHT: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#9679;</FONT></P></TD>
<TD style="VERTICAL-ALIGN: top">
<P id=PARA179 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left; MARGIN-TOP: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; MARGIN-RIGHT: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#8220;good reason&#8221; means the occurrence after a change in control of any of the following without the participant&#8217;s express written consent, unless fully corrected prior to the date of termination: (1) the material diminution of the participant&#8217;s duties, authorities or responsibilities from those in effect immediately prior to the change in control; (2) a material reduction in the participant&#8217;s base salary or target bonus opportunity as in effect on the date immediately prior to the change in control; (3) the relocation of the participant&#8217;s office from the location at which the participant is principally employed immediately prior to the date of the change in control to a location 35 or more miles farther from the participant&#8217;s residence immediately prior to the change in control; (4) the failure by the Company to pay any material compensation or benefits due to the participant; (5) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform the CIC Severance Plan; or (6) any purported termination of the participant&#8217;s employment that is not effected pursuant to a notice of termination satisfying the requirements of the CIC Severance Plan. </FONT></P></TD></TR></TABLE>
<P id=PARA180 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA181 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">If triggered upon a qualifying termination of employment, the participant is entitled to receive a lump sum amount equal to the sum of (1) any unpaid base salary or bonus (to the extent the Participant was eligible for such bonus) through the date of termination; and (2) a prorated annual incentive bonus for the portion of the fiscal year elapsed prior to the termination date in an amount equal to the average annual incentive bonus the participant earned with respect to three fiscal years immediately prior to the fiscal year in which the termination date occurs prorated for the portion of the fiscal year elapsed prior to the termination date. Additionally, participants are paid a lump sum cash severance payment equal to one times the sum of (1) the participant&#8217;s annual base salary at the highest rate of salary during the 12-month period immediately prior to the termination date or, if higher, during the 12 month period immediately prior to the change in control (in each case, as determined without regard for any reduction for deferred compensation, 401(k) plan contributions and similar items), and (2) the higher of (A) the average annual bonus the participant earned with respect to the three fiscal years immediately prior to the fiscal year in which the change in control occurs; and (B) the average annual bonus the participant earned with respect to the three fiscal years immediately prior to the fiscal year in which the termination occurs. </FONT></P>
<P id=PARA182 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA183 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Whether the Company sets any assets aside for the purposes of the CIC Incentive Plan, such assets shall at all times prior to payment to a participant be subject to the claims of the Company&#39;s creditors.</FONT></P>
<P id=PARA184 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA185 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Benefits are subject to the participant executing a release and agreeing to certain restrictive covenants. </FONT></P>
<P id=PARA186 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA187 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">As of October 1, 2015, named executive officers participating under the CIC incentive plan and benefits payable under the CIC Incentive Plan in the event of a change in control were Daniel M. Grow ($356,667), Eric D. Koster ($385,000), Tracy C. Paccione ($403,333) and Corey Whitely ($616,667). A copy of the CIC incentive plan is filed as Exhibit 10.3</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"> </FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">to this Form 8-K, and is incorporated herein by reference.</FONT></P>
<P id=PARA188 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA189 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U><B>Item 8.01&nbsp;&nbsp;&nbsp; &nbsp;&nbsp; Other Events.</B></U></FONT></P>
<P id=PARA190 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA191 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 17.1pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">On October 1, 2015, the Company issued a press release announcing that the Company will open a new Design Center in the Levis Commons shopping center in Toledo, OH on October 2, 2015. A copy of the press release is attached hereto as Exhibit 99.2 and hereby incorporated by reference. </FONT></P>
<P id=PARA192 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></P>
