UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

KID BRANDS, INC.

(Exact name of registrant as specified in its charter)

New Jersey		22-1815337
(State of or other jurisdiction of		(I.R.S. Employer Identification Number)
incorporation or organization)
1800 Valley Road, Wayne, New Jersey		07470
(Address of principal executive offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (201) 405-2400

Securities registered pursuant to Section 12(b) of the Act:

		Name of each exchange
Title of each Class		on which registered
Common Stock, $0.10 stated value		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The aggregate market value of the voting common equity held by non-affiliates of the Registrant computed by reference to the price of such stock at the close of business on June 30, 2009 was approximately $48.9 million.

The number of shares outstanding of each of the Registrant’s classes of common stock, as of March 19, 2010, was as follows:

Class		Number of Shares
Common Stock, $0.10 stated value		21,577,699

Documents Incorporated by Reference

None.

 

 

EXPLANATORY NOTE

In its Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission on March 26, 2010 (the “Original Filing”), Kid Brands, Inc., formerly known as Russ Berrie and Company, Inc. (the “Company”), provided certain of the information required by Items 10 through 14 of Part III of the Original Filing by incorporating by reference portions of the definitive proxy statement for the Company’s 2010 Annual Meeting of Shareholders, pursuant to General Instruction G of Form 10-K. The Company is filing this Amendment No. 1 on Form 10K/A (“Amendment No. 1”) solely: (i) to timely provide such Part III information, and (ii) to amend the section of the cover page captioned “Documents Incorporated by Reference” to read “None”. In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (“Rule 12b-15”), each Item of the Original Filing that is affected by this Amendment No. 1 has been amended and restated in its entirety. All other Items of the Original Filing are unaffected by this Amendment No. 1 and such Items have not been included in this Amendment No. 1. Except as otherwise noted, information included in this Amendment No. 1 is stated as of December 31, 2009 and does not reflect any subsequent information or events.

As required by Rule 12b-15, new certifications of our principal executive officer and principal financial officer are being filed as exhibits to this Amendment No. 1.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information relating to executive officers is included under the caption “Executive Officers of the Registrant” in Part I of the Original Filing.

DIRECTORS

As of August 9, 2006, investment entities and accounts managed and advised by Prentice Capital Management, L.P. (“Prentice”) purchased 4,399,733 shares of the Common Stock of the Company from The Russell Berrie Foundation (the “Foundation”), pursuant to a share purchase agreement with the Foundation. Also as of August 9, 2006, D. E. Shaw Laminar Portfolios, L.L.C. (“Laminar”) purchased 4,399,733 shares of Common Stock from the Foundation pursuant to a share purchase agreement with the Foundation. The total of 8,799,466 shares of Common Stock purchased by the Prentice entities and accounts and Laminar as described above (collectively, the “Purchases”), represent approximately 41% of the Company’s outstanding shares of Common Stock. The Company was not a party to either share purchase agreement nor did it receive any of the proceeds from the Purchases.

In connection with the Purchases, as of August 10, 2006, the Company entered into an Investors’ Rights Agreement (as amended, the “IRA”), with Prentice Capital Partners, LP, Prentice Capital Partners QP, LP, Prentice Capital Offshore, Ltd., GPC XLIII, LLC, S.A.C. Capital Associates, LLC, PEC I, LLC, Prentice Special Opportunities Master, L.P. and Prentice Special Opportunities, LP (collectively, the “Prentice Buyers”) and Laminar. As of April 13, 2010, all the shares of Common Stock of the Company owned by the Prentice Buyers other than S.A.C. Capital Associates, LLC were transferred to Prentice Consumer Partners, LP, an affiliate of Prentice and the Prentice Buyers. As a result, Prentice Consumer Partners, LP is bound by, and has become a party to, the IRA. Pursuant to the IRA, and subject to the limitations set forth therein, the Company has generally agreed, among other things, to nominate for election with respect to all stockholders meetings or consents concerning the election of members of the Board of Directors of the Company (the “Board”), two persons designated by Prentice (“Prentice Directors”), and two persons designated by Laminar (“Laminar Directors”), provided, that the number of Prentice Directors and Laminar Directors shall be decreased as set forth in the IRA if the number of shares of Common Stock held by Prentice or Laminar, as applicable, decreases to specified levels set forth therein; and provided further, that at any time that Prentice shall have the right to designate more than one Prentice Director, at least one of such designees shall be an Independent Director, and at any time that Laminar shall have the right to designate more than one Laminar Director, at least one of such designees shall be an Independent Director (defined generally as (i) “independent” for purposes of the governance rules of the New York Stock Exchange and (ii) “independent” under such rules if Prentice and Laminar were the listed company with respect to which independence is being determined). The Company has waived the requirement set forth in clause (ii) above for each of Laminar and Prentice. The current Prentice Directors are Messrs. Zimmerman and Ciampi; the current Laminar Director is Mr. Schaefer (Ms. Krueger resigned from the Board effective March 30, 2010 in connection with her resignation from her employment with an affiliate of Laminar, and a new Laminar Director has yet to be identified).

The information set forth below concerning the current directors of the Company has been furnished by them to the Company. Age and other information is as of April 25, 2010.

						Director
Name		Age				Since				Principal Occupation; Other Public Directorships*
Raphael Benaroya (4)			62				1993			From April through October 2009, Mr. Benaroya had been retained to perform an expanded role as Chairman of the Board. From April 2008 until March 2010, Mr. Benaroya had been a consultant for D. E. Shaw & Co., L.P. (“DES”), which is an affiliate and investment advisor of Laminar (7), a private investment fund, relating to certain of Laminar’s portfolio companies. Prior thereto, Mr. Benaroya was Chairman of the Board, President and Chief Executive Officer of United Retail Group, Inc., a Nasdaq-listed company, which operated a chain of retail specialty stores, from 1989 until its sale in October 2007 to Redcats USA, a division of PPR, a French public company, and continued as President and Chief Executive Officer thereafter until March 2008. Mr. Benaroya is also Managing Director of American Licensing Group, L.P., a company specializing in consumer goods’ brand name licensing, and a member of the Board of Managers of Biltmore Capital, a privately-held financial company which invests in secured debt.
Mario Ciampi (1)(2)			49				2007			Mr. Ciampi is currently a partner of Prentice (7), a New York-based private investment firm. From October 2004 to May 2006, he served as President of Disney Store—North America, a division of The Children’s Place Retail Stores, Inc., a specialty retailer of children’s merchandise. From 1996 to September 2004, he served in various capacities for The Children’s Place, most recently as Senior Vice President—Operations. Mr. Ciampi was elected to the Board of the Company at the 2007 Annual Meeting of Shareholders. Mr. Ciampi is also a member of the Board of Directors of Bluefly, Inc., an Internet retailer of discounted designer apparel and accessories, and home products and accessories.
Bruce G. Crain (4)			49				2007			As of December 4, 2007, Mr. Crain became President and Chief Executive Officer of the Company. Also as of such date, pursuant to his employment agreement with the Company, Mr. Crain was duly elected to the Board (5). Since March 2007 until his appointment as President and CEO, Mr. Crain had provided consulting services to the Company, DES and Prentice. Previously, Mr. Crain served in various executive capacities for Blyth, Inc., a NYSE-listed multi-channel designer and marketer of home decor and gift products, from 1997 to September 2006, including Senior Vice President (Corporate) from 2002 to 2006, a member of the Chairman’s Office Executive Committee from 2004 to 2006, Group President of the worldwide Wholesale Group segment from 2004 to 2006, President of the Home Fragrance Group from 2002 to 2004 and President of the European Affiliate Group from 1999 to 2001.
Frederick J. Horowitz (1)(3)(6)			46				2006			Since 2001, Mr. Horowitz has been the Chairman and CEO of A.P. Deauville, a value brand personal care company. Mr. Horowitz was elected to the Board of the Company on June 29, 2006. Mr. Horowitz is also a managing partner in American Brand Holdings, LLC, which is the owner of the “Hang Ten” brands, which is exclusively licensed to Kohl’s Corporation, an operator of family-oriented department stores.

						Director
Name		Age				Since				Principal Occupation; Other Public Directorships*
Salvatore M. Salibello (2)(3)			64				2006			Mr. Salibello founded Salibello & Broder LLP, a certified public accounting firm, in 1978, and is currently the firm’s managing partner. He is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants. Mr. Salibello currently sits on the Board of Directors of three closed-end mutual funds (Gabelli Dividend and Income Trust Fund, Gabelli Global Utility and Income Trust, and Gabelli Global Gold Nat’l Rest. Inc. Trust). Mr. Salibello was elected to the Board of the Company on June 29, 2006.
John Schaefer (2)(3)			51				2008			From August 2009 to the present, Mr. Schaefer has been the CEO of Sportsman’s Warehouse, an outdoor sporting goods retailer. From December 2008 through August 2009, he was the CEO of Team Express, a distributor of sporting goods and athletic equipment, footwear and apparel, and from August 2007 through December 2008, he was the CEO of Pierre Foods, a manufacturer, marketer and distributor of pre-cooked and ready-to-cook meals. From April 2007 to August 2007, Mr. Schaefer was the Managing Director of Lightning Management, LLC, an executive management services firm. From February 1998 through April 2007, Mr. Schaefer held various positions, including that of President and Chief Executive Officer (April 2005 — April 2007), President, Chief Operating Officer, Chief Financial Officer and Director (July 2004 to April 2005), and Chief Financial Officer (April 2001 — July 2004), with Cornerstone Brands, Inc., a family of catalog companies for the home, leisure and casual apparel, including Ballard Designs, Frontgate, Garnet Hill, Improvements, and Smith+Noble. Mr. Schaefer was also a director (and a member of the Audit Committee) of The Parent Company, a commerce (toys, baby products and electronics), content and new media company controlled by Laminar (7), that ceased operations in 2009, from September 2007 until January 2009. Mr. Schaefer became a member of the Board of the Company on February 14, 2008.
Michael Zimmerman (4)			40				2006			Mr. Zimmerman founded Prentice (7) in May 2005 and has been its Chief Executive Officer since its inception. Prior thereto, he managed investments in the retail consumer sector for S.A.C. Capital, a Connecticut-based investment fund, from 2002-2005. Mr. Zimmerman also serves as a director of The Wetseal, Inc., a national specialty retailer of contemporary apparel and accessory items. Mr. Zimmerman was elected to the Board of the Company on October 5, 2006.

Board Qualifications

Subject to the current rights of Prentice and Laminar to each designate two nominees to the Board, the Board seeks directors who represent a mix of backgrounds and experience that will enhance the quality of the Board’s deliberations and decisions. In addition, Board members should display the personal attributes necessary to be an effective director, including integrity, sound judgment, analytical skills, the ability to operate collaboratively, and commitment to the Company and its shareholders. In addition to considering a candidate’s background and accomplishments, candidates are reviewed in the context of the current composition of the Board and the evolving needs of our business. Our Board members represent a desirable mix of backgrounds, skills and experiences, and they all share the personal attributes of effective directors described above. Below are some of the specific experiences and skills of our directors that led the Board to conclude, in light of our business and structure, that such individuals should serve as members of the Board. The current Prentice designees are Messrs. Zimmerman and Ciampi; the current Laminar designee is Mr. Schaefer (Ms. Krueger resigned from the Board effective March 30, 2010, and a new designee has yet to be identified).

Raphael Benaroya

Mr. Benaroya, as a director of the Company since 1993, has a unique and extensive knowledge of the Company’s business. In addition, through Mr. Benaroya’s long-standing tenure as Chairman of the Board, President and CEO of United Retail Group, Inc., an Nasdaq-listed company which operated a chain of retail specialty stores, as well as his prior experience as Executive Vice President of the Izod LaCoste division of General Mills, Executive Vice President of Jordache Enterprises, Inc., and President of the Lane Bryant division of The Limited, he provides valuable business, leadership and management insights into driving strategic direction for the Company, as well as a critical perspective with respect to the retail industry and significant international expertise. In addition, his experience as managing director of American Licensing Group, LP, a consumer goods brand-name licensing company, gives him insight into the concerns of companies from whom we license intellectual property.

Mario Ciampi

Mr. Ciampi is a Prentice designee to our Board. His experience as a former President of Disney Store—North America, and his previous roles, including Senior Vice President—Operations, for The Children’s Place (an NYSE-listed company), each specialty retailers of children’s merchandise, result in a strong record of operational and strategy leadership in a complementary industry to ours, as well as extensive mergers and acquisitions and restructuring experience, all valued attributes for our Board. Mr. Ciampi, through his board membership of Bluefly, Inc., also brings public board and corporate governance experience to the Company.

Bruce Crain

As of December 4, 2007, in accordance with his employment agreement with the Company, Mr. Crain became President, CEO and a director of the Company. For approximately a decade prior thereto, Mr. Crain served in various executive capacities for Blyth, Inc., a NYSE-listed multi-channel designer and marketer of home decor and gift products, where he established a record of success in managing complex worldwide operations, strategic planning and building a strong consumer-brand focus. He has an extensive knowledge of the Company’s business, as well as broad international exposure and marketing experience, including his current role as a director of Kahn Lucas, a privately-held designer and wholesaler of juvenile apparel, and his former role as an international management consultant with McKinsey & Company.

Frederick Horowitz

Mr. Horowitz, as the Chairman and CEO of A.P. Deauville for nearly a decade, a value brand personal care company, and managing partner of American Brand Holdings, LLC, an owner of consumer brands, brings to our Board his knowledge of managing complex operations, strategic planning and building a strong consumer brands focus. He is also the Chairman and CEO of Sumner Capital, LLC, and a founding investor in NetGrocer and joined management of NetGrocer in November 1998 as President and CEO. Prior to NetGrocer, Mr. Horowitz was a co-founder of USA Detergents, Inc., a manufacturer and marketer of quality value brand laundry and household cleaning products which he built from startup and sold to Church and Dwight (NYSE: CD). He has over twenty-five years of active entrepreneurial experience, combined with understanding of branding, licensing, logistics, and retail sales channels.

Salvatore Salibello

Mr. Salibello, with over 30 years of experience as founder and managing partner of Salibello & Broder LLP, a certified public accounting firm, brings a high level of financial literacy to the Board. He is a Certified Public Accountant, a member of the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants, and an audit committee financial expert, which also makes him a valued member of our Audit Committee, of which he currently serves as Chairman. Mr. Salibello also has extensive corporate governance experience through his multi-year service on the Board of Directors of three closed-end mutual funds.

John Schaefer

Mr. Schaefer is a Laminar designee to our Board. His former experience in various positions, including that of President and CEO, COO, CFO and Director with Cornerstone Brands, Inc., a family of catalog companies, brings extensive leadership and a high level of operational and financial experience to the Board and our Audit Committee. His experience as the CEO of each of a retail enterprise, a manufacturer and a distributor of products gives him a broad perspective on many aspects of our operations. Mr. Schaefer also brings public board and governance experience as a director of The Parent Company (see above) from September 2007 until January 2009.

Michael Zimmerman

Mr. Zimmerman is a Prentice designee to our Board. Mr. Zimmerman, as a founder and CEO of Prentice since May 2005, and as a manager of investments in the retail consumer sector for S.A.C. Capital, a Connecticut-based investment fund, from 2002-2005, brings a high level of both financial expertise and industry experience to our Board, and enables him to bring valuable insights to the Board’s deliberations. Mr. Zimmerman also has public company and corporate governance experience as a director of The Wetseal, Inc., a national specialty retailer of contemporary apparel and accessory items.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s officers and directors, and persons who own beneficially more than ten percent of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC and the NYSE. Officers, directors and greater than ten percent shareholders are required to furnish the Company with copies of all Section 16(a) forms they file.

Based solely on its review of the copies of such Section 16(a) forms received by it, or written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that, during the fiscal year ended December 31, 2009, all filing requirements applicable to its officers, directors and greater than ten percent shareholders were complied with on a timely basis except for the following: Guy Paglinco, our CFO, filed a timely Form 4 on October 8, 2008, however, the amount of shares beneficially owned following the reported transaction on such Form 4 inadvertently omitted 1,304 shares (the “Omitted Shares”) previously acquired by him under the Company’s 2004 Employee Stock Purchase Plan. The Omitted Shares were also omitted from four additional Forms 4 filed by the reporting person subsequent to the Form 4 filed on October 8, 2008 (one Form 4 was filed on August 17, 2009, one was filed on December 2, 2009, and the other two were filed on December 15, 2009). These omissions were corrected by an amendment to the original Form 4 filed on March 10, 2010.

Audit Committee

The Company maintains a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee currently consists of Messrs. Salibello (Chair), Horowitz and Schaefer.

Audit Committee Financial Expert

The Board has affirmatively determined that the Chair of the Audit Committee, Mr. Salibello, is an “audit committee financial expert”, as that term is defined in Item 407(d)(5) of Regulation S-K of the Exchange Act, and is “independent” for purposes of current listing standards of the New York Stock Exchange.

Code of Ethics for Senior Financial Officers

The Company has adopted a Code of Ethics for Senior Financial Officers that applies to its principal executive officer, principal financial officer, principal accounting officer and controller (the “SFO Code”). The SFO Code can be found on the Company’s website located at www.kidbrandsinc.com, by clicking onto the words “Investor Relations” on the main menu, then clicking onto the words “Corporate Governance” on the next screen and then on the “Code of Ethics for Principal Executive Officer and Senior Financial Officers” link. Such SFO code will be provided, without charge, to any person who makes a written request therefore to the Company at 1800 Valley Road, Wayne, New Jersey 07470, Attention: Secretary. The Company will post any amendments to the SFO Code, as well as the details of any waivers to the SFO Code that are required to be disclosed by the rules of the Securities and Exchange Commission, on our website within four business days of the date of any such amendment or waiver.

