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

  



 

















 


	
   

  	
   

  	
  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 2-1⁄2 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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