Document:

mwk-ex417_7.htm

Exhibit 4.17

 

Description of Securities of Mohawk Group Holding, Inc.

The authorized capital stock of Mohawk Group Holdings, Inc., a Delaware corporation (the “Company”), consists of: 

	
 
	
•
	
500,000,000 shares of common stock, $0.0001 par value per share (“Common Stock”); and

	
 
	
•
	
10,000,000 shares of preferred stock, $0.0001 par value per share (“Preferred Stock”).

Common Stock 

Dividend Rights. Dividends may be declared and paid on Common Stock if, as and when determined by the Company’s board of directors (the “Board”), subject to any preferential dividend or other rights of any then outstanding Preferred Stock and to the requirements of applicable law.

Voting Rights. Holders of Common Stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders. The Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) does not provide for cumulative voting for the election of directors. Accordingly, the holders of a majority of the outstanding shares of Common Stock entitled to vote in any election of directors can elect all of the directors standing for election, if they so choose, other than any directors that holders of any outstanding Preferred Stock may be entitled to elect. The Certificate of Incorporation establishes a classified board of directors that is divided into three classes with staggered three-year terms. Only the directors in one class will be subject to election at each annual meeting of the Company’s stockholders, with the directors in the other classes continuing for the remainder of their respective three-year terms. The Certificate of Incorporation and the Company’s Amended and Restated Bylaws (the “Bylaws”) also provide that the directors may be removed only for cause and only by the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock entitled to vote thereon. In addition, the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock entitled to vote thereon is required to amend or repeal, or to adopt any provision inconsistent with, several of the provisions of the Certificate of Incorporation. See the section of this exhibit entitled “Anti-Takeover Effects of Certain Provisions of the Company’s Certificate of Incorporation, Bylaws and General Corporation Law of the State of Delaware” for additional details regarding the anti-takeover provisions of the Certificate of Incorporation and Bylaws.

MV II, LLC, Dr. Larisa Storozhenko and Mr. Maximus Yaney (collectively, the “Designating Parties”) have entered into a voting agreement, dated as of March 13, 2019, with Asher Delug and the Company (the “Restated Voting Agreement”), pursuant to which the Board has the sole right to vote all of their shares of capital stock of, and any other equity interest in, the Company (collectively, the “Voting Interests”) as the Designating Parties’ proxyholder. Pursuant to the proxy granted by the Designating Parties, the Board is required to vote all of the Voting Interests in direct proportion to the voting of the shares and equity interests voted by all holders other than the Designating Parties. The proxy granted by the Designating Parties under the Restated Voting Agreement is irrevocable. In addition, the Restated Voting Agreement proxyholder may not be changed unless the Company receives the prior approval of The Nasdaq Stock Market LLC. The 

 

 

Restated Voting Agreement became effective on June 12, 2019 and will continue until the earlier to occur of (1) a Deemed Liquidation Event unless, immediately upon such Deemed Liquidation Event, the Common Stock is and remains listed on The Nasdaq Stock Market LLC, or (2) Mr. Yaney’s death. For purposes of the Restated Voting Agreement, a “Deemed Liquidation Event” means (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company is a party, other than a transaction or series of transactions in which the holders of the Company’s voting securities outstanding immediately prior to such transaction or series of transactions retain, immediately after such transaction or series of transactions, as a result of the shares held by such holders prior to such transaction or series of transactions, a majority of the total voting power represented by the outstanding voting securities of the Company or such other surviving or resulting entity; (ii) a sale, lease or other disposition of all or substantially all of the Company’s and its subsidiaries’ assets taken as a whole by means of any transaction or series of related transactions, except where such sale, lease or other disposition is to a wholly-owned subsidiary of the Company; or (iii) any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary; however, a Deemed Liquidation Event shall not include any transaction effected primarily to raise capital for the Company or a spin-off or similar divestiture of the Company’s product or SaaS business as part of a reorganization of the Company approved by the Board.

As of December 31, 2020, the Board has voting power over an aggregate of 3,748,616 shares of the Common Stock, or 21.1% of the Company’s outstanding shares of Common Stock, pursuant to the Restated Voting Agreement. 