ITEM 11. EXECUTIVE COMPENSATION

ANALYSIS OF RISK IN OUR COMPENSATION STRUCTURE

As part of its responsibilities to annually review all incentive compensation and equity-based plans, and evaluate whether the compensation arrangements of the Company’s employees incentivize unnecessary and excessive risk-taking, the Compensation Committee evaluated the risk profile of our compensation policies and practices for 2009, and concluded that they do not motivate imprudent risk taking. In its evaluation, the Committee reviewed our employee compensation structures, and noted numerous design elements that manage and mitigate risk without diminishing the incentive nature of the compensation, including: (i) a balanced mix between cash and equity, and annual and longer-term incentives; (ii) caps on incentive awards at reasonable levels (as determined by a review of our economic position and prospects); (iii) linear payouts between target levels with respect to annual incentive awards; (iv) discretion on individual awards; (v) a portfolio of long-term incentives, and (vi) the existence of claw-back policies for payments made using materially inaccurate financial results. The Committee also reviewed our compensation programs for certain design features that may have the potential to encourage excessive risk-taking, including: over-weighting towards annual incentives, highly leveraged payout curves, unreasonable thresholds, and steep payout cliffs at certain performance levels that may encourage short-term business decisions to meet payout thresholds. The Committee concluded that our compensation programs do not include such elements. In addition, the Committee analyzed our overall enterprise risks and how compensation programs may impact individual behavior in a manner that could exacerbate these enterprise risks. For this purpose, the Committee considered the Company’s growth and return performance, volativity and leverage. In light of these analyses, the Committee concluded that it has a balanced pay and performance program that does not encourage excessive risk-taking that is reasonably likely to have a material adverse effect on the Company. We believe our compensation programs encourage and reward prudent business judgment and appropriate risk-taking over the long term.

COMPENSATION DISCUSSION AND ANALYSIS

The “Committee” as used in this section refers to the Compensation Committee of the Board. “Named executive officers” or “NEOs” refer to the individuals set forth in the Summary Compensation table below, and the “CEO” refers to Bruce G. Crain, our President and Chief Executive Officer.

COMPENSATION PHILOSOPHY AND OVERVIEW

We feel that the overall compensation levels of our executives (including our NEOs) should be sufficiently competitive to attract talented leaders and motivate those leaders to achieve superior results. At the same time, however, we believe that compensation should be set at responsible levels, reflecting our continued focus on improving sales and margins, controlling costs and creating value for our shareholders. At the core of our compensation philosophy is our belief that compensation should be linked to performance. We believe that offering a competitive total compensation package to executives that incorporates a reward-for-performance philosophy helps achieve these objectives. As a result, a significant portion of the compensation of our executive officers is based upon achievement of corporate objectives and individual performance goals. We also believe that total compensation and accountability should generally increase with position and responsibility. Consistent with this view, opportunities under our incentive compensation program typically represent an increasing portion of total compensation as position and responsibility increase, as individuals with greater responsibility have greater ability to influence the Company’s achievement of targeted results and strategic initiatives. Similarly, equity-based awards generally represent a higher portion of total compensation for persons with higher levels of responsibility, making a significant portion of their total compensation dependent on long-term stock appreciation. The Committee feels that it maintains a balanced pay and performance program that does not encourage excessive risk-taking. See “Analysis of Risk in Our Compensation Structure” above.

ELEMENTS OF 2009 EXECUTIVE COMPENSATION

The material elements of our 2009 executive compensation program were: (i) base salary; (ii) annual cash incentive compensation; and (iii) equity awards.

Although we fine-tune our compensation programs as conditions change, we believe it is important to maintain consistency in our compensation philosophy and approach. We recognize that value-creating performance by an executive or group of executives does not always translate immediately into appreciation in our stock price, particularly in periods of severe economic stress. However, the Committee believes that it may be appropriate for certain components of compensation to decline during periods of economic stress, reduced earnings and significantly lower stock prices (as was experienced during a large portion of 2009). As a result: (i) base salaries were not increased in 2009; (ii) the Company temporarily suspended its matching contributions under its 401(k) plan (which were reinstated for the full year at the end of 2009); and (iii) with respect to our executive incentive compensation program for 2009, higher minimum corporate performance than in prior years was needed to trigger entitlement to any award (from 80% of a specified target to 90%), a greater portion of potential awards were geared towards corporate performance (a 75%/25% split between corporate and individual goals, as opposed to 50%/50% in prior years), and all incentive compensation based on individual goals would be forfeited unless specified levels of corporate performance were achieved (50% was subject to forfeiture in prior years).

WHY WE CHOOSE TO PAY EACH ELEMENT

We provide cash compensation in the form of base salary and annual incentive compensation. The objective of base salary is to provide current compensation that reflects job responsibilities, value to the Company and individual performance, while maintaining market competitiveness.

The objective of cash incentive compensation is to assure that a significant portion of total compensation is based on a reward of superior performance with respect to specific objectives, initiatives and strategic goals. The opportunity for a more significant award increases when both the Company or a specific operating group and the executive achieve high levels of performance. Commencing in 2005, we initiated our Incentive Compensation Program (the “IC Program”). The IC Program in 2009 provided designated employees of the Company and its subsidiaries with an opportunity to earn substantial cash remuneration beyond their base salary based on: (i) the attainment of specified operating objectives by the Company (or specified divisions thereof); and (ii) fulfillment of specified individual goals and objectives established for specified participants. The objectives of the IC Program are to, among other things: (1) more closely align participants’ interests with those of shareholders; (2) reward participants for contributing to the short and long-term growth of the business; (3) provide participants with a more meaningful role in the attainment of maximum compensation levels; (4) provide a competitive platform for compensation vis-à-vis the marketplace; and (5) serve as a recruitment and retention tool. Incentive compensation awards under the IC Program are based on specified percentages of base salary. The determination of such percentages is discussed below, and with respect to our named executive officers in 2009, ranged from a maximum potential payment of approximately 75% to 130% of base salary in the event that the maximum targets and the highest level of individual objectives and initiatives were achieved. See “Operation of the 2009 IC Program” below for a detailed discussion of potential and actual cash incentive compensation awarded to the NEOs in 2009.

Equity awards are used to provide our executives with upside opportunity with the improvement of the Company’s stock price and to provide incentives for retention, as such awards vest over time. In addition, we feel that stock option and stock appreciation right (“SAR”) awards align the interests of our executives with those of our shareholders, support the Company’s pay-for-performance philosophy (e.g., all the value received by the recipient from a stock option or SAR is based on the growth of the stock price above the exercise price, and correspondingly, the recipient is both incentivized to perform in a manner designed to increase shareholder value and exposed to the risk of the effect of negative performance on the Company’s stock price), foster employee stock ownership, and focus the management team on increasing value for the shareholders. As a result, a substantial portion of most equity awards takes the form of stock options or SARs. In addition, stock options and SARs help to provide a balance to the Company’s overall compensation program, as the IC Program focuses on the achievement of annual performance targets, objectives and initiatives, whereas the vesting period of stock options and SARs generally encourages executive retention and creates incentive for increases in shareholder value over a longer term. We use restricted stock or restricted stock unit (“RSU”) awards to help align the interests of executives with those of the stockholders, foster employee stock ownership, contribute to the focus of the management team on increasing value for the stockholders, and encourage executive retention (through a multi-year vesting period). Restricted stock or RSU awards typically also result in less share dilution than a comparable amount (in terms of value) of options or SARs.

HOW WE CHOOSE AMOUNTS FOR EACH ELEMENT OF OUR COMPENSATION PROGRAM

We structure the size of the various elements awarded to all of our executives (including the NEOs) by balancing the interests of shareholders with the competitive need to provide an attractive overall compensation program. Although we do not have an exact formula for allocating among the different elements of our executive compensation program, including the division between cash and non-cash compensation and short and long-term incentives, we do ensure that a significant percentage of any executive’s aggregate compensation package (including that of the NEOs) is contingent upon either Company or operating group results as well as individual behavior, as is more fully discussed below.

We believe that the various components of our compensation package together provide a strong link between compensation and performance on both the individual and Company level. We do not believe that compensation should be based on the short-term performance of our stock, whether favorable or unfavorable, because we feel that the price of our stock will, in the long-term, reflect our operating performance, and ultimately, the management of the Company by our executives. Similarly, as we constantly strive for improved Company performance, amounts realizable from compensation awarded or earned in the past are treated as one factor of many considered in setting other elements of compensation.

The particular amount of each element of our executives’ compensation (including that of the NEOs) for a particular year is determined by or with the approval of the Committee, which uses the following “considerations”, among others, in making such determinations: (i) the performance of the Company or the relevant operational group; (ii) the results of an annual executive assessment for each executive for the previous year; (iii) the anticipated difficulty of achieving stated goals and objectives in the coming year; (iv) the value of each executive’s unique skills and capabilities to support long-term performance of the Company; (v) the contribution of each executive as a member of the executive management team; (vi) the scope and relative complexity of the individual’s responsibilities; (vii) competitive market and industry information, including periodic reports on performance versus a peer group of companies; (viii) the recommendations of our compensation consultant, if any; (ix) the contributions of such executive beyond his or her immediate area of responsibility; and (x) internal pay equity. Certain of these considerations are given greater weight depending on the element of compensation under consideration, as is discussed with respect to each element below.

The Committee engaged James F. Reda and Associates, LLC (“REDA”) in 2009 to provide information with respect to equity compensation grants for 2009. REDA was instructed to prepare an analysis of recent trends with respect to long-term incentive compensation of executives in light of the economic environment prevailing in early 2009. In particular, the Committee was concerned that, as a result of the decline in the Company’s stock price and the resultant decrease in the per share Black-Scholes value of share-based grants in the beginning of the year, equity compensation targeted to be consistent with prior grants to the Company’s executives (in terms of value) would result in significantly greater dilution to the Company’s stockholders. The Committee took REDA’s recommendations into consideration when determining the size of the February 2009 SAR grants. Based in part on the results of REDA’s analysis, such awards were similar to prior awards in terms of the number of shares underlying the grants, although the value associated with such grants was substantially less than in prior years. The Committee also engaged REDA in late 2009 to: (i) review the potential compensation package for candidates for president of each of Kids Line and Sassy [using broad-based market surveys], and (ii) help management to prepare a report discussing general market trends with respect to incentives for certain of the Company’s executives once relevant earn-out periods terminate (including one 2009 NEO). Peer companies were not used in the preparation of such report. In general, the Committee does not attempt to maintain specific target percentiles with respect to a specific list of benchmark companies, but instead periodically uses analyses of peer group companies to determine whether the Company’s compensation programs are generally competitive with that of others in similar industries. See “BENCHMARKING” below. Other than as described above, REDA provided no other services in 2009.

In addition to the foregoing, in making decisions with respect to any element of an executive’s compensation, the Committee considers the total compensation that may be awarded to such individual. The goal of the Committee is to set aggregate compensation levels that are reasonable, when all elements of potential compensation are considered. To aid in this analysis, the Committee uses tally sheets for each executive officer detailing such officer’s base salary, annual cash incentive award opportunity and payout, equity-based compensation, perquisites and other benefits. The tally sheets also show holdings of the Company’s Common Stock by such executive, as well as amounts payable upon termination of employment under various circumstances. The 2009 tally sheet amounts differ from the amounts set forth in the Summary Compensation Table because, among other things: (i) base salary reflects current amounts, whereas the Summary Compensation Table reflects the base salary amount during the entire year (base salaries may have increased during the year); and (ii) annual incentive cash compensation amounts include potential awards, while the Summary Compensation Table reflects the actual amount earned in 2009. The Committee uses these tally sheets to estimate the total annual compensation of our executives, to review, in one place, how a change in the amount of each compensation component affects each NEO’s total compensation, and to provide perspective on payouts under a range of termination scenarios.

As a general matter, if the Committee determines that the wealth accumulation of a particular executive and/or the potential payout resulting from the termination of his or her employment is excessive and/or unjustified, unless limited by contract, the Committee may use its discretion to adjust one or more elements of compensation for such executive. The Committee did not determine that any downward adjustments were required with respect to any NEO compensation packages or elements for 2009 as a result of wealth accumulation. However, see “ELEMENTS OF 2009 EXECUTIVE COMPENSATION” above for steps implemented in 2009 in reaction to the economic environment, reduced earnings and significantly lower stock prices prevailing for a significant portion of the year.

In general, we choose base salaries that are competitive relative to similar positions at companies of comparable size, including at companies in our industry, in order to provide us with the ability to attract, retain and motivate employees with a proven record of performance. However, we do not “benchmark” base salaries (see “BENCHMARKING” below). Amounts attainable under our IC Program are meant to assure that a significant portion of total compensation is based on a reward of superior performance with respect to specific objectives, initiatives and strategic goals. Our general policy for allocating between long-term and currently paid compensation is to establish adequate base compensation to attract and retain personnel, while providing sufficient incentives to maximize long-term value for our shareholders. As discussed above, the Company weights compensation for the executives with more responsibility (including the NEOs) more toward variable, performance-based compensation elements than for less senior employees.

Based on the Summary Compensation Table below, 2009 compensation for the NEOs was allocated as follows:

Base Salary			46.8	%
Short-Term Incentives:			30.5	%
Long-Term Incentives*			9.9	%
Other**			12.8	%

ONGOING PROCESS

Evaluation of executive performance and consideration of our business environment are year-round processes which culminate in the annual executive assessments discussed above. In addition to the involvement of the Committee in the determination of performance targets and objectives, meetings of the Committee or the full Board over the course of the year include reviews of financial reports on year-to-date performance versus budgeted performance and prior year performance, review of information on each executive’s stock ownership and equity award holdings and estimated grant-date values of equity awards and review of tally sheets setting forth the total compensation of the named executive officers.

ROLE OF MANAGEMENT

Senior management plays an important role in our executive compensation decision-making process, due to its direct involvement in and knowledge of the business goals, strategies, experiences and performance of the Company and its various operational units. With respect to our executive incentive compensation program (which is described in detail below), the Committee engages in active discussions with the CEO concerning: (i) who should participate in the program and at what levels; (ii) which performance metrics should be used in connection with different operational groups; and (iii) the determination of performance targets, as well as individual goals and initiatives for the coming year, where applicable, and whether and to what extent criteria for the previous year have been achieved. The CEO is advised by the other senior executives of the Company in recommending and determining the achievement of individual goals and initiatives for those executives that do not report directly to him. With respect to equity grants, the CEO makes recommendations to the Committee as to appropriate grant levels for executives. In making these recommendations, the CEO is advised by the other senior executives with respect to those executives that do not report directly to him. The Committee reviews the appropriateness of the recommendations of the CEO with respect to the foregoing and accepts or adjusts such recommendations in light of the “considerations” applicable to the relevant element of compensation (discussed with respect to each element below). In addition, the senior executives of the Company are involved in the compensation-setting process through: (i) their evaluation of employee performance used in connection with the annual executive assessments; and (ii) their recommendations to the CEO and/or Committee with respect to base salary adjustments. Senior executives also prepare meeting information for the Committee upon request.

ANALYSIS OF DECISIONS WITH RESPECT TO OUR 2009 COMPENSATION PROGRAM

Base Salaries

A minimum base salary for Messrs. Crain, Cappiello, Bivona and Levin was determined by each of their respective employment agreements. See the section captioned “Employment Agreements and Arrangements” following the Summary Compensation Table for a description of the material terms and considerations with respect to such employment agreements. The Committee annually reviews and approves base salary adjustments for the named executive officers as part of the annual executive assessments, and at the time of any promotion or other change in responsibilities. In this context, the Committee does not rely on predetermined formulas or a limited set of criteria, however, the following “considerations” factor most heavily in the determination of base salary adjustments: (i) the results of the executive assessment for such executive for the previous year; (ii) the value of such executive’s unique skills and capabilities to support long-term performance of the Company; (iii) competitive market and industry information, including a review of national and regional compensation surveys with respect to base salary increases for the year; (iv) the nature and responsibility of the executive’s position; (v) the importance of retaining the individual along with the competitiveness of the market for the individual’s talent and services; (vi) the recommendations of our compensation consultant, if any, (vii) general economic conditions; and (viii) the consumer price index increase for the applicable geographic region for the applicable year. With respect to 2009, base salaries for virtually all executives (and all NEOs) were not increased from 2008 levels. See the “Summary Compensation Table” below for base salaries of our named executive officers during 2009. With respect to 2010, in recognition of the lack of increases in 2009 and improved operating results, base salaries were increased an average of 2.5%, which generally reflects a 20% discount to average increases provided to other executives, based on a composite of various broad-based market surveys.

2009 Cash Incentive Compensation

The IC Program was in effect for 2009 and will be in effect for 2010. All named executive officers participate in the IC Program. As Mr. Cappiello left the employment of the Company in January of 2009, he did not receive any amounts with respect thereto. In addition, as Mr. Levin left the employment of the Company prior to the payment of amounts under the IC Program for 2009 (December 31, 2009), he was not entitled to any such payments. However, as the Committee felt that Mr. Levin had earned the incentive compensation amount to which he would otherwise have been entitled based on his performance and service to the Company through the end of the year, as well as his agreement to continue to provide certain consulting services to the Company subsequent to the termination of his employment on December 31, 2009, it used its discretion to award him such amount (as a result of the use of such discretion, such amount has been classified as a bonus). See “Employment Contracts and Arrangements” below.

