Exhibit 10.1 to IntriCon Corporation Form 10-Q for quarterly period ended 3-31-2009



Exhibit 10.1


XXXXX INDICATES MATERIAL THAT WAS OMITTED AND
FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 


INTRICON CORPORATION

ANNUAL INCENTIVE PLAN

FOR EXECUTIVES AND KEY EMPLOYEES


FISCAL YEAR 2009


PLAN OBJECTIVE


The objective of this incentive plan is to align the efforts of
executives and key employees with shareholder interests by rewarding
participants for the achievement of the company’s strategic objectives.


	
 

	
 

	
 

	
 

	
 


	
 


	
 

	
PLAN SUMMARY

	
 


	
 

	
 

	
 

	
 

	
 


	
 

	
•

	
A target level of financial performance must be met in order for any
 incentives to be paid.

	
 


	
 

	
 

	
 

	
 

	
 


	
 

	
•

	
You will be eligible to earn a percentage of your salary when the
 company satisfies a target level of financial performance (pro-forma net
 income), and strategic objectives of the company are accomplished.

	
 


	
 

	
 

	
 

	
 

	
 


	
 

	
•

	
Your incentive earnings will be paid by February 28th, based on
 audited year-end financial results.

	
 


	
 

	
 

	
 

	
 

	
 


	
 

	
Note:

	
 

	
The remaining pages and exhibits provide further explanation
 regarding plan design, payout criteria, and administration.

	
 


	
 

	
 

	
 

	
 

	
 





ELIGIBILITY CRITERIA


Executives and key employees of the company are eligible for plan
participation, as determined by the employment contract Compensation Committee
of the Board of Directors. Plan participants are those individuals who can have
a significant impact on the strategic and financial performance of IntriCon. 


- 1 -







SIZE OF AWARD OPPORTUNITY


The budgeted
incentive potential for plan participants is expressed as a percentage of base
salary on December 31st of the plan year. (Salary does not include any
incentive payments made from the previous year.)


	
 

	
 

	
 

	
 

	
 


	
Tier Level


	
 

	
Positions


	
 

	
Budgeted Incentive 

 Opportunity



	
1

	
 

	
Chief
 Executive Officer

	
 

	
50%


	
2

	
 

	
Officers

	
 

	
40%


	
3

	
 

	
Key
 Employees With Management Responsibilities*

	
 

	
25%


	
4

	
 

	
Key
 Employees Without Management Responsibilities*

	
 

	
20%





* Refer to
Exhibit 3 for 2009 participating list of titles.


Incentive
awards for plan participants who work less than full-time will be pro-rated
accordingly. 


FUNDING THE PLAN


At the beginning of the year a pro-forma net income target will be
established at the company level to determine incentive funding. The Chief
Executive Officer and Chief Financial Officer will communicate this financial
midpoint to you. If the company exceeds its target financial level, you will be
eligible to receive a greater than midpoint level incentive award.


The plan pays out for a range of financial performance based on
year-end results against budgeted pro-forma net income. Below 80% of budgeted
net income, no incentives will be paid. At 80% of budgeted net income, the plan
pays out one-half (or 50%) of the available incentive opportunity for that tier
(please refer to the table below and Exhibit 1 for an example based on the
current year’s financial goal.) At maximum (150% of pro-forma net income), the
plan pays out one and one-half (150%) times of the available incentive
opportunity for that tier.


	
 

	
 

	
 

	
 

	
 


	
Level


	
 

	
 

	
 

	
Company 

 Financial Goal

 2009 Goal



	
Target

	
 

	
80%

	
 

	
XXXXX


	
 

	
 

	
90%

	
 

	
XXXXX


	
Midpoint

	
 

	
100%

	
 

	
XXXXX


	
 

	
 

	
125%

	
 

	
XXXXX


	
Maximum

	
 

	
150%

	
 

	
XXXXX





- 2 -







Payout Criteria: Company Strategic Objectives


The company must
achieve at least the target level of pro-forma net income (80% of target) in
order for any payout to be earned for the achievement of company strategic
objectives. Your
incentive potential is determined by actual year-end company financial results
achieved. 


You may earn all or a portion of your total incentive potential
based on the achievement of the company’s strategic objectives.


