Exhibit 10.1

 

MORNINGSTAR, INC. INCENTIVE PLAN

 

(As Amended and Restated Effective January 1, 2009)

 

ARTICLE 1

 

Statement of Purpose

 

The compensation policies of Morningstar, Inc. (the “Company”) are intended to
support the Company’s overall objective of enhancing Shareholder value.  In
furtherance of this philosophy, the Company has designed this Morningstar, Inc.
Incentive Plan (the “Plan”) to provide incentives for business performance,
reward contributions towards goals consistent with the Company’s business
strategy, and enable the Company to attract and retain highly qualified
Employees.  The Plan was originally effective January 1, 2005 and was then
amended and restated on May 22, 2007, effective as of January 1, 2007.  The
Plan, as amended and restated herein, is effective January 1, 2009.  Where
applicable, the Bonuses payable under the Plan are intended to qualify as
“performance-based compensation” under Section 162(m) of the Code.

 

ARTICLE 2

 

Definitions

 

The terms used in this Plan include the feminine as well as the masculine gender
and the plural as well as the singular, as the context in which they are used
requires. The following terms, unless the context requires otherwise, are
defined as follows:

 

2.1

 

“Affiliate” means any parent, subsidiary or other entity that is (directly or
indirectly) controlled by, or controls, the Company.

 

 

 

2.2

 

“Board” means the Morningstar, Inc. Board of Directors.

 

 

 

2.3

 

“Bonus” means the incentive compensation determined under Section 4.4 of the
Plan payable in cash.

 

 

 

2.4

 

“Bonus Bank” means a bookkeeping account maintained by the Company pursuant to
Section 4.6(b) of the Plan.

 

 

 

2.5

 

“Bonus Pool” means an amount that may be established for the Company or a
Business Unit, all or a portion of which may be allocated among the Eligible
Employees of the Company or such Business Unit.

 

 

 

2.6

 

“Business Unit” means an organizational unit of business within the Company, as
identified by the Company.

 

 

 

2.7

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

 

 

2.8

 

“Committee” means the Compensation Committee of the Board or any successor
committee with responsibility for compensation, or any subcommittee, as long as
the

 

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number of Committee members and their qualifications shall at all times be
sufficient to meet the applicable requirements for “outside directors” under
Section 162(m) and the regulations thereunder and the independence requirements
of the NASDAQ Marketplace Rules or any other applicable exchange on which
Morningstar, Inc.’s common equity is at the time listed, in each case as in
effect from time to time.

 

 

 

2.9

 

“Company” means Morningstar, Inc. and any of its Subsidiaries that adopt this
Plan or that have Employees who are participants under this Plan.

 

 

 

2.10

 

“Covered Employee” means an Executive Officer who is a “covered employee” for
purposes of Section 162(m).

 

 

 

2.11

 

“Disability” means permanent and total disability as defined in the Company’s
long term disability plan, or if no such plan is then in effect, as defined in
Code Section 22(e)(3).

 

 

 

2.12

 

“Employee” means any person employed on a full-time or part-time basis by the
Company or an Affiliate in a common law employee-employer relationship. A
Participant shall not cease to be an Employee for purposes of this Plan in the
case of (i) any leave of absence approved by the Company, or (ii) transfers
between locations of the Company or among the Company, its Subsidiaries or any
successor.

 

 

 

2.13

 

“Executive Officer” means an Employee who is an “executive officer” as defined
in Rule 3b-7 promulgated under the Exchange Act.

 

 

 

2.14

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

 

 

2.15

 

“Participant” means an Executive Officer or Employee as described in Article 3
of this Plan.

 

 

 

2.16

 

“Performance Period” means the period for which a Bonus may be paid. Unless
otherwise specified by the Committee, the Performance Period shall be a calendar
year, beginning on January 1 and ending on December 31 of any year. The first
Performance Period under the Plan, as amended and restated herein, shall be the
calendar year 2009. Any bonus attributable to calendar year 2008 or any prior
year shall be governed by the terms of the Plan, as in effect prior to this
amendment and restatement effective January 1, 2009. No Bonus shall be payable
under this Plan for a Performance Period beginning on or after January 1, 2009
until the Plan has been approved by the Company’s shareholders.

