Document:

Exhibit
10.32

 

DOUGLAS DYNAMICS, INC.

2010 STOCK INCENTIVE PLAN

 

1.                                      Purpose

 

The purpose of the Douglas Dynamics, Inc. 2010 Stock Incentive
Plan (the “Plan”) is to advance the interests of Douglas Dynamics, Inc.
(the “Company”) by stimulating the efforts of employees, officers, non-employee
directors and other service providers, in each case who are selected to be
participants, by heightening the desire of such persons to continue working
toward and contributing to the success and progress of the Company.  The Plan provides for the potential grant of
Incentive and Nonqualified Stock Options, Stock Appreciation Rights, Restricted
Stock and Restricted Stock Units, any of which may be performance-based, and
for Incentive Bonuses, which may be paid in cash or stock or a combination
thereof, as determined by the Administrator. 
Following the adoption of the Plan, no additional awards shall be
granted under the Company’s Amended and Restated 2004 Stock Incentive Plan.

 

2.                                      Definitions

 

As used in the Plan, the following terms shall have the meanings set
forth below:

(a)                                  “Administrator”
means the Administrator of the Plan in accordance with Section 18.

 

(b)                                 “Affiliates”
shall have the meaning ascribed in Rule 12b-2 promulgated under the
Exchange Act.

 

(c)                                  “Ares” means
Ares Corporate Opportunities Fund, L.P., a Delaware limited partnership.

 

(d)                                 “Aurora
Entities” means Aurora Equity Partners II L.P., a Delaware limited partnership
and Aurora Overseas Equity Partners II, L.P., a Cayman Islands exempt limited
partnership

 

(e)                                  “Award” means
an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit or Incentive Bonus granted to a
Participant pursuant to the provisions of the Plan, any of which the
Administrator may structure to qualify in whole or in part as a Performance
Award.

 

(f)                                    “Award
Agreement” means a written agreement or other instrument as may be approved
from time to time by the Administrator implementing the grant of each
Award.  An Agreement may be in the form
of an agreement to be executed by both the Participant and the Company (or an
authorized representative of the Company) or certificates, notices or similar
instruments as approved by the Administrator.

 

(g)                                 “Beneficial
Owner,” “Beneficial Ownership” and “Beneficially Owned” shall have the meaning
ascribed in Rule 13d-3 under the Exchange Act.

 

 

(h)                                 “Board” means
the Board of Directors of the Company.

 

(i)                                     “Cause” means
(unless otherwise expressly provided in the Award Agreement or another contract,
including an employment agreement):

 

(1)                                  conviction or
indictment of an individual or the entering of a plea of nolo contendere by the
individual with respect to any felony, crime involving fraud or
misrepresentation, or any other crime (whether or not such felony or crime is
connected with his or her employment or service) the effect of which in the
judgment of the Board is likely to affect, materially and adversely, the
Company and/or any Company Affiliate;

 

(2)                                  gross
misconduct in connection with the performance of the individual’s duties;

 

(3)                                  demonstration
of habitual negligence in the performance of the individual’s duties; or

 

(4)                                  fraud or
dishonesty in connection with an individual’s employment or service, or theft,
misappropriation or embezzlement of the Company’s and/or any Company Affiliate’s
funds or other property.

 

(j)                                     “Change of
Control” means (unless otherwise expressly provided in the Award Agreement or
another contract, including an employment agreement) the occurrence of one or
more of the following, whether accomplished directly or indirectly, or in one
or a series of related transactions:

 

(1)                                  Any Person,
other than the Aurora Entities, Ares and their respective Affiliates, becomes
the Beneficial Owner, directly or indirectly, of voting securities of the
Company representing 50% or more of the combined voting power of the Company’s
then outstanding voting securities;

 

(2)                                  During any
period of two consecutive years, individuals who at the beginning of such
period constituted the Board and any new director (other than a director whose
initial assumption of office occurs as a result of either an actual or
threatened election contest or other actual or threatened tender offer,
solicitation of proxies or consents by or on behalf of a Person other than the
Board) whose appointment, election, or nomination for election was approved by
a vote of a majority of the directors then still in office who either were
directors at the beginning of the period or whose appointment, election or
nomination for election was previously so approved, cease for any reason to
constitute a majority of the Board;

 

