Document:

Exhibit 10.4

 

NIC INC. 2014 AMENDED AND RESTATED

 STOCK COMPENSATION PLAN

 

Amended and Restated Stock Option Agreement

NIC Inc., a Delaware corporation (the "Company"), seeks to provide a means by which the Company, through the grant of the Option (as defined below) to [executive name] ("Optionee"), may retain the Optionee's services and motivate the Optionee to exert his or her best efforts on behalf of the Company and any Affiliate;

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties agree as follows:

 

1.             Grant of Option.  The Company hereby grants to the Optionee an option to purchase (the "Option") the total number of shares of the Company's $0.0001 par value common stock subject to the Option (the “Shares”) set forth in the Certificate of Stock Option Grant (the "Certificate"), at the Grant Price per share set forth in the Certificate, subject to the terms and provisions of this Stock Option Agreement (this "Agreement") and of the Certificate and the NIC Inc. 2014 Amended and Restated Stock Compensation Plan (the “Plan”), which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Agreement. By accepting the Option, the Optionee (and any person to whom the Option is transferred) acknowledges that the Plan has been made available to him or her.

 

If designated in the Certificate as an Incentive Stock Option, the Option is intended to qualify as an Incentive Stock Option as defined in Code Section 422. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), the Option shall be treated as a Non-Qualified Stock Option. If designated in the Certificate as a Non-Qualified Stock Option, the Option is not intended to qualify as an Incentive Stock Option under Code Section 422.

 

2.             Terms and Conditions.

 

(a)           Grant Expiration Date. The Option shall expire on the Grant Expiration Date provided in the Certificate. The Optionee is responsible for taking any and all actions as may be required to exercise the Option in a timely manner, and for properly executing any documents as may be required for the exercise of the Option in accordance with such rules and procedures established from time to time under the Plan. The Company has no duty to notify the Optionee (or any person to whom the Option is transferred) of the expiration of the Option. By accepting the Option, the Optionee (and any person to whom the Option is transferred) acknowledges that the information regarding the procedures and requirements for the exercise of the Option has been made available to him or her.

 

(b)           Exercise of Option During Continuous Employment. Subject to the provisions of this Agreement, the Option may be exercised by the Optionee in installments as provided in the Certificate, rounded to the next lowest integer in the case of any fractional share.

 

To the extent not exercised, an installment shall accumulate and be exercisable, in whole or in part, in any subsequent period but not later than the Grant Expiration Date provided in Section 2(a) of this Agreement. When the right to exercise any installment accrues, the Shares included in that installment may be purchased at that time or from time thereafter during the Option period ending on the Grant Expiration Date provided in Section 2(a) of this Agreement.

 

An exercise of any part of the Option shall be accompanied by a written notice to the Company as provided in Section 5 of this Agreement and specifying the number of Shares as to which the Option is being exercised.

 

 

(c)           Exercise Upon Termination of Employment or Relationship as a Director or Consultant.

 

Death. In the event that the Optionee’s Continuous Status as an Employee, Director or Consultant terminates due to his or her death, the Option may be exercised by the Optionee’s estate or by any other person who acquired the Option by reason of the death of the Optionee within the 12 months immediately following his or her death and to the extent that the Optionee was entitled to exercise the Option at the date of his or her death; provided, however, that the Option may not be exercised after the Grant Expiration Date provided in Section 2(a) of this Agreement.

 

Disability. If the Optionee’s Continuous Status as an Employee, Director or Consultant terminates due to his or her disability (as defined in Code Section 22(e)(3)), the Option may be exercised by the Optionee within the 12 months immediately following such termination and to the extent that the Optionee was entitled to exercise the Option at the date of his or her termination due to his or her disability; provided, however, that the Option may not be exercised after the Grant Expiration Date provided in Section 2(a) of this Agreement.

 

Other Termination of Relationship. If the Optionee’s Continuous Status as an Employee, Director or Consultant terminates other than by death or due to disability and other than involuntarily for cause or voluntarily by the Optionee, the Optionee’s right to exercise the Option may be exercised within the 30 days immediately following such termination and to the extent that the Optionee was entitled to exercise the Option at the date his or her termination; provided, however, that the Option may not be exercised after the Grant Expiration Date provided in Section 2(a) of this Agreement.

 

If the Optionee’s Continuous Status as an Employee, Director or Consultant is voluntarily terminated by the Optionee or involuntarily terminated for cause, the Optionee’s right to exercise the Option shall immediately terminate and any then unexercised portion of the Option shall be immediately canceled.

 

For purposes of this Agreement, the term “cause” shall mean, with respect to any Optionee, (a) cause as defined in the employment agreement with the Company or any subsidiary thereof to which the Optionee is a party or, if none, (b) the occurrence of any of the following events:

 

(i)            the willful and continued failure by the Optionee to substantially perform his or her duties with the Company or any subsidiary thereof on a full-time basis (other than any such failure resulting from total or partial incapacity due to physical or mental illness) after a written

demand for substantial performance is delivered to the Optionee by the Board, which demand identifies the manner in which the Board believes that he or she has not substantially performed such duties;

 

(ii)           the willful engaging by the Optionee in conduct which is significantly injurious to the Company or to any subsidiary of the Company, monetarily or otherwise, after a written demand for cessation of such conduct is delivered to the Optionee by the Board, which demand specifically identifies the manner in which the Board believes that the Optionee has engaged in such conduct and the injury to the Company or to a subsidiary of the Company resulting therefrom;

 

(iii)          the commission by the Optionee of an act or acts constituting a crime involving moral turpitude;

 

(iv)          the breach by the Optionee of one or more covenants, if any, in an agreement to which the Optionee and the Company are parties;

 

(v)           violation by the Optionee of Company policy; or

 

(vi)          the commission by the Optionee of a significant act of dishonesty, deceit or breach of fiduciary duty in the performance of the Optionee’s duties with the Company or with any subsidiary of the Company.

