Document:

ex10_1.htm

Exhibit 10.1

 

AIR METHODS CORPORATION

PERFORMANCE PAY PLAN

Adopted by the Board: September 30, 2011

Adopted by the Stockholders: [_____ __, 201_]

	
SECTION 1.

	
ESTABLISHMENT; PURPOSE

Air Methods Corporation (the “Company”) hereby establishes the Air Methods Corporation Performance Pay Plan (the “Plan”) for the benefit of certain members of the Company’s senior management team.  The purposes of the Plan are to (i) place a significant portion of the compensation of Plan participants at risk by tying such compensation to specific measurable goals designed to drive shareholder value, and (ii) exempt bonuses paid hereunder from the deduction limitations of Code Section 162(m).  The Plan is intended to encourage initiative, resourcefulness, teamwork, motivation, and efficiency on the part of the Participants that will result in financial success for both the stockholders of the Company and the Participants.

	
SECTION 2.

	
CERTAIN DEFINITIONS.

“Board” means the Board of Directors of the Company.

“Cause” shall include (i) a material breach of the terms and conditions of a Participant’s employment agreement with the Company, (ii) willful disobedience of reasonable directions of the Board, (iii) gross malfeasance in performance of the Participant’s duties under his or her employment agreement, or (iv) acts resulting in an indictment charging a Participant with the commission of a felony; provided that the commission of acts resulting in such an indictment shall constitute Cause only if a majority of the directors who are not also subject to any such indictment determine that the Participant’s conduct was willful and has substantially adversely affected the Company or its reputation.

 

“Change in Control” means a merger, sale of assets, sale or exchange of stock, or other corporate reorganization occurs with another corporation or other entity, following which and as a result of which, at least fifty percent (50%) of the ownership interest of the surviving corporation is held by persons other than the stockholders of the Company prior to such transaction, or a majority of the directors of the surviving corporation are persons other than the directors of the Company prior to such transaction.

“Code” means the Internal Revenue Code of 1986, as amended.

“Code Section 162(m)” means Section 162(m) of the Code and the applicable Treasury Regulations and other guidance issued thereunder.

“Code Section 409A” means Section 409A of the Code and the applicable Treasury Regulations and other guidance issued thereunder.

  

 

  

“Committee” means a committee comprised of two or more directors, all of whom are “outside directors,” as defined in Treasury Regulation Section 1.162-27(e)(3).  In the absence of an explicit Board delegation to the contrary, the Committee shall be the Compensation Committee of the Board (or if one exists, the 162(m) subcommittee of the Compensation Committee).

“Participant” means any member of senior management of the Company who is selected to participate in the Plan for a Performance Period in accordance with Section 4, below.

“Disability” means the complete and total inability of the Participant, due to illness or physical or comprehensive mental impairment, to substantially perform all of his or her duties as described herein for a consecutive period of thirty (30) days or more.

“Performance Goals” means the specific, measurable goals set by the Committee for any given Performance Period.  Performance Goals may include multiple goals and may be based on one or more operational or financial criteria.  In setting the Performance Goals for any Performance Period, the Committee may include one or any combination of the following criteria in either absolute or relative terms, for the Company or any business unit thereof:  (a) stock price, (b) total shareholder return, (c) return on assets, return on equity, or return on capital employed, (d) measures of growth, such as “economic value added,” (e) measures of profitability such as earnings per share, corporate or business unit net income, net income before extraordinary or one-time items, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization, (f) cash flow from operations, (g) levels of operating expense or other expense items reported on the Company’s income statement, (h) non-core product development and growth, (i) infrastructure development for business units or administrative departments (such as IT and human resources), (j) measures of pricing efficiency and/or growth, (k) satisfactory completion of a major project or organizational initiative set in advance by the Committee, (l) measures of safety, (m) revenue and/or sales, and (n) strategic sales or acquisitions in compliance with specific criteria set forth in advance by the Committee.

“Performance Period”  means one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a bonus award granted under the terms of the Plan.

“Treasury Regulations” means the Treasury Regulations promulgated under the Code.

