exv10w1






Exhibit 10.1









Annual Incentive Plan

Fiscal Year 2011




Effective April 1, 2010 – March 31, 2011








 









 








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 Plan Objectives
	 
	Exhibit II:

	Payout Schedule for Sales Objective
	 
	Exhibit III:

	 	Payout Schedule for EBITDA Objective






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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 (the “Company”) by motivating, rewarding and
recognizing participants for their achievements and contribution to the Company’s success.




The proposed plan is intended to stimulate and reward participants to implement and achieve revenue
growth.




II. Eligibility



Most management-level employees 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 executive
officers. 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 components:





	 	•	 	Financial Objectives
	 
	 	•	 	Individual Objectives




The potential bonus payout is based on a participant’s level and type of position and is determined
as a percentage of the participant’s base salary apportioned between the financial and individual
components. That apportionment is summarized in Exhibit I.







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




V. Financial Objectives



The following Financial Objectives are measured based on attainment of specific levels of
performance of the Company (or of a subsidiary, division, or department thereof):





	 	•	 	Consolidated EBITDA target of $26.7M, inclusive of the Bonus Pool accrual.
	 
	 	•	 	Consolidated Net Sales Target of $537.7M.
	 
	 	•	 	For participants that are employees of a subsidiary of Navarre Corporation, the
financial objectives will be based upon subsidiary specific EBITDA and net sales targets.
For subsidiary performance above threshold but below target, the bonus payout will be
reduced proportionately.
	 
	 	•	 	The performance thresholds for the objectives payout will be attainment of 80% or
greater for EBITDA and 90% or greater for net sales. Payment will be on a sliding scale.
See Exhibits II and III.




Growth Pool



If Consolidated EBITDA exceeds the EBITDA target, the Bonus Pool will be increased by 25% of the
amount that Consolidated EBITDA exceeds the 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.
This provides an enhanced incentive payout opportunity to participants which would be funded
through improvement in Consolidated EBITDA beyond targeted amounts.




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, subsidiary, or department goals. Joint agreement on goals
will be confirmed with signatures of the participant and his/her manager. These goals must be
provided to Human Resources within two months of becoming eligible for the Annual Incentive Plan.







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Goal Monitoring



Participants will normally meet with their managers at least quarterly to review progress on the
established goals.



Goal Modification



Goals may be modified during the plan year if the business or the individual’s position requires
the change.



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 HR 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 other executive officers.




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



The Compensation Committee has determined that a discretionary pool should also be established to
reward participants in the plan with exemplary performance. The maximum amount of the
discretionary pool is $500,000, which may or may not be awarded in whole or in part.



Payments



Payments under the Plan will normally be paid 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. Checks for bonus
payments will normally be hand delivered in one-on-one meetings by the participant’s manager.







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Maximum Payment



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



Communication



After year-end closing, managers should meet individually with each participant to communicate the
final achievement on specific goals and communicate the incentive payment amount. Human Resources
will prepare a communication document to assist managers to effectively communicate this
information.




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 Plan Financial and Individual Objectives:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Consolidated	 	Subsidiary	 	Consolidated Net	 	Subsidiary	 	Individual
	Job Level	 	EBITDA	 	EBITDA	 	Sales	 	Net Sales	 	Objectives
	Corporate CEO and CFO
	 	 	65	%	 	 	 	 	 	 	25	%	 	 	 	 	 	 	10	%
	 
	Subsidiary Presidents
	 	 	 	 	 	 	65	%	 	 	 	 	 	 	25	%	 	 	10	%
	 
	Corporate VP’s
	 	 	55	%	 	 	 	 	 	 	25	%	 	 	 	 	 	 	20	%
	 
	Subsidiary VP’s
	 	 	 	 	 	 	55	%	 	 	 	 	 	 	25	%	 	 	20	%
	 
	Corporate Directors
	 	 	40	%	 	 	 	 	 	 	30	%	 	 	 	 	 	 	30	%
	 
	Subsidiary Directors
	 	 	 	 	 	 	40	%	 	 	 	 	 	 	30	%	 	 	30	%
	 
	Corporate Managers
	 	 	40	%	 	 	 	 	 	 	30	%	 	 	 	 	 	 	30	%
	 
	Subsidiary Managers
	 	 	 	 	 	 	40	%	 	 	 	 	 	 	30	%	 	 	30	%






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Exhibit II




Annual Incentive Plan




FY11 Payout Schedule for Net Sales Objective



	 	 	 	 	 	 	 	 	 
	 	 	Percent of	 	Payout
	 	 	Target	 	%
	Target	 	 	100	% 	 	 	100	% 
	 
	 	 	99	%	 	 	90	%
	 
	 	 	98	%	 	 	80	%
	 
	 	 	97	%	 	 	70	%
	 
	 	 	96	%	 	 	60	%
	 
	 	 	95	%	 	 	50	%
	 
	 	 	94	%	 	 	40	%
	 
	 	 	93	%	 	 	30	%
	 
	 	 	92	%	 	 	20	%
	 
	 	 	91	%	 	 	10	%
	 
	 	 	90	%	 	 	5.0	%
	Minimum for Sales
	 	 	90	%	 	 	5	%
	 
	 	Below 90%	 	0% Payout






Threshold




Sales — 90% or higher of target must be achieved and is paid out on a sliding scale




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Exhibit III




Annual Incentive Plan

Payout Schedule for EBITDA Objective




	 	 	 	 	 	 	 	 	 
	 	 	Percent of	 	Payout
	 	 	Target	 	%
	Target	 	 	100	%	 	 	100	%
	 
	 	 	99	%	 	 	97.5	%
	 
	 	 	98	%	 	 	95	%
	 
	 	 	97	%	 	 	90	%
	 
	 	 	96	%	 	 	85	%
	 
	 	 	95	%	 	 	80	%
	 
	 	 	94	%	 	 	75	%
	 
	 	 	93	%	 	 	70	%
	 
	 	 	92	%	 	 	65	%
	 
	 	 	91	%	 	 	60	%
	 
	 	 	90	%	 	 	55	%
	 
	 	 	89	%	 	 	50	%
	 
	 	 	88	%	 	 	45	%
	 
	 	 	87	%	 	 	40	%
	 
	 	 	86	%	 	 	35	%
	 
	 	 	85	%	 	 	30	%
	 
	 	 	84	%	 	 	25	%
	 
	 	 	83	%	 	 	20	%
	 
	 	 	82	%	 	 	15	%
	 
	 	 	81	%	 	 	10	%
	Minimum for EBITDA
	 	 	80	%	 	 	5	%
	 
	 	Below 80%	 	0% Payout






Threshold




EBITDA — 80% or higher of target must be achieved and is paid out on a sliding scale





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