 

 

For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the part of an Optionee shall be deemed to be willful unless knowingly done, or omitted to be done, by the Optionee not in good faith and without a reasonable belief that such action or omission was in the best interests of the Company or of a subsidiary of the Company.

 

(d)           Payment of Grant Price Upon Exercise. At the time of any purchase of Shares under the Option, the Grant Price for such Shares as set forth in the Certificate shall be paid by the Optionee in full to the Company. The Optionee may pay the Grant Price in whole or in part by any of the following methods:

 

(i)            cash or by check made payable to the Company;

 

(ii)           by delivery to the Company of certificates representing the number of Shares then owned by the Optionee, the Fair Market Value of which equals the purchase price of the Shares purchased pursuant to the Option, properly endorsed for transfer to the Company; provided, however, that Shares used for this purpose must have been held by the Optionee for such minimum period of time as may be established from time to time by the Committee; and provided further that the Fair Market Value of any Shares delivered in payment of the purchase price upon exercise of the Options shall be the Fair Market Value as of the exercise date, which shall be the date of delivery of the certificates for the Shares used as payment of the Option Grant Price;

 

In lieu of actually surrendering to the Company the stock certificates representing the number of Shares then owned by the Optionee, the Optionee may submit to the Company a statement affirming ownership by the Optionee of such number of Shares (together with such evidence of ownership as the Company may require) and request that such Shares, although not actually surrendered, be deemed to have been surrendered by the Optionee as payment of the exercise price;

 

(iii)          by authorizing a third party to sell a sufficient portion of the Shares acquired upon the exercise of the Option and remit to the Company the portion of the sale proceeds sufficient to pay the Grant Price and any tax withholding resulting from such exercise that is not paid by the Optionee in cash or by check; or

 

(iv)          any combination of the consideration provided in the foregoing subsections (i), (ii) and (iii).

 

(e)           Nontransferability. The Option shall not be transferable other than by a will of the Optionee or by the laws of descent and distribution, and shall be exercisable during the lifetime of the Optionee only by the Optionee or his attorney-in-fact or conservator, unless the Option is an Incentive Stock Option and such exercise by the attorney-in-fact or the conservator of the Optionee would disqualify the Option as such under Code Section 422.

 

(f)            Adjustments in Event of Change in Common Stock. If any change is made in the Shares subject to the Option, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Option will be appropriately adjusted in the class(es) and number of shares and price per share of stock of those subject Shares in such manner as the Board may deem equitable to prevent substantial dilution or enlargement of the rights granted to the Optionee; provided, however, that no such adjustment shall cause the Company to issue a fractional share under the Option. Such adjustments shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction not involving the receipt of consideration by the Company.)

 

 

(g)           No Rights as a Stockholder. The Optionee shall have no rights as a stockholder with respect to any Shares subject to the Option prior to the date of issuance to him or her of a certificate or certificates for such Shares.

 

(h)           No Rights to Continued Relationship. The Option shall not confer upon the Optionee any right with respect to continuance of employment by the Company or by an Affiliate, nor shall it interfere in any way with the right of his or her employer to terminate his or her employment at any time.

 

The Option shall not confer upon the Optionee any right with respect to continuance of a directorship of the Company or of an Affiliate, nor shall it interfere in any way with the right of the stockholders to remove him or her as a director at any time.

 

The Option shall not confer upon the Optionee any right with respect to continuance of any consulting arrangement with the Company or any Affiliate, nor shall it interfere in any way with the right of the Company or an Affiliate, as the case may be, to terminate any such arrangement.

 

(i)            Sale of the Company. In the event of a dissolution, liquidation or sale of all or substantially all of the assets of the Company, or that the Company is not the surviving corporation in any merger, consolidation, or reorganization, then the Option shall be canceled as of the effective date of such transaction; provided, however, the Board shall give at least 30 days’ written notice of the transaction to the Optionee and during the period beginning on the date the Optionee receives the notice and ending on the date of the transaction, the Optionee shall have the right to exercise all or any part of the unexercised portion of the Option (without regard to employment requirements or any installment exercise limitations) (the “Accelerated Amount”); provided further that no part of the Option may be exercised after the Grant Expiration Date provided in Section 2(a) of this Agreement. If the Option is an Incentive Stock Option, the Accelerated Amount under this Section shall remain exercisable as an Incentive Stock Option under Code Section 422 only to the extent that the $100,000 dollar limitation of Code Section 422(d) is not exceeded. To the extent that such dollar limitation is exceeded, the Accelerated Amount shall be exercisable as a Non-Qualified Stock Option.