	
SECTION 3.

	
ADMINISTRATION.

The Plan shall be administered by the Committee, and the Committee shall have full authority to administer the Plan, including authority to interpret and construe any provision of the Plan and to adopt such rules for administering the Plan as it may deem necessary to comply with the requirements of the Code, or to conform to any regulation or any change in any law or regulation applicable thereto.  The Committee may delegate any of its responsibilities under the Plan other than such responsibilities that are explicitly reserved for Committee action pursuant to Code Section 162(m).   The Committee’s decisions shall be final and binding upon all parties, including the Company, stockholders, and Participants.

  

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SECTION 4.

	
PERFORMANCE PERIODS; ELIGIBILITY

The Committee may, but need not, establish up to two (2) different Performance Periods beginning in any calendar year, with each such Performance Period to extend for such duration of three (3) years or less as may be determined by the Committee in its sole and absolute discretion.  Within ninety (90) days after the beginning of any such Performance Period, but in no event after twenty-five (25) percent of the Performance Period has elapsed, the Committee shall designate in writing those members of senior management of the Company who shall be Participants in the Plan for such Performance Period.  Only those individuals selected to be Participants shall be eligible to earn bonus awards under the Plan.

	
SECTION 5.

	
ESTABLISHMENT OF PERFORMANCE GOALS; DETERMINATION OF AWARDS

5.1           Establishment of Performance Goals; Bonus Formulas.  Within ninety (90) days after the beginning of a Performance Period, but in no event after twenty-five (25) percent of the Performance Period has lapsed, the Committee shall establish in writing (i) the Performance Goals and the underlying performance criteria applicable to the Performance Period, and (ii) the formula or methodology for determining the bonus award payable (if any) to each Participant for such Performance Period upon attainment of the specified Performance Goals.  Performance Goals must be objective and must satisfy the third-party objectivity standards under Code Section 162(m).  Notwithstanding the foregoing, at the time such Performance Goals are established, the Committee may determine that the Performance Goals may be adjusted to account for any unusual items or specified events or occurrences during the Performance Period.  In addition, unless otherwise provided by the Committee at the time the Performance Goals are established, the Performance Goals may be adjusted to exclude the effect of any of the following events that occur during the Performance Period:  (i) asset write-downs, (ii) extraordinary litigation, claims, judgments, or settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programs, (v) material changes to invested capital from pension and post-retirement benefits-related items and similar non-operational items, and (vi) any other extraordinary, unusual, non-recurring or non-comparable items (A) as described in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s Annual Report to stockholders, (B) as described in Accounting Principles Board Opinion No. 30 (or successor guidance thereto) or (C) as publicly announced by the Company in a  press release or conference call relating to the Company’s results of operations or financial condition for a completed quarterly or annual fiscal period.

5.2           Certification of Results; Calculation of Bonuses.  As soon as reasonably practicable after the close of the Performance Period, the Committee shall determine bonus awards to be paid under the terms of the Plan.  Any payments made under this Plan shall be contingent upon achieving the Performance Goals set in advance for the Performance Period in question.  The Committee shall certify in writing prior to approval of any awards that such Performance Goals have been satisfied (approved minutes of the Committee may be used for this purpose).

  

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5.3           Committee Discretion to Reduce Awards.  The Committee may, in its sole and absolute discretion, reduce the bonus awards to which any Participant is otherwise due for any Performance Period if it believes that such reduction is in the best interest of the Company and its shareholders, but any reduction cannot result in any increase in the bonus award of one or more other Participants for such Performance Period.  The Committee has no discretion to increase the bonus award otherwise payable to any Participant for any Performance Period.

5.4           Maximum Awards.  The maximum bonus award that may be paid to any Participant for any Performance Period shall be (x) two million five hundred thousand dollars ($2,500,000), multiplied by (y) the number of years (or portion thereof) in the Performance Period.

 

	
SECTION 6.

