Exhibit 10.5

 

Amended and Restated Notice of Performance Stock Award

 

(“Participant”)

 

Great Elm Capital Group, Inc.

 

 

ID: 94-3219054

 

 

800 South Street, Suite 230

 

 

Waltham, MA 02453

 

You have been awarded performance-based restricted shares of Common Stock of
Great Elm Capital Group Inc. (the “Company”) as detailed below (the “Performance
Shares”):

This Notice of Performance Stock Award (this “Notice”), together with the Great
Elm Capital Group, Inc. 2016 Long-Term Incentive Compensation Plan (the “Plan”)
in effect as of the Date of Grant, and the terms and conditions of the award of
the Performance Shares (the “Award Agreement”) attached hereto, contain the
terms of your Performance Shares.

 

Date of Grant:

 

Number of Performance Shares:

 

Time Vesting Schedule

20% on 11/03/2017 and 5% on each subsequent quarterly anniversary.

Performance Vesting Date

11/03/2021

 

Performance Criteria and Vesting Schedule:

The Performance Shares will vest (i) based on your continuing service as a
Non-Employee Director or Consultant or continuing employment as an Employee with
the Company, a Subsidiary or an Affiliate over a five year time-vesting period
ending November 3, 2021 and (ii) based upon the Percentage Achievement of the
Performance Goal (as defined in the Award Agreement), in each case, subject to
acceleration as further set forth in the Terms and Conditions of Performance
Stock Award set forth below and incorporated herein by reference.

The foregoing is qualified in its entirety by the Award Agreement.

Acknowledgements and Agreements:

By your signature and the signature of the representative for the Company,
below, you and the Company agree that these Performance Shares are granted under
and governed by the terms and conditions of the Plan and the Award Agreement,
all of which are attached hereto and hereby incorporated by reference and made a
part hereof.

 

PARTICIPANT

 

Great Elm Capital Group, INC.

 

 

 

 

 

 

By:

 

Signature

 

 

 

 

 

Title:

 

Print Name  

 

 

 

 

 

 

Date

 

Date

 

 

 

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Terms and Conditions of Performance Stock Award

1.

Grant of Restricted Performance Shares. The Company hereby awards to
Participant, as of the Date of Grant indicated in the accompanying notice of
award, an award (the “Award”) of a number of Performance Shares under the
Company’s 2016 Long-Term Incentive Compensation Plan (the “Plan”). Each
Performance Share is issued on the terms and conditions governing the Award,
including the applicable time-based and performance-based vesting requirements,
as set forth in this Award Agreement.

2.

Vesting Terms. The number of Performance Shares that may actually vest pursuant
to the Award shall be determined pursuant to the two-step process detailed
below:

(a)

Performance Vesting.  The Performance Shares shall vest based on the extent to
which revenue received by the Company pursuant to the Investment Management
Agreement, dated as of September 27, 2016, by and between Great Elm Capital
Corp. and Great Elm Capital Management, Inc., (such agreement, as amended,
modified, supplemented or replaced, the “IMA”), during the period November 3,
2016 to November 3, 2021 (the “Performance Period”) reaches $40 million (the
“Performance Goal”).  Within seventy-five days after the earlier to occur of
attainment of 100% of the Performance Goal or November 3, 2021, the Committee
shall determine and certify the actual level of attainment for the Performance
Goal (the “Percentage Achievement”). On the basis of that certified Percentage
Achievement level, the number of Performance Shares will be multiplied by the
applicable percentage (which may range from 0% to 100%) on a dollar for dollar
basis of actual revenue collected by the Company under the IMA during the
Performance Period compared to the Performance Goal. The number of Performance
Shares resulting from such calculation shall constitute the maximum number
Shares in which Participant may vest under this Award and shall be designated
the “Performance-Qualified Shares.” In no event may the number of such
Performance-Qualified Shares exceed 100% of the number of Performance Shares
specified in the Award.

(b)

Continuous Service Vesting. 20% of the Performance-Qualified Shares will vest on
November 3, 2017, and thereafter 5% of the Performance-Qualified Shares will
vest on each February 3, May 3, August 3 and November 3 on which Participant is
providing continuing service as a Non-Employee Director or Consultant or is
continuing employment as an Employee until fully vested on November 3, 2021
subject to Participant’s continuing service or continuing employment.  If
Participant’s service is terminated by the Company without Cause or Participant
terminates service for Good Reason, the Performance Shares will vest in full
(with respect to both service and performance) immediately upon such
termination. In addition to the vesting contemplated by Section 2(b), Section
2(c), Section 2(d) and Section 3, if Participant terminates service before
November 3, 2021, the Participant will be entitled to the Performance-Qualified
Shares (if any) that have vested pursuant to this Section 2 as of the date of
termination.

(c)

Vesting Upon Disability or Death.  If Participant’s continuous service is
terminated by reason of death or Disability, then the Performance-Qualified
Shares shall immediately vest in full immediately upon such termination solely
with respect to the service-based vesting in Section 2(b); the Performance
Shares shall continue to be subject to Performance Vesting, in Section 2(a).