On April 12, 2019, Asher Delug entered into a voting agreement with the Company on substantially the same terms as the Restated Voting Agreement (the “Delug Voting Agreement”), pursuant to which Mr. Delug agreed to relinquish the right to vote his shares of capital stock of, and any other equity interest in, the Company (collectively, the “Delug Voting Interests”) by granting the Board the sole right to vote all of the Delug Voting Interests as Mr. Delug’s proxyholder. The Delug Voting Interests include all shares of Common Stock held by Mr. Delug, as well as any of the Company’s securities or other equity interests acquired by Mr. Delug in the future. Pursuant to the proxy granted by Mr. Delug, the Board is required to vote all of the Delug Voting Interests in direct proportion to the voting of the shares and equity interests voted by all holders other than Mr. Delug. The proxy granted by Mr. Delug under the Delug Voting Agreement is irrevocable. In addition, the Delug Voting Agreement proxyholder may not be changed unless the Company receives the prior approval of The Nasdaq Stock Market LLC. The Delug Voting Agreement became effective on June 12, 2019, and it will continue until the earlier to occur of (1) a Deemed Liquidation Event unless, immediately upon such Deemed Liquidation Event, the Common Stock is and remains listed on The Nasdaq Stock Market LLC, (2) Mr. Delug’s death, or (3) the date we and Mr. Delug agree to terminate the Delug Voting Agreement. 

As of December 31, 2020, the Board has voting power over an aggregate of 2,503,608 shares of the Common Stock, or 14.1% of the Company’s outstanding shares of Common Stock, pursuant to the Delug Voting Agreement.

No Preemptive or Similar Rights. The Common Stock is not entitled to preemptive rights, and is not subject to conversion, redemption or sinking fund provisions.

 

 

Right to Receive Liquidation Distributions. If the Company becomes subject to a liquidation, dissolution or winding-up, the assets legally available for distribution to its stockholders would be distributable ratably among the holders of Common Stock and any participating Preferred Stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of Preferred Stock.

Fully Paid and Non-Assessable. All of the outstanding shares of Common Stock are duly authorized, validly issued, fully paid and non-assessable.

Anti-Takeover Provisions. See the below section titled “Anti-Takeover Effects of Certain Provisions of the Company’s Certificate of Incorporation, Bylaws and General Corporation Law of the State of Delaware”.

Listing

The Common Stock is listed on the Nasdaq Capital Market under the symbol “MWK”.

Preferred Stock

The Board is authorized, subject to limitations prescribed by Delaware law, to issue up to 10,000,000 shares of Preferred Stock in one or more series, to determine and fix from time to time the number of shares to be included in such series, and to fix the voting powers, designations, preferences and other rights, qualifications and restrictions thereof, including dividend rights, conversion rights, redemption privileges and liquidation preferences of such series, in each case without further vote or action by the stockholders. The Board can also increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding, without any further vote or action by the stockholders.

The Board may authorize the issuance of Preferred Stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of Common Stock. The issuance of Preferred Stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control and may adversely affect the market price of the Common Stock and the voting and other rights of the holders of Common Stock. The Company has no current plans to issue any shares of Preferred Stock.

Warrants

As of December 31, 2020, the Company had outstanding warrants to purchase an aggregate of 3,207,291 shares of Common Stock as follows:

	
 
	
•
	
A warrant to purchase an aggregate of 44,871 shares with an exercise price of $15.60 per share, which is currently exercisable and expires on October 16, 2027, which shall be automatically exercised on a “cashless” basis upon expiration if the fair market value of the Common Stock is greater than the exercise price of the warrant on the expiration date of the warrant; 

 

 

	
 
	
•
	
warrants to purchase an aggregate of 196,364 shares with an exercise price of $15.60 per share, all of which are currently exercisable and expire on September 4, 2023; 

	
 
	
•
	
warrants to purchase an aggregate of 76,923 shares with an exercise price of $15.60 per share, all of which are currently exercisable and expire on June 14, 2024, which shall be automatically exercised on a “cashless” basis upon expiration if the fair market value of the Common Stock is greater than the exercise price of the warrant on the expiration date of the warrant; 

	
 
	
•
	
warrants to purchase an aggregate of 2,864,133 shares of our common stock at an exercise price of $9.01 per share and initially provided that it would be exercisable on June 1, 2021, expire five years from the date of issuance and would be exercisable on a cash basis, unless there is not an effective registration statement covering the resale of the shares issuable upon exercise of the warrants, in which case the warrant would also be exercisable on a cashless exercise basis at High Trail loan’s election; and

	
 
	
•
	
warrants to purchase an aggregate of 25,000 shares of our common stock at an exercise price of $9.09 per share and will expire on August 18, 2030. 