	
PAYMENT OF AWARDS

Coincident with the Committee’s establishment of Performance Goals for any Performance Period, the Committee shall also establish in writing when bonus awards for such Performance Period (if any) shall be paid, including (but not limited to) the effect that a Participant’s death, Disability, or termination without Cause, or a Change of Control of the Company, shall have on the payment of such awards.  All payment terms shall be intended to comply with Code Section 409A.  Payment may be made in the form of cash or Company common stock (including Company common stock that is subject to forfeiture), or any combination thereof, as determined by the Committee in its sole and absolute discretion.

	
SECTION 7.

	
GENERAL PROVISIONS.

7.1           Nonassignability.  A Participant shall have no right to assign or transfer any interest under this Plan.

7.2           No Contract of Employment.  Nothing in this Plan shall confer upon the Participant the right to maintain his relationship with the Company or any affiliate as an employee, nor shall it interfere in any way with any right of the Company, or any such affiliate, to terminate its relationship with the Participant at any time for any reason whatsoever, with or without Cause.

7.3           Amendment and Termination.  The Board may from time to time alter, amend, suspend or discontinue the Plan, including, where applicable, any modifications or amendments as it shall deem advisable in order that the Plan not be subject to the limitations on deductibility contained in Code Section 162(m), or to conform to any regulation or to any change in law or regulation applicable thereto; provided, however, that no such action shall adversely affect the rights and obligations of the Participants with respect to the bonus amount payable under the Plan at the time of such alteration, amendment, suspension or discontinuance, except as may be required in order to comply with the requirements of Code Section 162(m) or Code Section 409A.

  

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7.4           Section 409A of the Code.  This Plan, including any payment terms established in accordance with Section 6, above, shall be established, administered and operated in the good faith determination of the Board or the Committee to comply with or be exempt from Code Section 409A.  Although the Company intends to administer the Plan so that it complies with or is exempt from the requirements of Code Section 409A, the Company does not warrant that any bonus amount payable under the Plan will not be subject to the tax imposed by Code Section 409A or will otherwise qualify for favorable tax treatment under any other provision of federal, state, local or foreign law.  The Company shall not be liable to any Participant for any tax, interest or penalties the Participant might owe as a result of his or her participation in the Plan.

7.5           Tax Withholding. The Company shall withhold all applicable taxes from any bonus awards payable hereunder, including any foreign, federal, state, and local taxes.

7.6           Applicable Law. This Plan shall be construed in accordance with provisions of the laws of the State of Colorado, without regards to the conflicts of laws provisions of such state.

	
SECTION 8.

	
EFFECTIVE DATE; PRIOR PLAN NOT SUSPENDED.

8.1           Effective Date of Plan. This Air Methods Corporation Performance Pay Plan was adopted by the Board of Directors effective as of September 30, 2011, and it shall remain in effect, subject to amendment from time to time.

8.2           Stockholder Approval.  The Plan will be submitted to the stockholders of the Company for approval as soon as practicable following the adoption of the Plan by the Board.  In the event stockholder approval of the Plan is not obtained prior to the end of any Performance Period established hereunder, no bonus award shall be payable pursuant to this Plan for such Performance Period.

8.3           1995 and 2006 Plans Not Superseded. This Plan does not supersede or otherwise affect the 1995 Stock Option Plan adopted on August 15, 1995 or the 2006 Equity Compensation Plan adopted on May 3, 2006.  All options and awards granted under either of the foregoing plans remain valid and shall continue to be governed by the provisions of such plans.

 

 

5ex10_2.htm

Exhibit 10.2

 

2011 – 2014 BONUS PROGRAM

The following terms and conditions set forth the 2011 – 2014 Bonus Program established under the Air Methods Corporation Performance Pay Plan (the “Performance Pay Plan”).  In the event of any conflict between the terms and conditions of this program and the terms and conditions of the Performance Pay Plan, the terms and conditions of the Performance Pay Plan shall control.