(3)                                  A
reorganization, merger, consolidation, recapitalization, tender offer, exchange
offer or other extraordinary transaction involving the Company (a “Fundamental
Transaction”) becomes effective or is consummated, unless at least 50% of the
outstanding voting securities of the surviving or resulting entity (including,
without limitation, an entity (“Parent”) which as a result of such transaction
owns the Company or all or substantially all of the Company’s assets either
directly or through one or more subsidiaries) (“Resulting Entity”) are, or are
to be, Beneficially Owned, directly or

 

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indirectly, by all or substantially all of
the Persons who were the Beneficial Owners of the outstanding voting securities
of the Company immediately prior to such Fundamental Transaction in
substantially the same proportions as their Beneficial Ownership, immediately
prior to such Fundamental Transaction, of the outstanding voting securities of
the Company;

 

(4)                                  A sale,
transfer or any other disposition (including, without limitation, by way of
spin-off, distribution, complete liquidation or dissolution) of all or
substantially all of the Company’s business and/or assets (an “Asset Sale”) to an unrelated third
party (the “Transferee Entity”)
is consummated.

 

(k)                                  “Code” means
the Internal Revenue Code of 1986, as amended from time to time, and the
rulings and regulations issues thereunder.

 

(l)                                     “Common Stock”
means the Company’s common stock, par value $.01, subject to adjustment as
provided in Section 12.

 

(m)                               “Company” means
Douglas Dynamics, Inc., a Delaware corporation, and its successors.  For purposes of this definition of
Corporation, after the consummation of a Fundamental Transaction or an Asset
Sale, the term “successor” shall include, without limitation, the Resulting
Entity or Transferee Entity, respectively.

 

(n)                                 “Company
Affiliate” means any person or entity that is a subsidiary of, or controlled
directly or indirectly by, Douglas Dynamics, Inc.  For the purposes of this definition, “control”
means the power to direct the management and policies of a person or entity,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise.

 

(o)                                 “Disability,”
unless otherwise defined in a Participant’s employment agreement with the
Company (if any), means an individual’s absence from, or material inability to
perform his or her usual duties or any comparable duties for, the Company on a
full-time basis for 90 consecutive business days or 120 business days in any
period of 180 business days as a result of mental or physical illness or injury
that is total and permanent, as reasonably determined by the Administrator and
that is not susceptible to reasonable accommodation.

 

(p)                                 “Exchange Act”
means the Securities Exchange Act of 1934, as amended from time to time.

 

(q)                                 “Fair Market
Value”  means, as of any given date, the
closing sales price on such date during normal trading hours (or, if there are
no reported sales on such date, on the last date prior to such date on which
there were sales) of the Shares on the New York Stock Exchange Composite Tape
or, if not listed on such exchange, on any other national securities exchange
on which the Shares are listed or on NASDAQ, in any case, as reported in such
source as the Administrator shall select. 
If there is no regular public trading market for such Common Shares, the
Fair Market Value of the Shares shall be determined by the Administrator in
good faith and in compliance with Section 409A of the Code.

 

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(r)                                    “Incentive
Bonus” means a bonus opportunity awarded under Section 9 pursuant to which
a Participant may become entitled to receive an amount based on satisfaction of
such performance criteria as are specified in the Award Agreement.

 

(s)                                  “Incentive
Stock Option” means a stock option that is intended to qualify as an “incentive
stock option” within the meaning of Section 422 of the Code.

 

(t)                                    “Nonemployee
Director” means each person who is, or is elected to be, a member of the Board
and who is not an employee of the Company or any Subsidiary.

 

(u)                                 “Nonqualified
Stock Option” means a stock option that is not intended to qualify as an “incentive
stock option” within the meaning of Section 422 of the Code.

 

(v)                                 “Option” means
an Incentive Stock Option and/or a Nonqualified Stock Option granted pursuant
to Section 6 of the Plan.

 

(w)                               “Participant”
means any individual described in Section 3 to whom Awards have been
granted from time to time by the Administrator and any authorized transferee of
such individual.

 

(x)                                   “Performance
Award” means an Award, the grant, issuance, retention, vesting or settlement of
which is subject to satisfaction of one or more performance criteria
established pursuant to Section 13.

 

(y)                                 “Person” means
an association, a corporation, an individual, a partnership, a trust or any
other entity or organization, including a governmental entity and a “person” as
that term is used under Section 13(d) or 14 (d) of the Exchange
Act.