All of the outstanding warrants contain provisions for the adjustment of the exercise price in the event of stock dividends, stock splits or similar transactions. In addition, certain of the warrants contain a “cashless exercise” feature that allows the holders thereof to exercise the warrants without a cash payment to the Company under certain circumstances. Certain of the warrants also contain provisions that provide certain rights to warrant holders in the event of a fundamental transaction, including a merger or consolidation with or into another entity, such as the right to receive the same amount and kind of consideration paid to the holders of Common Stock in the fundamental transaction.

Anti-Takeover Effects of Certain Provisions of the Company’s Certificate of Incorporation, Bylaws and General Corporation Law of the State of Delaware

Certain provisions of Delaware law, along with the Certificate of Incorporation and the Bylaws, may have the effect of delaying, deferring or discouraging another person from acquiring control of the Company. These provisions are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed, in part, to encourage persons seeking to acquire control of the Company to first negotiate with the Board. However, these provisions could have the effect of delaying, discouraging or preventing attempts to acquire the Company, which could deprive the stockholders of opportunities to sell their shares of Common Stock at prices higher than prevailing market prices.

Delaware Law

The Company is subject to Section 203 of the General Corporation Law of the State of Delaware (“DGCL”), which prohibits persons deemed to be “interested stockholders” from engaging in a “business combination” with a publicly held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting 

 

 

stock. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by the Board.

Choice of Forum

The Certificate of Incorporation provides that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for: (1) any derivative action or proceeding brought on the Company’s behalf; (2) any action asserting a claim of breach of a fiduciary duty by any of the Company’s directors, officers, employees, agents or stockholders to the Company or its stockholders, creditors or other constituents; (3) any action asserting a claim against the Company arising pursuant to any provision of the DGCL or the Certificate of Incorporation or the Bylaws; or (4) any action asserting a claim governed by the internal affairs doctrine. The provision will not apply to suits brought to enforce a duty or liability created by the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any other claim for which the federal courts have exclusive jurisdiction. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the choice of forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. However, the Certificate of Incorporation does not relieve the Company of its duties to comply with federal securities laws and the rules and regulations thereunder, and its stockholders will not be deemed to have waived the Company’s compliance with these laws, rules and regulations. The Certificate of Incorporation also provides that any person or entity purchasing or otherwise acquiring any interest in shares of the Company’s capital stock will be deemed to have notice of and to have consented to this choice of forum provision.

This choice of forum provision in the Certificate of Incorporation may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or its directors, officers, employees or agents, which may discourage such lawsuits against the Company and its directors, officers, employees or agents. In addition, stockholders who do bring a claim in the Court of Chancery in the State of Delaware could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. Furthermore, the enforceability of similar choice of forum provisions in other companies’ governing documents has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. 

Board of Directors Vacancies. Any vacancy or newly created directorship in the Board, however occurring, shall be filled only by the vote of a majority of the directors then in office, although less than a quorum, and shall not be filled by the stockholders, unless the Board determines by resolution that any such vacancy or newly created directorship shall be filled by the stockholders. In addition, the number of directors constituting the Board shall be determined from time to time by a resolution adopted by the Board. These provisions may prevent a stockholder from increasing the size of the Board and then gaining control of the Board by filling the resulting 

 

 

vacancies with its own nominees. This makes it more difficult to change the composition of the Board and promotes continuity of management.

Classified Board. The Board is divided into three classes. The directors in each class will serve for a three-year term (other than the directors initially assigned to Class I, whose term shall expire at the first annual meeting of stockholders following the Company’s initial public offering and those assigned to Class II, whose term shall expire to the second annual meeting of stockholders following the Company’s initial public offering), one class being elected each year by the stockholders. This system of electing and removing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of the Company, because it generally makes it more difficult for stockholders to replace a majority of the directors. 