	
SECTION 1:

	
OVERVIEW

The 2011 – 2014 Bonus Program is designed to measure financial performance of the Company in terms of “Economic Value Added” or “EVA” (as defined below) and to provide incentive compensation solely in the event EVA is positive during the Performance Period (positive EVA being the Performance Goal for the Performance Period).  A portion of any positive EVA during the Performance Period will then be available for distribution to program Participants (the “Distributable EVA”).  Each Participant’s bonus compensation will generally be equal to a percentage of the Distributable EVA, as established for the Participant in Section 3 below.  However, it is anticipated that the bonus compensation otherwise payable to a Participant will be reduced by the Committee pursuant to Section 4 if such reduction is in the best interests of the stockholders of the Company.

	
SECTION 2:

	
PERFORMANCE PERIOD

The Performance Period for this bonus program shall begin July 1, 2011 and shall end on June 30, 2014.

	
SECTION 3:

	
SELECTION OF PARTICIPANTS

The following chart sets forth the Participants in the 2011 – 2014 Bonus Program and the percentage of Distributable EVA established for each Participant:

	
Name

	
Title

	
Percentage of Distributable EVA

	
Michael D. Allen

	
Senior Vice President, Hospital-Based Services

	
14.3%

	
Trent J. Carman

	
Chief Financial Officer, Secretary and Treasurer of the Company

	
14.3%

	
Howard L. Ragsdale

	
Senior Vice President, Business Development

	
14.3%

	
Edward T. Rupert

	
Senior Vice President, Community-Based Services of the Company and President of Mercy Air Service, Inc.

	
14.3%

	
Paul Tate

	
Chief Operating Officer of the Company

	
14.3%

	
Aaron D. Todd

	
Director and Chief Executive Officer of the Company

	
28.5%

  

  

  

 

	
SECTION 4:

	
COMPUTATION OF BONUS AMOUNTS.

As soon as administratively practicable after the end of the Performance Period (but in no event later than September 1, 2014), the Committee shall certify in writing (which certification may be in the form of minutes of the Committee) the Bonus Amount (if any) to which each Participant is entitled as a result of the EVA for the Performance Period, which Bonus Amount shall be determined in accordance with this Section.  The Committee’s written certification shall detail in writing the results of each step in the bonus determination process described below.

Step 1 – Calculate EVA for the Performance Period.  The Committee shall certify in writing (which certification may be in the form of minutes of the Committee) the EVA for the Performance Period.  In making its determination, the Committee shall rely on the audited financial statements of the Company; provided, however, if the Company’s audited financial statements are not available, the Company shall rely on the unaudited financial statements of the Company.  The Committee shall make adjustments in determining EVA to properly measure the Company’s performance during the Performance Period in accordance with Section 5.1 of the Performance Pay Plan.  Any adjustments made by the Committee shall be described in the certification of the EVA calculation, as required by this Section, and the description shall include the reasoning for such adjustment.   In the event EVA for the Performance Period is not a positive number, no Bonus Amounts shall be payable pursuant to this program and no further determinations need be made by the Committee.

 

Step 2 – Calculate Distributable EVA for the Performance Period.  After the Committee certifies the EVA for the Performance Period, the Committee shall determine the Distributable EVA for the Performance Period, which shall be equal to:

	 	
(x) 

	
EVA for the Performance Periodmultiplied by (y) three percent (3%).

Step 3 – Calculate Initial Bonus Amounts for Each Participant.  After the Committee determines the Distributable EVA for the Performance Period, the Committee shall calculate the initial bonus amount for each Participant, which shall be equal to:

	 	
(x) 

	
Distributable EVAmultiplied by (y) the percentage set forth next to the Participant’s name in Section 3 hereof.

 

Step 4 – Determine Final Bonus Amounts for each Participant.  After the Committee determines the initial bonus amount for each Participant, it shall then determine the actual Bonus Amount payable to each Participant.  The actual Bonus Amount for a Participant shall equal the initial bonus amount for such Participant minus any reduction in the initial bonus amount for such Participant determined by the Committee to be in the best interests of the Company and its stockholders.  It is anticipated, but not required, that the Committee will reduce the initial bonus amount to which any Participant is otherwise entitled if senior management fails to adequately (i) develop non-core products, and/or (ii) build infrastructure for human resources and information technology departments.  It is anticipated further that other reductions to the initial bonus amount of any Participant shall be instituted by the Committee solely in the event of extraordinary circumstances.  The Committee is not required to reduce any initial bonus amounts pursuant to this Section, and all reductions shall be determined individually on a Participant-by-Participant basis.  In no event may the reduction of any Participant’s initial bonus amount result in an increase to the actual Bonus Amount for any other Participant.