At the beginning of the year, clearly measurable strategic objectives
for the company will be communicated to you by the Chief Executive Officer or
Chief Financial Officer. Typically, there will be no more than four strategic
objectives established. The strategic objectives may be weighted by tier and/or
by position within the tier to appropriately reflect the influence a given position
may have on the outcome of a specific objective. The total of the strategic
objectives should equal 100 percent for each participant.


Progress against strategic objectives will be reviewed on a quarterly
basis. In rare instances, modifications may be required. Any substantive
revisions to the objectives (such as changing a strategic objective or its
weighting) will require the approval of the Chief Executive Officer.


At year-end, performance against assigned strategic objectives will be
reviewed to determine an overall evaluation score (percent of strategic
objectives achieved.) The overall evaluation score will determine what portion
of the award you will receive. (For example, if 90 percent of the strategic
objectives are achieved, then 90 percent of the incentive opportunity will be
payable). Final incentive earnings will be determined in January.


Incentive awards will typically be paid following year end audited
results, usually by February 28th.


	
 

	
 

	
 


	
 

	
Note:

	
Please see Exhibit 1 for a plan payout example. Exhibit 2 further
 details plan definitions, eligibility, and payout criteria.





QUALIFICATION OF AWARD PAYMENT


The Chief Executive Officer reserves the right to withhold incentive
payment in the event an individual is on probation status at fiscal year end. 


- 3 -







PLAN ADMINISTRATION


Payout Timing


Individual incentives will be paid upon final approval of the
Compensation Committee of the Board of Directors, with payout contingent upon
completion of the year-end audited financial results, usually no later than
February 28th.


Plan Amendment,
Modification, or Termination


From time to time IntriCon may make plan amendments as it believes
appropriate and/or may terminate the plan at any time, provided that no such
amendment or termination will affect the right of any participant to receive
incentive compensation in accordance with the terms of the plan for the portion
of any year up to the date of the amendment or termination. Typically, any such
modification would be made on an annual basis. 


New Hires 


New hires must begin their employment by October 1st to qualify for
plan participation. For individuals hired by October 1st of the plan
year, eligibility begins on the first date of employment. Individual incentive
awards will be prorated from the date of hire.


Promotions 


For individuals promoted into an incentive eligible position that has a
different award opportunity, the new opportunity will apply based on the actual
time served in the new position, and the prior incentive opportunity will apply
to the actual time served in the prior position. At no time will an individual
receive more than a 12-month incentive payment for the fiscal year.


Promotions – Newly
Eligible


Individuals must be promoted into an incentive eligible position by
October 1st to qualify. Individual incentive awards will be prorated
from the date of promotion.


Leaves of Absence 


A participating employee who takes a leave of absence from IntriCon for
a period of more than 12 weeks will be subject to a pro-rated incentive award
calculation. Only the length of the leave in excess of 12 weeks will be
considered in the pro-ration calculation. Leaves of absence include (but are
not limited to) Family and Medical Leave (FMLA), disability leave, medical
leave, etc.


- 4 -







Termination of
Employment


In the event an eligible participant ceases to be an employee during
any year in which he/she is participating in the plan, he/she will not be
eligible to receive any incentive compensation for such year. Individuals need
to be employed as of December 31st, of the plan year in order to
receive an award. 


Should the plan participant be covered by an employment contract, all
such provisions regarding payout of incentives upon termination of employment
shall be adhered to.


Right to Continue
Employment


Nothing contained in the plan shall be construed to confer upon any
employee the right to continue in the employment of, or the right of IntriCon
to terminate his/her employment at any time.


General Provisions


The extent to which incentive payments are eligible compensation for
benefit plan purposes is determined solely by the plan document governing the
respective benefit plan. Interpretation of the provisions of any employee
benefit plan, including the intent of any provision, rests solely with the
Compensation Committee of the Board of Directors. All payments are subject to
Federal, state, FICA, and other required withholdings


- 5 -








Exhibit 1


INTRICON CORPORATION

ANNUAL INCENTIVE PLAN

FOR EXECUTIVES AND KEY EMPLOYEES


FISCAL YEAR 2009


- Payout Example 1 -


EXAMPLE ASSUMPTIONS


	
 

	
 


	
•

	
Assumes a
 Tier 4 employee eligible for a 20% reward at midpoint (expressed as a percent
 of base compensation) and annual compensation of $80,000.


	
 

	
 


	
•

	
Assumes
 year-end company financial performance achieved at midpoint level = 20% total
 award potential with payout scale as indicated below.