Stockholder Meetings. The Certificate of Incorporation and the Bylaws provide that a special meeting of stockholders may be called only by the Board, the chairperson of the Board, chief executive officer or president (in the absence of a chief executive officer), thus prohibiting a stockholder (in the capacity as a stockholder) from calling a special meeting. These provisions might delay the ability of the stockholders to force consideration of a proposal or for stockholders controlling a majority of the capital stock to take any action, including the removal of directors.

Elimination of Stockholder Action by Written Consent. The Certificate of Incorporation and the Bylaws eliminate the right of stockholders to act by written consent without a meeting. As a result, a holder controlling a majority of the capital stock would not be able to amend the Bylaws or remove directors without holding a meeting of the stockholders called in accordance with the Bylaws.

Advance Notice Requirements for Stockholder Proposals and Director Nominations. The Bylaws establish advance notice procedures with respect to stockholder proposals to be brought before a stockholder meeting and the nomination of candidates for election as directors. The Bylaws also specify certain requirements regarding the form and content of a stockholder’s notice. These provisions might preclude the stockholders from bringing matters before an annual meeting of stockholders or from making nominations for directors at an annual meeting of stockholders if the proper procedures are not followed. The Company expects that these provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.

No Cumulative Voting. The Certificate of Incorporation does not permit stockholders to cumulate their votes in the election of directors. Accordingly, the holders of a majority of the outstanding shares of Common Stock entitled to vote in any election of directors can elect all of the directors standing for election, if they choose, other than any directors that holders of Preferred Stock may be entitled to elect.

Directors Removed Only for Cause. The Certificate of Incorporation and the Bylaws provide that no member of the Board may be removed from office by the stockholders except for cause and upon the approval of not less than two-thirds in voting power of the outstanding shares of capital stock then entitled to vote in the election of directors.

 

 

Issuance of Undesignated Preferred Stock. The ability of the Board, without action by the stockholders, to issue up to 10,000,000 shares of undesignated Preferred Stock with voting or other rights or preferences as designated by the Board could impede the success of any attempt to change control of the Company. This may have the effect of deferring hostile takeovers or delaying changes in control or management of the Company.

Amendment of Charter Provisions. The amendment of any of the above provisions, except for the provisions making it possible for the Board to issue Preferred Stock or for the stockholders to cumulate their votes, require approval by holders of at least two-thirds of the total voting power of all of the outstanding voting stock. The provisions of the DGCL, the Certificate of Incorporation and the Bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of the Common Stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in the composition of the Board. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.ex_234025.htm

Exhibit 10.1

 

 

inTEST CORPORATION

 

2021 EXECUTIVE OFFICER COMPENSATION PLAN

 

The Compensation Committee (the “Committee”) of the Board of Directors of inTEST Corporation (the “Company”) has approved a compensation plan for its executive officers. The components of this plan include (i) base salary, (ii) short term incentive compensation in the form of a performance based bonus and (iii) long term incentive compensation in the form of equity compensation grants. The executive officers who are eligible to participate in this plan are Richard N. Grant, Jr., President and Chief Executive Officer, and Hugh T. Regan, Jr., Secretary, Treasurer and Chief Financial Officer.

 

Base Salary

 

The base salary of each executive officer for 2021, effective on April 1, 2021, are as follows:

 

	 	Richard N. Grant, Jr.	$375,000
	 	 	 
	 	Hugh T. Regan, Jr.	$272,950

 

Short Term Incentive Compensation

 

The performance bonus payment target percentages to be used in the executive officer’s bonus calculation for 2021 are as follows:  

 

	 	Richard N. Grant, Jr.	70%
	 	 	 
	 	Hugh T. Regan, Jr.	55%

  

The amount of the executive officer’s bonus may range from zero (if none of the performance metrics are satisfied) to an amount that may exceed the target performance bonus amounts.