  

  

  

 

	
SECTION 5:

	
PAYMENT OF AWARDS.

5.1           Notification of Bonus Amounts.  The Committee shall notify each Participant in writing by September 4, 2014 of the Bonus Amount payable to the Participant under the program (if any).

5.2           Timing of Payment; General.  Subject to Section 8.2 of the Performance Pay Plan (regarding necessary stockholder approval) and the provisions of Section 5.3, below, Bonus Amounts shall be paid to Participants in three (3) equal installments on each of September 12, 2014, January 1, 2015 and 2016 (each a “Payment Date” and collectively, the “Payment Dates”); provided that the Participant remains employed by the Company and holds the same, equivalent, or more senior position as set forth in Section 2 hereof on each of the scheduled Payment Dates.

5.3           Death, Disability, Termination of Employment; Change in Control.  Notwithstanding anything herein to the contrary, the provisions below shall apply in the event of the occurrence prior to January 1, 2016 of the Participant’s death, Disability, termination of employment, or upon a Change in Control (subject to Section 8.2 of the Performance Pay Plan):

(a)           Voluntary Resignation; Termination for Cause.  In the event the Participant voluntarily resigns from the Company or is terminated for Cause prior to January 1, 2016 and prior to any of the other events set forth in subsections (b), (c), or (d) of this Section 5.3, then:

(i)  if the resignation or termination for Cause occurs prior to the end of the regularly scheduled Performance Period, the Participant shall forfeit any right to receive any Bonus Amount hereunder.

(ii)  if the resignation or termination for Cause occurs after the end of the regularly scheduled Performance Period but prior to a Payment Date, the Participant shall forfeit any unpaid portion of the Bonus Amount as of the date of termination.  For example, if the Participant voluntarily resigns from the Company or is terminated for Cause on June 30, 2015, the Participant would not be entitled to receive any unpaid portion of the Bonus Amount which would have otherwise been payable on January 1, 2016.

 

  

  

  

 

(b)           Termination Without Cause; Demotion.  In the event the Participant is terminated without Cause or is demoted prior to January 1, 2016 and prior to any of the other events set forth in subsections (a), (c) or (d) of this Section 5.3, then:

(i)  if the termination without Cause or demotion occurs prior to the end of the regularly scheduled Performance Period, the Participant shall forfeit any right to receive any Bonus Amount hereunder.

(ii)  if the Participant is terminated without Cause or is demoted after the end of the regularly scheduled Performance Period, any portion of the Bonus Amount that has not yet been paid as of the date of termination shall become payable immediately.

(c)           Death; Disability.  In the event the Participant dies or becomes Disabled prior to January 1, 2016 and prior to any of the other events set forth in subsections (a), (b) or (d) of this Section 5.3, then:

(i)  if the death or Disability occurs prior to the end of the regularly scheduled Performance Period, the Company shall treat the Performance Period as having ended (with respect to the affected Participant only) on the date of death or Disability and shall determine EVA, Distributable EVA, and the affected Participant’s Bonus Amount as of such date.  The Participant’s Bonus Amount as so calculated shall become payable immediately.

(ii)  if the death or Disability occurs after the end of the regularly scheduled Performance Period, any portion of the Bonus Amount that has not yet been paid as of the date of death or Disability shall become payable immediately.