<DIV id=PGBK253  style="WIDTH: 100%; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<DIV id=PGFTR253  style="WIDTH: 100%; TEXT-ALIGN: center">&nbsp;</DIV>
<DIV id=PGNUM253  style="FONT-SIZE: 10pt; WIDTH: 100%; TEXT-ALIGN: center">&nbsp;</DIV>
<HR style="HEIGHT: 2px; WIDTH: 100%; PAGE-BREAK-AFTER: always; COLOR: #000000" noShade>

<DIV id=PGHDR253  style="WIDTH: 100%; TEXT-ALIGN: left">&nbsp;</DIV></DIV>
<P id=PARA253.2 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></P>
<P id=PARA193 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Additional Information and Where to Find It</B></FONT></P>
<P id=PARA194 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA195 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif; TEXT-TRANSFORM: uppercase">the company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the company&#39;s stockholders in respect of the 2015 Annual Meeting. THE COMPANY plans to file with the U.S. Securities and Exchange Commission a definitive proxy statement and an accompanying proxy card in connection with the 2015 Annual Meeting (the &#8220;2015 Proxy Materials&#8221;). The 2015 Proxy Materials will contain important information about the company, its directors and executive officers, the 2015 Annual Meeting and related matters. Stockholders are strongly urged to read the 2015 Proxy Materials, any amendments and supplements thereto, and the accompanying proxy card carefully when they are available. Stockholders will be able to obtain free copies of the 2015 Proxy Materials and other documents filed with the SEC by THE COMPANY through the web site maintained by the SEC at www.sec.gov and on THE COMPANY&#8217;s web site at http://www.ethanallen.com/en_US/investor-relations1.html. Information regarding the identity of potential participants, and their direct or indirect interests, by security holdings or otherwise, will be set forth in the 2015 Proxy Materials.</FONT></P>
<P id=PARA196 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA197 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<TABLE id=TBL200  style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif; WIDTH: 93.3%; TEXT-INDENT: 0px" cellSpacing=0 cellPadding=0 border=0>

<TR>
<TD style="WIDTH: 38.9%; VERTICAL-ALIGN: top">
<P id=PARA198 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Item 9.01.</B></FONT></P></TD>
<TD style="WIDTH: 61.1%; VERTICAL-ALIGN: top">
<P id=PARA199 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp; Financial Statements and Exhibits.</B></FONT></P></TD></TR></TABLE>
<P id=PARA201 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 108pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: -36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA202 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA203 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 10.8pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(d)</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Exhibits</I>.</FONT></P>
<P id=PARA204 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA205 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 10.8pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">See Index to Exhibits attached hereto.</FONT></P>
<P id=PARA206 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA207 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA208 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA209 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"></FONT></P>
<P id=PARA211 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>SIGNATURES</B></FONT></P>
<P id=PARA212 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA213 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.</FONT></P>
<P id=PARA214 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA215 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"></FONT></P>
<TABLE id=TBL229  style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif; WIDTH: 87.7%; TEXT-INDENT: 0px" cellSpacing=0 cellPadding=0 border=0>

<TR>
<TD style="WIDTH: 37.4%; VERTICAL-ALIGN: top">
<P id=PARA217 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P></TD>
<TD style="WIDTH: 62.6%; VERTICAL-ALIGN: top" colSpan=2>
<P id=PARA218 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">ETHAN ALLEN INTERIORS INC.</FONT></P>
<P id=PARA219 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25">&nbsp;</P></TD></TR>
<TR>
<TD style="WIDTH: 37.4%; VERTICAL-ALIGN: top">
<P id=PARA220 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Date: October 1, 2015</FONT></P></TD>
<TD style="WIDTH: 12.6%; VERTICAL-ALIGN: top">
<P id=PARA221 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">By:</FONT></P></TD>
<TD style="WIDTH: 50%; VERTICAL-ALIGN: top">
<P id=PARA222 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U>/s/ Corey Whitely&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </U></FONT></P></TD></TR>
<TR>
<TD style="WIDTH: 37.4%; VERTICAL-ALIGN: top">&nbsp;</TD>
<TD style="WIDTH: 12.6%; VERTICAL-ALIGN: top">&nbsp;</TD>
<TD style="WIDTH: 50%; VERTICAL-ALIGN: top">&nbsp;</TD></TR>
<TR>
<TD style="WIDTH: 37.4%; VERTICAL-ALIGN: top">