 

Chief Executive Officer Short Term Incentive Target and Performance Objectives

 

The Chief Executive Officer (“CEO”) will be eligible to receive a performance bonus payment upon satisfaction of the following weighted performance metrics during 2021:

 

Achievement of Financial Goals – 70%

 

Completion of One or More Acquisitions in 2021 – 15%

 

Achievement of Key Elements of the 5 year Strategic Plan – 15%

 

	 	
			o

				
			Geographic & Market Expansion – 7.5%

			

 

	 	
			o

				
			Innovation & Differentiation – 7.5%

			

 

 

 

 

Achievement of Financial Goals

 

A portion of the Chief Executive Officer’s performance bonus may be earned based upon the Company’s achievement of net revenue and earnings before income tax amounts as compared to budgeted net revenue and earnings before income tax amounts for 2021. The Chief Executive Officer is eligible to achieve this portion of the executive officer’s performance bonus based upon the following calculation:

 

	The Chief Executive Officer’s performance bonus target percentage multiplied by the executive officer’s base salary; with that amount multiplied by the performance metric weighting factor (70%); with that amount multiplied by the Financial Goals percentage, if any, determined from the matrix below.  The Financial Goals percentage is determined by locating on the matrix below the intersection of (i) the column that indicates the percentage calculated by dividing (A) the Company’s actual net revenue for 2021 by (B) its budgeted net revenue for 2021 and (ii) the row that indicates the percentage calculated by dividing (A) the Company’s actual earnings before income tax for 2021 by (B) its budgeted earnings before income tax for 2021.

 

	 	 	
			 

			Revenue v. Target

			 

			
	 	 	
			 

			<80%

			 

				
			80%

				
			90%

				
			100%

				
			110%

				
			120%

			
	
			 

				
			 

			<80%

			 

				
			0%

				
			0%

				
			0%

				
			0%

				
			0%

				
			0%

			
	 	
			 

			80%

			 

				
			0%

				
			50%

				
			63%

				
			75%

				
			88%

				
			100%

			
	
			Earnings b/ 

			income tax v. 

				
			 

			90%

			 

				
			0%

				
			63%

				
			75%

				
			88%

				
			100%

				
			113%

			
	
			Target

				
			 

			100%

			 

				
			0%

				
			75%

				
			88%

				
			100%

				
			113%

				
			125%

			
	 	
			 

			110%

			 

				
			0%

				
			88%

				
			100%

				
			113%

				
			125%

				
			138%

			
	 	
			 

			120%

			 

				
			0%

				
			100%

				
			113%

				
			125%

				
			138%

				
			150%

			

 

 

With regards to the net revenue calculation, a column milestone is not achieved unless such percentage is exceeded without regards to rounding up the percentage achieved by the calculation. With regards to the earnings before income tax calculation, a row milestone is not achieved unless such percentage is exceeded without regards to rounding up the percentage achieved by the calculation. Any expenses that are treated for accounting purposes as restructuring items or transaction related expenses, contingent consideration adjustments related to any acquisition earnouts and the impact from any completed acquisitions, shall be excluded from the actual amounts when determining the revenue and earnings before income tax amounts for 2021.

 

 

 

 

Completion of One or More Acquisitions in 2021

 

A portion of the Chief Executive Officer’s performance bonus will be earned based upon the Company’s consummation of one or more acquisitions of a company or assets of a company in 2021. The Chief Executive Officer is eligible to achieve this portion of the executive officer’s performance bonus based upon the following calculation:

 

The Chief Executive Officer’s performance bonus target percentage multiplied by the executive officer’s base salary; with that amount multiplied by the performance metric weighting factor (15%).

 

If a single acquisition, the acquired company or assets must have generated minimum trailing twelve months revenues of $10 million. If two or more acquisitions, then each of the acquired company or assets must have generated minimum trailing twelve months revenues of between $5 million and $10 million. In addition, the transaction or transactions must close in 2021 with the transfer of substantially all assets and/or stock of the target company to the Company completed in 2021. Escrow and earn-out of purchase price amounts is permitted to continue beyond 2021 so long as the transaction or transactions is/are closed in 2021.

 

Achievement of Key Elements of the 5 Year Strategic Plan

 

A portion of the Chief Executive Officer’s performance bonus will be earned based upon the Company’s achievement of key elements of the 5 Year Strategic Plan provided to the Board in early 2021 as follows:

 

	 	
			1.