 

 

 

2.17

 

“Plan”, except where the context clearly indicates otherwise, means the
Morningstar, Inc. Incentive Plan, as stated herein and as may be amended from
time to time.

 

 

 

2.18

 

“SEC” means the U.S. Securities and Exchange Commission.

 

 

 

2.19

 

“Section 162(m)” means Code Section 162(m) and regulations promulgated
thereunder by the Secretary of the Treasury.

 

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ARTICLE 3

 

Participation

 

An Executive Officer or other Employee of the Company designated by the
Committee individually or by classification shall be a Participant in this Plan
and shall continue to be a Participant until any Bonus he may receive has been
paid or forfeited under the terms of this Plan.  The amount of a Participant’s
Bonus, if any, will be governed by Article 4.

 

ARTICLE 4

 

Incentive Bonuses

 

4.1

 

Objective Performance Goals. The Committee shall establish written, objective
performance goals for a Performance Period not later than 90 days after the
beginning of the Performance Period (but not after more than 25% of the
Performance Period has elapsed); provided that the outcome is substantially
uncertain at the time the Committee establishes the Performance Goal. The
objective performance goals shall be stated as specific amounts of, or specific
changes in, one or more of the financial measures described in Section 4.2.
Objective performance goals may also include operational goals such as:
productivity, safety, other strategic objectives and individual performance
goals. The objective performance goals need not be the same for different
Performance Periods and for any Performance Period may be stated: (a) as goals
for Morningstar, Inc., for one or more of its Subsidiaries, Business Units,
divisions, organizational units, or for any combination of the foregoing; (b) on
an absolute basis or relative to the performance of other companies or of a
specified index or indices, or be based on any combination of the foregoing; and
(c) separately for one or more Participants or Business Units, or in any
combination of the two.

 

 

 

4.2

 

Financial Measures. The Committee shall use any one or more of the following
financial measures to establish objective performance goals under Section 4.1:
earnings before interest and taxes (EBIT); earnings before interest, taxes,
depreciation and amortization (EBITDA); net earnings; operating earnings or
income; earnings growth; net income (absolute or competitive growth rates
comparative); net income per share; cash flow, including operating cash flow,
free cash flow, discounted cash flow return on investment, and cash flow in
excess of cost of capital; earnings per share; return on shareholders’ equity
(absolute or peer-group comparative); stock price (absolute or peer-group
comparative); absolute and/or relative return on common shareholders’ equity;
absolute and/or relative return on capital; absolute and/or relative return on
assets; economic value added (income in excess of cost of capital); customer
satisfaction; expense reduction; ratio of operating expenses to operating
revenues; gross revenue or revenue by pre-defined business segment (absolute or
competitive growth rates comparative); revenue backlog; margins realized on
delivered services; total Shareholder return; dept-to-capital ratio or market
share. The Committee may specify any reasonable definition of the financial
measures it uses. Such definitions may provide for reasonable adjustments and
may include or exclude items, including but not limited to: realized

 

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investment gains and losses; extraordinary, unusual or non-recurring items;
gains or losses on the sale of assets; changes in accounting principles or the
application thereof; currency fluctuations, acquisitions, divestitures, or
necessary financing activities; recapitalizations, including stock splits and
dividends; expenses for restructuring or productivity initiatives; and other
non-operating items.

 

 

 

4.3

 

Performance Evaluation. Within a reasonable time after the close of a
Performance Period, the Committee shall determine, and with respect to Executive
Officers certify in writing, whether the objective performance goals established
for that Performance Period have been met by the respective Company, Business
Unit, Executive Officers, Employees or otherwise subject to such performance
goals, and the extent to which such performance goals may have been exceeded.