(d)

Vesting Upon Sale of the Investment Management Agreement.  If (i) the Company or
its affiliates, directly or indirectly, transfers, sells, assigns, distributes,
participates, delegates or encumbers its economic interest under the IMA (other
than to GECC GP Corp or the Company) or (ii) the Company or any of its
affiliates receives any compensation in connection

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with the transfer, sale, assignment, distribution, participation, delegation,
encumbrance, termination modification or amendment of the IMA, then the
Performance Goal shall be deemed fully satisfied and the Participant’s service
obligations under Section 2(b) shall be deemed fully satisfied as of the date of
receipt of such consideration.

3.

Change of Control Vesting.  If a Change of Control occurs, the Performance
Shares shall no longer be subject to achievement of the Performance Goal and
shall immediately upon the Change of Control (i) become subject to only the
time-based vesting schedule in Section 2(b), subject to the Participant’s
continued service through each applicable time-based vesting date.  If following
a Change of Control, Participant’s continuous service is terminated by the
Company without Cause or Participant terminates for Good Reason, the Performance
Shares will vest in full immediately upon such termination.

(a)

For purposes of this Award Agreement, “Cause” shall mean: (i) Participant’s
theft, dishonesty, misconduct, or falsification of any of the Company’s or its
affiliates’ records; (ii) any action by Participant outside of the scope of
Participant’s employment agreement with the Company that has a material
detrimental effect on the Company’s reputation or business as reasonably
determined by the Committee; (iii) Participant’s substantial failure or
inability to perform any reasonably assigned duties within the scope of
Participant’s employment agreement with the Company that has not been cured
within 30 business days of written notice from the Company to Participant, in
each case, as determined by the Committee in its sole discretion; (iv)
Participant’s violation of any Company policy; (v) Participant’s conviction
(including any plea of guilty or no contest) of any criminal act; or (vi)
Participant’s material breach of any written agreement with the Company which
has not been cured within 10 business days’ of written notice from the Company
to Participant thereof.

(b)

For purposes of this Award Agreement, “Disability” shall mean the inability of
the Participant, in the opinion of a qualified physician acceptable to the
Company, to perform the major duties of Participant’s position with the Company
or an Affiliate of the Company because of the sickness or injury of the
individual, or as may be otherwise defined under applicable local laws.

(c)

For purposes of this Award Agreement, "Good Reason" shall mean the Participant’s
resignation from the Company within six months after the occurrence of any of
the following events: (i) without the Participant’s express prior written
consent, the significant reduction of the Participant’s duties, authority,
responsibilities, job title, or reporting relationships relative to your duties,
authority, responsibilities, job title, or reporting relationships as in effect
immediately prior to such reduction, or the assignment to the Participant of
such reduced duties, authority, responsibilities, job title, or reporting
relationships; (ii) without the Participant’s express prior written consent, a
reduction by the Company of the Participant’s base salary or bonus target as in
effect immediately prior to such reduction or the Company’s failure to pay such
amounts when due; (iii) a material reduction by the Company in the kind or level
of employee benefits, excluding salary and bonuses, to which the Participant was
entitled immediately prior to such reduction with the result that the
Participant’s overall benefits package is significantly reduced (unless such
reduction is part of a program generally applicable to other  employees of the
Company of a similar level); (iv) the relocation of the Participant’s principal
place of work to a facility or a location more than twenty five miles from the
Participant’s then present location, without the Participant’s express prior
written consent or (v) breach by the Company of its obligations hereunder or
under incentive award (including the related award agreements) you hold;
provided, however, that in each case, the Participant’s resignation shall not
constitute Good Reason under this provision unless (A) the Participant provides
the Company with written notice of the applicable event or circumstance within
thirty days after the Participant first has

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knowledge thereof, which notice reasonably identifies the event or circumstance
that the Participant believes constitutes grounds for Good Reason, and (B) the
Company fails to correct the event or circumstance so identified within thirty
days after receipt of such notice.

4.

Issuance Date. The Performance Shares shall be issued on the date of the Award
and held by the Company, as escrow agent, for the benefit of the Participant and
the Company, until the Company determines the extent to which the Performance
Shares vest pursuant to Section 2.

5.

Limited Transferability. Prior to the determination of which Performance Shares
(if any) are Performance-Qualified Shares, Participant may not transfer any
interest in the Performance Shares subject to this Award or pledge or otherwise
hedge the sale of those Performance Shares , including (without limitation) any
short sale or any acquisition or disposition of any put or call option or other
instrument tied to the value of the Performance Shares.  Participant may also
direct the Company to record the ownership of any Performance Shares that become
vested hereunder in the name of a bona fide retirement planning, estate planning
or charitable donation vehicle. Participant may make such a beneficiary
designation or ownership directive at any time by completing the required forms
and filing the completed form with the Committee or its designee.

6.