 

(z)                                   “Plan” means
the Douglas Dynamics, Inc. 2010 Stock Incentive Plan as set forth herein
and as amended from time to time.

 

(aa)                            “Restricted
Stock” means Shares granted pursuant to Section 8 of the Plan.

 

(bb)                          “Restricted
Stock Unit” means an Award granted to a Participant pursuant to Section 8
pursuant to which Shares or cash in lieu thereof may be issued in the future.

 

(cc)                            “Share” means a
share of the Common Stock, subject to adjustment as provided in Section 12.

 

(dd)                          “Stock
Appreciation Right” means a right granted pursuant to Section 7 of the
Plan that entitles the Participant to receive, in cash or Shares or a
combination thereof, as determined by the Administrator, value equal to or
otherwise based on the excess of (i) the Fair Market Value of a specified
number of Shares at the time of exercise over (ii) the exercise price of
the right, as established by the Administrator on the date of grant.

 

(ee)                            “Subsidiary”
means any entity (other than the Company) in an unbroken chain of entities
beginning with the Company where each of the entities in the unbroken chain
other than the last entity owns stock or other equity possessing at least 50
percent or more of the total 

 

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combined voting power of all classes of stock
or other equity in one of the other entities in the chain, and if specifically
determined by the Administrator in the context other than with respect to
Incentive Stock Options, may include an entity in which the Company has a
significant ownership interest or that is directly or indirectly controlled by
the Company.

 

(ff)                                “Termination of
Employment” means ceasing to serve as an employee of the Company or any
Subsidiary or, with respect to a Nonemployee Director or other service
provider, ceasing to serve as such for the Company or any Subsidiary, except
that with respect to all or any Awards held by a Participant (i) the
Administrator may determine, subject to Section 6(c), that an approved
leave of absence or approved employment on a less than full-time basis shall be
considered a Termination of Employment, (ii) the Administrator may
determine that a transition of employment to service with a partnership, joint
venture or corporation not meeting the requirements of a Subsidiary in which
the Company or a Subsidiary is a party is not considered a Termination of
Employment, (iii) service as a member of the Board or other service
provider shall constitute continued employment with respect to Awards granted
to a Participant while he or she served as an employee and (iv) service as
an employee of the Company or a Subsidiary shall constitute continued
employment with respect to Awards granted to a Participant while he or she
served as a member of the Board or other service provider.  The Administrator shall determine whether any
corporate transaction, such as a sale or spin-off of a division or subsidiary
that employs a Participant, shall be deemed to result in a Termination of
Employment with the Company or any Subsidiary for purposes of any affected
Participant’s Awards, and the Administrator’s decision shall be final and
binding.

 

3.                                      Eligibility

 

Any person who is a current or prospective officer or employee of the
Company or of any Subsidiary shall be eligible for selection by the
Administrator for the grant of Awards hereunder.  In addition, Nonemployee Directors and any
other service providers who have been retained to provide consulting, advisory
or other services to the Company or to any Subsidiary shall be eligible for the
grant of Awards hereunder as determined by the Administrator.  Options intending to qualify as Incentive
Stock Options may only be granted to employees of the Company or any corporate
Subsidiary within the meaning of the Code, as selected by the Administrator.

 

4.                                      Effective Date and Termination of Plan

 

This Plan was adopted by the Board and approved by the Company’s
stockholders on April    , 2010.  The Plan shall remain available for the grant
of Awards until the tenth (10th) anniversary of the Effective Date.  Notwithstanding the foregoing, the Plan may
be terminated at such earlier time as the Board may determine.  Termination of the Plan will not affect the
rights and obligations of the Participants and the Company arising under Awards
theretofore granted and then in effect.

 

5.                                      Shares Subject to the Plan and to Awards

 

(a)                                  Aggregate
Limits.  The aggregate number of Shares
issuable pursuant to all Awards shall not exceed 2,130,000.  The aggregate number of Shares that may be
issued 

 

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pursuant to the exercise of Incentive Stock
Options granted under this Plan shall not exceed 2,130,000, which number shall
be calculated and adjusted pursuant to Section 12 only to the extent that
such calculation or adjustment will not affect the status of any option
intended to qualify as an Incentive Stock Option under Section 422 of the
Code.