 

(j)            Compliance with Other Laws and Regulations. The Option and the obligation of the Company to sell and deliver Shares hereunder, shall be subject to all applicable federal and state laws, rules, and regulations, and to such approvals by any government or regulatory agency as may be required. The Company shall not be required to issue or deliver any certificates for Shares prior to the completion of any registration or qualification of such Shares under any federal or state law, or any rule or regulation of any governmental body which the Company shall, in its sole discretion, determine to be necessary or advisable.

 

To the extent applicable, it is intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code. This Agreement and the Plan shall be administered in a manner consistent with this intent, and any provision that would cause this Agreement or the Plan to fail to satisfy Section 409A of the Code shall have no force or effect until amended to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted by Section 409A of the Code and may be made by the Company without the consent of the Optionee).

(k)           Withholding Taxes. The Optionee agrees to make appropriate arrangements with the Company or Affiliate, as the case may be, for the satisfaction of all federal, state and local income and employment tax withholding requirements applicable to the exercise of the Option. No Shares will be delivered pursuant to the exercise of the Option until the Optionee, or any other person to whom the Option is transferred, has made acceptable arrangements for these withholding requirements. Unless denied by the Committee, the Optionee may elect to pay tax withholding by electing to transfer to the Company, or have withheld from any shares otherwise eligible to be delivered under this Agreement, shares of Common Stock having a value equal to the amount to be withheld for tax purposes under federal, state or local law as may be elected by the Optionee. The value of shares of Common Stock to be transferred to the Company shall be the fair market value of the shares on the date that the amount of tax to be withheld is to be determined (the “Tax Date”), as determined by the Company; provided, however, in no event shall the Fair Market Value of any shares of Common Stock withheld or tendered to satisfy any such tax withholding obligations exceed the sum of (i) the product of the amount of ordinary income recognized in connection with the Option exercise and the Optionee's highest marginal income tax rate, and (ii) the Optionee's FICA tax liability in connection with the Option exercise. Any such elections by the Optionee to have shares of Common Stock withheld for this purpose will be subject to the following restrictions:

 

 

(i)            All elections must be made prior to the Tax Date;

 

(ii)           All elections shall be irrevocable; and

 

(iii)          If the Optionee is an officer or director of the Company within the meaning of Section 16 of the Securities Exchange Act of 1934 (“Section 16”), the Optionee must satisfy the requirements of such Section 16 and any applicable rules thereunder with respect to the use of Common Stock to satisfy such tax withholding.

 

3.             Investment Representation. The Company may require that the Optionee furnish to the Company, as a condition of exercising or acquiring stock underlying the Option, (a) written assurances satisfactory to the Company, or counsel for the Company, as to the Optionee’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company, or counsel for the Company, who is knowledgeable and experienced in financial and business matters, and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Option; and (b) written assurances satisfactory to the Company, or counsel for the Company, stating that the Optionee is acquiring the stock subject to the Option for the Optionee’s own account and not with any present intention of selling or otherwise distributing the stock underlying the Option. The Company may (a) restrict the transferability of the stock underlying the Option and require a legend to be endorsed on the certificates representing such stock, as appropriate to reflect resale restrictions, if any, imposed by the Board pursuant to the Option when granted, or as appropriate to comply with any applicable state or federal securities laws, rules or regulations; and (b) condition the exercise of the Option or the issuance and delivery of stock underlying the Option upon the listing, registration or qualification of such stock upon a securities exchange or quotation system or under applicable securities laws. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (a) the issuance of stock upon the exercise of the Option has been registered under a then currently effective registration statement under the Securities Act, or (b) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Option as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the stock.

 

4.             Optionee Bound by the Plan. The Optionee agrees to be bound by all the terms and provisions of the Plan. To the extent that the terms of this Agreement are inconsistent with the terms of the Plan, the terms of the Plan shall govern. The captions used in the Certificate, this Agreement, and the Plan are inserted for convenience and shall not be deemed a part of the Option for construction or interpretation.

 

This Agreement, the Certificate, and the Plan shall be construed in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles.

 

5.             Notices. Any notice to the Company or the Board that is required to be made under the terms of this Agreement or under the terms of the Plan shall be addressed to the Company in care of its Compensation Committee Chairman at 25501 West Valley Parkway, Suite 300, Olathe, Kansas  66061, with a copy to its General Counsel at the same address.  Any notice that is required to be made to the Optionee under the terms of this Agreement or under the terms of the Plan shall be addressed to him or her at the address indicated in the Certificate unless the Optionee notifies the Company of his or her address change in writing as provided in this Section 5 in which case the notice shall be addressed to the Optionee at his or her new address. A notice under this Section 5 shall be deemed to have been given or delivered upon personal delivery or upon deposit in the United States mail, by registered or certified mail, postage prepaid and properly addressed as provided in this Section.

 

*****Exhibit 10.5

 

NIC Inc.

Management Annual Incentive Plan for Senior Executives

(as approved [Date])

Objective – The Management Annual Incentive Plan for Senior Executives  ("MAIPSE" or "Plan") is intended (i) to attract, retain, and reward key executives of NIC Inc. ("NIC" or "the Company") (ii) to promote execution against annual performance goals and (iii) with respect to any Potential Covered Employee, to operate as a Plan within or under an "umbrella" plan previously adopted and titled the NIC Inc. Executive Incentive Plan ("Executive Incentive Plan").  The Plan is designed to:

	
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Reinforce strategically important operational and financial objectives;

	
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Contribute to competitive compensation opportunities; and

	
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Align the interests of Participants with those of NIC's stockholders.