Operation of the 2009 IC Program

(a) General

Subject to certain specified exclusions set forth in the IC Program, participants consist of senior employees who work in specified operational groups of either the Company or its subsidiaries selected on an annual basis by the CEO in his sole discretion in consultation with the heads of business units and certain senior executives of his choice, in each case as approved by the Committee. Participants generally have the rank of vice president (or its functional equivalent at certain subsidiaries) or above, but titles are not determinative. The operational groups in 2009 consisted of: (i) corporate participants; (ii) Sassy participants; (iii) Kids Line participants; (iv) LaJobi participants; and (v) CoCaLo participants. As 2009 was a transition year for Sassy (Sassy repositioned its operations in late 2008), all IC bonuses for Sassy participants for 2009 were in the sole discretion of the Committee. However, as the Sassy participants missed the Minimum Target, no incentive compensation was earned (Sassy participants will participate in the IC Program for 2010 in accordance with its terms).

Participants are eligible to participate in the IC Program at specified levels (expressed as a percentage of annual base salary). The percentage for each participant (such participant’s “Applicable Percentage”) was recommended for 2009 by Mr. Crain and approved by the Committee (in certain cases, including Messrs. Crain, Levin, and Bivona, the Applicable Percentage was determined pursuant to the relevant employment agreement). We believe the levels chosen are appropriate to ensure that a significant portion of all of our executives’ total compensation is contingent upon the achievement of specified corporate objectives, as well as individual performance goals.

Towards that end, the Applicable Percentages of all participants in the IC Program in 2009 range from 20% to 75% of base salary. Unless a specified percentage is set forth in an employment agreement, approval of a participant’s Applicable Percentage is based primarily on the following “considerations”: (i) the results of the annual executive assessment for such executive for the previous year; (ii) the anticipated difficulty of achieving stated goals and objectives in the coming year; (iii) the value of such executive’s unique skills and capabilities to support long-term performance of the Company; (iv) the contribution of such executive as a member of the executive management team; (v) the contributions of such executive beyond his immediate area of responsibility; and (vi) the importance of retaining the individual along with the competitiveness of the market for the individual’s talent. NEOs, as a result of their higher responsibility levels and greater ability to impact Company performance, generally have Applicable Percentages in excess of those of less senior executives. During 2009, the Applicable Percentage and participant group for each named executive officer was as set forth in the table in paragraph (b) below.

Each participant’s annual base salary multiplied by such participant’s Applicable Percentage equals a number (the “IC Factor”) that is used to determine such participant’s total incentive compensation which may be earned for the relevant year. As is explained below, however, the maximum amount of compensation that can be earned under the IC Program is greater than the IC Factor in the event that “stretch” goals are achieved by the Company.

With respect to the 2009 IC Program, potential incentive compensation for most participants was comprised of two separate components: a corporate performance component and an individual goals and objectives component (however, Mr. Levin’s incentive compensation was based solely on corporate performance pursuant to the terms of his employment agreement). Basing a portion of awards on individual goals and objectives allows the Committee to play a more proactive role in identifying performance objectives beyond purely financial measures, including, for example, exceptional performance of an individual’s functional responsibilities as well as leadership, innovations, creativity, collaboration, growth initiatives and other activities that are critical to driving long-term value for shareholders. Each component may entitle a participant to earn a specified percentage of the IC Factor, as described below.

(b) Establishing Corporate Objectives and Calculating the Corporate Component

Corporate objectives for each operational group consist of three separate levels of achievement (“Targets”) with respect to one or several specified measures of operating performance each year, such as operating income, Adjusted EBITDA, etc. (the “Chosen Metric”). Both the Chosen Metric and the Targets required are recommended by the CEO on an annual basis and approved by the Committee. The Chosen Metric for all participant groups during 2009 (and until such time as it is changed) was Adjusted EBITDA (either consolidated or that of a specified operating group, as applicable), which is defined for this purpose as net income before net interest expense, provision for income taxes, depreciation, amortization and other non-cash, special or non-recurring charges (as determined by the Company). The Committee believes Adjusted EBITDA to be an appropriate metric by which to measure performance because it is a measure of cash flow that provides the flexibility needed to adjust for special circumstances that affect the Company from time to time and therefore provides an opportunity to measure performance from different periods in a more consistent manner. There is no requirement that the Targets be based on or refer to budgeted levels of operating performance, or to any other plan or projection with respect to the Company’s business, although the Targets are typically based on budgets for the relevant year. Targets are calculated to include a reserve to fund IC payments. We have not disclosed target levels for the corporate component of the IC Program because we believe such disclosure will cause competitive harm to the Company with regard to various short-term business strategies and goals. The Targets for 2009 with respect to continuing operations were set at amounts that exceeded 2008 results. The Targets are based on consolidated Company Adjusted EBITDA for corporate participants. Targets for the corporate component for Sassy, Kids Line, LaJobi and CoCaLo participants are based on their respective Adjusted EBITDAs.

For most participants (and all NEOs other than Mr. Levin) during 2009, 75% of such participant’s IC Factor was designated the “Part A Amount”. The Targets consisted of the following: (i) a specified minimum level of achievement in the Chosen Metric (the “Minimum Target”) required to earn an amount equal to 20% of a participant’s Part A Amount; (ii) a specified level of achievement in the Chosen Metric in excess of the Minimum Target (the “Target”) required to earn an amount equal to 100% of a participant’s Part A Amount; and (iii) a specified level of achievement in the Chosen Metric in excess of the Target (the “Maximum Target”) required to earn an amount equal to 150% of a Participant’s Part A Amount for all participant groups other than (i) Kids Line, where the payment for achievement of the Maximum Target would have been 125% of the Part A Amount, and (ii) for Mr. Crain, where achievement of the Maximum Target would entitle him to an amount equal to 65% of his annual base salary, or 173.3% of his Part A Amount). In general, the Minimum Target rewards achievement of a significant percentage of budgeted performance targets (90% of Target in 2009). Achievement of the Target generally represents a slight “stretch”, representing how the Company would perform if it achieved budgeted amounts, recognizing that the budgets are generally set at slightly optimistic levels, whereas the Maximum Target is designed to be a true “stretch” goal for the Company or the relevant operational group (115% of Target for all participant groups in 2009 other than CoCaLo, where due to its smaller relative size, the Maximum Target was equal to 120% of Target). From 2005 (the first year that the IC Program was in effect) through 2009, with respect to the corporate objectives, current participant groups achieved performance as follows (where “X” signifies that the Minimum Target was not reached; and a designation of “Target signifies that that the applicable Target was either reached or achieved, but in no year has any participant group achieved in excess of 107% of Target):

Participant Group		2005		2006		2007		2008		2009
Corporate		N/A		Target		Min. Target		X		Target
Sassy		X		X		X		X		X
Kids Line		Target		Target		Target		X		Target
LaJobi		N/A		N/A		N/A		Target		Target
CoCaLo		N/A		N/A		N/A		X		Target

The Maximum Target was not achieved by any participant group in any year. Generally, the Company seeks to maintain the relative difficulty of achieving the target levels from year to year. As a result of the elimination of the individual goals and objectives for Mr. Levin, he was eligible to earn 15% of his base salary in the event of achievement of the Minimum Target, 75% of his base salary in the event of achievement of the Target, and 130% of his base salary in the event of achievement of the Maximum Target.

Amounts earned for achievement of results between (i) the Minimum Target and the Target and (ii) the Target and the Maximum Target, are in each case determined by a straight-line interpolation. No amounts are paid for achievement of results in excess of the Maximum Target. No amounts are paid for achievement of results below the Minimum Target. The Chosen Metric may change from year to year, different measurements may be used for different operating groups within the same year, and the Targets are expected to change each year. In determining whether any of the Targets were achieved for the year, the Committee may exercise its judgment whether to reflect or exclude the impact of changes in accounting principles and extraordinary, unusual or infrequently occurring events reported in the Company’s public filings that it believes were not driven by the current performance or that otherwise had a distorting positive or negative impact relative to the performance of our executives. To the extent appropriate, the CEO or a participant’s direct supervisor, as applicable, also considers the nature and impact of unusual or extraordinary events in the context of ascertaining whether and to what extent the individual goals and objectives discussed below have been achieved. No such discretion was applied with respect to the NEOs in 2009.

The following table sets forth information with respect to potential and actual awards under the corporate performance component of the IC Program for the named executive officers during 2009:

										Potential								Potential
										Award for				Potential				Award for								% of
		Participant								Min.				Award for				Max.				Amount				Base
NEO		Group				IC %				Target				Target				Target				Awarded				Salary
Bruce G. Crain		Corporate					75	%		$	61,875			$	309,375			$	536,250			$	324,411				59.0	%
Guy Paglinco		Corporate					45	%		$	17,888			$	89,438			$	134,156			$	92,401				34.9	%
Marc S. Goldfarb		Corporate					50	%		$	24,450			$	122,250			$	183,375			$	126,301				38.9	%
Lawrence Bivona		LaJobi					50	%		$	22,500			$	112,500			$	168,750			$	119,100				53.3	%
Michael Levin*		Kids Line					75	%		$	65,625			$	328,125			$	568,750			$	359,000				82.1	%
Anthony Cappiello*		Corporate					50	%		$	26,475			$	132,375			$	198,563			$	0				N/A

(c) Calculating the Individual Goals and Objectives Component

The individual goals and objectives for each participant for each year are determined by the CEO in his sole discretion in the event that the CEO is the participant’s direct supervisor or, in the event that the CEO is not the direct supervisor of the participant, by the CEO in consultation with the participant’s direct supervisor (and by the Committee with respect to Mr. Crain), and may be modified mid-year. The individual goals and objectives are based primarily upon individual performance and activities within each participant’s primary areas of responsibility that the Company wishes to incentivize.

Each participant’s individual goals and objectives are evaluated by the participant’s direct supervisor, who recommends in his/her sole discretion whether and to what extent such goals and objectives have been achieved and what, if any, percentage of the Part B Amount (25% of the IC Factor) has been earned, as approved by the Committee. Subject to the forfeiture provision discussed below, each participant (other than Mr. Levin) could have earned between 0% and 150% of such participant’s Part B Amount (or 125% of the Part B Amount with respect to Kids Line participants and 173.3% of the Part B Amount in the case of Mr. Crain), with respect to this component. Not all goals and objectives are given equal weight in such determination. The individual goals and objectives are intended to be difficult to achieve, representing exemplary performance in areas within and outside of each participant’s daily activities. The particular payout level awarded, if any, in each case will depend on the assessment of the applicable supervisor and the Committee as to the degree of achievement attained and performance beyond specified goals, and will account for the difficulty of the particular goal, the scope of responsibility of the applicable individual and the complexity of the required tasks. Mr. Crain’s individual goals and objectives are discussed under “2009 Incentive Compensation for Mr. Crain” below.

Amounts between 100% and 150% of the Part B Amount (125% for Kids Line participants, and 173.3% in the case of Mr. Crain) are reserved for superior performance, or for exemplary performance on special initiatives beyond the participant’s daily responsibilities; provided, however, that: (i) eligibility for any potential earnings under this component for all participants will be forfeited if 80% of the Target for the corporate component of the relevant participant group is not achieved; and (ii) for performance of between 80% and 90% of Target for the corporate component of the relevant participant group, participants will be entitled to earn up to a maximum of 25% of the Part B Amount (50% for Kids Line participants). This provision was added because, although the Company rewards superior individual behavior apart from corporate performance, it was deemed inappropriate to award individuals the maximum potential payout under this component of the IC Program in the event that a minimum level of corporate performance for the year was not achieved. As the Minimum Target was achieved in 2009 for all participant groups other than Sassy, this forfeiture provision was not triggered during 2009 with respect to the NEOs.

The following table sets forth information with respect to potential and actual awards under the individual goals and objectives portion of the IC Program for NEOs participating in the IC Program (other than Mr. Levin, whose IC Award potential for 2009 did not include an individual goals component):

		Max. Amt.				% of Part B
NEO		Obtainable				Amount Earned				Amount Awarded				% of Base Salary
Bruce Crain (1)		$	178,750				100	%		$	103,125				18.8	%
Guy Paglinco (2)		$	25,341				100	%		$	29,813				11.3	%
Marc Goldfarb (3)		$	61,125				100	%		$	40,750				12.5	%
Lawrence Bivona (4)		$	56,250				109	%		$	40,900				13.6	%
Anthony Cappiello(5)		$	66,188				N/A				N/A				N/A

See the Summary Compensation Table for total amounts of incentive compensation earned by the named executive officers under the IC Program and otherwise during 2009.

2009 Incentive Compensation for Mr. Crain

In accordance with the employment arrangement between Mr. Crain and the Company, Mr. Crain is eligible for an annual cash incentive compensation opportunity in an amount not less than 75% of his base salary at target and 130% at maximum. Mr. Crain’s performance goals in respect of such incentive compensation opportunity, which are established by the Committee annually in consultation with Mr. Crain, will not be established at levels that are more difficult to achieve than for other bonus participants who have identical performance measures.

For 2009, the Compensation Committee determined that 75% of Mr. Crain’s incentive compensation opportunity would be based upon achievement by the Company of specified consolidated EBITDA levels equivalent to those pertaining to corporate participants under the IC Program, and 25% would be based on achievement in five distinct categories of personal goals.

With respect to Mr. Crain’s corporate performance goals: (i) achievement of the Minimum Target would entitle Mr. Crain to earn an amount equal to 11.25% of his annual base salary; (ii) achievement of the Target would entitle Mr. Crain to earn an amount equal to 56.25% of his annual base salary; and (iii) achievement of the Maximum Target would entitle Mr. Crain to earn an amount equal to 97.5% of his annual base salary (or 20%, 100% and 173.3% of his Part A Amount, respectively). Other elements generally applicable to the corporate component of the IC Program are also applicable to Mr. Crain.

With respect to Mr. Crain’s personal goals, five different categories were created as follows: (i) operational efficiencies; (ii) strategic organic growth; (iii) financing and investor relations; (iv) management development and reporting; and (v) strategic alternatives, which would entitle Mr. Crain to receive from 0% to 32.5% of his annual base salary at the maximum level of achievement in each of the five categories (or 173.3% of his Part B Amount). Amounts between 100% and 173.3% of the Part B Amount are reserved for superior performance, or for exemplary performance on special initiatives beyond the participant’s daily responsibilities. Not all goals and objectives are given equal weight. The individual goals and objectives are intended to be difficult to achieve, representing exemplary performance in each of the areas identified. The particular payout level awarded, if any, in each case will depend on the assessment of the Committee as to the degree of achievement attained, and will account for the difficulty of the particular goal, the scope of responsibility of the applicable individual and the complexity of the required tasks. The Committee determined in its sole discretion that Mr. Crain’s level of achievement of each of these personal goals ranged from 50% to 150%, and after taking into account his performance over the range of applicable categories, determined that, on average, Mr. Crain had achieved 100% of his individual goals and objectives (i.e., the target level on average for the five categories), and awarded him 100% of his Part B Amount, for an aggregate payment of $130,125 in respect of his individual goals.

Potential amounts payable to Mr. Crain with respect to his incentive compensation program for 2009 were as follows:

		Minimum				Target				Maximum				Amount Awarded
		($)				($)				($)				($)				% of Base Salary
EBITDA			61,875				309,375				536,250				324,411				59.0	%
Individual Goals			0				103,125				178,750				103,125				18.8	%

Equity Awards

The specific amount of an equity grant to an executive depends on the individual’s position, scope of responsibility, ability to affect profits and shareholder value and the individual’s historic and recent performance, the value of equity awards in relation to other elements of total compensation, as well as the performance of the Company or the relevant operational group. Other than the Severance Policy and the 401K plans maintained by the Company and each of its subsidiaries (each discussed below), we do not maintain any supplemental retirement plans for executives or other executive programs that reward tenure. We consider that equity awards and the resulting stock ownership are our method of providing for a substantial part of an executive’s retirement and wealth creation. Since equity awards are our primary contribution to an executive’s potential long-term wealth creation, we determine the size of the grants with that consideration in mind. We intend that our executives will share in the creation of value in the Company but will not have substantial guaranteed benefits at termination if value has not been created for stockholders.

As a result of the evolution of regulatory, tax and accounting treatment of equity incentive programs and because it is important to us to retain our executive officers and key employees, the Committee determined that it is desirable to utilize forms of equity awards in addition to stock options and restricted stock. In February of 2009, the NEOs other than Mr. Paglinco (who had received an equity award in October of 2008), and Mr. Cappiello (whose employment previously terminated) received a grant of SARs. The Company granted SARs because such instruments provide greater flexibility to the Company than options, as SARs may be settled in cash, stock or a combination of both, and were unavailable to the Company prior to the approval of its Equity Incentive Plan in July of 2008. The Committee felt that the amounts awarded represented a significant and appropriate

level of long-term compensation for 2009 in light of the other elements of the 2009 executive compensation program. The specific percentages utilized were determined using a combination of factors, including market comparables provided by REDA, and the scope of each individual’s responsibilities and performance throughout the year. In addition, Mr. Crain accepted a grant of 114,943 immediately vested SARs in lieu of a cash incentive compensation amount for 2008, which was issued to him in March of 2009. In August of 2009, SARs and RSUs were granted to Guy Paglinco in connection with his appointment as Vice President and Chief Financial Officer of the Company. The Company elected to include RSUs as a portion of his grant because RSUs create less dilution to shareholders (fewer RSUs as compared to stock options or SARs need to be granted to achieve a specified value), retain their incentive characteristics regardless of movements in the price of the stock and are increasingly becoming a standard part of comprehensive equity awards at other companies with whom the Company may compete for talented executives. Such awards also provide flexibility similar to SARs.

