Exhibit 10.1

 

 

 

 

 

 

 

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Annual Incentive Plan

Fiscal Year 2014

 

Effective April 1, 2013 – March 31, 2014

 

 
 

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Contents

 

 

 

I.

Purpose of the Plan

 

 

II.

Eligibility

 

 

III.

Administration

 

 

IV.

Plan Design

 

 

V.

Financial Objectives

 

 

VI.

Individual Objectives

 

 

VII.

Incentive Payments

 

 

VIII.

Amendment, Suspension and Termination

 

 

IX.

Unfunded Plan

 

 

X.

Other Benefit and Compensation Programs

 

 

XI.

Governing Law

 

 

Exhibit I:     Apportionment of Performance Objectives

 

Exhibit II:     Financial Objective Performance Threshold – Net Sales

 

Exhibit III:     Financial Objective Performance Threshold – Adjusted EBITDA

 

 
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I.       Purpose of the Plan

The purpose of the Annual Incentive Plan is to align all participants with the
business objectives of Navarre Corporation and its subsidiaries based in the
United States and Canada (the “Company”) by motivating, rewarding and
recognizing participants for their achievements and contribution to the
Company’s success.

 

II.      Eligibility

Many management-level employees and significant contributors of the Company are
eligible to participate in the Plan. New hires must be employed prior to October
1st to be eligible for a pro-rata incentive payment for that fiscal year.
Participants that terminate from the company, for any reason, prior to the date
of the incentive payment, will lose their eligibility to receive an incentive
payment.

 

III.     Administration

The Plan is administered by the Compensation Committee of the Company’s Board of
Directors (the “Compensation Committee”). The Chief Executive Officer of the
Company (the “CEO”) will make recommendations to the Compensation Committee
regarding participation, level of awards, changes to the Plan, financial
objectives, and other aspects of the Plan’s administration. The Compensation
Committee has the authority to interpret the Plan, and, subject to the Plan’s
provisions, to make and amend rules and to make all other decisions necessary
for the Plan’s administration. Any decision of the Compensation Committee in the
interpretation and administration of the Plan shall lie within its sole and
absolute discretion and shall be final, conclusive and binding on all parties
concerned. Specifically, the Compensation Committee has the authority to approve
payout percentages and to approve individual awards, including discretionary
awards, for the members of the Company’s executive committee. The CEO has the
authority to approve individual awards, including discretionary awards, for
other participants consistent with the Plan.

 

IV.     Plan Design

The Annual Incentive Plan has two major components:

 

●

Financial Objectives

 

●

Individual Objectives

 

The potential bonus payout for each participant is determined as a percentage of
the participant’s base salary and is apportioned between elements of these two
components. This apportionment is summarized in Exhibit I attached hereto.

 

The annual “Bonus Pool” is the amount available for payout of bonuses as
determined by the Compensation Committee, based upon the aggregate bonus
potential of all participants, as determined by the extent to which the
objectives have been achieved.

 

 
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V.     Financial Objectives

The following Financial Objectives are measured based on attainment of specific
targeted levels of performance of the Company as follows:

 

●

Consolidated adjusted EBITDA target of $21.5 million (including the impact of
the Bonus Pool accrual), with a threshold of 85% or greater of this adjusted
EBITDA target to be achieved before any payment is made.

 

●

Consolidated net sales target of $550 million, with a threshold of 90% or
greater of this consolidated net sales target to be achieved before any payment
is made.

 

●

The performance thresholds for the Financial Objectives payout shall be
determined on a sliding scale as it relates to achievement of targets. See
Exhibit II and Exhibit III.

 

Primary Threshold

A primary threshold of $18.3 million in consolidated adjusted EBITDA must be
attained before any bonus is earned pursuant to this plan (other than as a
discretionary pool payout, where applicable), regardless of achievement of the
consolidated net sales target, and divisional targets or the participant’s
individual objectives.

 

Growth Pool

If the Company’s consolidated adjusted EBITDA exceeds the consolidated adjusted
EBITDA target, the Bonus Pool will be increased by 25% of the amount that the
Company’s consolidated adjusted EBITDA exceeds the consolidated adjusted EBITDA
target. Participants will share in the enhanced Bonus Pool on a pro-rata basis,
subject to the maximum payment provision in Paragraph VII herein.

 

VI.      Individual Objectives

Goal Setting

Plan participants and their managers will share accountability for establishing
annual goals for the Individual Objectives component of the incentive plan.
Generally, participants will have a number of specific and measurable goals
which may be weighted or prioritized. These goals should tie directly to the
overall Company and department goals.