Definitions – Certain terms are defined in Attachment A for the purposes of the Plan.

Administration – The Plan shall be administered by the Compensation Committee of the Board of Directors (the "Committee"); provided, however, that the Committee, in its discretion, may delegate to certain officers or employees of the Company the responsibility for handling certain day-to-day operational aspects of the Plan.  Any reference to the Plan Administrator hereinafter which relates to administration of the Plan will refer to the Committee and/or any officer(s) or employee(s) to whom the Committee has delegated responsibilities or powers, except to the extent such delegation of a responsibility or power would cause an Award that the Committee intends to qualify as "performance-based compensation," as described in Code Section 162(m)(4)(C), to fail to qualify as such.

The Committee has discretion, subject to the provisions of this Plan and the Executive Incentive Plan, and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board of Directors, to (i) interpret the Plan; (ii) prescribe, amend, and rescind any rules and regulations necessary or appropriate for the administration of the Plan; and (iii) make such other determinations and take such other action as it deems necessary or advisable.  Without limiting the generality of the foregoing sentence, the Committee may, in its sole discretion, treat all or any portion of any period during which a Participant is on military leave or on an approved leave of absence (as defined by the Committee) from the Company as a period of employment of such Participant by the Company for the purpose of this Plan.  Any interpretation, determination, or other action made or taken by the Committee shall be final, binding, and conclusive on all interested parties.

If the Committee determines that a Participant may be a Covered Employee at the end of the Company's fiscal year during which the value of an Award is to be paid pursuant to the terms of the Plan and recognized as income to the Participant for federal income tax purposes (a "Potential Covered Employee"), the Committee may determine to make the Award qualify as "performance-based compensation" under Code Section 162(m)(4)(C). If so, the Committee shall exercise its powers under this Plan in a manner consistent with Code Section 162(m) and Treas. Reg. § 1.162-27.

Term of the Plan – The Plan will be considered in effect as of the start of the Plan Year, subject to approval of the Committee and ratification of the Board of Directors of the Company (the "Board"). The Plan will be effective for one Plan Year unless terminated earlier by action of the Board or Committee.  Awards granted hereunder prior to such termination will continue to be effective in accordance with the terms and conditions of the Plan. NIC anticipates that a successor to the Plan will be established each year, but has no obligation to establish any such successor plan.

 

 

Eligibility – The Plan covers select employees of the Company, as determined by the Committee.  Eligibility under the Plan or participation in the Plan is not a guarantee of employment, and does not guarantee eligibility or participation in any successor plan.  To be eligible for the full Award under the Plan, a Participant must remain in the Company's employ for the entire Plan Year, except as otherwise provided in this Plan or the Participant's employment agreement with the Company.

For individuals that are not eligible under the Plan at the start of the Plan Year, the following guidelines apply:

	
1.

	
Newly-hired Employee

At the sole discretion of the Committee, a newly-hired employee shall be eligible for an Award if the individual commences employment with the Company at or prior to the first day of the third quarter of the Plan Year (i.e., minimum six months of employment for the Plan Year).  No Award under the Plan shall be granted if employment commences more than six months after commencement of the Plan Year.

	
2.

	
Mid-period Promotion

At the sole discretion of the Committee, an employee who is promoted into eligibility during the Plan Year shall be eligible if the promotion becomes effective at or prior to the first day of the third quarter of the Plan Year (i.e., promotion becomes effective a minimum of six months prior to the end of the Plan Year).  No Award shall be granted if the promotion becomes effective less than six months prior to the end of the Plan Year.

	
3.

	
Establishment of Performance Goals

If the Committee intends the Award to qualify as "performance-based compensation" under Code Section 162(m)(4)(C), the Committee may establish a Section 162(m) Performance Goal specifically for the individual, or may apply the limitations and requirements of such "performance-based compensation" directly to the Award, using performance measures and goals authorized in the Executive Incentive Plan. Any performance goal intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C) shall be substantially uncertain as of time the goal is established, and shall be established before 25% of the performance period applicable to the Participant has elapsed.

Termination of Service – In the event a Participant separates from service to the Company prior to the end of a Plan Year, the Award made to the Participant will be treated as follows:

	
1.

	
Death or Disability

If the applicable performance goals are ultimately satisfied, a Participant who dies or experiences a Disability during the Plan Year will receive (or the Participant's estate will receive) a pro rata Award based on actual days worked during the Plan Year, based on actual performance as measured at the end of the Plan Year.  Accordingly, for the avoidance of doubt, such award will be made only if the performance goals are attained. The Award will be paid as soon as practicable following certification of attainment of the applicable performance goals.

	
2.

	
Retirement

If the applicable performance goals are ultimately satisfied, a Participant who retires during a given Plan Year will receive a pro rata Award based on actual performance as measured at the end of the Plan Year, subject to any required severance agreement.  Accordingly, for the avoidance of doubt, such award will be made on account of a Participant's retirement only if the performance goals are attained. The Award will be paid as soon as practicable following certification of attainment of the applicable performance goals.

	
3.

