Long Term Incentive Plan

3 Months Ended

Mar. 31, 2015

Restricted Stock Units and Long Term Incentive Plan

Long Term Incentive Plan

6. Long Term Incentive Plan

Employee

The Company grants incentive awards pursuant to the 2012 Long Term Incentive Plan (the “2012 Plan”). For awards granted in 2012 through 2015, the target amount of an award granted was based on a percentage of each employee’s annual base salary ranging from 18% to 85%. Each award is comprised of a Performance Award and an Employment Award. For awards granted in 2010 through 2012, the Performance Award and the Employment Award each constituted half of the award. For awards granted in 2013 through 2015, the Performance Award constituted 60% of the award and the Employment Award constituted 40% of the award. The Performance Award is based on the Company’s achievement of a predetermined cash flow goal (cash flow before interest, taxes and dividends and long term incentive expense and equity based compensation and debt repayment) and an adjusted EBITDA goal (before long term incentive expense and equity based compensation) over a three year performance period.

Each of the 40% Employment Awards are subject to continued employment and each of the 60% Performance Awards are subject to the Company’s achievement of financial performance criteria. Each award will be settled in cash and is subject to earlier pro rata settlement as provided in the 2012 Plan.

Changes in the employee long term incentive plan account are as follows:

	Granted Incentive
	Compensation Range				Vesting Date		Settlement (in thousands)
Grant	Low		High		Employment	Performance	Employment Awards			Performance Awards
Date	Grant		Grant		Awards	Awards	Date	Amount		Date	Amount
4/25/2011	$	23,000	$	550,000	8/31/2013	12/31/2013	9/6/2013	$	1,452	3/14/2014	$	1,551
3/1/2012	$	22,000	$	652,000	8/31/2014	12/31/2014	9/5/2014	$	1,509	3/6/2015	$	1,938
3/1/2013	$	20,000	$	680,000	12/31/2015	12/31/2015	N/A	$	—	N/A	$	—
3/1/2014	$	27,000	$	707,000	12/31/2016	12/31/2016	N/A	$	—	N/A	$	—
3/1/2015	$	29,000	$	741,000	12/31/2017	12/31/2017	N/A	$	—	N/A	$	—

Independent Directors

The Company entered into agreements (“LTI Agreements”) granting incentive compensation to each director who is not an employee of the Company or Hallmark Cards or their respective subsidiaries subject to continued membership on the Company’s board and achievement of the financial performance criteria. Each award will be settled in cash and is subject to earlier pro rata settlement as provided in each LTI Agreement.

Changes in the independent director long term incentive plan account are as follows:

Grant				Settlement
Date	Grant Amount		Vesting Date	Date	Amount
8/17/2012	$	50,000	12/31/2014	3/4/2015	$	306,000
3/1/2013	$	50,000	12/31/2015	N/A	$	—
8/16/2013	$	35,000	8/15/2014	8/19/2014	$	262,000
3/1/2014	$	50,000	12/31/2016	N/A	$	—
3/1/2015	$	50,000	12/31/2017	N/A	$	—

Vesting

Vesting of the 2013, 2014 and 2015 performance awards under the LTI Agreements will be determined in accordance with the Company’s performance criteria concerning adjusted EBITDA and cash flow and subject to earlier pro rata settlement as provided in each LTI Agreement.

In recognition of these LTI Agreements, the accompanying unaudited condensed consolidated statements of operations include $884,000 and $872,000 among selling, general and administrative expense for the three months ended March 31, 2014 and 2015, respectively. Additionally, the $5.9 million and $4.5 million liabilities for these agreements were included in accounts payable and accrued liabilities in the accompanying unaudited condensed consolidated balance sheets at December 31, 2014, and March 31, 2015, respectively.