See the “2009 Outstanding Awards at Fiscal Year End” table and accompanying footnotes below for a description of the material terms and amounts of outstanding equity held as of December 31, 2009 by the named executive officers.

OTHER ELEMENTS OF COMPENSATION AND RELATED BENEFITS

Perquisites

We limit the perquisites that we make available to our executive officers. Executives are entitled to few benefits that are not otherwise available to all of our employees. The perquisites provided to the CEO and the other NEOs in 2009 are described in footnote (7) to the Summary Compensation Chart below. The Company and its subsidiaries currently maintain separate health insurance plans, which are the same for all employees within a particular company.

40l(k) Plan

The Company and each of its subsidiaries offer eligible employees the opportunity to participate in a retirement plan (the “401(k) Plans”) that is based on employees’ pretax salary deferrals pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”). The Company, LaJobi and Sassy match a portion (either one-half of any amount up to 6%, or 100% of any amount up to 3%, of salary contributed) of the compensation deferred by each employee, and Kids Line contributes 3% (9% for Mr. Levin in 2009) of eligible salary pursuant to the safe harbor provisions of Section 401(k) of the Code. Matching contributions are fully vested after four years of employment at the rate of 25% per year of employment (after six years of employment for LaJobi). See the section captioned “Termination of Employment and Change in Control Arrangements” below for a more detailed description of the 401(k) Plans. See the Summary Compensation Table for amounts contributed to the named executive officers under the 401(k) Plans during 2009. The objective of these programs is to help provide financial security into retirement, and to reward and motivate tenure and recruit and retain talent in a competitive market.

Employee Stock Purchase Plan

Under the Company’s 2009 Employee Stock Purchase Plan (the “2009 ESPP”), eligible employees, including the NEOs, are provided the opportunity to purchase the Company’s common stock at the lesser of 85% of the closing market price of the Company’s common stock on either the first trading day or the last trading day of the plan year. We feel that offering the opportunity to purchase our stock at a discount to our employees (including our executives) encourages the alignment of their interests with those of our stockholders. “Options” are granted to participants as of the first trading day of each calendar year, and may be exercised as of the last trading day of each plan year, to purchase from the Company the number of shares of common stock that may be purchased at the relevant purchase price with the aggregate amount contributed by each participant. In each plan year, an eligible employee may elect to participate in the plan by authorizing a payroll deduction of up to 10% (in whole percentages) of his or her compensation. No participant shall have the right to purchase Company common stock under this plan that has a fair market value in excess of $25,000 in any plan year. If an employee does not elect to exercise his or her “option”, the total amount credited to his or her account during that plan year is returned to such employee without interest, and his or her “option” expires. The 2009 ESPP is the successor to the substantially similar 2004 Employee Stock Purchase Plan, as amended (the “2004 ESPP”), which terminated on December 31, 2008.

POST-TERMINATION BENEFITS

Change-in-Control Plan (terminated as of February 24, 2009)

Participants in the Company’s change in control plan during 2009 (prior to its termination) would have been entitled to specified benefits in the event of defined terminations in connection with specified changes in control. However, as a result of the Board’s determination that this method of compensation was no longer warranted in the current environment, this plan was terminated as of February 24, 2009.

Severance Policy

The Company’s severance policy, applicable generally to employees who are domestic vice presidents or above and who are designated as participants in the plan by the Committee (other than Messrs. Crain, Levin and Bivona in 2009, who are not participants in this plan), described in further detail in the section captioned “Termination of Employment and Change in Control Arrangements” below, generally provides that in the event of a termination by the Company without cause, participants will be granted specified severance benefits. In addition, effective March 30, 2007, the severance policy specifies that in the event that the employment of eligible vice presidents is terminated in connection with the consummation of certain corporate transactions, the severance payments and benefits applicable to such terminated individual will be extended by an additional 4 months up to a maximum severance period of 12 months, and in the event that a participant is due payments and benefits under both the Severance Policy and the Change in Control Plan (while it remained in existence, as such plan was terminated as of February 24, 2009), such participant would have received the greater of the benefits and payments, determined on an item-by-item basis. This trigger was deemed appropriate to provide a limited degree of income protection to our executives in the event of a termination of employment by the Company other than for cause. We feel that the amounts provided pursuant to this plan are appropriately based on years of service and are reasonable in the context of our total compensation program. See the “Potential Payments Upon Termination or Change in Control” table and subsequent narrative below for a description of the potential amounts payable pursuant to this plan as of the end of 2009 to participating named executive officers under specified assumptions.

CEO COMPENSATION

Mr. Crain

In determining the various components of Mr. Crain’s compensation package at the time of the commencement of his employment, the Committee reviewed a variety of factors it deemed appropriate, including, but not limited to, Mr. Crain’s prior responsibilities and experience, most current compensation, scope of the position, the then-current operational position of the Company, the recommendations of REDA as well as the Company’s then-current challenges and future plans. As a result of this analysis and negotiations between Mr. Crain and the Company, as of December 4, 2007, the Company entered into an employment agreement with Mr. Crain as President and Chief Executive Officer of the Company, at an annual base salary of $550,000 (which salary cannot be decreased during the term of his agreement). See “Internal Pay Equity” below.

In addition, pursuant to his employment agreement, and as further inducement to his joining the Company, the Company made specified equity grants to Mr. Crain, and agreed to provide Mr. Crain with specified incentive compensation opportunities and perquisites. See the section captioned “Employment Agreements and Arrangements” for a description of the material provisions of Mr. Crain’s employment agreement, as amended as of August 10, 2009, including incentive compensation, equity grants, perquisites and post-termination benefits. See the Summary Compensation Table for a description of the elements of Mr. Crain’s compensation during 2009.

OTHER COMPENSATION POLICIES AND CONSIDERATIONS

Periodic Review

We periodically review each element of our compensation program described above to ensure that each such element continues to meet our stated objectives.

Internal Pay Equity

We believe that internal equity is one factor of many to be considered in establishing compensation for our executives. We have not established a policy regarding the ratio of total compensation of the CEO to that of the other executive officers, but do review compensation levels to ensure that appropriate equity exists. The difference between the Chief Executive Officer’s compensation and that of the other named executive officers reflects the significant difference in their relative responsibilities. The CEO’s responsibilities for management and oversight of all functions of an enterprise are significantly higher than those of other executive officers. As a result, the market pay level for our CEO is substantially higher than the market pay for other officer positions. We intend to continue to review internal compensation equity and may consider the adoption of a formal policy in the future if we deem such a policy to be appropriate.

Timing of Stock Option (and Other Equity) Grants

Our practices with respect to equity grants include the following:

(i) except for inducement awards to new executives, we plan stock option and other equity grant dates in advance of any actual grant (regarding usual grants, the timing of each grant is determined at least several weeks in advance to coincide with a scheduled meeting of the Board and the Committee);

(ii) except for inducement awards, the grant date for all awards is made an appropriate period in advance of or is deferred until after the Company has released earnings for the fiscal year or latest relevant fiscal quarter (with respect to inducement awards, such awards are usually made some period after the commencement of employment, typically between one and ninety days after announcement or commencement); grants are typically made to all employees receiving awards (other than inducement awards) at the same time;

(iii) the Company’s executives do not determine the grant date of equity awards;

(iv) the grant date of equity awards is generally the date of approval of the grants;

(v) the exercise price with respect to grants of stock options and SARs is the market closing price of the underlying common stock on the grant date;

(vi) if at the time of any planned equity grant date any member of the Board or senior executive is aware of material non-public information, we would not generally make the grant; and

(vii) regarding the grant process, the Committee does not delegate any related function, however, as is described above, the Committee receives significant input and recommendations from the CEO with respect to appropriate grant levels. See “Role of Management” above.

ACCOUNTING CONSIDERATIONS

The Committee considers the accounting and cash flow implications of various forms of executive compensation. In its consolidated financial statements, the Company records salaries and performance-based compensation in the amount paid or to be paid to the named executive officers. Accounting rules also require the Company to record an expense in its financial statements for equity awards, even though equity awards are not paid as cash to employees and may not vest or be earned by such employees. The accounting expense of equity awards to employees is calculated in accordance with current accounting rules under GAAP, which require stock-based compensation expense to be measured at the grant date based on the fair value of the award. The Committee believes that the many advantages of equity compensation, as discussed above, more than compensate for the associated non-cash accounting expense required relevant accounting rules; however, the Committee considers the amount of this expense in determining the amount of equity compensation awards.

TAX CONSIDERATIONS

Section 162(m) of the U.S. Internal Revenue Code of 1986 generally disallows a tax deduction to public companies for compensation in excess of $1 million paid to the CEO or any of the four other most highly-compensated officers. Performance-based compensation arrangements may qualify for an exemption from the deduction limit if they satisfy various requirements under Section 162(m). Although the Company considers the impact of this rule when developing and implementing its executive compensation programs, tax deductibility is not a primary objective of our compensation programs. In our view and the view of the Committee, meeting the compensation objectives set forth above is more important than the benefit of being able to deduct the compensation for tax purposes. Accordingly, the Company has not adopted a policy that all compensation must qualify as deductible under Section 162(m).

If an executive is entitled to nonqualified deferred compensation benefits that are subject to Section 409A of the U.S. Internal Revenue Code of 1986, and such benefits do not comply with Section 409A, then the benefits are taxable in the first year they are not subject to a substantial risk of forfeiture. In such case, the executive is subject to regular federal income tax, interest and an additional federal income tax of 20% of the benefit includible in income. Our plans that are subject to Section 409A are generally designed to comply with the requirements of such section so as to avoid possible adverse tax consequences that may result from noncompliance with Section 409A.

BENCHMARKING

We do not believe that it is appropriate to establish compensation levels primarily based on benchmarking. Therefore, we do not attempt to maintain a specific target percentile with respect to a specific list of benchmark companies in determining compensation for NEOs or other executives. Nevertheless, we do believe that information regarding pay practices at other companies is useful in two respects. First, we recognize that our compensation practices must be competitive in the marketplace. Second, this marketplace information is one of the “considerations” used by the Committee in assessing the reasonableness of compensation. Accordingly, the Committee periodically reviews compensation levels for our named executive officers and other key executives against compensation levels at companies in our industry or industries similar to ours, and the Company does factor in the results of compensation surveys and the periodic recommendations of compensation consultants in establishing compensation for our NEOs and other key executives.

STOCK OWNERSHIP GUIDELINES

Although we encourage stock ownership in the Company by our executives and directors, we have not established a formal policy regarding such stock ownership. We may explore whether the adoption of such a policy in the future would be appropriate.

FINANCIAL RESTATEMENT

To the extent permitted by governing law, the Committee has the sole and absolute authority to make retroactive adjustments to any cash or equity based incentive compensation paid to executive officers and certain other officers where the payment was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement. Where applicable and appropriate, the Company will seek to recover any amount determined to have been inappropriately received by the individual executive.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included herein with management, and based on such review and discussions, the Compensation Committee recommended to the Board that such Compensation Discussion and Analysis be included in its Annual Report on Form 10-K for the year ended December 31, 2009, as amended, and the Proxy Statement for the 2010 Annual Meeting of Shareholders of the Company.

Kid Brands, Inc. Compensation Committee

Frederick Horowitz and Mario Ciampi

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 2009, the following were members of the Compensation Committee: Messrs. Horowitz and Ciampi and Ms. Krueger. Mr. Ciampi, a partner of Prentice, is a Prentice Director, and Ms. Krueger, an executive officer of an affiliate of Laminar (until March 31, 2010), was a Laminar Director (until March 30, 2010). None of the foregoing individuals is or ever has been an officer or employee of the Company or any of its subsidiaries, and no “compensation committee interlocks” existed during 2009.

Summary Compensation Table

The following table sets forth compensation for the year ended December 31, 2009 awarded to, earned by, paid to or accrued for the benefit of the principal executive officer of the Company, the principal financial officer of the Company, the former interim principal financial officer of the Company, and the three most highly compensated executive officers of the Company during 2009 other than the foregoing, who were serving as executive officers on December 31, 2009 (collectively, the “named executive officers”, or the “NEOs”).

																						Non-
																						Equity
																						Incentive
														Stock				Option				Plan				All Other
Name and Principal						Salary				Bonus				Awards				Awards				Comp.				Comp.
Position		Year				($)(1)				($)(3)				($)(4)				($)(5)				($)(6)				($)(7)				Total ($)
Bruce Crain (A)			2009				550,000				n/a				n/a				135,000				427,536				26,099				1,138,635
President and CEO			2008				550,000				n/a				n/a				574,000				100,000				22,409				1,246,409
			2007				432,198	(2)			n/a				1,364,250				651,200				n/a				27,728				2,475,376
Guy Paglinco (B)(C) VP and CFO			2009				231,214				n/a				26,700				34,800				122,214				17,039				431,967
Marc S. Goldfarb			2009				325,080				n/a				n/a				45,000				167,051				21,047				558,178
SVP and General			2008				325,080				n/a				n/a				n/a				170,000				24,073				519,153
Counsel			2007				315,000				75,000				60,372				162,526				107,896				20,402				741,196
Lawrence Bivona President — LaJobi (C)			2009				300,000				n/a				n/a				67,500				160,000				17,285				544,785
Michael Levin			2009				449,280				359,000				n/a				90,000				n/a				29,511				927,791
President and CEO —			2008				451,924				n/a				n/a				n/a				n/a				27,169				479,093
Kids Line (C)
Anthony Cappiello (D)			2009				39,470				n/a				n/a				n/a				n/a				406,950				446,420
EVP, CAO; interim CFO			2008				352,221				65,000				n/a				n/a				140,000				54,753				611,974
			2007				341,300				100,000				65,403				175,686				116,905				47,057				846,351

																		Income
										Annual								Recognized
										Premium								from
										for Long-				Annual				Provision of
						Annual				Term				Premium				Group				Extra				Contrib-
						Car				Disability				for Life				Term Life				Week				utions to
						Allow-				Insurance				Insurance				Insurance				Vacation				401(k) Plans				Other
Name		Year				ance ($)				($)(a)				($)(a)				($)(b)				($)(c)				($)(d)				($)(e)				Total ($)
Bruce Crain			2009				n/a				6,659				611				902				10,577				7,350				n/a				26,099
			2008				n/a				3,911				1,000				21				10,577				6,900				n/a				22,409
			2007				n/a				n/a				n/a				n/a				881				n/a				26,847				27,728
Guy Paglinco			2009				9,300				n/a				n/a				389				n/a				7,350				n/a				17,039
Marc Goldfarb			2009				13,200				n/a				n/a				497				n/a				7,350				n/a				21,047
			2008				13,200				n/a				n/a				21				6,252				4,600				n/a				24,073
			2007				13,200				n/a				n/a				183				6,312				707				n/a				20,402
Lawrence Bivona			2009				12,000				29				18				n/a				n/a				5,238				n/a				17,285
Michael Levin			2009				6,844				580				n/a				37				n/a				22,050				n/a				29,511
			2008				6,736				145				n/a				38				n/a				20,250				n/a				27,169
Anthony Cappiello			2009				1,371				n/a				n/a				n/a				n/a				n/a				405,579				406,950
			2008				13,200				n/a				n/a				21				6,773				6,900				27,859				54,753
			2007				13,200				n/a				n/a				494				6,563				6,442				20,358				47,057

2009 Grants of Plan-Based Awards

The following table provides information with respect to non-equity incentive plan awards to the NEOs in 2009 as well as equity awards made to the NEOs in 2009.

All Other

All Other

Stock

Option

Exercise

Estimated Possible(1) Payouts

Estimated Future Payouts

Award:

Awards:

or Base

Under Non-equity Incentive Plan

Under Equity Incentive Plan

Number

Number of

Price of

Grant Date

Awards

Awards

of Shares

Securities

Option/

Fair Value of

Thresh-

Thresh-

of Stock

Underlying

SAR

Stock and

Grant

old

Target

Max

old

Target

Max

or Units

Options/SARs

Awards

Option

Name

Plan

Date

($)(2)

($)(2)

($)(2)

(#)

(#)

(#)

(#)

(#)

($/Sh)(6)

Awards ($)(7)

Bruce Crain(3)(4)

IC Program

—

61,875

412,500

715,000

3/27/09

114,943

1.36

100,000

2/24/09

150,000

1.53

135,000

Guy Paglinco(4)

IC Program

—

17,888

119,250

178,875

8/14/09

5,000

26,700

8/14/09

10,000

5.34

34,800

Marc Goldfarb(4)

IC Program

—

24,450

163,000

244,500

2/24/09

50,000

1.53

45,000

Lawrence Bivona

IC Program

—

22,500

150,000

225,000

2/24/09

75,000

1.53

67,500

Michael Levin(4)(5)

IC Program

—

65,625

328,125

568,750

2/24/09

100,000

1.53

90,000

Anthony Cappiello

n/a

Employment Contracts and Arrangements

Mr. Crain

As of December 4, 2007 (the “Commencement Date”), Mr. Crain entered into an agreement, amended as of August 10, 2009 (the “Crain Agreement”) with the Company, with respect to his employment as President and Chief Executive Officer of the Company, at an annual base salary of $550,000. Mr. Crain’s base salary may not be decreased during the term of his employment with the Company, and is subject to annual increase in the discretion of the Compensation Committee (his current base salary remains unchanged). The Company has also agreed to nominate him as a member of the Board during the term of the Crain Agreement. Commencing in 2008, Mr. Crain became eligible for an annual cash incentive compensation opportunity in an amount not less than 75% of his base salary at target and 130% at maximum. Mr. Crain’s performance goals in respect of such incentive compensation opportunity, which are established by the Compensation Committee annually in consultation with Mr. Crain, may not be established at levels that are more difficult to achieve than for other IC Program participants who have identical performance measures. The Compensation Committee determined that 75% of Mr. Crain’s incentive compensation opportunity for 2009 would be based upon achievement by the Company of the consolidated EBITDA Targets, and 25% would be based on achievement in five distinct categories of personal goals. The EBITDA Targets were achieved for 2009, and with respect to Mr. Crain’s personal goals, the Compensation Committee determined that Mr. Crain earned 100% of the applicable targets. (See CD&A above under the caption “2009 Incentive Compensation for Mr. Crain”).