	
Other Termination

All other termination events will be treated in accordance with the provisions set forth in a Participant's employment agreement; provided, however, that any provision of an employment agreement that requires vesting of any portion of an Award for a Covered Employee shall have no effect if the Committee intends such Award to qualify as "performance-based compensation" under Code Section 162(m)(4)(C) (unless such vesting occurs as the result of the Participant’s death or Disability).

 

 

Incentive Opportunity – The Committee will establish incentive opportunities under the Plan for each Participant during the "applicable period," which is no later than 90 days after the start of the Plan Year (or if shorter, before 25% of the performance period applicable to the Participant has elapsed for Awards subject to Code Section 162(m)). The Committee will, in its sole discretion and within the applicable period, establish Threshold, Target, and Superior goals associated with each performance measure and determine the weighting of each measure for the purposes of incentive opportunities under the Plan.  Generally, incentive opportunities will be established as a percentage of a Participant's base salary, and the Award percentage earned will be applied to a Participant's base salary (as described in this Plan under "Award Payout"). At the end of the Plan Year, a Participant may earn an Award equal to, greater than, or lesser than (including zero) the target opportunity, subject to Threshold, Target, and Superior levels of performance, as established by the Committee in its sole discretion.  No payments will be awarded if Threshold performance is not achieved, and no additional payments above the maximum incentive amount will be awarded for performance in excess of the Superior level, except as determined by the Committee, in its sole discretion, subject to limitations required to maintain the intended purpose of the Plan and of any particular Award, including prohibitions on discretionary increases applicable to Awards that the Committee intends to qualify as "performance-based compensation," as described in Code Section 162(m)(4)(C).

Performance Measurement Period – Except as otherwise provided in the Plan, the measurement period is the Plan Year, coinciding with the Company's fiscal year beginning on January 1 and ending on December 31.

Performance Measures and Goals – The Committee will establish the performance measures and associated weightings for incentive calculations under the Plan.  The Committee may modify the definition of performance measures under the Plan and/ or substitute new measures for new Plan Years.

These performance measures can be one or more of the following consolidated (company-wide) or subsidiary, division or operating unit financial measures; provided that for any Award that is intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C), either (a) payment of any amount pursuant to the Award will be subject to achieving the Section 162(m) Performance Goal established by the Committee for the Participant under the Executive Incentive Plan, or (b) the performance measures shall be one or more of those measures described in section 4 of the NIC Executive Incentive Plan: (1) pre-tax or after-tax income (before or after allocation of corporate overhead and bonus), (2) net income (before or after taxes), (3) reduction in expenses, (4) pre-tax or after-tax operating income, (5) earnings (including earnings before taxes, earnings before interest and taxes, or earnings before interest, taxes, depreciation and amortization,  (6) gross revenue, (7) working capital, (8) profit margin or gross profits, (9) share price, (10) cash flow or cash flow per share (before or after dividends), (11) cash flow return on investment or cash flow return on invested capital,  (12) return on capital (including return on total capital or return on invested capital), (13) return on assets or net assets, (14) market share, (15) pre-tax or after-tax earnings per share, (16) pre-tax or after-tax operating earnings per share,  (17) total stockholder return, (18) growth measures, such as revenue growth or operating income growth, as compared with a peer group or other benchmark, (19) economic value-added models or equivalent metrics, (20) comparisons with various stock market indices, (21) improvement in or attainment of expense levels or working capital levels, (22) operating margins, gross margins or cash margins, (23) year-end cash, (24) debt reductions, (25) stockholder equity, (26) regulatory achievements, (27) implementation, completion or attainment of measurable objective with respect to research, development, products or projects, production volume levels, acquisitions and divestitures and recruiting and maintaining personnel,  (28) customer satisfaction, (29) operating efficiency, productivity ratios, (30) strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market penetration, geographic business expansion goals (including accomplishing regulatory approval for projects), cost or cost savings targets, accomplishing critical milestones for projects, and goals relating to acquisitions or divestitures, or any combination thereof (in each case before or after such objective income and expense allocations or adjustments as the Committee may specify within the applicable period).

 

 

Performance goals may be expressed on an absolute and/ or relative basis, may be based on or otherwise employ comparisons based on current internal targets, the past performance of the Company or the performance of one or more subsidiaries, divisions or operating units of the Company or the past or current performance of other companies, or any combination thereof and in the case of earnings-based measures, may use or employ comparisons relating to capital (including, but not limited to, the cost of capital), stockholders' equity and/ or shares outstanding, or to assets or net assets.  Regardless of whether the Participant is a Covered Employee, and as described in Treas. Reg. § 1.162-27(e), (a) the performance goals shall be objective, (b) the achievement of such goals be "substantially uncertain" at the time that they are established, and (c) the Award’s compensation formula shall be defined in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the performance goal has been met and what amount of compensation would be paid as a result. Notwithstanding the foregoing, the Committee shall have the right to apply “negative discretion,” within the meaning of Treas. Reg. § 1.162-27(e)(2)(iii), to reduce or eliminate the compensation payable as a result of such performance.

The Committee, in its sole discretion, may determine during the applicable period to specifically exclude any or all of the following from performance calculations under the Plan: effects of extraordinary, unusual, special, or one-time events; effects of legal, accounting, or regulatory changes; effects of events that are outside of management's control; effects of events that are not reflective of a decision made (or area overseen) by management; effects of "preventive" measures taken by management; effects from the disposal of a business segment; or effects of tax adjustments. The Committee may also, in its sole discretion, specifically exclude any or all of the foregoing events or effects after the end of the applicable period, to the extent such events or effects were not reasonably anticipated to occur; provided, however, that the Committee’s discretion to exclude such events or effects after the end of the applicable period shall be limited to “negative discretion,” within the meaning of Treas. Reg. § 1.162-27(e)(2)(iii), to the extent necessary for any Award that is intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C) to maintain such qualification.