 

 

 

4.4

 

Bonus. If the Committee has determined, and with respect to Executive Officers
certified in writing, that objective performance goals established for a
Performance Period have been satisfied, the Committee will determine in its
discretion the amount of bonuses payable by the Company. Bonus amounts
determined by the Committee may be expressed as individual Bonuses payable to a
Participant or as one or more Bonus Pools, all or a portion of which may be
allocated as individual Bonuses to Participants employed in one or more Business
Units. Such allocation may be made by the Committee or, to the extent permitted
by applicable law, rule or regulation, by the senior executive of such Business
Unit (or his or her designee) or other individuals as may be designated by the
Committee.

 

 

 

 

 

Notwithstanding any provision of this Plan to the contrary, the Committee shall
determine any Bonus payable to a Covered Employee in a manner intended to
satisfy the performance-based compensation exception under Code Section 162(m).
As such, at the time the Committee establishes the objective performance goals
for a Performance Period pursuant to Section 4.1, it shall establish a formula
or standard for computing the amount of the Bonus payable to each Executive
Officer, which Bonus, in the case of a Covered Employee, may be decreased, but
may not be increased, in the Committee’s discretion. If such Bonus is to be
derived from the amount allocated to one or more Bonus Pools, then: (i) the
percentage of each such Bonus Pool that may be allocated to each Covered
Employee must be stated as a specified share of such Bonus Pool or stated as a
formula determining such share of the Bonus Pool(s); (ii) the total of such
specified shares may not exceed 100% of the relevant Bonus Pool; and (iii) any
discretion exercised by the Committee to decrease the Bonus payable to any
Employee under a Bonus Pool may not result in an increase of the Bonus payable
to any other Covered Employee under such Bonus Pool or any other Bonus Pool that
may be established for such Performance Period. In no event may a Bonus payable
to a Covered Employee for any Performance Period exceed $5,000,000.

 

 

 

4.5

 

Eligibility for Payments.

 

 

 

 

 

(a)           Except as otherwise provided in this Section 4.5, a Participant
will be eligible to receive his or her Bonus only if the Participant is employed
by the Company continuously from the first day of the Performance Period up to
and including the last day of the Performance Period.

 

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(b)           Under Section 4.5(a), a leave of absence that lasts less than
three months and that is approved in accordance with applicable Company policies
is not a break in continuous employment. In the case of a leave of absence of
three months or longer: (1) the Committee shall determine whether the leave of
absence constitutes a break in continuous employment, and (2) if a Participant
is on a leave of absence on the last day of the Performance Period, the
Committee may require that the Participant return to active employment with the
Company at the end of the leave of absence as a condition of receiving the Bonus
or payment.  Any determination as to a Participant’s eligibility for a Bonus or
payment under this Section 4.5(b) may be deferred for a reasonable period after
such Participant’s return to active employment.

 

 

 

 

 

(c)           The Committee may determine, in its sole discretion, that a Bonus
will be payable pro-rata for a Participant who either becomes an Employee during
the Performance Period or terminates his or her employment with the Company
during the Performance Period due to death or Disability.

 

 

 

4.6

 

Payment, Bonus Bank or Deferral of the Bonus.

 

 

 

 

 

(a)           As soon as practicable after the amount of a Participant’s Bonus
is determined under Section 4.4, the Company shall pay the portion of the Bonus
to the Participant that is not otherwise put in the Bonus Bank or deferred under
this Section 4.6.  Payments under the Plan shall be made on or before the date
that is 2-½ months after the end of the calendar year which includes the end of
the Performance Period.  The Company shall deduct from any Bonus, any applicable
Federal, state and local income and employment taxes, and any other amounts that
the Company is otherwise required to deduct.  Any payment attributable to a
deceased Participant shall be made to the beneficiary designated in the
Company’s qualified 401(k) plan or, if no beneficiary is so designated, to his
or her spouse or, if none, to his or her estate.