(d)           Change in Control.  In the event of a Change in Control occurring prior to January 1, 2016 and prior to any of the other events set forth in subsections (a), (b) or (c) of this Section 5.3, then:

 

(i)  if the Change in Control occurs prior to the end of the regularly scheduled Performance Period, the Company or any successor in such Change in Control transaction shall, in its sole and absolute discretion, either (A) treat the Performance Period as having ended on the date of the Change in Control, in which case the Company shall determine EVA, Distributable EVA, and individual Bonus Amounts for all Participants as of such date, and Bonus Amounts as so calculated shall be paid in full on the date of the Change in Control, or (B) elect to continue the terms hereof in which case the Performance Period shall continue as if such Change in Control had not occurred and payment (if any) shall be made in accordance with the applicable provisions of this Section 5.

  

  

  

 

(ii)  if the Change in Control occurs after the end of the regularly scheduled Performance Period, any Bonus Amounts that have not yet been paid shall become payable immediately.

5.3           No Trust Fund or Security Interest.  Each Bonus Amount that becomes payable under this program shall be paid solely from the general assets of the Company.  Nothing herein shall be construed to create a trust or to establish or evidence any Participant’s claim of any right other than as an unsecured general creditor with respect to any payment to which he may be entitled.

	
SECTION 6:

	
SECTION 409A

All Bonus Amounts payable hereunder are intended to be exempt from the requirements of Code Section 409A as “short-term deferrals,” and this 2011 – 2014 Bonus Program shall be interpreted accordingly.

	
SECTION 7:

	
DEFINITIONS

The following capitalized terms shall have the meanings ascribed to them below.  Any capitalized term not defined below or elsewhere in this program shall have the meaning ascribed to such term in the Performance Pay Plan.

“Bonus Amount” means the cash bonus amount payable to a Participant under this program, as calculated pursuant to Section 4 above.

“Business Valuation Multiple” means the number six (6).

“Cash” means, as of the date such determination is made, the sum of all cash and cash equivalents as reflected on the Company’s audited balance sheet; provided, however, if the Company’s audited balance sheet is not available on the date of such determination, the sum of all liabilities as reflected on the Company’s unaudited balance sheet.

 

“Closing Valuation” means (i) EBITDAR for the twelve (12) month period ended on the Final Measurement Date multiplied by (ii) the Business Valuation Multiple minus (iii) any Debt as of the Final Measurement Date plus (iv) any Cash as of the Final Measurement Date.

 

“Debt” means, as of the date such determination is made, the sum of long term debt and obligations under capital leases as reflected on the Company’s audited balance sheet; provided, however, if the Company’s audited balance sheet is not available on the date of such determination, the sum of long term debt and obligations under capital leases as reflected on the Company’s unaudited balance sheet.

“EBITDAR” means Net Income for such period plus the sum of all amounts deducted in arriving at such Net Income amount in respect of (a) Interest Expense for such period, (b) foreign, federal, state, and local income taxes for such period, (c) depreciation of fixed assets and amortization of intangible assets for such period, (f) share-based options expensed pursuant to FAS 123R, and (g) all rents paid during the period with respect to operating leases plus any unfavorable lease amortization.

  

  

  

 

“Economic Value Added” or “EVA” means (i) the Closing Valuation minus (ii) the Opening Valuation, as same may be adjusted pursuant to Section 4, above.

“Final Measurement Date” means June 30, 2014.

“GAAP” means generally accepted accounting principles in effect in the United States at the relevant time, applied on a consistent basis.

“Initial Measurement Date” means June 30, 2011.

“Interest Expense” means the sum of all interest charges (including imputed interest charges with respect to any Capitalized Lease and all amortization of Debt discount and expense) of the Company and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP.

“Net Income” means the net income (or net loss) of the Company and its Subsidiaries for such period computed on a consolidated basis in accordance with GAAP.

“Opening Valuation” means (i) EBITDAR for the twelve (12) month period ending on the Initial Measurement Date, multiplied by (ii) the Business Valuation Multiple minus (iii) any Debt as of the Initial Measurement Date plus (iv) any Cash as of the Initial Measurement Date.

“Property” means all types of real, personal, tangible, intangible or mixed property owned by the Company and its Subsidiaries whether or not included in the most recent balance sheet of the Company and its subsidiaries under GAAP.

“Subsidiaries” has the meaning given such term in Section 424(f) of the Code.

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