				
			Geographic & Market Expansion – The Chief Executive Officer will develop and begin substantive execution of at least one adjacent / new vertical market growth initiative. Milestones shall be identification of the target vertical with Total Available Market >$100 million, development of a product plan, development of a channel strategy, development of a marketing strategy and deployment of resources to support the initiative.  The plan will be presented to the Board no later than July 1, 2021. Success will be determined by the Compensation Committee based on a realistic expectation that the plan will deliver incremental revenue in 2023 on an organic growth basis.

			

 

 

 

 

	 	
			2.

				
			Innovation & Differentiation – The Chief Executive Officer will implement an outside of budget growth program where the Business Units can submit actionable growth accelerating ideas for review and selection by the Chief Executive Officer and the Board, with project(s) selected to be funded in 2021 by the amounts so provided for in the Corporate budget. Success will be determined by the Compensation Committee based on a realistic expectation that the project(s) selected and implemented are on track to deliver their stated objectives and on the magnitude of incremental revenue and/or operating income realistically expected to be achieved by the end of 2022. The program timeline will be:

			

 

 

	 	
			i.

				
			Launch the program in Q1

			

 

	 	
			ii.

				
			Select the winning submission(s) by the end of Q1

			

 

	 	
			iii.

				
			Kickoff the selected program(s) in the Business Unit(s) in early Q2

			

 

	 	
			iv.

				
			Track progress closely at the Corporate level (monthly) throughout the remainder of the year to ensure program(s) are being driven on time, on budget and on quality 

			

 

	 	
			v.

				
			Report progress and results to the Board on a quarterly basis

			

 

The Chief Executive Officer is eligible to achieve this portion of the executive officer’s performance bonus based upon the following calculation:

 

The Chief Executive Officer’s performance bonus target percentage multiplied by the executive officer’s base salary; with that amount multiplied by the performance metric weighting factor (15%). With regards to the achievement of the key elements of the 5 year Strategic Plan included in the CEO’s 2021 goals, Geographic & Market Expansion and Innovation & Differentiation shall both be weighted at 7.5%.         

 

Chief Financial Officer Short Term Incentive Target and Performance Objectives

 

The Chief Financial Officer (“CFO”) will be eligible to receive a performance bonus payment upon satisfaction of the following weighted performance metrics during 2021:

 

Achievement of Financial Goals – 60%

 

Completion of One or More Acquisitions in 2021 – 20%

 

Achievement of CFO Specific Objectives – 20%

 

	 	
			o

				
			Implementation of a Robust Risk Management Program – 10%

			

 

	 	
			o

				
			Creation and Execution of an IT & Business Automation Roadmap – 10%

			

 

Achievement of Financial Goals

 

A portion of the Chief Financial Officer’s performance bonus may be earned based upon the Company’s achievement of net revenue and earnings before income tax amounts as compared to budgeted net revenue and earnings before income tax amounts for 2021. The Chief Financial Officer is eligible to achieve this portion of the executive officer’s performance bonus based upon the following calculation:

 

 

 

 

	The Chief Financial Officer’s performance bonus target percentage multiplied by the executive officer’s base salary; with that amount multiplied by the performance metric weighting factor (60%); with that amount multiplied by the Financial Goals percentage, if any, determined from the matrix below.  The Financial Goals percentage is determined by locating on the matrix below the intersection of (i) the column that indicates the percentage calculated by dividing (A) the Company’s actual net revenue for 2021 by (B) its budgeted net revenue for 2021 and (ii) the row that indicates the percentage calculated by dividing (A) the Company’s actual earnings before income tax for 2021 by (B) its budgeted earnings before income tax for 2021.

 

	 	 	
			 

			Revenue v. Target

			 

			
	 	 	
			 

			<80%

			 

				
			80%

				
			90%

				
			100%

				
			110%

				
			120%

			
	
			 

				
			<80%

				
			 

			0%

			 

				
			0%

				
			0%

				
			0%

				
			0%

				
			0%

			
	 	
			80%

				
			 

			0%

			 

				
			50%

				
			63%

				
			75%

				
			88%

				
			100%

			
	
			 Earnings b/ 

			income tax v.