<P id=PARA223 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P></TD>
<TD style="WIDTH: 12.6%; VERTICAL-ALIGN: top">&nbsp; </TD>
<TD style="WIDTH: 50%; VERTICAL-ALIGN: top">
<P id=PARA224 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Corey Whitely</FONT></P></TD></TR>
<TR>
<TD style="WIDTH: 37.4%; VERTICAL-ALIGN: top">&nbsp;</TD>
<TD style="WIDTH: 12.6%; VERTICAL-ALIGN: top">&nbsp;</TD>
<TD style="WIDTH: 50%; VERTICAL-ALIGN: top">&nbsp;</TD></TR>
<TR>
<TD style="WIDTH: 37.4%; VERTICAL-ALIGN: top">
<P id=PARA225 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P></TD>
<TD style="WIDTH: 12.6%; VERTICAL-ALIGN: top">
<P id=PARA226 style="TEXT-ALIGN: right; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P></TD>
<TD style="WIDTH: 50%; VERTICAL-ALIGN: top">
<P id=PARA227 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I>Executive Vice President, Administration, </I></FONT></P>
<P id=PARA228 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I>Chief Financial Officer and Treasurer</I></FONT></P></TD></TR></TABLE>
<P id=PARA230 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA231 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA232 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>EXHIBIT INDEX</B></FONT></P>
<P id=PARA233 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<TABLE id=TBL246  style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif; WIDTH: 93.1%; MARGIN-LEFT: 9pt; MARGIN-RIGHT: 6.9%; TEXT-INDENT: 0px" cellSpacing=0 cellPadding=0 border=0>

<TR>
<TD style="WIDTH: 13%; VERTICAL-ALIGN: bottom">
<P id=PARA234 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U>Exhibit </U></FONT></P>
<P style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U></U><U>Number</U></FONT></P></TD>
<TD style="WIDTH: 87%; VERTICAL-ALIGN: bottom">
<P id=PARA235 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U>Description</U></FONT></P></TD></TR>
<TR>
<TD style="WIDTH: 13%; VERTICAL-ALIGN: top">
<P id=PARA236 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">10.1</FONT></P></TD>
<TD style="WIDTH: 87%; VERTICAL-ALIGN: top">
<P id=PARA237 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Employment Agreement between the Company and M. Farooq Kathwari dated October 1, 2015 </FONT></P></TD></TR>
<TR>
<TD style="WIDTH: 13%; VERTICAL-ALIGN: top">
<P id=PARA238 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">10.2</FONT></P></TD>
<TD style="WIDTH: 87%; VERTICAL-ALIGN: top">
<P id=PARA239 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Form of Performance-Based Stock Unit Agreement</FONT></P></TD></TR>
<TR>
<TD style="WIDTH: 13%; VERTICAL-ALIGN: top">
<P id=PARA240 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">10.3</FONT></P></TD>
<TD style="WIDTH: 87%; VERTICAL-ALIGN: top">
<P id=PARA241 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Change in Control Severance Plan</FONT></P></TD></TR>
<TR>
<TD style="WIDTH: 13%; VERTICAL-ALIGN: top">
<P id=PARA242 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">99.1</FONT></P></TD>
<TD style="WIDTH: 87%; VERTICAL-ALIGN: top">
<P id=PARA243 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Press release dated October 1, 2015 announcing Director changes</FONT></P></TD></TR>
<TR>
<TD style="WIDTH: 13%; VERTICAL-ALIGN: top">
<P id=PARA244 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">99.2</FONT></P></TD>
<TD style="WIDTH: 87%; VERTICAL-ALIGN: top">
<P id=PARA245 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Press release dated October 1, 2015 announcing new Design Center opening</FONT></P></TD></TR></TABLE>
<P id=PARA247 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; BACKGROUND-COLOR: #ffffff"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P></BODY></HTML>
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eth20151001_8k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 29, 2015
ETHAN ALLEN INTERIORS INC.
(Exact name of registrant as specified in its charter)
Delaware
1-11692
06-1275288
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)
Ethan Allen Drive
Danbury, CT
06811
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code:
(203) 743-8000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☒
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
INFORMATION TO BE INCLUDED IN REPORT
Item 5.02
Compensatory Arrangements of Certain Officers.
Appointment of New Director
On September 30, 2015, the Board of Directors of Ethan Allen Interiors Inc.'s (the "Company") issued a press release announcing the election of Tara I. Stacom, 57, as an independent director of the Company. The Company will also nominate Ms. Stacom as an independent director at the Company's upcoming annual meeting of stockholders. Ms. Stacom has served as an Executive Vice Chairman at Cushman & Wakefield, a worldwide commercial real estate firm since 2013, and has served in various capacities at Cushman & Wakefield since 1981. Ms. Stacom will receive a standard director compensation package that has been described in the Company's form DEF 14A filed with the SEC on October 8, 2014 under the section entitled "Director Compensation", and is incorporated herein by reference into this item 5.02.