Performance measures, their weightings, and associated goals for the Plan Year are set forth in Attachment B.

Award Payout - Awards will be paid to Participants as soon as practicable in the year following the Plan Year, after the Committee certifies results of the performance measures. No interest shall accrue or be paid on any Awards, even if payment is substantially delayed.  Awards that are determined as a percentage of a Participant's base salary will be calculated using the Participant’s actual base salary as of May 1st for the Year in which the performance goals are established and the Performance Award is payable, unless the Award is intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C).

If the Award is intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C), then either (a) the Award will be calculated as a percentage of the Participant's actual base salary as of the time the performance goal was established, or (b) if a Section 162(m) Performance Goal applies to the Participant, the compensation payable to Participant under the Award shall be limited by the Section 162(m) Performance Goal Formula based upon the Participant's actual base salary as of the time the performance goal was established.

Payment under the Plan is subject to compliance by the Participant with any written agreement between the Participant and the Company, including an employment agreement, non-compete agreement, or other agreement relating to confidential information.  If the Participant breaches any such agreement, he/ she shall immediately forfeit his/ her right to receive any unpaid amounts earned under the Plan.

The Company has the right to deduct from all net amounts paid under the Plan any federal, state, or local taxes required by law to be withheld with respect to such payments.

Miscellaneous Provisions

	
1.

	
The Plan may be amended or discontinued by the Committee at any time without prior notification to Participants.  However, no amendment may adversely affect an outstanding Award made under the Plan.

	
2.

	
The Committee maintains sole discretion to adjust Awards under the Plan downward for legitimate and reasonable performance reasons.

 

 

	
3.

	
The Committee will, to the extent permitted by law, have the sole and absolute authority to make retroactive adjustments to any Awards paid to Participants where the payment was predicated upon the achievement of erroneous financial or strategic business results, or where the Participant engaged in intentional misconduct that increased his/ her incentive income. Where applicable, the Company will seek to recover any amount determined to have been inappropriately received by a Participant under the Plan.

	
4.

	
The Committee may obtain such agreements or undertakings, if any, as the Committee may deem necessary or advisable to assure compliance with any law or regulation of any governmental authority.  The Plan and any Award made hereunder shall be subject to all applicable federal and state laws, rules and regulations, and to such approvals by any government or regulatory agency as may be required.

	
5.

	
No member of the Board or Committee, nor any officer or employee of the Company acting on behalf of the Board or Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan.  All members of the Board or Committee, and each and any officer or employee of the Company acting on their behalf will, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation.

	
6.

	
The interests of Participants under the Plan are not subject to claims, indebtedness, attachment, execution, garnishment, or other legal or equitable process.  Participant interests under the Plan may not be transferred or assigned, other than by will or by the laws of descent and distribution.  If the Participant attempts to alienate, assign, pledge, hypothecate, or otherwise dispose of Awards or other rights under the Plan, except as provided for in this Plan, or in the event of any levy, attachment, execution, or similar process upon the right or interest conferred by this Plan, the Board may terminate the Participant's Award by notice to him/ her, and it shall thereupon become null and void.

 

 

Attachment A – Definitions

	
1.

	
"Award" means, a performance compensation opportunity granted to a Participant under (and subject to the terms of) this Plan, which provides for a cash payment if specified performance criteria are satisfied and the Participant complies with all other criteria under the Plan.

	
2.

	
"Code" means the Internal Revenue Code of 1986, as amended, and any Internal Revenue Code adopted in the future to replace the Internal Revenue Code of 1986.

	
3.

	
"Covered Employee" means Covered Employee as defined in the NIC Executive Incentive Plan.

	
4.

	
"Disability" means except as otherwise provided by the Committee, that the Participant has become eligible to receive long-term disability benefits under a Company-sponsored long-term disability plan, if any.

	
5.

	
"Employee" refers to any person who is employed by the Company, is on the Company's payroll, and whose wages are subject to withholding under the Federal Insurance Contributions Act, codified in Code § 3121.

	
6.

	
"Participant" shall mean an Employee of the Company to whom an Award is granted under this Plan.

	
7.

	
"Plan Administrator" means the individual or committee appointed or designated by the Committee to administer the Plan, if not the Committee itself.

	
8.

	
"Plan Year" refers to the active twelve-month period of performance under the Plan, which is the same period as NIC’s fiscal year.

	
9.

	
"Potential Covered Employee" means a Participant the Committee determines may be a Covered Employee at the end of the Company's fiscal year during which the value of an Award is to be paid pursuant to the terms of the Plan and recognized as income by the Participant for federal income tax purposes.

	
10.

	
"Retirement" means a Participant's date of termination which is designated by the Committee as a "Retirement" for purposes of the Plan or, if applicable, a Participant's date of termination after the normal retirement date specified in a plan maintained by the Company under which the Participant is covered, and which is qualified under section 401(a) of the Code.

	
11.