				
			90%

				
			 

			0%

			 

				
			63%

				
			75%

				
			88%

				
			100%

				
			113%

			
	Target 	
			100%

				
			 

			0%

			 

				
			75%

				
			88%

				
			100%

				
			113%

				
			125%

			
	 	
			110%

				
			 

			0%

			 

				
			88%

				
			100%

				
			113%

				
			125%

				
			138%

			
	 	
			120%

				
			 

			0%

			 

				
			100%

				
			113%

				
			125%

				
			138%

				
			150%

			

 

 

With regards to the net revenue calculation, a column milestone is not achieved unless such percentage is exceeded without regards to rounding up the percentage achieved by the calculation. With regards to the earnings before income tax calculation, a row milestone is not achieved unless such percentage is exceeded without regards to rounding up the percentage achieved by the calculation. Any expenses that are treated for accounting purposes as restructuring items or transaction related expenses, contingent consideration adjustments related to any acquisition earnouts and the impact from any completed acquisitions, shall be excluded from the actual amounts when determining the revenue and earnings before income tax amounts for 2021.

 

Completion of One or More Acquisitions in 2021

 

A portion of the Chief Financial Officer’s performance bonus will be earned based upon the Company’s consummation of one or more acquisitions of a company or assets of a company in 2021. The Chief Financial Officer is eligible to achieve this portion of the executive officer’s performance bonus based upon the following calculation:

 

The Chief Financial Officer’s performance bonus target percentage multiplied by the executive officer’s base salary; with that amount multiplied by the performance metric weighting factor (20%).

 

 

 

 

If a single acquisition, the acquired company or assets must have generated minimum trailing twelve months revenues of $10 million. If two or more acquisitions, then each of the acquired company or assets must have generated minimum trailing twelve months revenues of between $5 million and $10 million. In addition, the transaction or transactions must close in 2021 with the transfer of substantially all assets and/or stock of the target company or companies to the Company completed in 2021. Escrow and earn-out of purchase price amounts is permitted to continue beyond 2021 so long as the transaction or transactions is/are closed in 2021.

 

Achievement of CFO Specific Objectives

 

A portion of the Chief Financial Officer’s performance bonus will be earned based upon the achievement of CFO specific objectives as follows:

 

	 	
			1.

				
			Implementation of a Robust Risk Management Program - The Audit Committee of the Board has requested the CFO lead an initiative designed to have the Company execute a more robust and proactive approach to Risk Management. At each (2nd) quarterly Audit Committee meeting, a specific topic or process area will be reviewed with the Audit Committee. It will be the responsibility of the CFO to lead a detailed discussion of the specific area with a focus on how business risks are identified, evaluated (as to likelihood of occurrence and severity if they do occur), mitigated, monitored and managed. In preparation for these meetings, the CFO and his designees will take a fresh look at the topic or process with a view towards also identifying opportunities to drive process enhancements, potentially make better use of the technology and data related to the process, and if applicable, identify cost savings opportunities. A formal presentation will be prepared by the CFO outlining findings and recommendations for presentation at each (2nd) quarterly Audit Committee meeting.

			

 

The four topic/process areas to be addressed in 2021 are:

 

Q-1: Taxes (including income, excise, franchise, sales and use and other taxes incurred by the Company globally)

 

Q-2: Supply Chain

 

Q-3: Cybersecurity

 

Q-4: Compliance with Laws and Regulations

 

 

 

 

Measurement of Achievement of Objective: After each quarter, the Audit Committee will evaluate the quality, depth and substance of the presentation and related discussion on the risk area. Up to 20% of the 10% bonus target may be earned each quarter based on the results of that evaluation (up to 80% in the aggregate), such earned percentage to be reported by the Audit Committee chair to the CFO and recommended to the Compensation Committee for approval after each such quarterly meeting . The remaining 20% may be earned based on the quality of the collective process improvement, cost reduction or better use of data/technology recommendations implemented by the CFO and his team in 2021, to be determined by the Audit Committee and recommended to the Compensation Committee for approval.

 

	 	
			2.