A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Approval of
2015 Employment
Agreement
As of September 29, 2015, the Company's Compensation Committee approved and the independent members of the Company's Board of Directors ratified, subject to Stockholder approval of the incentive components at the 2015 annual meeting, the terms of the a new employment agreement, dated as of October 1, 2015 and effective as of July 1, 2015, between the Company and Mr. Kathwari (the "2015 Employment Agreement"). Pursuant to the 2015 Employment Agreement the Company agreed to continue to employ Mr. Kathwari and Mr. Kathwari agreed to remain as Chairman, President and Principal Executive Officer of the Company and Ethan Allen Global, Inc., for a period of approximately five years, with two automatic one-year extensions commencing on each of July 1, 2021 and July 1, 2022 (each a "New Anniversary Date") unless notice of non-renewal is given by either Mr. Kathwari or the Company, not later than nine (9) months prior to a New Anniversary Date. Pursuant to the terms of the 2015 Employment Agreement, Mr. Kathwari will continue to receive the current base salary of $1,150,050 per year throughout the term of the 2015 Employment Agreement.
Under the terms of the 2015 Employment Agreement, Mr. Kathwari will be entitled to an annual incentive bonus based upon the Company's Adjusted Operating Income, as defined herein. For purposes of computing Mr. Kathwari's annual incentive bonus, the Adjusted Operating Income for each fiscal year is defined as the consolidated operating income of the Company as set forth in the Company's audited consolidated financial statement as of June 30
th
of each fiscal year as adjusted by adding thereto the charges, expenses or accruals, if any, charged against such operating income for (1) non-recurring, extraordinary or unusual events, (2) annual bonuses, both incentive and discretionary, to officers and managers, including the annual incentive bonus, (3) share-based compensation expense recognized in accordance with ASC 718, or otherwise, including in respect of the issuance to the Company's executives, managers, employees, dealers and other business associates of capital stock of the Company, or the issuance or exercise to or by such persons of options, warrants or other rights to acquire capital stock of the Company, stock appreciation rights of the Company or similar equity equivalents, including in respect of restricted stock awards, performance-based stock awards and stock options contemplated by the 2015 Employment Agreement and prior employment agreements between the Company and Mr. Kathwari, and (4) any increased depreciation, amortization or other charges resulting from purchase accounting adjustments by virtue of acquisitions or business combinations by the Company, Ethan Allen Global, Inc. or any affiliate of the Company (provided, however, that no such adjustments will be made under this clause (4) with respect to acquisitions occurring prior to the effective date of the 2015 Employment Agreement).
For purposes of Mr. Kathwari's annual incentive bonus for each fiscal year, the Compensation Committee of the Board of Directors, subject to review and ratification by the Board of Directors, will set and establish the target and goal (the "AIB Annual Target") for Adjusted Operating Income for such fiscal year within 90 days following the commencement of that fiscal year, provided, that if the Compensation Committee, subject to review and ratification of the Board of Directors, does not set and establish the AIB Annual Target for any fiscal year for any reason or no reason, then the AIB Annual Target for that fiscal year will automatically be set and established as a five percent (5%) increase and improvement in Adjusted Operating Income as compared to the actual Adjusted Operating Income for the immediately preceding fiscal year. Mr. Kathwari's annual incentive bonus for a given fiscal year will be determined by reference to the achievement of the Company of its Adjusted Operating Income for that fiscal year measured against the AIB Annual Target for that fiscal year as follows:
Annual Incentive Bonus Payout
Adjusted Operating
Income Achievement
Level
Performance
(as Percentage of AIB
Annual Target)
Payout
(as Percentage of
Base Salary)
Annual Incentive
Bonus Amount
Minimum Threshold
80-85%

33%
$375,000
AIB Annual Target
100%

65%
$750,000
Maximum
120-130%

148% (i.e., above target bonus)
$1,700,000
Mr. Kathwari will only be entitled to receive the annual incentive bonus with respect to a fiscal year if and to the extent the Adjusted Operating Income performance targets and goals are achieved. For the avoidance of doubt, Mr. Kathwari shall not be entitled to earn or receive an annual incentive bonus for a fiscal year where the actual Adjusted Operating Income Achievement Level is less than 80% of the AIB Annual Target for such fiscal year (but the failure to earn and receive an annual incentive bonus for any fiscal year will not affect the right to receive an annual incentive bonus earned for a subsequent fiscal year).