Also pursuant to the Crain Agreement, on December 5, 2007, Mr. Crain was awarded 85,000 shares of restricted stock under the Company’s 2004 Stock Option, Restricted and Non-Restricted Stock Plan (the “2004 Plan”), which vest ratably over a four-year period commencing one year after the Commencement Date. In addition, on December 5, 2007, Mr. Crain was granted 100,000 stock options pursuant to the 2004 Plan. Of the foregoing, 80,000 of such options vest ratably over a five-year period commencing one year after the Commencement Date, and will be generally exercisable for 10 years from the Commencement Date. The remaining 20,000 of such options became fully vested on the six-month anniversary of the Commencement Date and are generally exercisable for 10 years from the Commencement Date. An additional 20,000 options were granted to Mr. Crain on December 5, 2007 outside of the 2004 Plan (due to grant limitations therein), which vest ratably over a five-year period commencing one year after the Commencement Date, and are generally exercisable for 10 years from the Commencement Date. Pursuant to the Crain Agreement, an additional 100,000 options were granted to Mr. Crain on January 4, 2008 under the 2004 Plan, which options vest ratably over a five-year period commencing one year after the Commencement Date and will be generally exercisable for 10 years from the Commencement Date. Each grant of options and restricted stock described above (collectively, the “Equity Awards”, and as to the options only, the “Options”) were made pursuant to an option agreement or a restricted stock agreement, as applicable. The exercise price of the Options is the closing price of the Company’s Common Stock on the New York Stock Exchange on the date of grant. Future equity grants are at the discretion of the Compensation Committee. See the “2009 Grants of Plan Based Awards” table for a description of equity granted to Mr. Crain in 2009.

Pursuant to the Crain Agreement, Mr. Crain is entitled to participate in the Company’s employee benefit plans and programs applicable to senior executives generally and on a basis no less favorable than those provided to other senior executives. In addition, Mr. Crain is entitled to life insurance coverage equal to 200% of his annual base salary (or the life insurance benefit under the Company’s life insurance program for senior executives if the latter would provide for a higher level of coverage), long-term disability benefits during the period of disability equal to 50% of his base salary (prior to offsets provided in the Company’s long-term disability plan) through the Company’s long-term disability plan and a supplemental disability program (the Company will use commercially reasonable best efforts to arrange for the provision of all or part of the supplemental disability benefit on a non-taxable basis to Mr. Crain), reimbursement for tax preparation and financial planning services not to exceed $5,000 annually, reimbursement for an annual physical examination and director’s and officer’s liability insurance coverage during the term of his employment and for six years thereafter in an annual amount equal to at least the greater of $5.0 million or the coverage provided to any other present or former senior executive or director of the Company. Mr. Crain was also entitled to reimbursement for his legal fees in connection with the Crain Agreement and the consulting arrangement he had with the Company prior to execution of the Crain Agreement, up to a maximum of $25,000, and outplacement services in the event of his termination without Cause or termination for Good Reason for a period of six months following such termination in an amount not to exceed $10,000. Mr. Crain is not a participant in the Company’s Severance Policy or Change in Control Plan (prior to its termination). Mr. Crain is entitled to three week’s vacation annually (one week more than he would be entitled to based on tenure). See footnote 7 of the “Summary Compensation Table” above for a description of perquisites received by Mr. Crain during 2009.

If the employment of Mr. Crain is terminated by the Company for Cause or by Mr. Crain without Good Reason (each as defined in the Crain Agreement), he will be entitled to receive his base salary earned through the date of termination, bonus amounts earned for any prior year and not yet paid, and other amounts and benefits, if any, provided under applicable Company programs and policies (collectively, the “Accrued Benefits”). In addition, the unvested portion of the Equity Awards will be cancelled or immediately forfeited, as applicable, and any unexercised, vested portion of the Options shall remain exercisable for the shorter of 90 days following the date of termination and the remainder of their term.

If the Company terminates the employment of Mr. Crain without Cause or he terminates his employment for Good Reason (subsequent to the 2009 amendment to the Crain Agreement, not in connection with a Change in Control), Mr. Crain will be entitled to receive his base salary earned through the date of termination and for a period of six months thereafter, bonus amounts earned for any prior year and not yet paid, continued life insurance coverage (as set forth in the Crain Agreement) for a period of six months following the date of termination, coverage under the Company’s medical and dental, if any, programs during the twelve-month period following the date of termination, and in the event of termination without Cause only, the pro-rata portion of his bonus for the year in which the date of termination occurs based on actual performance for such year. Also in the event of any such termination, the Equity Awards will become immediately vested and/or non-forfeitable, as applicable, to the same extent as if Mr. Crain had completed an additional two years of service after the date of termination, and the Options shall remain exercisable for the shorter of 90 days following the date of termination and the remainder of their term.

If the employment of Mr. Crain is terminated by the Company as a result of his Disability (as defined in the Crain Agreement), he will be entitled to receive the Accrued Benefits, as well as the long-term disability benefit described above. If the employment of Mr. Crain is terminated as a result of his death, his estate will be entitled to receive the Accrued Benefits, and his designated beneficiary (or his estate in the absence of such designation) will be entitled to receive the life insurance benefit described above. In addition, in the event that the employment of Mr. Crain is terminated as a result of his death or Disability, he, his estate, or his designated beneficiary, as applicable, will be entitled to the pro-rata portion of the bonus for the year in which the date of termination occurs based on actual performance for such year, and the Equity Awards will become immediately vested and/or non-forfeitable, as applicable, to the same extent as if Mr. Crain had completed an additional two years of service after the date of termination, and the Options shall remain exercisable for the shorter of one year following the date of termination and the remainder of their term.

Prior to the 2009 amendment to the Crain Agreement (described below), in the event of a Change of Control (as defined in the Crain Agreement), whether or not termination of employment occurs, the Equity Awards will become immediately vested and/or non-forfeitable, as applicable, to the extent that such Equity Awards were scheduled to vest within three years of the date of such Change in Control, and the vesting dates of the Equity Awards that were not scheduled to vest within three years of the date of such Change in Control shall be accelerated by three years. Prior to the 2009 amendment to the Crain Agreement (described below), if the Company terminates Mr. Crain’s employment without Cause and a Change in Control occurs within six months of the date of such termination, such Equity Awards that were scheduled to vest within three years of the date of termination, and which did not vest as described above, shall become vested and exercisable on the date of such Change in Control, and shall remain exercisable for the shorter of 90 days following the date of termination and the remainder of their term.

The Crain Agreement includes a restriction against specified competitive activities during Mr. Crain’s employment by the Company and for a period of one year thereafter and a non-solicitation agreement for a period of two years.

If Mr. Crain determines that any amounts due to him under the Crain Agreement and any other plan or program of the Company constitute a “parachute payment,” as such term is defined in Section 280G(b)(2) of the Code, and the amount of the parachute payment, reduced by all federal, state and local taxes applicable thereto, including the excise tax imposed pursuant to Section 4999 of the Code, is less than the amount that he would receive if he were paid three times his “base amount,” as defined in Section 280G(b)(3) of the Code, less $1.00, reduced by all federal, state and local taxes applicable thereto, then at Mr. Crain’s request the Company shall reduce the aggregate of the amounts constituting the parachute payment to an amount that will equal three times his base amount less $1.00.

In the event of any termination of the employment of Mr. Crain, he is under no obligation to seek other employment, and there shall be no offset against any amounts due him on account of any remuneration attributable to any subsequent employment that he may obtain.

As of August 10, 2009, the Crain Agreement was amended (the “Amendment”) to, among other things, effect the changes set forth below. We deemed it appropriate and reasonable to enter into this Amendment in order to help ensure a smooth transition should a Change in Control occur, and to help eliminate from any decision-making process potential distractions caused by concerns over personal financial and employment security.

If Mr. Crain’s employment is terminated without Cause by the Company or by Mr. Crain with Good Reason, in either case within the 120 day period prior to or the 120 day period following a Change in Control (as defined in the Amendment), he will be entitled to receive: (i) his base salary for a period of 21 months after the termination date (instead of 6 months); and (ii) coverage under the Company’s life insurance programs for 12 months following the termination date (instead of 6 months). In addition, the Amendment specifies that bonus calculations with respect to such termination will be applied to the year in which the earlier of the termination date or the Change in Control occurs (the earlier of such dates, the “Trigger Date”), and will be based on actual targets (pro rated through the Trigger Date) and performance achieved through the Trigger Date (provided, if targets have not been set by the Company for the year in which the Trigger Date occurs, such bonus will be based on actual targets and performance achieved for the year prior to the year in which the Trigger Date occurs, and prorated as set forth above as if the Trigger Date occurred in such prior year), in each case with the amount of the bonus prorated for the period of the relevant year through the Trigger Date. Other benefits to which Mr. Crain is entitled in the event of a termination without Cause by the Company or for Good Reason by Mr. Crain remain substantially unchanged.

In the event of a Change in Control, all equity granted to Mr. Crain as of the date of the Amendment (“Current Equity”) will become immediately vested or non-forfeitable, as applicable (prior to the Amendment, equity awards granted pursuant to his original employment agreement would be accelerated by 3 years in such circumstance), and if a Change in Control occurs within 6 months following a termination of the employment of Mr. Crain without Cause, the remaining unvested portion of the Current Equity will vest, and any unexercised portion of the Current Equity will remain exercisable for one year following the Change in Control, or their respective expiration dates, whichever is earlier.

The definition of Change in Control was expanded to include specified additional triggers.

Mr. Paglinco

Mr. Paglinco was hired as Vice President — Corporate Controller of the Company in September 2006. He was promoted to Vice President and Chief Accounting Officer in November 2007, and assumed the additional role of interim Chief Financial Officer as of January 30, 2009. Effective August 14, 2009, he was promoted to Vice President and Chief Financial Officer of the Company. In connection therewith, his annual base salary was increased from $214,000 to $265,000, his Applicable Percentage under the Company’s IC Program was increased from 35% to 45% (effective for 2009), and he was issued 10,000 stock appreciation rights and 5,000 restricted stock units under the Company’s Equity Incentive Plan, each with a five-year vesting period, commencing on August 14, 2010. His employment is “at will”.

Pursuant to his current arrangement with the Company, Mr. Paglinco is also entitled to participate generally in all retirement, savings, welfare and other employee benefit plans and arrangements provided to other executive officers of the Company, including the Company’s Severance Policy, and receives a monthly car allowance. Mr. Paglinco is also entitled to three weeks annual vacation. In addition, the March 30, 2007 amendments to the Severance Policy are applicable to Mr. Paglinco; i.e., in the event such amendments are triggered, he will be entitled to receive payments and benefits under the Severance Policy for a period of 12 months following a qualified termination.

In addition, the Company issued a letter, effective August 7, 2009, to Mr. Paglinco (a “Change in Control Letter”), stating that if the Company consummates a Change in Control (as defined in the Amendment to the Crain Agreement) on or before April 30, 2010, and the employment of the officer is terminated without cause within the 120 day period prior to or the 120 day period following the consummation of such Change in Control, such officer will be entitled to the benefits set forth below, in addition to, and notwithstanding anything to the contrary in, the Severance Policy, the IC Program, the award agreement governing the relevant equity, or the plan pursuant to which such equity was issued. The Company deemed it appropriate and reasonable to enter into these letters in order to help ensure a smooth transition should a Change in Control occur, and to help eliminate from any decision-making process potential distractions caused by concerns over personal financial and employment security.

1. All equity granted to him as of August 14, 2009 will become immediately vested or non-forfeitable, as applicable, and if a Change in Control occurs following a termination of the employment of the officer without Cause (but on or prior to April 30, 2010), the remaining unvested portion of such equity will vest, and any unexercised portion will remain exercisable for 90 days following the Change in Control, or their respective expiration dates, whichever is earlier;

2. Severance payments under the Severance Policy will not be terminated in the event of subsequent employment of the officer; and

3. A pro rata portion of the officer’s IC bonus for the year in which the earlier of: (a) the termination date; and (b) the date of the consummation of the Change in Control (the earlier of such dates, the “Trigger Date”) occurs based on actual targets (pro rated through the Trigger Date) and performance achieved through the Trigger Date (provided, if targets have not been set by the Company for the year in which the Trigger Date occurs, such bonus will be based on actual targets and performance achieved for the year prior to the year in which the Trigger Date occurs, and prorated as set forth above as if the Trigger Date occurred in such prior year), in each case with the amount of the bonus prorated for the period of the relevant year through the Trigger Date.

Mr. Goldfarb

On September 26, 2005, Marc S. Goldfarb was hired as Vice President, General Counsel and Secretary of the Company at an annual base salary of $260,000. In accordance with the terms of his current employment arrangement with the Company, Mr. Goldfarb serves as Senior Vice President and General Counsel of the Company (as of May 31, 2006) and during 2009, his annual base salary was $325,080. Pursuant to his current arrangement, Mr. Goldfarb is entitled to participate in the IC Program, with an Applicable Percentage of 50%. Mr. Goldfarb was granted 40,000 stock options pursuant to the 2004 Plan in connection with the commencement of his employment. Future option grants are at the discretion of the Compensation Committee. See the “2009 Grants of Plan Based Awards” table for a description of equity granted to Mr. Goldfarb in 2009. His employment is “at will”.

Pursuant to his arrangement with the Company, Mr. Goldfarb is also entitled to participate generally in all retirement, savings, welfare and other employee benefit plans and arrangements provided to other executive officers of the Company, including the Company’s Severance Policy (with a guaranteed minimum of 8 months of severance thereunder), and receives a monthly car allowance. Mr. Goldfarb is also entitled to three weeks annual vacation. Mr. Goldfarb was a participant in the Change in Control Plan prior to its termination. In addition, the March 30, 2007 amendments to the Severance Policy are applicable to Mr. Goldfarb; i.e., in the event such amendments are triggered, Mr. Goldfarb will be entitled to receive payments and benefits under the Severance Policy for a period of 12 months following a qualified termination.

Mr. Goldfarb also received a Change in Control Letter.

Mr. Bivona

Lawrence Bivona serves as President of LaJobi, Inc. pursuant to an employment agreement dated as of April 2, 2008 (the “Bivona Agreement”), at an annual base salary of $300,000. Mr. Bivona is a participant in the IC Program, with an Applicable Percentage of 50% during 2009. In connection with the execution of and pursuant to the Bivona Agreement, Mr. Bivona was granted 28,000 stock options and 4,300 shares of restricted stock pursuant to the 2004 Plan. In addition, during each of 2009 and 2010 (provided he is a full-time employee), additional equity grants are to be made to Mr. Bivona, valued at $50,000. Additional annual equity grants are at the discretion of the Company. His employment is “at will”. See the “2009 Grants of Plan Based Awards” table for a description of equity granted to Mr. Bivona in 2009.

Pursuant to the terms of the Bivona Agreement, Mr. Bivona is entitled (i) to be included in any life insurance, disability insurance, medical, dental or health insurance, savings, pension and retirement plans and other similar benefit plans or programs (including, if applicable, any excess benefit or supplemental executive retirement plans) maintained by the Company for the benefit of its key executives (“Benefit Plans”); (ii) to be provided with any other perquisites generally provided to all other senior executives of the Company on terms no less favorable than those provided to any other such executive; (iii) to four weeks annual paid vacation and holiday leave per the terms of LaJobi’s employee policies manual in effect from time to time; (iv) to reimbursement for the cost of leasing and operating an automobile (including insurance and maintenance), up to a maximum reimbursement of $1,000 per month; (v) while Mr. Bivona is employed, to be included under any director’s and officer’s liability insurance policy maintained by LaJobi or the Company on terms and conditions (including scope, deductibles, etc.) no less favorable to him than those applicable to any person who is solely an officer and/or director of a subsidiary of the Company; and (vi) to an additional amount (the “Gross Up Payment”) if any payment made to him becomes subject to the excess tax provided for in Section 409A of the Internal Revenue Code (a “409A Violation”). The Gross Up Payment shall equal an amount such that after Mr. Bivona’s payment of all taxes, interest, and penalties imposed on the Gross Up Payment, he retains an amount of the Gross Up Payment equal to the sum of (A) the interest under Section 409A(a)(1)(B)(i)(I) of the Internal Revenue Code (the “Code”) resulting from the 409A Violation; (B) the additional tax under Section 409A(a)(1)(B)(i)(II) of the Code resulting from such 409A Violation; (C) any penalties resulting from such 409A Violation; and (D) if Mr. Bivona recognizes income prior to the taxable year that the income would have been included in his gross income in the absence of such 409A Violation, the amount of the taxes on the income recognized other than the additional tax under subclause (B). LaJobi will also indemnify Mr. Bivona for all costs, expenses, and reasonable attorney’s and paralegal’s fees incurred by him as a result of any audit by any tax authorities to the extent the same relates to the tax consequences of such 409A Violation (the “Indemnified Amount”). See footnote 7 of the “Summary Compensation Table” above for a description of perquisites received by Mr. Bivona during 2009.