 

(b)                                 Adjustment.  The aggregate number of Shares available for
grant under this Plan and the number of Shares subject to outstanding Awards
shall be subject to adjustment as provided in Section 12.  The Shares issued pursuant to Awards granted
under this Plan may be shares that are authorized and unissued or shares that
were reacquired by the Company, including shares purchased in the open market.

 

(c)                                  Issuance
of Shares.  For
purposes of Section 5(a), the aggregate number of Shares issued under this
Plan at any time shall equal only the number of Shares actually issued upon
exercise or settlement of an Award.  The
aggregate number of Shares available for Awards under this Plan at any time
shall not be reduced by (i) Shares subject to Awards that have been
terminated, expired unexercised, forfeited or settled in cash, (ii) Shares
subject to Awards that have been retained or withheld by the Company in payment
or satisfaction of the exercise price, purchase price or tax withholding
obligation of an Award, or (iii) Shares subject to Awards that otherwise
do not result in the issuance of Shares in connection with payment or
settlement thereof.  In addition, Shares
that have been delivered (either actually or by attestation) to the Company in
payment or satisfaction of the exercise price, purchase price or tax withholding
obligation of an Award shall be available for Awards under this Plan.

 

6.                                      Options

 

(a)                                  Option
Awards.  Options may be granted at any
time and from time to time prior to the termination of the Plan to Participants
as determined by the Administrator.  No Participant
shall have any rights as a stockholder with respect to any Shares subject to an
Option hereunder until said Shares have been issued.  Each Option shall be evidenced by an Award
Agreement.  Options granted pursuant to
the Plan need not be identical but each Option must contain and be subject to
the terms and conditions set forth below.

 

(b)                                 Price.  The Administrator will establish the exercise
price per Share under each Option, which, in no event will be less than the
Fair Market Value of the Shares on the date of grant; provided, however, that
the exercise price per Share with respect to an Option that is granted in
connection with a merger or other acquisition as a substitute or replacement
award for options held by optionees of the acquired entity may be less than
100% of the Fair Market Value of the Shares on the date such Option is granted
if such exercise price is based on a formula set forth in the terms of the
options held by such optionees or in the terms of the agreement providing for such
merger or other acquisition.  The
exercise price of any Option may be paid in Shares, cash or a combination
thereof, as determined by the Administrator, including an irrevocable
commitment by a broker to pay over such amount from a sale of the Shares issuable
under an Option, the delivery of previously owned Shares and withholding of
Shares deliverable upon exercise.

 

(c)                                  Provisions
Applicable to Options.  The
date on which Options become exercisable shall be determined at the sole
discretion of the Administrator and set forth in an Award 

 

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Agreement. 
Unless provided otherwise in the applicable Award Agreement, to the
extent that the Administrator determines that an approved leave of absence is
not a Termination of Employment, the vesting period and/or exercisability of an
Option shall be adjusted by the Administrator during or to reflect the effects
of any period during which the Participant is on an approved leave of absence
or is employed on a less than full-time basis. 
The Administrator shall establish the term of each Option, which in no
case shall exceed a period of ten (10) years from the date of grant.

 

(d)                                 Incentive
Stock Options. 
Notwithstanding anything to the contrary in this Section 6, in the
case of the grant of an Option intending to qualify as an Incentive Stock
Option: (i) if the Participant owns stock possessing more than 10% of the
combined voting power of all classes of stock of the Company (a “10%
Stockholder”), the exercise price of such Option must be at least 110% of the
Fair Market Value of the Shares on the date of grant and the Option must expire
within a period of not more than five (5) years from the date of grant,
and (ii) Termination of Employment will occur when the person to whom an
Award was granted ceases to be an employee (as determined in accordance with Section 3401(c) of
the Code and the regulations promulgated thereunder) of the Company or any
Subsidiary.  Notwithstanding anything in
this Section 6 to the contrary, Options designated as Incentive Stock
Options shall not be eligible for treatment under the Code as Incentive Stock
Options (and will be deemed to be Nonqualified Stock Options) to the extent
that either (1) the aggregate Fair Market Value of Shares (determined as
of the time of grant) with respect to which such Options are exercisable for
the first time by the Participant during any calendar year (under all plans of
the Company and any Subsidiary) exceeds $100,000, taking Options into account
in the order in which they were granted, or (2) such Options otherwise
remain exercisable but are not exercised within three (3) months of
Termination of Employment (or such other period of time provided in Section 422
of the Code).  If the requirements for an
Option to qualify for incentive stock option tax treatment are changed, this Section 6(d) shall
be deemed to be automatically amended to reflect such requirements.