If the Adjusted Operating Income for a fiscal year is between the Minimum Threshold and the AIB Annual Target, or the AIB Annual Target and the Maximum, the specific amount of the annual incentive bonus for that fiscal year will be linearly interpolated on a straight line basis based on actual performance (as a percentage of the AIB Annual Target), interpolated linearly either between the Minimum Threshold and the AIB Annual Target or between the AIB Annual Target and the Maximum, respectively, and then utilizing that same percentile for the determination of the annual incentive bonus, interpolated linearly either between the Minimum Threshold and the AIB Annual Target or between the AIB Annual Target and the Maximum, respectively.
If the Company effects a major acquisition which acquisition constitutes a change of ownership or control of the Company within the meaning of Treas. Reg. Section 1.162-27(e)(2)(v) during any fiscal year, Mr. Kathwari and the Company shall negotiate in good faith an appropriate revision to the threshold amount to implement the purpose of the annual incentive bonus such that the annual incentive bonus may be payable even if the threshold amount is not achieved with respect to such fiscal year.
Mr. Kathwari's right to receive (or retain) any annual incentive bonus will be subject to "clawback" or similar obligations set forth in Company policies duly approved by the Board of Directors and required by applicable laws and regulations (including by any securities exchange) from time to time and applicable to the Company and Mr. Kathwari.
Performance-Based Restricted Stock Units
Under the terms of the 2015 Employment Agreement, Mr. Kathwari will also be entitled to performance-based restricted stock units ("Performance Units") providing a contingent right to receive shares of the Company's common stock, , par value $.01 per share ("Common Stock"), conditioned upon the Company's achievement of certain performance targets and goals, and subject to the terms of the 2015 Employment Agreement and a separate performance–based stock unit agreement (the "Performance-Based Stock Unit Agreement") to be executed by Mr. Kathwari and the Company.
Each fiscal year during the term of Mr. Kathwari's employment under the 2015 Employment Agreement, Mr. Kathwari shall be granted Performance Units entitling Mr. Kathwari to earn 0 to 81,250 shares of the Common Stock, with each such grant to be made within ninety (90) days of the beginning of each fiscal year and earning of such shares of Common Stock to be contingent upon the performance of the Company in accordance with the 2015 Employment Agreement and the applicable performance–based stock unit agreement, such that Performance Units in relation to up to 406,250 shares of Common Stock could be earned during the full term of Mr. Kathwari's employment under the 2015 Employment Agreement.
The number of shares of Common Stock issuable in respect of each Performance Unit as of the date of the 2015 Employment Agreement is one share and the aggregate number of shares of Common Stock issuable with respect to a grant of Performance Units under the 2015 Employment Agreement for any fiscal year is specified as of the date of the 2015 Employment Agreement. Such number or numbers of shares shall be adjusted for stock splits, stock dividends, reclassifications, recapitalizations and similar events in respect of the Common Stock occurring after the date of the 2015 Employment Agreement.
For purposes of the Performance Units to be granted for each fiscal year, the Compensation Committee, subject to review and ratification by the Board of Directors, will set and establish the target and goal (the "PSU Annual Target") for Adjusted Operating Income Per Share (as defined below) for such fiscal year and for each of the two immediately following fiscal years (for a total of three fiscal years) within 90 days following the commencement of that initial fiscal year, provided, that if the Compensation Committee, subject to review and ratification of the Board of Directors, does not establish the PSU Annual Target for any of such fiscal years for any reason or no reason, the PSU Annual Target will automatically be established for each such fiscal year as a five percent (5%) increase and improvement in actual Adjusted Operating Income Per Share as compared to the Adjusted Operating Income Per Share for the immediately preceding year (assuming no change in the number of outstanding shares of Common Stock on a diluted weighted average common share basis as set forth in the Company's audited consolidated financial statements). If there has been a change in such number, the PSU Annual Target and such Actual Adjusted Operating Income Per Share will be correspondingly adjusted by the Compensation Committee. Pursuant to the 2015 Employment Agreement, "Adjusted Operating Income Per Share" means the Adjusted Operating Income divided by the number of outstanding shares of the Company's Common Stock on a diluted weighted average common share basis as reflected in the Company's audited consolidated financial statements.