 

Goal Monitoring

Participants will meet with their managers on a regular basis to review progress
on the established goals.

 

Goal Modification

Goals may be modified in response to changes to the Company’s business or the
individual’s position. If the goals of a member of the Company’s executive
committee are adjusted, approval by the Compensation Committee is required.

 

 
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Goal Measurement

Plan participants and their managers will discuss the participant’s goal
achievement on their Individual Objectives and managers must submit the
achievement to Human Resources for approval in a timely manner. The Compensation
Committee will evaluate and determine achievement of the CEO’s individual
performance and review the achievement for the members of the Company’s
executive committee.

 

VII.   Incentive Payments

 

Results and Adjustments

Actual business results for the fiscal year will be provided by the Chief
Financial Officer and approved by the Compensation Committee. The Compensation
Committee may approve adjustments to actual business results to reflect
organizational, operational, or other changes which have occurred during the
year, e.g., acquisitions, dispositions, expansions, contractions, material
non-recurring items of income or loss, extraordinary items, effects of
accounting changes or other events.

 

Discretionary Pool

A discretionary pool may also be established to reward participants in the plan
with exemplary performance. If the Compensation Committee determines that
discretionary awards will be made, they may authorize a discretionary pool up to
the maximum amount of $750,000. Discretionary pool payments to members of the
Company’s executive committee require the prior approval of the Compensation
Committee.

 

Payments

Payments under the Plan are anticipated to be provided within 45 days of the
conclusion of the Company’s annual audit by its certified public accountants.
Payment will be made for the number of full months that the participant held a
qualifying position during the plan year and amounts paid will be taxed in
compliance with Internal Revenue Service guidelines for bonuses.

 

Maximum Payment

Notwithstanding anything to the contrary provided in this Plan, payouts under
the Plan to any one participant will not exceed 150% of the participant’s target
bonus.

 

Communication

Upon determining the payments to be made under the Plan, if any, managers will
meet individually with each participant to communicate the achievement of
Financial Objectives, Individual Objectives, and the individual’s incentive
payment amount. Human Resources will prepare a communication document to assist
managers to effectively communicate this information.

 

 
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VIII.  Amendment, Suspension and Termination

The Compensation Committee or the Board of Directors may at any time, and
without prior notice, terminate, suspend, amend or modify this Plan or any
incentive payments under the Plan not yet paid. No payments pursuant under this
Plan will be made during any suspension of the Plan or after its termination.

 

IX.     Unfunded Plan

The Plan is unfunded and the Company shall not be required to segregate any
assets for incentive payments under the Plan.

 

X.      Other Benefit and Compensation Programs

 

Payments received by a participant under this Plan shall not be deemed a part of
a participant’s regular, recurring compensation for purposes of the termination,
indemnity or severance pay law of any state and shall not be included in, nor
have any effect on, the determination of benefits under any other employee
benefit plan, contract or similar arrangement provided by the Company unless
expressly so provided by such other plan, contract or arrangement. Nothing in
the Plan shall be construed as a contractual payment obligation or guarantee of
employment for any participant.

 

XI.     Governing Law

To the extent that Federal laws do not otherwise control, the Plan and all
determinations made and actions taken pursuant to the Plan shall be governed by
the laws of Minnesota and construed accordingly.

 

 
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Exhibit I

Apportionment of Performance Objectives

 

 

Participant Level

Adjusted EBITDA

Net Sales

Individual

Objectives

CEO, CFO, Divisional Presidents, and VP’s

75%

25%

 

All Other Participants

40%

30%

30%

 

 

 
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Exhibit II

Financial Objective Performance Threshold – Net Sales

 

 

 

Performance Threshold – Net Sales

 

Percent of

 

Target / Budget

Payout %

Target

100%

100%

99%

95%

98%

90%

97%

85%

96%

80%

95%

75%

94%

50%

93%

40%

92%

30%

91%

20%

Minimum

90%

10%

Below 90%

0% Payout

 

 

 

 
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Exhibit III

Financial Objective Performance Threshold – Adjusted EBITDA

 

 

Performance Threshold – Adjusted EBITDA

 

Percent of

 

Target / Budget

Payout %

Target

100%

100%

99%

95%

98%

90%

97%

85%

96%

80%

95%

75%

94%

70%

93%

66%

92%

64%

91%

62%

90%

60%

89%

58%

88%

56%

87%

54%

86%

52%

Minimum

85%

50%

Below 85%

0% Payout

 

 

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