If Mr. Bivona’s employment is terminated due to his death, Disability, for Cause or without Good Reason (each as defined in the Bivona Agreement), he will be entitled to his salary through his final day of active employment, any unreimbursed expenses and any accrued but unused vacation pay. He will also be entitled to any benefits mandated under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) or required under the terms of any death, insurance or retirement plan, program or agreement provided by the Company and in which he participates (“Mandated Benefits”). If Mr. Bivona’s employment is terminated either without Cause or for Good Reason (each as defined in the Bivona Agreement), he will be entitled to: (i) his salary through his final date of active employment, any unreimbursed expenses and any accrued but unused vacation pay; and (ii) as severance, twelve (12) months of (a) Base Salary continuation, payable at the regular payroll periods of LaJobi and (b) continuation of participation in the Benefit Plans. As a condition to receiving such severance amounts, Mr. Bivona must execute a release of claims in an agreed-upon form within twenty-one (21) days after the date of termination. Mr. Bivona will not have the obligation to mitigate damages, and subsequent employment will not affect or alter the payment of any amounts payable to him under the Bivona Agreement. Additionally, Mr. Bivona will be entitled to any Mandated Benefits.

The Bivona Agreement includes non-solicitation agreements and restrictions against specified competitive activities during the period of his employment and, with respect to specified activities, for a period of 1 year thereafter.

Mr. Levin (last day of employment with the Company was December 31, 2009)

Mr. Levin, who joined the Company in December of 2004 upon the Company’s purchase of Kids Line, LLC, served as President and Chief Executive Officer of Kids Line, LLC until December 31, 2009, pursuant to an employment agreement dated March 12, 2008, amended as of August 10, 2009. As of January 1, 2008, his employment agreement provided for an annual base salary of $400,000, provided, that, at the discretion of the Compensation Committee, such base salary could have be increased to $475,000. For 2009, Mr. Levin’s base salary was $437,500. Mr. Levin was entitled to participate in the IC Program (based on Kids Line EBITDA with no individual component), with a potential compensation opportunity equal to 75% of his base salary at Target and 130% at the Maximum Target. Mr. Levin was no longer employed by the Company at the time of payment of amounts earned under the IC Program for 2009. As a result, Mr. Levin was not entitled to any payment thereunder. However, as the Committee felt that Mr. Levin had earned the incentive compensation amount to which he would otherwise have been entitled based on his performance and service to the Company through the end of the year, as well as his agreement to continue to provide certain consulting services to the Company subsequent to the termination of his employment on December 31, 2009, it used its discretion to award him such amount. (See CD&A above under the section “Establishing Corporate Objectives and Calculating the Corporate Component under the caption “Operation of the 2009 IC Program”).

In accordance with the terms of an amendment to his employment agreement effective August 10, 2009, commencing December 15, 2009, either party may terminate the agreement at will upon two weeks’ prior written notice. Under this provision, Mr. Levin would not be entitled to any severance payments, nor be subject to any mitigation duties or obligations. In accordance with this provision, Mr. Levin’s last day of employment with the Company was December 31, 2009.

If Mr. Levin’s employment was terminated due to death or disability, any IC Award would have been prorated based on the number of days that he was employed during the year based on actual performance through the remainder of the relevant year.

Mr. Levin was also eligible to participate in all benefit programs made generally available to executives of Kids Line, as the same may be modified from time to time. Further, throughout the period of his employment, Mr. Levin was entitled to the following perquisites: a monthly car allowance, a long-term disability insurance policy and four weeks’ annual vacation (consistent with Kids Line policy). See footnote 7 of the “Summary Compensation Table” above for a description of perquisites received by Mr. Levin during 2009.

Mr. Levin’s employment agreement contains a one-year post-employment non-solicitation provision with respect to specified activities and persons.

Equity grants are at the discretion of the Compensation Committee.

See the Summary Compensation Table above for information with respect to compensation received by the NEOs under their employment agreements and arrangements during 2009.

Mr. Cappiello (left the employment of the Company as of January 30, 2009)

On July 27, 2005, the Company entered into an employment agreement, effective August 1, 2005 with Anthony Cappiello, with respect to his employment as Executive Vice President and Chief Administrative Officer of the Company. In accordance with the terms of his agreement, Mr. Cappiello was entitled to an annual base salary of $325,000, which could not be reduced (his 2009 base salary was $353,000). Mr. Cappiello assumed the position of interim principal financial officer upon the retirement of Mr. O’Reardon as of November 13, 2007, and in connection therewith, received a special one-time bonus of $25,000. Mr. Cappiello was also entitled to participate in the IC Program with an Applicable Percentage of 50%. In addition, after 3 months of continuous employment, Mr. Cappiello was granted 50,000 stock options pursuant to the 2004 Plan. Future option grants were at the discretion of the Compensation Committee of the Board. No equity was issued to Mr. Cappiello in 2008 or 2009.

Pursuant to his agreement, Mr. Cappiello was also entitled to participate generally in all retirement, savings, welfare and other employee benefit plans and arrangements provided to other executive officers of the Company, and received a car allowance. Mr. Cappiello was entitled to three week’s annual vacation (one week more than he would be entitled to based on tenure). Mr. Cappiello was not a participant in the Company’s Severance Policy, but was a participant in the Company’s Change in Control Plan. In addition, Mr. Cappiello was entitled to an annual housing allowance, resulting in a reimbursement of $2,893 in 2009. His employment was “at will”.

In accordance with his agreement, in the event that Mr. Cappiello’s employment with the Company was terminated for any reason other than for cause, except in the case of a Change in Control in the Company, as defined in the Company’s Change in Control Plan (in which case severance would have been governed by the terms of such plan), he would be eligible to receive severance in accordance with the following schedule: (i) during the first 8 months following such termination, severance pay at the rate of 100% of his annual base salary in effect on the termination date (the “Termination Amount”), (ii) during the 9^th and 10^th months following such termination, severance pay at the rate of 75% of the Termination Amount, and (iii) during the 11^th and 12^th months following such termination, severance pay at the rate of 50% of the Termination Amount. All severance payments will be paid over the course of the severance period. During such severance period, Mr. Cappiello will be entitled to continue to participate in Company insurance plans (and will continue to receive his car allowance). All severance payments and benefits, however, will terminate if Mr. Cappiello obtains gainful employment during the severance period. In addition, the March 30, 2007 amendments to the Severance Policy are applicable to Mr. Cappiello (i.e., if triggered, Mr. Cappiello would be entitled to receive 100% of his annual base salary for a period of 12 months). Mr. Cappiello left the employment of the Company as of January 30, 2009. As the March 30, 2007 amendments to the Severance Policy were triggered in connection with his termination, Mr. Cappiello received substantially the payments and other benefits applicable to a termination by the Company without Cause as described above. See “Actual Terminations in 2009” below for a description of amounts payable to Mr. Cappiello as a result of the termination of his employment with the Company.

Termination of Employment and Change-In-Control Arrangements

(i) 40l(k) Plans

The Company offers eligible employees the opportunity to participate in a 401(k) Plan based on employees’ pretax salary deferrals with Company matching contributions. As a result of the Company’s historical acquisition strategy, the 401(k) Plans may differ among the Company and its subsidiaries. Participating employees may elect to contribute from 1% to 80% (but not in excess of the amount permitted by the Code, i.e., $16,500 in 2009, and $22,000 in 2009 for employees age 50 and older who elect to make catch-up contributions) of their compensation, on a pretax basis, to the 401(k) Plan. Because the 401(k) Plan is a qualified defined contribution plan, if certain highly compensated employees’ contributions exceed the amount prescribed by the Code, such contributions will be reduced or limited. Employees’ contributions are invested in one or more of several funds (as selected by each participating employee). The Company, LaJobi and Sassy match a portion (either one-half of any amount up to 6%, or 100% of any amount up to 3%, of salary contributed) of the compensation deferred by each employee, and Kids Line contributes 3% (9% for Mr. Levin) of eligible salary pursuant to the safe harbor provisions of Section 401(k) of the Code. Matching contributions are fully vested after four years of employment at the rate of 25% per year of employment (after six years of employment for LaJobi). Under certain circumstances, the 401(k) Plan permits participants to make withdrawals or receive loans from the 401(k) Plan prior to retirement age. In light of economic conditions at the commencement of 2009, the Company temporarily suspended its matching contributions under its 401(k) (which were reinstated for the full year at the end of 2009).

(ii) Change in Control Plan

The Board adopted a Change in Control Severance Plan (the “Change in Control Plan”) effective January 29, 2003, as amended December 22, 2003, March 13, 2007 (to clarify a provision thereunder) and December 22, 2008. The Change in Control Plan was terminated by the Board on February 24, 2009, although such termination did not impair the rights of participants who experienced a qualifying termination prior to the termination of such plan. As a result, the Change in Control Plan is not applicable to NEOs currently employed by the Company. Details of the material terms of the Change in Control Plan can be found in the Company’s proxy statement for its 2009 Annual Meeting of Shareholders.

(iii) Severance Policy

The Compensation Committee adopted an amendment (the “Amendment”) to the Company’s general severance policy (which previously allowed for a maximum of six week’s severance pay under specified circumstances), applicable in general only to employees who are domestic vice presidents or above and who are designated by the Committee as eligible participants in the plan (collectively, “DVPs”), effective February 11, 2003. This severance policy was further amended as of March 30, 2007, as described below, and on December 22, 2008 to address the provisions of Section 409A of the Code and to clarify the scope of the plan (as so amended, the “Severance Policy”).

Benefits. If a DVP’s employment with the Company is terminated by the Company without “Cause” (as defined in the Change in Control Plan), and not in connection with (i.e., occurring more than 6 months before or more than two years after) a Change in Control of the Company (as defined in the Change in Control Plan), such DVP will be paid “Severance Payments” ranging from a minimum amount equal to 4 months of such DVP’s base salary in effect on the date of termination, exclusive of any bonuses or commissions (“Current Salary”) to a maximum amount equal to 12 months of such DVP’s Current Salary, depending on the period of time that such DVP was employed by the Company at the time of such termination. The time period on which Severance Payments are based (i.e., 4 months of total employment, 6 months of total employment, etc.) shall be the “Severance Period”. Severance Payments will be paid over the course of the relevant Severance Period in accordance with the Company’s regular salary payment schedule (not in a lump sum), unless otherwise required by Section 409A of the Code (in which case payments will be made in the manner set forth in the Severance Policy). As of March 30, 2007, the Company amended the Severance Policy to specify that notwithstanding anything to the contrary therein, in the event that the employment of specified DVPs is terminated in connection with the consummation of certain corporate transactions, the severance payments and benefits applicable to such terminated DVP will be extended by an additional 4 months up to a maximum Severance Period of 12 months.

During the relevant Severance Period, the Company will continue to provide the terminated DVP with medical and other insurance benefits, in each case to the extent and on substantially the same basis (including relevant payroll deductions) as provided immediately prior to the termination (subject to provisions intended to address Section 409A of the Code). In addition, for a period of 60 days following the DVP’s termination, the Company will continue to provide to the DVP use of an automobile or an equivalent payment therefor.

Termination of Severance Payments. If the terminated DVP obtains gainful employment during the Severance Period, the Amendment provides that Severance Payments will terminate on the date that such new employment commences.

Amendment. The Company reserves the right to amend, in whole or in part, or terminate, the Severance Policy, provided that no amendment to the Severance Policy will become effective (as to a person covered thereby prior to such amendment) prior to the date which is six months from the date such amendment is approved by the Board or the Compensation Committee, and provided further that an amendment may become effective earlier if it will result in the avoidance of the excise tax and/or interest imposed under Section 409A of the Code without materially diminishing the economic benefit to a DVP.

General Release. As a condition to the receipt of any Severance Payments, each terminated DVP will be required to execute the Company’s form of General Release, which provides generally for the following: (i) an irrevocable release by the DVP of existing or future claims against the Company and specified related parties arising out of the performance of services to or on behalf of the Company by such DVP through the date of such release, (ii) an agreement by the DVP to keep all non-public information pertaining to the Company and specified parties confidential, (iii) an agreement by the DVP not to disparage the Company or specified related persons and (iv) an affirmation by the DVP of his/her obligations under or pursuant to any restrictive covenant (non-compete) agreements that such DVP signed with the Company. In the event that such release is not executed within 45 days of its delivery to the relevant DVP, such DVP will be entitled to only one week of severance pay for each year of service, with a maximum severance payment equal to six (6) weeks of severance pay, less any applicable withholdings, in addition to medical and dental insurance coverage (if enrolled therein on the date of termination of employment), paid by the Company, until the end of the month of termination. Thereafter, the DVP will be entitled to continue his/her medical and dental insurance coverage, at his/her expense, pursuant to the provisions of COBRA.

Rights Under Other Agreements. The Amendment supersedes any other agreement between the Company and a DVP that provides for lesser benefits with respect to the type of termination covered thereby in effect on the effective date of the Amendment or thereafter.

Equity Incentive Plan

The Board adopted the Equity Incentive Plan (the “EI Plan”) on June 3, 2008, and the EI Plan was approved by the Company’s shareholders as of July 10, 2008. The EI Plan is a successor to the 2004 Plan (defined below), which terminated as of the date of such approval (although outstanding awards thereunder will continue to be covered by its terms).

Awards

The EI Plan provides for awards in any one or a combination of: (a) stock options, (b) SARs, (c) Restricted Stock, (d) RSUs, (e) non-restricted stock, and/or (f) dividend equivalent rights. Any award under the EI Plan may, as determined by the committee administering the EI Plan (the “Plan Committee”) in its sole discretion, constitute a “Performance-Based Award” (an award that qualifies for the performance-based compensation exemption of Section 162(m) of the Internal Revenue Code of 1986, as amended). All awards granted under the EI Plan will be evidenced by a written agreement between the Company and each participant (which need not be identical with respect to each grant or participant) that will provide the terms and conditions, not inconsistent with the requirements of the EI Plan, associated with such awards, as determined by the Plan Committee in its sole discretion. Award agreements must be executed by the Company and a participant in order for the award covered by such agreement to be effective.

Reserved Shares

A total of 1,500,000 shares of Common Stock have been reserved that may be subject to, delivered in connection with, and/or available for awards under the EI Plan, which will consist of authorized but unissued shares of Common Stock or shares of Common Stock held in treasury. Awards under the EI Plan are counted against the reserved shares as described in the EI Plan. In the event all or a portion of an award is forfeited, terminated or cancelled, expires, is settled for cash, or otherwise does not result in the issuance of all or a portion of the shares of Common Stock subject to the award in connection with the exercise or settlement of such award (“Unissued Shares”), such Unissued Shares will in each case again be available for awards under the EI Plan, as described therein. The preceding sentence will apply to any awards outstanding on the effective date of the EI Plan under the 2004 Plan (discussed below), up to a maximum of an additional 1,750,000 shares. Subject to the terms of the EI Plan, assumed or replacement awards in connection with the acquisition of any business by the Company or any of its subsidiaries shall be in addition to those available thereunder.

Participants

Participants are officers (including directors), non-employee (outside) directors, employees and specified consultants of the Company or any of its subsidiaries selected by the Plan Committee in its sole discretion to receive an award under the EI Plan. Incentive Stock Options may not be awarded to participants who are not employees of the Company.

Administration of the Plan

The Plan Committee must be a committee comprised of at least two (2) directors, each of whom shall be, to the extent applicable an “outside director” within the meaning of Section 162(m) of the Code. In the absence of a contrary appointment by the Board, the Plan Committee will be the Compensation Committee, except regarding awards to outside directors, with respect to whom the Board will act as the Plan Committee. The Plan Committee, subject to the limitations set forth in the EI Plan, has absolute discretion and authority: (i) to make and administer grants under the EI Plan (including to determine the form, amount and other terms and conditions of awards granted, and to waive, amend or modify conditions initially established for grants, including to accelerate vesting and to extend or limit the exercisability of grants, except as specifically restricted by the EI Plan), (ii) to determine when and to which individuals awards will be granted, (iii) to determine whether, to what extent and under what circumstances awards may be settled, paid or exercised in cash, Common Stock or other property, or canceled, forfeited or suspended, (iv) to determine the terms and provisions of any award agreement and any amendment of such award agreement, and (v) to establish, amend, waive and/or rescind any rules and regulations as it deems necessary for the proper administration of the EI Plan, including to make such determinations and interpretations and to take such actions in connection with the EI Plan and any awards granted thereunder as it deems necessary or advisable to carry out its purposes.

Grant Date

The grant date is the date designated by the Plan Committee as the date of an award under the EI Plan, which will not be earlier than the date the Plan Committee authorizes (by resolution or written action) the grant of such award, notwithstanding the date of any award agreement evidencing such award. In the absence of a designated date or fixed method of computing such date being specifically set forth in the Plan Committee’s resolution, then the date of grant will be the date of the Plan Committee’s resolution or action.