For each grant of Performance Units, the amount of the grant that will be earned and paid will be determined by reference to the achievement of the Company of the PSU Annual Target for each of the two initial fiscal years (on a cumulative basis) and the three fiscal years (on a cumulative basis) applicable to such grant.
Performance Units Earned
Adjusted Operating
Income Per Share
Achievement Level
Performance as
Percentage of
Cumulative PSU
Annual Target for
Applicable Two or
Three Year Period
Percentage of Units
Earned (Per Grant)
Number of Earned
Units (Per Grant)
Threshold
80-85%

50%
32,500
Target
100%

100%
65,000
Maximum
115-120%

125% (i.e., more than target award)
81,250
Performance Units for each grant may be earned over either a two fiscal year or three fiscal year period. Accordingly, if Performance Units with respect to a grant are earned in the first two fiscal years in relation to such grant, then those Performance Units shall be paid. If all of the Performance Units with respect to a grant are earned during such two fiscal years, then no additional Performance Units in relation to that grant shall be earned in the third fiscal year. If less than all of the Performance Units with respect to a grant are earned in the first two fiscal years in relation to that grant (due to shortfalls or otherwise), then any unearned Performance Units in relation to such grant shall be earned in the third fiscal year in relation to that grant to the extent that the number of Performance Units earned during the three fiscal years in relation to such grant exceeds the number of Performance Units earned in relation to such two fiscal years. For illustrative purposes only, if as a result of the Company's cumulative performance for the first two fiscal years, Mr. Kathwari would earn 65,000 Performance Units (each of which would represent one share of Common Stock (unless adjusted pursuant to the 2015 Employment Agreement, the applicable performance-based stock unit agreement and the Option Plan) and would be paid by issuance of such Common Stock after such results are certified by the Compensation Committee) and, as a result of the Company's cumulative performance for the first three fiscal years, Mr. Kathwari would earn 70,000 Performance Units, then Mr. Kathwari would earn an additional 5,000 Performance Units for fiscal year three (which would be similarly paid).
If the Adjusted Operating Income Per Share for an applicable two or three fiscal year period is between the Minimum Threshold and the PSU Annual Target, or the PSU Annual Target and the Maximum, the specific amount of the Performance Units earned in relation to a grant for that period will be linearly interpolated on a straight-line basis based on actual performance (as a percentage of PSU Annual Target), interpolated linearly either between the Minimum Threshold and the PSU Annual Target or between the PSU Annual Target and the Maximum, respectively, and then utilizing that same percentile for the determination of the number of Performance Units earned, interpolated linearly either between the Minimum Threshold and the PSU Annual Target or between the PSU Annual Target and the Maximum, respectively.
If the Company effects a major acquisition which constitutes a change of ownership or control of the Company within the meaning of Treas. Reg. Section 1.162-27(e)(2)(v) during any fiscal year, Mr. Kathwari and the Company shall negotiate in good faith an appropriate revision to the threshold amounts set forth above to implement the purpose of the Performance Units such that the Performance Units may be payable even if the threshold amounts are not achieved with respect to such fiscal year.
Mr. Kathwari's right to receive (or retain) any Performance Units or benefits for Performance Units is conditional upon the achievement of the PSU Annual Targets.
Moreover, Mr. Kathwari's right to receive (or retain) any Performance Units or benefits of the Performance Units will be subject to "clawback" or similar obligations set forth in Company's policies duly approved by the Board and required by applicable laws and regulations (including by any securities exchange) from time to time and applicable to the Company and Mr. Kathwari, and furthermore, will be subject to retention and restriction on sale, hedging, transfer or similar obligations in relation to Company executives set forth in Company policies duly approved by the Board.
In the event Mr. Kathwari's employment with the Company is terminated by reason of death or disability, he (or his estate) will receive salary continuation for twelve (12) months, an annual incentive bonus in respect of the full fiscal year in which the date of termination occurs, accelerated vesting of all restricted stock and options awarded and granted under the 2015 Employment Agreement, deferred compensation, life and disability insurance premiums, expense reimbursement and such other and customary benefits as the Company provides to its employees.