	
"Section 162(m) Performance Goal" means the Plan Year performance goal established by the Committee under the Executive Incentive Plan, no later than 90 days after the start of the Plan Year, which must be achieved and certified by the Committee in order for a Participant who was designated by the Committee as subject to such goal to receive any amount of compensation pursuant to his or her Award under this Plan. The Committee shall set forth the generally applicable Section 162(m) Performance Goal for the Plan Year in Attachment C to this Plan.

	
12.

	
"Termination of Service" occurs when a Participant ceases to serve as an Employee of the Company, for any reason.

  

 

Attachment B – Performance Measures and Weightings

For [Year], designated Participants shall be subject to a Section 162(m) Performance Goal that must be achieved in order for payment of an Award under this Plan to occur. The designated Participants and the applicable Section 162(m) Performance Goal are set forth in Attachment C.

For [Year], all Participants will be evaluated based on the Company's consolidated operating results.  The Committee has determined the following two measures will be used for Plan purposes, each with the assigned weightings as described:

	
·

	
Operating Income

 [%] of a Participant's opportunity under the Plan – The definition of Operating Income is consistent with that term defined in generally accepted accounting principles and will be derived directly from the face of the consolidated statements of income included in the Company's Annual Report on Form 10-K for the year ending December 31, [Year]

	
·

	
Total Revenue

 [%] of a Participant's opportunity under the Plan – The definition of Total Revenue is consistent with that term defined in generally accepted accounting principles and will be derived directly from the face of the consolidated statements of income included in the Company's Annual Report on Form 10-K for the year ending December 31, [Year]

For the [Year] Plan Year, the Committee determined a "Target" performance level for the Company for each of the above two performance criteria.  Performance of the Company at the Target level will result in an annual cash incentive that is [%] of base salary for the Chief Executive Officer ("CEO"), [%] of base salary for the Chief Operating Officer (“COO”), [%] of base salary for the Chief Financial Officer ("CFO"), and [%] of base salary for the Chief Security Officer ("CSO").  The Committee also determined a range of possible cash incentives above and below Target performance for the CEO, ranging from [%] of base salary for achieving "Threshold" performance to [%] of base salary for achieving "Superior" performance; for the COO ranging from [%] of base salary for achieving "Threshold" performance to [%] of base salary for achieving "Superior" performance; for the CFO ranging from [%] of base salary for achieving "Threshold" performance to [%] of base salary for achieving "Superior" performance; and for the CSO ranging from [%] of base salary for achieving "Threshold" performance to [%] of base salary for achieving "Superior" performance.  For each of the CEO, COO, CFO and CSO, the maximum multiple of target (as a % of base salary) for each performance criteria at the “Superior” performance level is two (2) times Target; however, the overall maximum incentive payout for the two performance criteria, in the aggregate, is limited to [__] times Target.  No payments are awarded under the plan if Threshold performance is not achieved, and except as otherwise provided in this Attachment B, no additional payments are awarded for performance in excess of the Superior level.  To the extent an Award is intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C), then either: (a) the Award will be calculated as a percentage of the Participant's actual base salary as of the time the performance goal was established, or (b) if a Section 162(m) Performance Goal applies to the Participant, the compensation payable to Participant under the Award shall be limited by the Section 162(m) Performance Goal Formula based upon the Participant's actual base salary as of the time the performance goal was established.

The following table sets forth Threshold, Target and Superior Company performance levels for the performance criteria included in the Plan for the [Year] Plan Year and the performance levels for Annual Cash Incentives as described above:

	
Performance Criteria

	
Performance Levels

	
Threshold

 

	
Target

 

	
Superior

 

	
Operating income ([%] of opportunity)

	
[%] of budget

 

	
Budget

	
[%] of Budget

	
Total revenues ([%] of opportunity)

	
[%] of budget

 

	
Budget

	
[%] of Budget

 

 

 

	
Performance Levels Annual Cash Incentive as a Percentage of Base Salary

	
Performance Levels

	
Threshold

 

	
Target

 

	
Superior

 

	
Chief Executive Officer

 

	
[%]

	
[%]

	
[%] (in the aggregate)

([%] of [%])

	 	 	 	 
	
Any one or more measures (subject to aggregate limit)

	 	 	
[%]

([%] of [%])

	 	 	 	 
	
Chief Operating Officer

 

	
[%]

	
[%]

	
[%] (in the aggregate)

([%] of [%])

	 	 	 	 
	
Any one or more measures (subject to aggregate limit)

	 	 	
[%]

([%] of [%])

	 	 	 	 
	
Chief Financial Officer

 

	
[%]

	
[%]

	
[%] (in the aggregate)

([%] of [%])

	 	 	 	 
	
Any one or more measures (subject to aggregate limit)

	 	 	
[%]

([%] of [%])

	
Chief Security Officer

 

	
[%]

	
[%]

	
[%] (in the aggregate)

([%] of [%])

	 	 	 	 
	
Any one or more measures (subject to aggregate limit)

	 	 	
[%]

([%] of [%])

	
 

Discretionary range of ± 20% of the above percentages at each performance level; provided, however, that for any Award intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C), then (a) if no Section 162(m) performance goal applies, there shall be no discretion to increase the range of the above percentages at any performance level; and (b) if a Section 162(m) Performance Goal applies, then the discretion to increase the range of the above percentages at any performance level shall be limited so that the compensation payable for the Award cannot exceed the amount of compensation payable pursuant to the Section 162(m) Performance Goal Formula.