	
 

	
 


	
•

	
Assumes
 company strategic objective achievement at 85 percent.





COMPANY NET INCOME GOAL AND INCENTIVE PAYOUT
AMOUNTS


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Company Financial Goal

 2009 Goal


	
 

	
 

	
 

	
 

	
Individual Reward Potential

 % of Base Salary


	
 


	
Target

	
 

	
80

	
%

	
 

	
10

	
%

	
 


	
 

	
 

	
90

	
%

	
 

	
15

	
%

	
 


	
Midpoint

	
 

	
100

	
%

	
 

	
20

	
%

	
 


	
 

	
 

	
125

	
%

	
 

	
25

	
%

	
 


	
Maximum

	
 

	
150

	
%

	
 

	
30

	
%

	
 





Objectives
established for Tier 4 at beginning of year:


	
 

	
 

	
 

	
 

	
 


	
Objectives


	
 

	
Weighting


	
 


	
1

	
 

	
50

	
%

	
 


	
2

	
 

	
30

	
%

	
 


	
3

	
 

	
20

	
%

	
 


	
Total

	
 

	
100

	
%

	
 





- 6 -







Exhibit
1
(Continued)


At year end:


	
 

	
 


	
Step 1:

	
Determine incentive funding based on
 financial results


	
 

	
 


	
 

	
Midpoint
 level pro-forma net income achieved = 20% opportunity funded


	
 

	
 


	
 

	
20% x
 $80,000 = $16,000


	
 

	
 


	
Step 2:

	
Determine results
 achieved for each goal








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
Objective


	
 

	
Weighting


	
 

	
Percentage Earned


	
 

	
Results Achieved


	
 


	
 

	
1

	
 

	
50

	
%

	
 

	
90

	
%

	
 

	
45

	
%

	
 


	
 

	
2

	
 

	
30

	
%

	
 

	
80

	
%

	
 

	
24

	
%

	
 


	
 

	
3

	
 

	
20

	
%

	
 

	
80

	
%

	
 

	
16

	
%

	
 


	
 

	
Total

	
 

	
100

	
%

	
 

	
 

	
 

	
 

	
85

	
%

	
 








	
 

	
 


	
Step 3:

	
Calculate
 incentive award based on ratings.


	
 

	
 


	
 

	
$16,000 x
 85% results achieved = $13,600


	
 

	
 


	
Step 4:

	
Total incentive
 payout earned:


	
 

	
 


	
 

	
Total: $13,600





- 7 -







Exhibit
1

(Continued)


- Payout Example 2 -


EXAMPLE ASSUMPTIONS


	
 

	
 


	
•

	
Assumes a
 Tier 4 employee eligible for a 20% reward at midpoint (expressed as a percent
 of base compensation) and annual compensation of $80,000.


	
 

	
 


	
•

	
Assumes
 year-end company financial performance exceeded midpoint at 110% level = 25%
 total award potential with payout scale as indicated below.


	
 

	
 


	
•

	
Assumes
 company strategic objective achievement at 96 percent.





COMPANY NET INCOME GOAL AND INCENTIVE PAYOUT
AMOUNTS


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Company Financial Goal

 2009 Goal


	
 

	
 

	
 

	
Individual Reward Potential

 % of Base Salary


	
 


	
Target

	
 

	
80

	
%

	
 

	
10

	
%

	
 


	
 

	
 

	
90

	
%

	
 

	
15

	
%

	
 


	
Midpoint

	
 

	
100

	
%

	
 

	
20

	
%

	
 


	
 

	
 

	
125

	
%

	
 

	
25

	
%

	
 


	
Maximum

	
 

	
150

	
%

	
 

	
30

	
%

	
 





Individual objectives established at
beginning of year:


	
 

	
 

	
 

	
 

	
 


	
Objectives


	
 

	
Weighting


	
 


	
1

	
 

	
60

	
%

	
 


	
2

	
 

	
40

	
%

	
 


	
Total

	
 

	
100

	
%

	
 





- 8 -







Exhibit
1

(Continued)


	
 

	
 


	
At year end:

	
 


	
 

	
 


	
Step 1:

	
Determine incentive funding based on
 financial results


	
 

	
 


	
 

	
Midpoint
 level pro-forma net income exceeded = 25% opportunity funded


	
 

	
 


	
 