Stockholder Rights and Dividends. Subject to the other terms and restrictions
set forth herein, including, but not limited to, the restriction on the right to
transfer such Award prior to vesting, the holder of the Award shall have the
rights and privileges of a stockholder of the Company, including, without
limitation, voting rights and rights to dividends, in respect of any Performance
Shares.  However, any such dividends shall be paid based on the number of
Performance Shares, if any, that vest in accordance with the terms of this Award
Agreement.

7.

Adjustment in Shares. The Committee shall adjust the Performance Shares as set
forth in Section 3.2 of the Plan.

8.

Withholding and Section 83(b) Election.  The Company shall be entitled to
require a cash payment by or on behalf of the Participant and/or to deduct from
other compensation payable to the Participant any sums required by federal,
state or local tax law to be withheld with respect to the grant or vesting of
the Award and any dividends paid in relation to the Award.  Participant
understands that Section 83(a) of the Code taxes as ordinary income the
difference between the amount, if any, paid for the Performance Shares and the
Fair Market Value of such Shares at the time the Performance Shares vest.
Participant understands that, notwithstanding the preceding sentence,
Participant may elect to be taxed at the time of the Date of Grant, rather than
at the time the Performance Shares vest, by filing an election under Section
83(b) of the Code (an “83(b) Election”) with the Internal Revenue Service within
30 days of the Date of Grant.  In the event Participant files an 83(b) Election,
Participant shall provide the Company a copy thereof prior to the expiration of
such 30 day period. Participant understands that if an 83(b) Election is filed
with the Internal Revenue Service within such time period, Participant will
recognize ordinary income in an amount equal to the difference between the
amount, if any, paid for the Performance Shares and the Fair Market Value of
such Performance Shares as of the Date of Grant. Participant further understands
that an additional copy of such 83(b) Election form should be filed with his or
her federal income tax return for the calendar year in which the date of this
Award Agreement falls.  Participant acknowledges that the foregoing is only a
summary of the effect of United States federal income taxation with respect to
the Award hereunder, and does not purport to be complete.  Participant further
acknowledges that the Company is not responsible for filing the Participant’s
83(b) Election, and the Company has directed Participant to seek independent
advice regarding the applicable provisions of the Code, the income tax laws of
any

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municipality, state or foreign country in which Participant may reside, and the
tax consequences of Participant’s death.

PARTICIPANT HEREBY ASSUMES ALL RESPONSIBILITY FOR FILING PARTICIPANT’S 83(b)
ELECTION AND PAYING ANY TAXES RESULTING FROM SUCH ELECTION OR FROM FAILURE TO
FILE THE ELECTION AND PAYING TAXES RESULTING FROM THE VESTING OF THE PERFORMANCE
SHARES.

PARTICIPANT UNDERSTANDS THAT PARTICIPANT MAY SUFFER ADVERSE TAX CONSEQUENCES AS
A RESULT OF PARTICIPANT’S PURCHASE OR DISPOSITION OF SHARES AND PARTICIPANT
REPRESENTS THAT PARTICIPANT IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.

9.

Compliance with Laws and Regulations. The issuance of Performance Shares
pursuant to the Award shall be subject to compliance by the Company and the
Participant with all applicable laws relating thereto.

10.

Construction. This Award Agreement and the Award evidenced hereby are made and
granted pursuant to the Plan and are in all respects limited by and subject to
the terms of the Plan. In the event of any conflict between the provisions of
this Award Agreement and the terms of the Plan, the terms of the Plan shall be
controlling. All decisions of the Committee with respect to any question or
issue arising under the Plan or this Award Agreement shall be conclusive and
binding on all persons having an interest in the Award.  Articles 14-18 of the
Plan shall apply mutatis mutandis as if set forth herein.  Notwithstanding
anything to the contrary in the Plan, this Award Agreement may not be modified
in any manner adverse to the Participant other than pursuant to a written
agreement signed by the Participant.

11.

Governing Law. The interpretation, performance and enforcement of this Award
Agreement shall be governed by the laws of the State of Delaware applicable to
contracts made in and to be solely performed in the State of Delaware.

12.

Employment at Will. Nothing in this Award Agreement or in the Plan shall confer
upon Participant any right to remain in employment or service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company (or any Subsidiary of Affiliate employing or retaining
Participant) or of Participant, which rights are hereby expressly reserved by
each, to terminate Participant’s service or employment at any time for any
reason, with or without Cause.

13.

Participant Acceptance. Participant must accept the terms and conditions of this
Award Agreement either electronically through the electronic acceptance
procedure established by the Company or through a written acceptance delivered
to the Company in a form satisfactory to the Company. In no event shall any
Shares be issued under this Award Agreement in the absence of such acceptance.

14.

Amendment and Restatement.  This Award Agreement amends and fully restates the
award agreement between the Company and the Participant, dated November 3, 2016
(the “Original Agreement”).  The Performance Shares issued under the Original
Agreement shall remain outstanding under this Award Agreement and this Award
Agreement shall govern such Performance Shares retroactive to their original
issuance. The Original Agreement shall be superseded by this Award Agreement.

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