				
			Creation and Execution of an IT & Business Automation Roadmap - The Board has requested that the CFO review the Company’s current IT and business process structures to determine how to improve the efficacy, efficiency and reliability of these structures as well as to identify opportunities to eliminate waste. Upon completion of this review, the CFO will develop a roadmap that prioritizes the opportunities based upon impact to the business, cost and speed/ease of implementation. The expectation is that the roadmap would be created and presented to the Board for approval as soon as practical but no later than the date of the Company’s annual meeting in June 2021, with a recommendation on the top priority project(s) that will be started for execution during the balance of 2021. The CFO will be responsible for project(s) oversight to ensure execution is completed on time and on budget. At the end of 2021, the Compensation Committee will access the quality and completeness of the roadmap as it determines the assessment of this CFO specific objective.

			

 

Measurement of Achievement of Objective: The Compensation Committee will evaluate the quality, depth and substance of the IT & Business Automation Roadmap and related discussion. Up to 50% of the 10% bonus target may be earned by completion and approval of a robust IT and Business Automation Roadmap as determined by the Compensation Committee at its sole discretion. The remaining 50% may be earned based on the successful and high-quality completion of the top priority project(s) on time and on budget, the process improvement derived, the cost reduction generated, the efficiency/productivity gained or the better use of data/technology obtained as a result of the IT and Business Automation Roadmap implementation, to be determined by the Compensation Committee at its sole discretion.

 

General

 

The Compensation Committee shall calculate and determine achievement of all components of the short term incentive compensation. In the case of financial achievements, the determination shall be based on amounts derived from the Company’s audited financial statements. The Compensation Committee reserves the right to make subjective determinations and interpretations regarding the impact of unusual circumstances or events on achievement of each performance metric component by the executive officers. All such determinations will apply to all executive officers in the same manner. The Compensation Committee shall have final decision making authority regarding all issues related to the short term incentive compensation component of the Plan. The Compensation Committee shall finalize the amount of and authorize payment of the bonuses to the executive officers as part of the approval process for the Company’s 2021 audited financial statements. If an executive officer leaves the Company other than for death, disability, or retirement, they will receive no bonus if they are not employed on December 31, 2021.  For executive officers who retire (age plus years of service equal to at least 70), or who die or become disabled, they will be entitled to a pro-rated bonus calculated by multiplying the bonus calculated above by the result obtained by dividing the number of completed months the executive officer is employed in 2021 by twelve.  Any bonus payment shall be made on or before March 15, 2022. The Compensation Committee shall have such authority to demand the repayment or “claw back” of any amounts paid pursuant to this Plan as needed to comply with all applicable laws and regulations.

 

 

 

 

Long Term Incentive Compensation

 

The executive officers shall be entitled to receive equity compensation grants consisting of restricted stock and stock options under the inTEST Corporation Third Amended and Restated 2014 Stock Plan as follows:

 

	 	
			Shares of Restricted Stock

				
			Options to Purchase Shares

			of Common Stock

			
	
			Richard N. Grant, Jr.

				
			18,668

				
			112,000

			
	
			Hugh T. Regan, Jr.

				
			8,800

				
			52,800

			

 

All equity compensation shall be awarded to the executive officers as soon as possible in 2021. The Company will grant restricted stock pursuant to award agreements in the form attached as Exhibit “A” hereto. All restricted stock awards will vest in equal increments over four years. At the Compensation Committee’s discretion, with the advice of the Company’s professional advisors, the Company will grant either non-qualified stock options or incentive stock options pursuant to stock option award agreements in the forms attached as Exhibits “B” and “C” hereto. All stock option awards will vest in equal increments over four years and will have an exercise price that is no less than the closing price of the Company’s common stock as listed on the NYSE American on the date of the award.

 

[Exhibits A, B and C are omitted here. The Company’s standard form of Restricted Stock Agreement for Employees was previously filed with the Company’s Form 10-Q for the quarter ended September 30, 2020 and the Company’s standard forms of Incentive Stock Option Agreement and Non-Qualified Stock Option Agreement are filed with the Company’s Form 8-K filed on March 16, 2021.]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00324-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00324-of-00352.parquet"}]]