 

(e)                                  Effect
of Termination of Employment.  Unless an Option earlier expires upon the
expiration date established pursuant to Section 6(c), upon a Termination
of Employment (i) any portion of the Option that is not exercisable at the
time of such Termination of Employment shall be forfeited and canceled as of
the date of such Termination of Employment and (ii) a Participant’s (or
his or her Beneficiary’s) rights to exercise any portion of the Option that is
exercisable at the time of such Termination of Employment shall be only as
follows, in each case, unless otherwise expressly provided in the Award Agreement
or another contract, including an employment agreement:

 

(1)                                  Death.  If a Participant incurs a Termination of
Employment by reason of death, any Option held by such Participant, to the
extent then exercisable, may thereafter be exercised by the Participant’s
Beneficiary for a period of one hundred eighty days from the date of such death
or until the expiration of the stated term of such Option, whichever period is
the shorter.

 

(2)                                  Disability.  If a Participant incurs a Termination of
Employment by reason of Disability, any Option held by such Participant, to the
extent then exercisable, may thereafter be exercised by the Participant for a
period of one hundred eighty days from 

 

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the date of such Termination of Employment or
until the expiration of the stated term of such Option, whichever period is the
shorter.

 

(3)                                  Cause.  If a Participant incurs a Termination of
Employment by reason of a termination by the Company for Cause, the entire
Option, whether or not then exercisable, shall be immediately forfeited and
canceled as of the date of such Termination of Employment.

 

(f)                                    Termination
for Reasons other than Death, Disability or Cause.  If a Participant incurs a Termination of
Employment for any reason other than death, Disability or for Cause, any Option
held by such Participant, to the extent then exercisable, may thereafter be
exercised by the Participant for a period of ninety days from the date of such
Termination of Employment or until the expiration of the stated term of such
Option, whichever period is the shorter.

 

7.                                      Stock Appreciation Rights

 

Stock Appreciation Rights may be granted to Participants from time to
time either in tandem with or as a component of other Awards granted under the
Plan (“tandem SARs”) or not in conjunction with other Awards (“freestanding
SARs”) and may, but need not, relate to a specific Option granted under Section 6.  The provisions of Stock Appreciation Rights
need not be the same with respect to each grant or each recipient.  Any Stock Appreciation Right granted in
tandem with an Award may be granted at the same time such Award is granted or
at any time thereafter before exercise or expiration of such Award.  All freestanding SARs shall be granted
subject to the same terms and conditions applicable to Options as set forth in Section 6
and all tandem SARs shall have the same exercise price, vesting,
exercisability, forfeiture and termination provisions as the Award to which
they relate.  Subject to the provisions
of Section 6 and the immediately preceding sentence, the Administrator may
impose such other conditions or restrictions on any Stock Appreciation Right as
it shall deem appropriate.  Stock
Appreciation Rights may be settled in Shares, cash or a combination thereof, as
determined by the Administrator and set forth in the applicable Award
Agreement.

 

8.                                      Restricted Stock and Restricted Stock
Units

 

(a)                                  Restricted
Stock and Restricted Stock Unit Awards.  Restricted Stock and Restricted Stock Units
may be granted at any time and from time to time prior to the termination of
the Plan to Participants as determined by the Administrator.  Restricted Stock is an award or issuance of
Shares the grant, issuance, retention, vesting and/or transferability of which
is subject during specified periods of time to such conditions (including
continued employment or performance conditions) and terms as the Administrator
deems appropriate.  Restricted Stock
Units are Awards denominated in units of Shares under which the issuance of
Shares is subject to such conditions (including continued employment or
performance conditions) and terms as the Administrator deems appropriate.  Each grant of Restricted Stock and Restricted
Stock Units shall be evidenced by an Award Agreement.  Unless determined otherwise by the
Administrator, each Restricted Stock Unit will be equal to one Share and will
entitle a Participant to either the issuance of Shares or payment of an amount
of cash determined with reference to the value of Shares.  To the extent determined by the
Administrator, Restricted Stock and Restricted Stock Units may be satisfied or
settled in Shares, cash or a combination thereof.  Restricted Stock and 

 

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Restricted Stock Units granted pursuant to
the Plan need not be identical but each grant of Restricted Stock and
Restricted Stock Units must contain and be subject to the terms and conditions
set forth below.