	
25% x
 $80,000 = $20,000


	
 

	
 


	
Step 2:

	
Determine results
 achieved for each goal








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
Objective


	
 

	
Weighting


	
 

	
Percentage Earned


	
 

	
Results Achieved


	
 


	
 

	
1

	
 

	
60

	
%

	
 

	
100

	
%

	
 

	
60

	
%

	
 


	
 

	
2

	
 

	
40

	
%

	
 

	
90

	
%

	
 

	
36

	
%

	
 


	
 

	
Total

	
 

	
100

	
%

	
 

	
 

	
 

	
 

	
96

	
%

	
 








	
 

	
 


	
Step 3:

	
Calculate
 incentive award based on ratings.


	
 

	
 


	
 

	
$20,000 x 96%
 results achieved = $19,200


	
 

	
 


	
Step 4:

	
Total incentive
 payout earned:


	
 

	
 


	
 

	
Total:
 $19,200





- 9 -








Exhibit 2


INTRICON CORPORATION

ANNUAL INCENTIVE PLAN

FOR EXECUTIVES AND KEY EMPLOYEES


FISCAL YEAR 2009


DEFINITION OF TERMS


The following
terms as used in the plan have meaning as described below:


Designation of Participants


Any executive
or key employee who has been designated by the Chief Executive Officer as a
participant in the plan for the year or during the year. Upon determination of
eligibility, each participant will be furnished with an outline of the plan as
it applies to him/her and will be notified of the level of incentive for which
he/she is eligible.


Pro-Forma Net Income


Pro-Forma Net
Income represents consolidated net income, as defined by “GAAP” (General
Accepted Accounting Principles), after the accrual of the bonus payout. 


Eligibility Criteria


Individuals
need to be regular employees, work a minimum of half time to be eligible for
plan participation, and be in an executive or key position. Incentive awards
for employees who work less than full-time will be prorated according to
his/her annual base wage.


Financial Objective


The level of
organizational performance against pro-forma net income, as approved by the
Board of Directors. IntriCon may amend the goals to reflect material adjustment
in or changes to the company’s policies; to reflect material changes such as
mergers or acquisitions; and to reflect such other events having a material
impact on goals.


Strategic Objective


Clearly measureable strategic
objectives will be identified by executive management and the board of
directors. These strategic objectives will be communicated to the participants
at the beginning of the plan year. The achievement of these strategic
objectives will be determined by the board of directors. 


- 10 -







Exhibit
2

(Continued)


Payout 


The actual
amount to be paid to a participant based upon achievement of IntriCon’s financial results and strategic
goal achievement.


Plan Year


The fiscal
year of IntriCon (January 1 through December 31).


Salary


The
employee’s base salary as of December 31st of the plan year.








- 11 -









Exhibit 3 


INTRICON CORPORATION 

ANNUAL INCENTIVE PLAN 

FOR EXECUTIVES AND KEY EMPLOYEES


FISCAL YEAR 2009 

PARTICIPATING TITLES BY TIER*


	
Tier 1
 	
Location
 
	
 
 	
 
 
	
•   Chief Executive
Officer
 	
MN
 
	
 
 	
 
 
	
Tier 2
 	
 
 
	
 
 	
 
 
	
•   Chief Financial Officer
 	
MN
 
	
•   Vice President of Sales and Marketing 
 	
MN
 
	
•   Vice President of Operations 
 	
MN
 
	
•   Vice President of Research and Development 
 	
MN
 
	
•   Vice President of Quality and Regulatory Affairs 
 	
MN
 
	
•   General Manager 
 	
CA
 
	
 
 	
 
 
	
Tier 3
 	
 
 
	
 
 	
 
 
	
•   XXXXX
 	
XXXXX
 
	
•   XXXXX 
 	
XXXXX
 
	
•   XXXXX 
 	
XXXXX
 
	
 
 	
 
 
	
Tier 4
 	
 
 
	
 
 	
 
 
	
•   XXXXX
 	
XXXXX
 
	
•   XXXXX
 	
XXXXX
 
	
•   XXXXX
 	
XXXXX
 
	
•   XXXXX
 	
XXXXX
 
	
•   XXXXX
 	
XXXXX
 
	
•   XXXXX
 	
XXXXX
 
	
•   XXXXX
 	
XXXXX
 






* IntriCon
reserves the right to change the participation list from year to year. 








- 12 -