Limitations on Grants

Grants under the EI Plan can be made to any eligible individual at the discretion of the Plan Committee at any time. All grants of Stock Options are subject to a 350,000 shares per participant per plan year limit. In the case of Incentive Stock Options, the aggregate fair market value (as of the date of grant) of all shares of Common Stock underlying any grant of Incentive Stock Options, however made, that become exercisable by a participant during any calendar year may not exceed $100,000 (options granted in excess of this amount shall not be treated as Incentive Stock Options). Grants of Incentive Stock Options are subject to other restrictions set forth in the EI Plan.

Vesting, Term and Acceleration Provisions

Stock Options. Each Stock Option will be subject to such terms and conditions, including vesting, as the Plan Committee may determine from time to time in its discretion, provided that no Stock Option shall be exercisable later than 10 years from the date of grant (5 years in the case of an Incentive Stock Options granted to a Ten-Percent Stockholder (as defined in the EI Plan)). Notwithstanding the foregoing, unless otherwise provided in the award agreement relating to such award, each Stock Option shall vest and become exercisable ratably over five years (20% per year), commencing on the first anniversary of the date of grant, and shall continue to be exercisable for a period of 10 years from the date of grant.

Unless otherwise provided in the award agreement governing such Stock Options or the Change in Control Plan (other than with respect to awards of Stock Options to outside directors, which is discussed in the following paragraph), (i) upon Disability (as defined in the EI Plan) or death, all unexercised options vest, and may be exercised for up to one year or the remaining term of the Stock Option, if earlier; and (ii) if a participant’s employment is terminated for any other reason, all unexercised Stock Options are cancelled as of the termination date; provided however, if a participant’s employment is terminated for reasons other than Cause (as defined in the EI Plan), vested unexercised Stock Options may be exercised within 90 days of termination, or the remaining term of the Stock Option, if earlier, and if a participant retires (as defined in the Company’s 401(k) plan), vested unexercised Stock Options may be exercised within 1 year of such retirement, or the remaining term of the Stock Option, if earlier. With respect to awards of Stock Options to outside directors, unless otherwise provided in the award agreement governing such Stock Options, in the event of the death or Disability (as defined in the EI Plan) of a participant while serving as a member of the Board, all unexercised options vest, and may be exercised for up to one year or the remaining term of the Stock Option, if earlier; if a participant ceases to serve as a member of the Board for any other reason, vested options shall be exercisable for a period of 90 days following termination, or the remaining term of the Stock Option, if earlier.

Stock Appreciation Rights. Each SAR will be subject to such terms and conditions, including vesting, as the Plan Committee determines in its sole discretion; provided, however, that if an SAR is granted in tandem with a Stock Option, the SAR will become exercisable and expire in the same manner as the corresponding Stock Option, unless otherwise determined by the Plan Committee, and provided further, that if an SAR is granted in tandem with an Incentive Stock Option, such SAR will be exercisable only if the Fair Market Value of a share of Common Stock on the date of exercise exceeds the exercise price of the related Incentive Stock Option. SARs will be exercisable at such time or times as shall be determined by the Plan Committee in its sole discretion; provided, however, that no SARs shall be exercisable later than ten (10) years after the date of grant. SARs shall terminate at such earlier times and upon such conditions or circumstances determined by the Plan Committee in its sole discretion.

Restricted Stock Awards. Awards of Restricted Stock may be subject to such restrictions, terms and conditions as the Plan Committee determines in its sole discretion, including a requirement of a cash or other payment therefore in whole or in part. Notwithstanding the foregoing, unless otherwise provided in the award agreement relating to the award of Restricted Stock, such awards will vest ratably over five years (20% per year), beginning on the first anniversary of the Date of Grant, and upon vesting, shall not be subject to any further restrictions. The Plan Committee may, in its sole discretion, accelerate the time at which any or all restrictions will lapse or remove any or all of such restrictions. Unless otherwise provided in an agreement governing the award or the Company’s Change in Control Plan (while it remains in existence), upon a participant’s termination of employment for any reason (not including an authorized leave of absence) all non-vested restricted stock is forfeited, except in the event of Disability (as defined in the EI Plan) or death, in which case all restrictions lapse as of the date of the relevant event.

Stock Units. Stock Units may be subject to such terms and conditions including, but not limited to, vesting, acceleration of vesting and forfeiture as the Plan Committee determines in its sole discretion.

Dividend Equivalent Rights. Dividend Equivalent Rights may be granted in tandem with another award or as a separate award. The terms and conditions applicable to each Dividend Equivalent Right, including vesting, risks of forfeiture and other restrictions, will be determined by the Plan Committee in its sole discretion. Amounts payable in respect of Dividend Equivalent Rights may be paid currently or withheld until the lapsing of any applicable restrictions thereon or until the vesting, exercise, payment, settlement or other lapse of restrictions on the award to which the Dividend Equivalent Rights relate.

Performance Based Awards

Any awards granted under the EI Plan may be granted in a manner such that the awards qualify for the performance-based compensation exemption of Section 162(m) of the Code.

Exercise Price

Each Stock Option granted under the EI Plan will have a per-share exercise price as the Plan Committee determines on the date of grant, but not less than 100% of the Fair Market Value of a share of Common Stock on the Date of Grant (or 110% of Fair Market Value in the case of a Ten Percent Stockholder).

Adjustments

In the event of changes in the outstanding Common Stock or in the capital structure of the Company by reason of a dissolution or liquidation of the Company, sale of all or substantially all of the assets of the Company, mergers, consolidations or combinations with or into any other entity if the Company is the surviving entity, stock or extraordinary dividends, stock splits, reverse stock splits, stock combinations, rights offerings, statutory share exchanges involving capital stock of the Company, reorganizations, recapitalizations, reclassifications, exchanges, spin-offs, dividends in kind, or other relevant changes in capitalization, awards granted under the EI Plan and any award agreements, the maximum number of shares of Common Stock deliverable under the EI Plan, and/or the maximum number of shares of Common Stock with respect to which Stock Options may be granted to or measured with respect to any one person under the EI Plan shall be subject to adjustment or substitution, as determined by the Plan Committee in its sole discretion, as to the number, price or kind of a share of Common Stock or other consideration subject to such awards, and any and all other matters deemed appropriate by the Plan Committee, including, without limitation, accelerating the vesting, settlement and/or exercise period pertaining to any award hereunder, or as otherwise determined by the Plan Committee to be equitable.

Outstanding awards and award agreements, and the maximum number of shares of Common Stock with respect to which Stock Options may be granted to or measured with respect to any one person during any period, shall be subject to adjustment or substitution, as determined by the Plan Committee in its sole discretion, as to the number, price or kind of a share of Common Stock or other consideration subject to such awards, and any and all other matters deemed appropriate by the Plan Committee, including, without limitation, accelerating the vesting, settlement and/or exercise period pertaining to any award hereunder, or as otherwise determined by the Plan Committee to be equitable, in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution or enlargement of the rights granted to, or available for, participants, or which otherwise warrants equitable adjustment in the sole discretion of the Plan Committee because it interferes with the intended operation of the Plan.

In connection with a Business Combination (as defined in the EI Plan), the Plan Committee, in its sole discretion, may provide for: (i) the continuation of the EI Plan and/or the assumption of the awards granted thereunder by a successor corporation (or a parent or subsidiary thereof), (ii) the substitution for such awards of new awards covering the stock of a successor corporation (or a parent or subsidiary thereof), with appropriate adjustments as to the number and kind of shares and exercise prices, (iii) upon 10 days’ advance notice from the Plan Committee to the affected participants, the acceleration of the vesting, settlement and/or exercise period pertaining to any award hereunder, or (iv) upon 10 days’ advance notice from the Plan Committee to the affected participants, (x) the cancellation of any outstanding awards that are then exercisable or vested and the payment to the holders thereof, in cash or stock, or any combination thereof, of the value of such awards based upon the price per share of stock received or to be received by other stockholders of the Company in connection with the Business Combination, and (y) the cancellation of any awards that are not then exercisable or vested. In the event of any continuation, assumption or substitution contemplated by the foregoing clauses, the EI Plan and/or such awards shall continue in the manner and under the terms so provided.

Transferability

Each award granted under the EI Plan (other than Non-Restricted Stock Awards and Restricted Stock Awards with respect to which all restrictions have lapsed) is not transferable otherwise than by will or the laws of descent and distribution, and is exercisable, during a participant’s lifetime, only by such participant. Notwithstanding the foregoing, the Plan Committee in its sole discretion may permit the transferability of an award (other than an Incentive Stock Option) by a participant to a member of such participant’s immediate family or trusts for the benefit of such persons, or partnerships, corporations, limited liability companies or other entities owned solely by such persons, including trusts for such persons, subject to any restriction included in the grant of the award.

Tax Compliance.

The EI Plan includes specific limitations on awards to ensure compliance with the provisions of Section 409A of the Code.

Rights of Holders of Restricted Stock

A holder of restricted stock has all rights of a shareholder with respect to such stock, including the right to vote and to receive dividends thereon, except as otherwise provided in the award agreement relating to such award.

Additional Limitations

The grant of any award under the EI Plan may also be subject to such other provisions as the Plan Committee in its sole discretion determines appropriate, including, without limitation, provisions for the forfeiture of, or restrictions on resale or other disposition of, Common Stock acquired under any form of award, provisions for the acceleration of exercisability or vesting of awards (subject to the provisions of the EI Plan), provisions to comply with federal and state securities laws, or conditions as to the participant’s employment in addition to those specifically provided for under the EI Plan. Participants may be required to comply with any timing or other restrictions with respect to the payment, settlement or exercise of an award, including a window-period limitation, as may be imposed in the sole discretion of the Plan Committee.

Amendment, Termination and Duration of the Plan

The Plan Committee may at any time: (i) amend, modify, terminate or suspend the EI Plan, and (ii) alter or amend any or all award agreements to the extent permitted by the EI Plan and applicable law. Amendments of the EI Plan are subject to the approval of the shareholders of the Company only as required by applicable law, regulation or stock exchange requirement. The EI Plan will remain in effect until all stock subject to it is distributed or all awards have expired or lapsed, whichever is latest to occur, or the EI Plan is earlier terminated by the Plan Committee. No awards may be granted under the EI Plan after the fifth anniversary of its effective date.

Indemnification.

The EI Plan contains an indemnification provision for Plan Committee members.

2004 Stock Option, Restricted and Non-Restricted Stock Plan (the “2004 Plan”)

The 2004 Plan provided for awards of options to officers, directors and key employees designated by the Compensation Committee to purchase Common Stock of the Company (including options designated as incentive stock options under Section 422 of the Code, and options not so designated), restricted stock and non-restricted stock (outside directors may be awarded options only). A total of 2,750,000 shares of Common Stock were reserved for the grant of options and awards of Common Stock under the 2004 Plan for all eligible plan participants. No award may be granted under the 2004 Plan after July 10, 2008, the date the EI Plan became effective.

Acceleration of Vesting/Exercise Period

Subject to the following, options and restricted stock generally vest ratably over five years, commencing on the first anniversary of the date of grant. With respect to awards of options (other than awards to outside directors, which is discussed below), upon retirement (as defined in the Company’s 401(k) plan), Disability (as defined in the 2004 Plan) or death (either while employed or within the year after retirement), all unexercised options vest, and may be exercised for up to one year (unless provided otherwise in an option agreement evidencing the award) or the term of the unexpired option, if earlier; unless otherwise provided in an option agreement or the Company’s Change in Control Plan, (i) if a participant’s employment is terminated for reasons other than Cause (as defined in the 2004 Plan), vested unexercised options may be exercised within 30 days of termination, or the term of the unexpired option, if earlier, and (ii) if a participant’s employment is terminated for any other reason, all options are cancelled as of the termination date.

With respect to awards of options to outside directors, in the event of the death or Disability (as defined in the 2004 Plan) of a participant while serving as a member of the Board, all unexercised options vest, and may be exercised for up to one year (unless provided otherwise in an agreement evidencing the award) or the term of the unexpired option, if earlier; if a participant ceases to serve as a member of the Board for any other reason, vested options shall be exercisable for a period of 30 days following termination (unless otherwise provided in an agreement evidencing the award).

With respect to awards of restricted stock, unless otherwise provided in an agreement governing the award or the Company’s Change in Control Plan, all non-vested restricted stock is forfeited (at the time of termination) if the participant has not remained in the continuous employment of the Company for the period during which the restrictions are applicable, generally five years from the date of grant, except in the event of retirement, Disability (as defined in the 2004 Plan) or death, in which case all restrictions lapse as of the date of the relevant event.

Adjustments

In the event of any change in the outstanding Common Stock as a result of events specified in the 2004 Plan, the Committee may adjust the aggregate number of shares of Common Stock available for awards under the 2004 Plan, the exercise price of any options granted under the 2004 Plan, and any or all other matters deemed appropriate by the Committee, including, without limitation, accelerating the vesting and/or exercise period pertaining to any award thereunder.

For a more complete description of the 2004 Plan, see the Company’s Proxy Statement for its 2008 Annual Meeting of Shareholders.

2009 Outstanding Equity Awards at Fiscal Year End

The following table sets forth information with respect to outstanding equity awards for the NEOs as of December 31, 2009 (the table does not include equity grants made in 2010).

Option Awards

Stock Awards

Equity

Incentive

Equity

Plan

Incentive

Awards:

Plan

Number

Awards:

of

Market or

Equity

Unearned

Payout

Incentive Plan

Market

Shares,

Value of

Awards:

Value of

Units or

Unearned

Number of

Number of

Number of

Number of

Shares or

Other

Shares,

Securities

Securities

Securities

Shares or

Units of

rights

Units or

Underlying

Underlying

Underlying

Units of

Stock that

that have

Other

Unexercised

Unexercised

Unexercised

Option/SAR

Option/SAR

Stock that

have not

not

Rights that

Options/SARs (#)

Options/SARs (#)

Unearned

Exercise Price

Expiration

have not

Vested

Vested

have not

Name

Exercisable

Unexercisable

Options (#)

($)

Date

Vested (#)

($)(7)

(#)

Vested (#)

Bruce Crain

52,000

(1)

48,000

(1)

n/a

16.05

12/4/17

n/a

n/a

8,000

(2)

12,000

(2)

16.05

12/4/17

40,000

(3)

60,000

(3)

14.83

12/4/17

150,000

(4)

1.53

2/24/19

114,943

(5)

1.36

3/27/19

42,500

(6)

186,150

Guy Paglinco

4,000

(8)

6,000

(8)

n/a

14.90

8/10/17

n/a

n/a

2,780

(9)

11,120

(9)

6.43

10/6/18

10,000

(10)

5.34

8/14/19

1,500

(11)

6,570

1,520

(12)

6,658

5,000

(13)

21,900

Marc Goldfarb

20,000

(14)

n/a

11.52

12/16/15

n/a

n/a

9,880

(15)

14,820

(15)

16.77

12/27/17

50,000

(4)

1.53

2/24/19

2,160

(16)

9461

Lawrence Bivona

5,600

(17)

22,400

(17)

n/a

13.65

4/3/18

n/a

n/a

75,000

(4)

1.53

2/24/19

3,440

(18)

15,067

Michael Levin*

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

Anthony Cappiello*

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

2009 Option Exercises and Stock Vested

The following table sets forth the number of shares of Company Common Stock acquired by NEOs during 2009 upon the exercise of options or SARs and the number of shares with respect to which restrictions on restricted stock or RSUs held by NEOs lapsed as of December 31, 2009.

Option Awards

Stock Awards

Number of Shares

Number of Shares

Acquired on

Value Realized on

Acquired on

Value Realized on

Name

Exercise (#)

Exercise ($)

Vesting (#)

Vesting ($)

Bruce Crain

n/a

n/a

21,250

99,663

(1)

Guy Paglinco

n/a

n/a

880

5,105

(2)

Marc Goldfarb

n/a

n/a

720

2,794

(3)

Lawrence Bivona

n/a

n/a

860

1,307

(4)

Michael Levin

n/a

n/a

11,600

45,008

(5)

Anthony Cappiello

n/a

n/a

n/a

n/a

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

Our named executive officers may receive compensation in connection with the termination of their employment. The nature and amount of such compensation depend on whether their employment terminates as a result of: (i) death; (ii) disability; (iii) retirement; (iv) termination by the Company without cause (either in connection with a change in control or not) or termination by the executive with good reason; or (v) termination by the Company for cause or termination by the executive without good reason. Estimates of the compensation that each of our named executive officers would be entitled to receive under each of these termination circumstances is described in the following tables, assuming that their employment terminated on December 31, 2009, the last business day of such year (note that as the Change in Control Plan was terminated on February 24, 2009, and as no change of control as defined therein occurred within the 24-month period prior thereto, the provisions of such plan would not apply to a termination on December 31, 2009, and is therefore not discussed below). In addition, the following tables do not reflect: (i) additional or alternate payments or benefits provided under individual employment agreements between the Company and each of Messrs. Crain and Bivona, which are discussed separately below under the caption “Individual Termination/Change in Control Arrangements”; or (ii) arrangements with respect to Messrs. Cappiello and Levin, whose employment with the Company terminated in 2009, and are discussed separately below under the caption “Actual Terminations in 2009”. Further, the following tables do not include payments under the Company’s (or its subsidiaries’) 401k plans, or the Company’s life insurance or disability plans, as these plans are available to all salaried employees generally and do not discriminate in scope, terms or operation, in favor of our executive officers.

Any actual compensation received by our named executive officers in the circumstances set forth below may be different than we describe because many factors affect the amount of any compensation received. These factors include: the date of the executive’s termination of employment; the executive’s base salary at the time of termination; the Company’s stock price at the time of termination; and the executive’s age and service with the Company at the time of termination. In addition, although the Company has entered into individual agreements with certain of our named executive officers, in connection with a particular termination of employment the Company and the named executive officer may mutually agree on severance terms that vary from those provided in pre-existing agreements.