 

 

 

 

 

(b)           The Committee or, to the extent permitted by applicable law,
rule or regulation, the senior executive of a Business Unit (or his or her
designee) or other individuals as may be designated by the Committee, may
determine that any portion of a Participant’s Bonus for a Performance Period
shall be held in a Bonus Bank.  Any Bonus held in a Bonus Bank shall become
payable, in whole or in part, only upon the satisfaction of objective
performance goals identified and established by the Committee for the following
Performance Period.  If such objective performance goals are met in the
following Performance Period, all or a portion of the Bonus held in a Bonus Bank
on behalf of such Participant shall be payable under Section 4.6(a), with
interest at a risk-free rate as determined by the Committee.  If such objective
performance goals are not met in the following Performance Period, any Bonus
held in a Bonus Bank on behalf of such Participant will be forfeited unless
otherwise determined by the Committee in its discretion.  This
Section 4.6(b) shall apply to any Bonus for calendar year 2008 that is held in a
Bonus Bank and is contingent upon satisfaction of the objective performance
goals for the Performance Period beginning January 1, 2009.

 

 

 

 

 

(c)           Subject to the Committee’s approval and applicable law,
Participants may request that payments of a Bonus be deferred under a deferred
compensation arrangement maintained by the Company by making a deferral election
prior to or, as permitted,

 

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during the Performance Period pursuant to such rules and procedures as the
Committee may establish from time to time with respect to such arrangement.

 

ARTICLE 5

 

Administration

 

5.1

 

General Administration and Delegation of Authority. This Plan shall be
administered by the Committee, subject to such requirements for review and
approval by the Board as the Board may establish. As permitted by applicable law
and the Company, the Committee may delegate any of its duties and authority
under the Plan.

 

 

 

5.2

 

Administrative Rules. The Committee shall have full power and authority to
adopt, amend and rescind administrative guidelines, rules and regulations
pertaining to this Plan and to interpret this Plan and rule on any questions
respecting any of its provisions, terms and conditions.

 

 

 

5.3

 

Committee Members Not Eligible. No member of the Committee shall be eligible to
participate in this Plan.

 

 

 

5.4

 

Committee Members Not Liable. The Committee and each of its members shall be
entitled to rely upon certificates of appropriate officers of the Company with
respect to financial and statistical data in order to determine if the objective
performance goals for a Performance Period have been met. Neither the Committee
nor any member shall be liable for any action or determination made in good
faith with respect to this Plan or any Bonus paid hereunder.

 

 

 

5.5

 

Decisions Binding. All decisions, actions and interpretations of the Committee
concerning this Plan shall be final and binding on Morningstar, Inc. and its
Subsidiaries and their respective boards of directors, and on all Participants
and other persons claiming rights under this Plan.

 

ARTICLE 6

 

Amendments; Termination

 

This Plan may be amended or terminated by the Board or the Committee. All
amendments to this Plan, including an amendment to terminate this Plan, shall be
in writing. An amendment to this Plan shall not be effective without the prior
approval of the shareholders of Morningstar, Inc. if such approval is necessary
to qualify Bonuses as performance-based compensation under Section 162(m), or
otherwise under Treasury or SEC regulations, the NASDAQ Marketplace Rules or any
other applicable exchange or any other applicable law or regulations. Unless
otherwise expressly provided by the Board or the Committee, no amendment to this
Plan shall apply to potential Bonuses with respect to a Performance Period that
began before the effective date of such amendment.

 

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ARTICLE 7

 

Other Provisions

 

7.1

 

Bonuses Not Assignable. No Bonus or any right thereto shall be assignable or
transferable by a Participant except by will or by the laws of descent and
distribution. Any other attempted assignment or alienation shall be void and of
no force or effect.