 

(b)                                 Contents
of Agreement.  Each Award
Agreement shall contain provisions regarding (i) the number of Shares or
Restricted Stock Units subject to such Award or a formula for determining such
number, (ii) the purchase price of the Shares, if any, and the means of
payment, (iii) the performance criteria, if any, and level of achievement
versus these criteria that shall determine the number of Shares or Restricted
Stock Units granted, issued, retainable and/or vested, (iv) such terms and
conditions on the grant, issuance, vesting and/or forfeiture of the Shares or
Restricted Stock Units as may be determined from time to time by the
Administrator, (v) the term of the performance period, if any, as to which
performance will be measured for determining the number of such Shares or
Restricted Stock Units, and (vi) restrictions on the transferability of
the Shares or Restricted Stock Units. 
Shares issued under a Restricted Stock Award may be issued in the name
of the Participant and held by the Participant or held by the Company, in each
case as the Administrator may provide.

 

(c)                                  Vesting
and Performance Criteria.  The
grant, issuance, retention, vesting and/or settlement of shares of Restricted
Stock and Restricted Stock Units will occur when and in such installments as
the Administrator determines or under criteria the Administrator establishes, which
may include performance criteria.

 

(d)                                 Discretionary
Adjustments and Limits. 
Notwithstanding the satisfaction of any performance goals, the number of
Shares granted, issued, retainable and/or vested under an Award of Restricted
Stock or Restricted Stock Units on account of either financial performance or
personal performance evaluations may, to the extent specified in the Award
Agreement, be reduced, but not increased, by the Administrator on the basis of
such further considerations as the Administrator shall determine.

 

(e)                                  Voting
Rights.  Unless otherwise determined by
the Administrator, Participants holding shares of Restricted Stock granted
hereunder may exercise full voting rights with respect to those shares during
the period of restriction.  Participants
shall have no voting rights with respect to Shares underlying Restricted Stock
Units unless and until such Shares are reflected as issued and outstanding
shares on the Company’s stock ledger.

 

(f)                                    Dividends
and Distributions. 
Participants in whose name Restricted Stock is granted shall be entitled
to receive all dividends and other distributions paid with respect to those
Shares, unless determined otherwise by the Administrator.  The Administrator will determine whether any
such dividends or distributions will be automatically reinvested in additional
shares of Restricted Stock and subject to the same restrictions on
transferability as the Restricted Stock with respect to which they were
distributed or whether such dividends or distributions will be paid in
cash.  Shares underlying Restricted Stock
Units shall be entitled to dividends or dividend equivalents only to the extent
provided by the Administrator.

 

(g)                                 Effect
of Termination of Employment.  Upon a Participant’s Termination of
Employment for any reason (including by reason of death or Disability), any
then unvested Restricted Stock or Restricted Stock Units held by the
Participant shall be forfeited and canceled 

 

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as of the date of such Termination of
Employment, unless otherwise expressly provided in the Award Agreement or
another contract, including an employment agreement.

 

9.                                      Incentive Bonuses

 

(a)                                  General.  Each Incentive Bonus Award will confer upon
the Participant the opportunity to earn a future payment tied to the level of
achievement with respect to one or more performance criteria established for a
performance period established by the Administrator.

 

(b)                                 Incentive
Bonus Document.  The terms
of any Incentive Bonus will be set forth in an Award Agreement.  Each Award Agreement evidencing an Incentive
Bonus shall contain provisions regarding (i) the target and maximum amount
payable to the Participant as an Incentive Bonus, (ii) the performance
criteria and level of achievement versus these criteria that shall determine
the amount of such payment, (iii) the term of the performance period as to
which performance shall be measured for determining the amount of any payment, (iv) the
timing of any payment earned by virtue of performance, (v) restrictions on
the alienation or transfer of the Incentive Bonus prior to actual payment, (vi) forfeiture
provisions and (vii) such further terms and conditions, in each case not
inconsistent with this Plan as may be determined from time to time by the
Administrator.

 

(c)                                  Performance
Criteria.  The
Administrator shall establish the performance criteria and level of achievement
versus these criteria that shall determine the target and maximum amount
payable under an Incentive Bonus, which criteria may be based on financial
performance and/or personal performance evaluations.