For a description of: (i) triggering events that provide for payments and benefits set forth in the following tables; (ii) payment schedules and duration with respect to such payments and benefits; and (iii) how appropriate payment and benefit levels are determined under such triggering events, please see the section captioned “Termination of Employment and Change in Control Arrangements” above, which set forth such matters in detail. The value of SAR acceleration is equal to the difference between the market price of the Company’s Common Stock on December 31, 2009 ($4.38) and the exercise price of the relevant SARs, multiplied by the number of SARs that would accelerate as a result of the triggering event (the exercise prices of all outstanding options were in excess of such price on such date). The value of the restricted stock and RSU acceleration in the tables below is equal to the market price of the Company’s Common Stock on December 31, 2009 multiplied by the number of shares of restricted stock or RSUs that become vested or non-forfeitable as a result of the triggering event.

Note that if an NEO is terminated with cause or by the NEO without good reason, such NEO will be entitled to the payment of amounts that have accrued at the time of termination, but have not been paid (other than payments under the IC program, for which a participant must be in the employ of the Company at the time of payment, which is typically in March following the year of determination).

Termination as a Result of a Change in Control

The Company issued a letter, effective August 7, 2009, to each of Mr. Paglinco and Mr. Goldfarb (a “Change in Control Letter”), stating that if the Company consummates a Change in Control (as defined in the Amendment to the Crain Agreement) on or before April 30, 2010, and the employment of the officer is terminated without cause within the 120 day period prior to or the 120 day period following the consummation of such Change in Control, such officer will be entitled to the benefits set forth below, in addition to, and notwithstanding anything to the contrary in, the Severance Policy, the IC Program, the award agreement governing the relevant equity, or the plan pursuant to which such equity was issued. For purposes of this table, we have assumed that a qualifying Change of Control occurs within the 120 day period after a 12/31/09 termination, making 12/31/09 the “Trigger Date” as described below.

										IC Amount
		SAR				Restricted				(Assuming a
		Acceleration				Stock/RSU				Trigger Date of
NEO		($)(1)				Acceleration ($)(1)				12/31) ($)(2)				Total ($)
Guy Paglinco			0				35,128				122,214				157,342
Marc Goldfarb			142,500				9,461				167,051				319,012

Termination as a Result of Disability or Death*

						Restricted Stock/RSU
NEO		SAR Acceleration ($)				Acceleration ($)				Total ($)
Guy Paglinco			0				35,128				35,128
Marc Goldfarb			142,500				9,461				151,961
Lawrence Bivona			213,750				15,067				228,817

Termination as a Result of Retirement*

Restricted Stock

NEO

SAR Acceleration

Acceleration

Total

Guy Paglinco

n/a

6,570

6,570

Marc Goldfarb

n/a

9,461

9,461

Lawrence Bivona

n/a

15,067

15,067

Terminations Under the Severance Policy*

NEO		Cash				Other Benefits (1)				Total
Guy Paglinco			176,667				22,082				198,749
Marc Goldfarb			216,720				22,732				239,452

Individual Termination/Change in Control Arrangements

Mr. Crain

Assuming that an appropriate triggering event took place on December 31, 2009, Mr. Crain would have been entitled to the following payments and benefits pursuant to the Crain Agreement, as amended (Mr. Crain does not participate in the Company’s Severance Policy), described in detail in the section captioned “Employment Contracts and Arrangements” above. The value of the SAR acceleration is equal to the difference between the market price of the Company’s Common Stock on December 31, 2009 ($4.38) and the exercise price of the relevant SARs multiplied by the number of SARs that would accelerate as a result of the termination. As the exercise prices of all outstanding unvested options/SARs held by Mr. Crain as of December 31, 2009 were in excess of this amount other than the 150,000 SARS issued to him on February 24, 2009, no amounts are recognized below with respect to any option acceleration triggered by qualified terminations other than with respect to the February 2009 SARS. The value of the restricted stock acceleration is equal to the market price of the Company’s Common Stock on December 31, 2009 multiplied by the number of shares of restricted stock that become vested or non-forfeitable as a result of the termination. In addition to the total amounts set forth below, Mr. Crain is entitled to director’s and officer’s liability insurance coverage during the term of his employment and for six years thereafter in an annual amount equal to at least the greater of $5.0 million or the coverage provided to any other present or former senior executive or director of the Company. No incremental expense will be incurred to provide this benefit.

A. Termination by the Company for Cause or by Mr. Crain without Good Reason (each as defined in the Crain Agreement): No additional benefit assuming base salary and bonus amounts earned for prior periods as of the date of termination had been paid. In addition, the unvested portion of his equity awards will be cancelled or immediately forfeited, as applicable, and any unexercised, vested portion of his options and SARs shall remain exercisable for the shorter of 90 days following the date of termination and the remainder of their term.

B(1). Termination by the Company without Cause or by Mr. Crain for Good Reason, and not in connection with a Change in Control (each as defined in the Crain Agreement, as amended), assuming that all base salary and bonus amounts earned for prior periods as of the date of termination had been paid:

(i) $275,000, representing 100% of his annual base salary for a period of six months following termination, which amount shall be paid commencing on the first day of the month following the Termination Date and on the first day of each of the next five months thereafter, provided, however, that any payment(s) that would be made under such schedule after March 15 of the year following the Termination Date shall instead be paid on March 1st of the year following the termination date;

(ii) $427,536 in respect of incentive compensation amounts (under the Crain Agreement, in the event of a termination without Cause only, he is entitled to the pro-rata portion of his bonus for the year in which the termination occurs based on actual performance for such year);

(iii) $801, representing the cost to the Company for continued life insurance coverage for Mr. Crain for a period of six months following termination;

(iv) $5,124, representing the cost to the Company for Mr. Crain to remain on the Company’s health and dental insurance plan through the first anniversary of his termination;

(v) $10,000, representing the maximum amount payable for outplacement services for a period of six months following termination; and

(vi) $186,150, representing restricted stock acceleration;

for a total of $904,611.

B(2). Termination by the Company without Cause or by Mr. Crain for Good Reason (each as defined in the Crain Agreement, in either case within the 120 day period prior to or the 120 day period following a Change in Control), assuming that all base salary and bonus amounts earned for prior periods as of the date of termination had been paid (for purposes of the payout set forth below, we have assumed that a qualifying Change of Control occurs within the 120-day period after a 12/31/09 termination, making 12/31/09 the “Trigger Date” (as defined above):

(i) $962,500, representing 100% of his annual base salary for a period of 21 months following termination, which amount shall be paid commencing on the first day of the month following the Termination Date and on the first day of each of the next 20 months thereafter, provided, however, that any payment(s) that would be made under such schedule after March 15 of the year following the Termination Date shall instead be paid on March 1st of the year following the termination date;

(ii) $427,536, in respect of incentive compensation amounts (assuming a Trigger Date of 12/31/09);

(iii) $1,602, representing the cost to the Company for continued life insurance coverage for Mr. Crain for a period of 12 months following termination;

(iv) $5,124, representing the cost to the Company for Mr. Crain to remain on the Company’s health and dental insurance plan through the first anniversary of his termination; and

(v) $10,000, representing the maximum amount payable for outplacement services for a period of six months following termination;

for a total of $979,316.

C. Termination by the Company as a result of Disability (as defined in the Crain Agreement), assuming that all base salary and bonus amounts earned for prior periods as of the date of termination had been paid:

(i) $3,600,000, representing benefits equal to 50% of Mr. Crain’s base salary payable to Mr. Crain under a long-term disability insurance policy for an assumed period of sixteen years (until Mr. Crain reaches retirement age).

(ii) $427,536 in respect of incentive compensation amounts (under the Crain Agreement, in the event of a termination as a result of Disability, he is entitled to the pro-rata portion of his bonus for the year in which the termination occurs based on actual performance for such year); and

(iii) $427,500, representing SAR acceleration, and $186,150 representing restricted stock acceleration;

for a total of $4,641,186.

D. Termination by the Company as a result of death, assuming that all base salary and bonus amounts earned for prior periods as of the date of termination had been paid:

(i) $1,100,000 representing life insurance benefits under an insurance policy equal to 200% of his base salary;

(ii) $427,536 in respect of incentive compensation amounts (under the Crain Agreement, in the event of a termination as a result of his death, he is entitled to the pro-rata portion of his bonus for the year in which the termination occurs based on actual performance for such year); and

(iii) $427,500, representing SAR acceleration, and $186,150, representing restricted stock acceleration;

for a total of $2,141,186.

E. Change of Control (as defined in the Crain Agreement), whether or not a termination of employment occurs: $427,500 representing SAR acceleration, and $186,150, representing restricted stock acceleration.

F. Change of Control occurring within six months following a termination without Cause (in addition to the amounts and benefits described in Item “B(1) or (2)” above, as applicable, for the termination without Cause): $427,500 in SAR acceleration.

If Mr. Crain determines that any amounts due to him under the Crain Agreement and any other plan or program of the Company constitute a “parachute payment,” as such term is defined in Section 280G(b) (2) of the Code, and the amount of the parachute payment, reduced by all federal, state and local taxes applicable thereto, including the excise tax imposed pursuant to Section 4999 of the Code, is less than the amount that he would receive if he were paid three times his “base amount,” as defined in Section 280G(b) (3) of the Code, less $1.00, reduced by all federal, state and local taxes applicable thereto, then at Mr. Crain’s request the Company will reduce the aggregate of the amounts constituting the parachute payment to an amount that will equal three times his base amount less $1.00.

All of the foregoing amounts are without interest if paid when due. In order to receive the foregoing payments, Mr. Crain and the Company must sign a mutual irrevocable release of existing or future claims against the other and specified affiliated parties arising out of the performance of services to or on behalf of the Company by Mr. Crain (other than claims with respect to specified sections of the employment agreement). Pursuant to the Crain Agreement, Mr. Crain has agreed that during his employment, and for one year thereafter, he will not directly or indirectly, engage or be interested in (as owner, partner, stockholder, employee, director, officer, agent, fiduciary, consultant or otherwise), with or without compensation, any business engaged in the manufacture, distribution, promotion, design, marketing, merchandising or sale of infant bedding and accessories, infant feeding utensils and bowls, pacifiers, bibs and bottles, infant developmental toys, soft toys and plush products or any other product providing more than 10% of the revenues of the Company for the prior fiscal year. In addition, for two years after his termination of employment, Mr. Crain will not, directly or indirectly, solicit the employment or retention of (or attempt, directly or indirectly, to solicit the employment or retention of or participate in or arrange the solicitation of the employment or retention of) any person who is to his knowledge then employed or retained by the Company, or by any of its subsidiaries or affiliates. Notwithstanding the foregoing, nothing shall prohibit Mr. Crain from (i) performing services, with or without compensation, for, or engaging or being interested in, any business or entity, that does not directly relate to business activities that compete directly and materially with a material business of the Company or its subsidiaries or (ii) acquiring or holding not more than five percent of any class of publicly-traded securities of any business. A business or entity that realized less than 20% of its revenues during its most recently completed fiscal year from sales of the aggregate of the following products shall not be deemed to compete directly and materially with a material business of the Company or its subsidiaries: infant bedding and accessories; infant feeding utensils and bowls, pacifiers, bibs and bottles, infant developmental toys, soft toys and plush products and any other product providing more than 10% of the revenues of the Company for the prior fiscal year. In addition, Mr. Crain has agreed that after his employment with the Company has terminated, he will refrain from any action that could reasonably be expected to harm the reputation or goodwill of the Company, its subsidiaries or affiliates. Mr. Crain has also agreed that during and after his employment, he will retain in the strictest confidence (subject to specified exceptions) all confidential information related to the Company and various affiliated and related parties. If Mr. Crain breaches the foregoing provisions and such breach is either (x) willful and not inconsequential or (y) in a material respect and not cured promptly after notice from the Company, he shall not thereafter be entitled to any payments or benefits under the Crain Agreement.

Mr. Bivona

If Mr. Bivona’s employment is terminated due to his death, Disability, for Cause or without Good Reason (each as defined in the Bivona Agreement), he will be entitled to his salary through his final day of active employment, any unreimbursed expenses and any accrued but unused vacation pay. He will also be entitled to any benefits mandated under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) or required under the terms of any death, insurance or retirement plan, program or agreement provided by the Company and in which he participates (“Mandated Benefits”).

If Mr. Bivona’s employment is terminated either without Cause or for Good Reason (each as defined in the Bivona Agreement), he will be entitled to: (i) his salary through his final date of active employment, any unreimbursed expenses and any accrued but unused vacation pay; and (ii) as severance, twelve (12) months of (a) Base Salary continuation ($300,000, assuming a termination date of 12/31/09), payable at the regular payroll periods of LaJobi and (b) continuation of participation in the Benefit Plans ($7,437), for a total of $307,437 (for (ii)(a) and (b).

As a condition to receiving such severance amounts, Mr. Bivona must execute a release of claims in an agreed-upon form within twenty-one (21) days after the date of termination. Mr. Bivona will not have the obligation to mitigate damages, and subsequent employment will not affect or alter the payment of any amounts payable to him under the Bivona Agreement. Additionally, Mr. Bivona will be entitled to any Mandated Benefits.

In addition, Mr. Bivona is entitled to an additional amount (the “Gross Up Payment”) if any payment made to him becomes subject to the excess tax provided for in Section 409A of the Internal Revenue Code (a “409A Violation”). The Gross Up Payment shall equal an amount such that after Mr. Bivona’s payment of all taxes, interest, and penalties imposed on the Gross Up Payment, he retains an amount of the Gross Up Payment equal to the sum of (A) the interest under Section 409A(a)(1)(B)(i)(I) of the Internal Revenue Code (the “Code”) resulting from the 409A Violation; (B) the additional tax under Section 409A(a)(1)(B)(i)(II) of the Code resulting from such 409A Violation; (C) any penalties resulting from such 409A Violation; and (D) if Mr. Bivona recognizes income prior to the taxable year that the income would have been included in his gross income in the absence of such 409A Violation, the amount of the taxes on the income recognized other than the additional tax under subclause (B). LaJobi will also indemnify Mr. Bivona for all costs, expenses, and reasonable attorney’s and paralegal’s fees incurred by him as a result of any audit by any tax authorities to the extent the same relates to the tax consequences of such 409A Violation (the “Indemnified Amount”).

The SAR acceleration and restricted stock acceleration applicable in the event of Mr. Bivona’s death, disability or retirement is included in the tables above captioned “Termination as a Result of Disability or Death”, and “Termination as a Result of Retirement.”

Actual Terminations in 2009

Mr. Cappiello

Mr. Cappiello’s employment with the Company was terminated on January 30, 2009. As a result, Mr. Cappiello was entitled to the following payments and benefits pursuant to his employment agreement with the Company, described in detail in “Employment Agreements and Arrangements” above.

A. $353,004, which is comprised of $29,417 for each of the first 12 months following such termination, paid in accordance with the provisions of the Severance Policy; and

B. $29,598, representing the cost to the Company (x) for Mr. Cappiello to remain on the Company’s health and dental insurance plan ($16,398) during the 12 months following the termination, and (y) for his car allowance ($13,200) for 12 months following the termination;

for a total of $382,602.

In connection with the payments and benefits set forth above, Mr. Cappiello executed the Company’s General Release, described under “Severance Policy” above.

Mr. Levin

Mr. Levin’s last day of employment with the Company was December 31, 2009. Mr. Levin was not entitled to any severance payments, nor shall Mr. Levin have any mitigation duties or obligations. Mr. Levin was no longer employed by the Company at the time of payment of amounts earned under the IC Program for 2009. As a result, Mr. Levin was not entitled to any payment thereunder. However, as the Committee felt that Mr. Levin had earned the incentive compensation amount to which he would otherwise have been entitled based on his performance and service to the Company through the end of the year, as well as his agreement to continue to provide certain consulting services to the Company subsequent to the termination of his employment on December 31, 2009, it used its discretion to award him such amount ($359,000).

2009 Director Compensation (1)

Change in

Pension Value

Fees

and

Earned

Option

Non-Equity

Nonqualified

or Paid in

Stock

Awards

Incentive Plan

Deferred

All Other

Cash

Awards

(3)(4)(5)

Compensation

Compensation

Compensation

Total

Name

($)(2)

($)

($)

($)

Earnings ($)

($)

($)

Raphael Benaroya

29,167

n/a

10,028

n/a

n/a

169,864

(7)

209,059

Mario Ciampi

42,250

n/a

10,028

n/a

n/a

n/a

52,278

Fred Horowitz

50,500

n/a

10,028

n/a

n/a

n/a

60,528

Lauren Krueger

37,500

(6)

n/a

10,028

n/a

n/a

n/a

47,528

Salvatore Salibello

37,500

n/a

10,028

n/a

n/a

n/a

47,528

John Schaefer

31,250

n/a

10,028

n/a

n/a

n/a

41,278

Michael Zimmerman

27,500

n/a

10,028

n/a

n/a

n/a

37,528

		Outstanding Option				Vested Portion of Outstanding
Name		Awards at 12/31/09				Option Awards at 12/31/09
Raphael Benaroya			75,000				33,000
Mario Ciampi			45,000				9,000
Fred Horowitz			60,000				18,000
Lauren Krueger			45,000				9,000
Salvatore Salibello			60,000				18,000
John Schaefer			30,000				3,000
Michael Zimmerman			60,000				18,000