If Mr. Kathwari's employment is terminated by the Company without "cause", or by Mr. Kathwari "for good reason" he will receive salary continuation for twenty-four (24) months and a severance payment not to exceed $2 million dollars, one additional year of vesting, for all outstanding stock options or restricted stock awards granted pursuant to the 2015 Employment Agreement, life and disability insurance premiums, and health and welfare benefits. Mr. Kathwari will also be subject to a twenty-four (24) month "non-compete" restrictive covenant.
If Mr. Kathwari's employment is terminated as a result of a change in control, he will receive salary continuation for twenty-four (24) months plus a severance payment not to exceed $2 million dollars, immediate vesting of all outstanding stock options or restricted stock awards granted pursuant to the 2015 Employment Agreement, life and disability premiums, and health and welfare benefits. Mr. Kathwari will also be subject to a twenty-four (24) month "non compete" restrictive covenant granted by Mr. Kathwari for the benefit of the Company. If the payments described in this paragraph would constitute a "parachute payment" under Section 280G of the Internal Revenue Code (the "Code") and subject Mr. Kathwari to an excise tax under Section 4999 of the Code, the payments will be reduced to the extent necessary such that Mr. Kathwari will not be subject to an excise tax. However, such payments will not be reduced if, without the reduction, Mr. Kathwari would be entitled to receive and retain, on a net after-tax basis, a greater amount than he would be entitled to receive and retain after such reduction.
If Mr. Kathwari's employment is terminated for "cause", Mr. Kathwari will receive, in addition to payment of all compensation due or unreimbursed expenses as of the date of termination, deferred compensation in accordance with the terms of the applicable arrangement, as well as payment of life and disability insurance premiums and such other and customary benefits as the Company provides to its employees.
If Mr. Kathwari's employment is terminated as a result of retirement by Mr. Kathwari, he will receive his salary to the date of termination plus a prorated annual incentive bonus in respect of the fiscal year in which the date of termination occurs. There is no accelerated vesting of any restricted stock or options and any unvested equity awards will be forfeited. He will receive deferred compensation in accordance with the terms of the applicable arrangement, as well as payment of life and disability insurance premiums, health and welfare benefits, and such other and customary benefits as the Company provides for its employees.
The foregoing description of the Employment Agreement and the Performance-Based Stock Unit Agreement are qualified in their entirety by reference to such agreements, which are filed as Exhibit 10.1 and Exhibit 10.2 to this Form 8-K, and are incorporated herein by reference.
Adoption of Compensation and Benefit Plans
On September 29, 2015, the Company's Compensation Committee approved and the independent members of the Company Board of Directors ratified, a Change in Control Severance Plan (CIC Severance Plan). The CIC Severance Plan provides severance pay to key executives of the Company, other than the Chief Executive Officer, in the event the executive's employment is involuntarily terminated without "cause," or executive voluntarily terminates his/her employment for "good reason" within two years after a "change in control" of the Company, or is terminated in anticipation of a "change in control" of the Company. The CIC Severance Plan provides assurances that the Company will have the continued dedication of, and the availability of objective advice and counsel from, key executives of the Company notwithstanding the possibility, threat or occurrence of a change in control, and promotes the retention and continuity of certain key executives of the Company.
Following is a summary of several key terms of the CIC Severance Plan:
●
"change in control" means the first to occur of: (1) the acquisition of 50% or more of the Company's then-outstanding shares of common stock or the combined voting power of the Company's then-outstanding voting securities; (2) the Company's incumbent directors cease to constitute at least a majority of the board of directors of the Company, except in connection with the election of directors approved by a vote of at least a majority of the directors then comprising the incumbent Board of Directors of the Company; (3) consummation of the Company's sale in a merger or similar transaction, or sale or other disposition of all or substantially all of the Company's assets; or (4) approval by the Company's shareholders of the Company's complete liquidation or dissolution.
●
"cause" means (1) the participant's material misappropriation of the Company's funds or property; (2) the participant's unreasonable and persistent neglect or refusal to perform his or her duties which is not remedied in a reasonable period of time following notice from the Company; (3) conviction of the participant of a securities law violation; or (4) a finding by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission that the participant has violated any Federal or State securities law or pleading of nolo contendere, or conviction of a felony or pleading of nolo contendere to a felony.