 

(d)                                 Timing
and Form of Payment.  The
Administrator shall determine the timing of payment of any Incentive
Bonus.  Payment of the amount due under
an Incentive Bonus may be made in cash or in Shares, as determined by the
Administrator.  The Administrator may
provide for or, subject to such terms and conditions as the Administrator may
specify, may permit a Participant to elect for the payment of any Incentive
Bonus to be deferred to a specified date or event.

 

(e)                                  Discretionary
Adjustments. 
Notwithstanding satisfaction of any performance goals, the amount paid
under an Incentive Bonus on account of either financial performance or personal
performance evaluations may, to the extent specified in the Award Agreement, be
reduced, but not increased, by the Administrator on the basis of such further
considerations as the Administrator shall determine.

 

(f)                                    Subplans.  Incentive Bonuses payable hereunder may be
pursuant to one or more subplans.

 

(g)                                 Effect
of Termination of Employment.  Upon a Participant’s Termination of
Employment for any reason (including by reason of death or Disability), the
Participant shall receive payment in respect of any Incentive Bonuses only to
the extent specified by the Administrator, unless otherwise expressly provided
in the Award Agreement or another contract, including an employment
agreement.  Payments in respect of any
such Incentive Bonuses shall be made at the time specified by the Administrator
and set forth in the Award Agreement.

 

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10.          Deferral of Gains

 

The
Administrator may, in an Award Agreement or otherwise, provide for the deferred
delivery of Shares upon settlement, vesting or other events with respect to
Restricted Stock or Restricted Stock Units, or in payment or satisfaction of an
Incentive Bonus.  Notwithstanding
anything herein to the contrary, in no event will any deferral of the delivery
of Shares or any other payment with respect to any Award be allowed if the
Administrator determines, in its sole discretion, that the deferral would
result in the imposition of the additional tax under Section 409A(a)(1)(B) of
the Code.  No award shall provide for
deferral of compensation that does not comply with Section 409A of the
Code, unless the Board, at the time of grant, specifically provides that the
Award is not intended to comply with Section 409A of the Code.  The Company shall have no liability to a
Participant, or any other party, if an Award that is intended to be exempt
from, or compliant with, Section 409A of the Code is not so exempt or
compliant or for any action taken by the Board.

 

11.          Conditions and Restrictions Upon Securities Subject to
Awards

 

The
Administrator may provide that the Shares issued upon exercise of an Option or
Stock Appreciation Right or otherwise subject to or issued under an Award shall
be subject to such further agreements, restrictions, conditions or limitations
as the Administrator in its discretion may specify prior to the exercise of
such Option or Stock Appreciation Right or the grant, vesting or settlement of
such Award, including without limitation, conditions on vesting or
transferability, forfeiture or repurchase provisions and method of payment for
the Shares issued upon exercise, vesting or settlement of such Award (including
the actual or constructive surrender of Shares already owned by the
Participant) or payment of taxes arising in connection with an Award.  Without limiting the foregoing, such
restrictions may address the timing and manner of any resales by the
Participant or other subsequent transfers by the Participant of any Shares
issued under an Award, including without limitation (i) restrictions under
an insider trading policy or pursuant to applicable law, (ii) restrictions
designed to delay and/or coordinate the timing and manner of sales by
Participant and holders of other Company equity compensation arrangements, (iii) restrictions
as to the use of a specified brokerage firm for such resales or other transfers
and (iv) provisions requiring Shares to be sold on the open market or to
the Company in order to satisfy tax withholding or other obligations.

 

12.          Adjustment of and Changes in the Stock; Certain
Transactions

 

(a)           In the event that any dividend or
other distribution (whether in the form of cash, Shares, other securities or
other property, but excluding regular, quarterly and other periodic cash
dividends), stock split or a combination or consolidation of the outstanding
Shares into a lesser number of shares, is declared with respect to the Shares,
the authorization limits under Section 5(a) shall be increased or
decreased proportionately, and the Shares then subject to each Award shall be
increased or decreased proportionately without any change in the aggregate
purchase price therefore.  In the event the
Shares shall be changed into or exchanged for a different number or class of
shares of stock or securities of the Company or of another corporation, whether
through recapitalization, reorganization, reclassification, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of
Shares or other securities of the Company, issuance of warrants or other rights
to purchase Shares or other