	 	 	 

 

Target performance levels for operating income and total revenues are based upon the Company's fiscal [Year] annual budget approved by the Board of Directors on [Date]. Threshold and Superior performance levels in the table above were recommended by management and approved by the Committee based on the Company's past performance with respect to these metrics generally and relative to budget.

 

 

At the end of each Plan Year, the Committee shall have the option to evaluate actual Company performance against (i) Target expectations and (ii) broader market performance and/or the performance of the Company’s peer group used for executive compensation benchmarking, and consider adjustments to the annual cash incentive, if appropriate.  For example, in periods where the Company achieves Target performance and outperforms the market, the Committee may determine it appropriate to pay more than if the Company were to achieve Target performance but underperform the market.  The intent of this approach is to provide the Committee the option to adjust the annual cash incentive upward or downward with primary consideration to absolute performance against Target and secondary consideration to performance against market. The Committee may adjust the annual cash incentive component downward by up to 20% with respect to any Award, and may adjust the annual cash incentive component upward by up to 20% provided, however, that for any Award intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C), then (a) if no Section 162(m) Performance Goal applies, there shall be no discretion to increase the range of the above percentages at any performance level; and (b) if a Section 162(m) Performance Goal applies, then the discretion to increase the range of the above percentages at any performance level shall be limited so that the compensation payable for the Award cannot exceed the amount of compensation payable pursuant to the Section 162(m) Performance Goal Formula.

Example 1:

The CEO's annual cash incentive is being calculated.  The Company meets the Superior performance level for Operating Income and the Target performance level for Total Revenues.  The CEO's annual cash incentive is computed as follows, and is subject to an achieved Section 162(m) Performance Goal:

	
Measure

	
% of

Opportunity

	
Performance

Level

Attained

	
Cash Incentive

as % of

Base Salary

	
Award as

% of

Base Salary

	 	 	 	 	 
	
Operating Income

	
[%]

	
Superior

	
[%]

	
[%]

	
Total Revenues

	
[%]

	
Target

	
[%]

	
[%]

	
Total Cash Incentive

	 	 	 	
[%]

	 	 	 	 	 
	Total Cash Incentive subject to ± 20% adjustment for a range of [%] to [%] of base salary; provided, however, that no adjustment to increase the compensation payable can occur unless the Award is also subject to an achieved Section 162(m) Performance Goal, and the amount payable pursuant to the Award cannot exceed the amount of compensation payable pursuant to the Section 162(m) Performance Goal Formula.

 

 

Example 2:

The CEO's annual cash incentive is being calculated.  The Company meets the Superior performance level for the two measures of Operating Income and Total Revenues.

The CEO's annual cash incentive is computed as follows, for an Award intended to qualify as "performance-based compensation," as described in Code Section 162(m)(4)(C):

	
Measure

	
% of

Opportunity

	
Performance

Level

Attained

	
Cash Incentive

as % of

Base Salary

	
Award as

% of

Base Salary

	 	 	 	 	 
	
Operating Income

	
[%]

	
Superior

	
[%]

	
[%]

	
Total Revenues

	
[%]

	
Superior

	
[%]

	
[%]

	
Total cash incentive - Preliminary (in excess of aggregate limit)

	
[%]

	 	 
	
Total cash incentive – Final, reduced to

	
[%]

	 	 	 	 	 
	
Total Cash Incentive subject to ± 20% adjustment for a range of [%] to [%] of base compensation; provided, however, that no adjustment to increase the compensation payable can occur unless the Award is also subject to an achieved Section 162(m) Performance Goal, and the amount payable pursuant to the Award cannot exceed the amount of compensation payable pursuant to the Section 162(m) Performance Goal Formula.

 

 

Attachment C – Section 162(m) Performance Goal

For Participants subject to a Section 162(m) Performance Goal, (a) no compensation will be paid pursuant to a Plan Award unless the Participant’s Section 162(m) Performance Goal is achieved, as certified by the Committee; and (b) no compensation paid pursuant to an Award may exceed the amount of compensation payable pursuant to the Section 162(m) Performance Goal Formula.

The following Participants are subject to the Section 162(m) Performance Goal established under the Executive Incentive Plan:

All Covered Employees

Except as otherwise specified in writing for any designated Participant, the Section 162(m) Performance Goal for [Year], as established under the Executive Incentive Plan, by the Committee no later than 90 days after the start of the [Year] fiscal year, shall be the following:

[Section 162(m) Performance Goal]

In determining the foregoing Section 162(m) Performance Goal, the following events or effects shall be excluded: [none].

If the Participant’s Section 162(m) Performance Goal is not achieved, no payment will owed pursuant to the Section 162(m) Performance Goal and no payment may be made pursuant to this Plan. If the Section 162(m) Performance Goal is attained (as certified by the Committee), the “Section 162(m) Performance Goal Formula” will be the lesser of (a) 200% of the Participant’s base salary at the time the Section 162(m) Performance Goal is established, or (b) $2 million (unless the Committee has, in writing, established a different formula for any Participant. In addition, however, the Committee shall exercise its ability to use “negative discretion” to reduce the amount payable under the Section 162(m) Performance Goal Formula, pursuant to the rules set forth in this Plan.

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