 

 

 

7.2

 

Participant’s Rights. The right of any Participant to receive any Bonus granted
or allocated to such Participant pursuant to the provisions of this Plan shall
be an unsecured claim against the general assets of the Company. This Plan shall
not create, nor be construed in any manner as having created, any right by a
Participant to any Bonus or portion of a Bonus Pool for a Performance Period
because of a Participant’s participation in this Plan for any prior Performance
Period or employment during such Performance Period. The application of the Plan
to one Participant shall not create, nor be construed in any manner as having
created, any right by another Participant to similar or uniform treatment under
the Plan.

 

 

 

7.3

 

Termination of Employment. The Company retains the right to terminate the
employment of any Participant or other Employee at any time for any reason or no
reason, and a Bonus is not, and shall not be construed in any manner to be, a
waiver of such right.

 

 

 

7.4

 

Exclusion from Benefits. Bonuses under this Plan shall not constitute
compensation for the purpose of determining participation or benefits under any
other plan of the Company unless specifically included as compensation in such
plan.

 

 

 

7.5

 

Successors. Any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of Morningstar, Inc.’s
business or assets, shall assume Morningstar, Inc.’s liabilities under this Plan
and perform any duties and responsibilities in the same manner and to the same
extent that Morningstar, Inc. would be required to perform if no such succession
had taken place.

 

 

 

7.6

 

Law Governing Construction. The construction and administration of this Plan and
all questions pertaining thereto shall be governed by the laws of the State of
Illinois, except to the extent that such law is preempted by Federal law.

 

 

 

7.7

 

Headings Not a Part Hereto. Any headings preceding the text of the several
Articles, Sections, subsections, or paragraphs hereof are inserted solely for
convenience of reference and shall not constitute a part of this Plan, nor shall
they affect its meaning, construction or effect.

 

 

 

7.8

 

Severability of Provisions. If any provision of this Plan is determined to be
void by any court of competent jurisdiction, this Plan shall continue to operate
and, for the purposes of the jurisdiction of the court only, shall be deemed not
to include the provision determined to be void.

 

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7.9

 

Offsets. The Company shall have the right to offset from any Bonus payable
hereunder any amount that the Participant owes to the Company or any Affiliate
without the consent of the Participant (or his Beneficiary, in the event of the
Participant’s death).

 

 

 

7.10

 

Dispute Resolution. Notwithstanding any employee agreement in effect between a
Participant and the Company or any Affiliate, if a Participant or Beneficiary
brings a claim that relates to benefits under this Plan, regardless of the basis
of the claim (including but not limited to, actions under Title VII, wrongful
discharge, breach of employment agreement, etc.), such claim shall be settled by
final binding arbitration in accordance with the rules of the American
Arbitration Association (“AAA”) and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. Arbitration
must be initiated by serving or mailing a written notice of the complaint to the
other party describing the facts and claims for each claim. Written notice shall
be provided within one year (365 days) after the day the complaining party first
knew or should have known of the events giving rise to the complaint, unless the
applicable statute of limitation provides for a longer period of time. If the
complaint is not properly submitted within the appropriate time frame, all
rights and claims that the complaining party has or may have against the other
party shall be waived and void. Notice will be deemed given according to the
date of any postmark or the date of time of any personal delivery. Each party
may be represented in the arbitration by an attorney or other representative
selected by the party. The Company or Affiliate shall be responsible for its own
costs, the AAA filing fee and all other fees, costs and expenses of the
arbitrator and AAA for administering the arbitration. The claimant shall be
responsible for his attorney’s or representative’s fees, if any. However, if any
party prevails on a statutory claim which allows the prevailing party costs
and/or attorneys’ fees, the arbitrator may award costs and reasonable attorneys’
fees as provided by such statute.

 

 

 

7.11

 

Section 409A. All Bonuses paid hereunder, including those held in a Bonus Bank
contingent upon satisfaction of performance criteria for a subsequent
Performance Period, are intended to be “short-term deferrals” that are exempt
from Section 409A of the Code and the applicable regulations and guidance
thereunder. The Plan shall be administered and interpreted consistently with
such intent.

 

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