●
"good reason" means the occurrence after a change in control of any of the following without the participant's express written consent, unless fully corrected prior to the date of termination: (1) the material diminution of the participant's duties, authorities or responsibilities from those in effect immediately prior to the change in control; (2) a material reduction in the participant's base salary or target bonus opportunity as in effect on the date immediately prior to the change in control; (3) the relocation of the participant's office from the location at which the participant is principally employed immediately prior to the date of the change in control to a location 35 or more miles farther from the participant's residence immediately prior to the change in control; (4) the failure by the Company to pay any material compensation or benefits due to the participant; (5) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform the CIC Severance Plan; or (6) any purported termination of the participant's employment that is not effected pursuant to a notice of termination satisfying the requirements of the CIC Severance Plan.
If triggered upon a qualifying termination of employment, the participant is entitled to receive a lump sum amount equal to the sum of (1) any unpaid base salary or bonus (to the extent the Participant was eligible for such bonus) through the date of termination; and (2) a prorated annual incentive bonus for the portion of the fiscal year elapsed prior to the termination date in an amount equal to the average annual incentive bonus the participant earned with respect to three fiscal years immediately prior to the fiscal year in which the termination date occurs prorated for the portion of the fiscal year elapsed prior to the termination date. Additionally, participants are paid a lump sum cash severance payment equal to one times the sum of (1) the participant's annual base salary at the highest rate of salary during the 12-month period immediately prior to the termination date or, if higher, during the 12 month period immediately prior to the change in control (in each case, as determined without regard for any reduction for deferred compensation, 401(k) plan contributions and similar items), and (2) the higher of (A) the average annual bonus the participant earned with respect to the three fiscal years immediately prior to the fiscal year in which the change in control occurs; and (B) the average annual bonus the participant earned with respect to the three fiscal years immediately prior to the fiscal year in which the termination occurs.
Whether the Company sets any assets aside for the purposes of the CIC Incentive Plan, such assets shall at all times prior to payment to a participant be subject to the claims of the Company's creditors.
Benefits are subject to the participant executing a release and agreeing to certain restrictive covenants.
As of October 1, 2015, named executive officers participating under the CIC incentive plan and benefits payable under the CIC Incentive Plan in the event of a change in control were Daniel M. Grow ($356,667), Eric D. Koster ($385,000), Tracy C. Paccione ($403,333) and Corey Whitely ($616,667). A copy of the CIC incentive plan is filed as Exhibit 10.3
to this Form 8-K, and is incorporated herein by reference.
Item 8.01       Other Events.
On October 1, 2015, the Company issued a press release announcing that the Company will open a new Design Center in the Levis Commons shopping center in Toledo, OH on October 2, 2015. A copy of the press release is attached hereto as Exhibit 99.2 and hereby incorporated by reference.
Additional Information and Where to Find It
the company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the company's stockholders in respect of the 2015 Annual Meeting. THE COMPANY plans to file with the U.S. Securities and Exchange Commission a definitive proxy statement and an accompanying proxy card in connection with the 2015 Annual Meeting (the "2015 Proxy Materials"). The 2015 Proxy Materials will contain important information about the company, its directors and executive officers, the 2015 Annual Meeting and related matters. Stockholders are strongly urged to read the 2015 Proxy Materials, any amendments and supplements thereto, and the accompanying proxy card carefully when they are available. Stockholders will be able to obtain free copies of the 2015 Proxy Materials and other documents filed with the SEC by THE COMPANY through the web site maintained by the SEC at www.sec.gov and on THE COMPANY's web site at http://www.ethanallen.com/en_US/investor-relations1.html. Information regarding the identity of potential participants, and their direct or indirect interests, by security holdings or otherwise, will be set forth in the 2015 Proxy Materials.
Item 9.01.
Financial Statements and Exhibits.
(d)
Exhibits
.
See Index to Exhibits attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ETHAN ALLEN INTERIORS INC.
Date: October 1, 2015
By:
/s/ Corey Whitely
Corey Whitely
Executive Vice President, Administration,
Chief Financial Officer and Treasurer
EXHIBIT INDEX
Exhibit
Number
Description
10.1
Employment Agreement between the Company and M. Farooq Kathwari dated October 1, 2015
10.2
Form of Performance-Based Stock Unit Agreement
10.3
Change in Control Severance Plan
99.1
Press release dated October 1, 2015 announcing Director changes
99.2
Press release dated October 1, 2015 announcing new Design Center opening