 

11

 

securities of the Company, or any other similar corporate transaction
or event affects the Shares such that an equitable adjustment would be required
in order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the authorization
limits under Section 5(a) shall be adjusted proportionately, and an
equitable adjustment shall be made to each Share subject to an Award such that
no dilution or enlargement of the benefits or potential benefits occurs.  Each such Share then subject to each Award
shall be adjusted to the number and class of shares into which each outstanding
Share shall be so exchanged such that no dilution or enlargement of the
benefits occurs, all without change in the aggregate purchase price for the
Shares then subject to each Award.  Action
by the Administrator pursuant to this Section 12(a) may include
adjustment to any or all of: (i) the number and type of Shares (or other
securities or other property) that thereafter may be made the subject of Awards
or be delivered under the Plan; (ii) the number and type of Shares (or
other securities or other property) subject to outstanding Awards; (iii) the
purchase price or exercise price of a Share under any outstanding Award or the
measure to be used to determine the amount of the benefit payable on an Award;
and (iv) any other adjustments the Administrator determines to be
equitable.  No right to purchase
fractional shares shall result from any adjustment in Awards pursuant to this Section 12.  In case of any such adjustment, the Shares
subject to the Award shall be rounded down to the nearest whole share.  The Company shall notify Participants holding
Awards subject to any adjustments pursuant to this Section 12(a) of
such adjustment, but (whether or not notice is given) such adjustment shall be
effective and binding for all purposes of the Plan.

 

(b)           Unless otherwise expressly provided
in the Award Agreement or another contract, including an employment agreement,
or under the terms of a transaction constituting a Change of Control, the
Administrator may provide for the acceleration of the vesting and, if
applicable, exercisability of any outstanding Award, or portion thereof, or the
lapsing of any conditions of restrictions on or the time for payment in respect
of any outstanding Award, or portion thereof upon termination of the
Participant’s employment following a Change of Control.   In addition, unless otherwise expressly
provided in the Award Agreement or another contract, including an employment
agreement, or under the terms of a transaction constituting a Change of
Control, the Administrator may provide that any or all of the following shall
occur in connection with a Change of Control: (i) the substitution for the
Shares subject to any outstanding Award, or portion thereof, stock or other
securities of the surviving corporation or any successor corporation to the
Company, or a parent or subsidiary thereof, in which event the aggregate
purchase or exercise price, if any, of such Award, or portion thereof, shall
remain the same, (ii) the conversion of any outstanding Award, or portion
thereof, into a right to receive cash or other property upon or following the
consummation of the Change of Control in an amount equal to the value of the
consideration to be received by holders of Common Shares in connection with
such transaction for one Share, less the per share purchase or exercise price
of such Award, if any, multiplied by the number of Shares subject to such
Award, or a portion thereof, (iii) acceleration of the vesting (and, as
applicable, the exercisability) of any and/or all outstanding Awards, and/or (iv) the
cancellation of any outstanding and unexercised Awards upon or following the
consummation of the Change of Control. 
Any actions or determinations of the Administrator pursuant to this Section 12(b) may,
but need not be uniform as to all outstanding Awards, and the Administrator
may, but need not treat all holders of outstanding Awards identically.

 

12

 

13.          Performance-Based Compensation

 

The
Administrator may establish performance criteria and level of achievement
versus such criteria that shall determine the number of Shares to be granted,
retained, vested, issued or issuable under or in settlement of or the amount
payable pursuant to an Award. 
Notwithstanding satisfaction of any performance goals, the number of
Shares issued under or the amount paid under an award may, to the extent
specified in the Award Agreement, be reduced, but not increased, by the
Administrator on the basis of such further considerations as the Administrator
in its sole discretion shall determine.

 

14.          Transferability

 

No
Award may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated by a Participant other than by will or the laws of descent and
distribution, and each Option or Stock Appreciation Right shall be exercisable
only by the Participant during his or her lifetime.  Notwithstanding the foregoing, to the extent
permitted by the Administrator, the person to whom an Award is initially granted
(the “Grantee”) may transfer an Award to any “family member” of the Grantee (as
such term is defined in Section 1(a)(5) of the General Instructions
to Form S-8 under the Securities Act of 1933, as amended (“Form S-8”)),
to trusts solely for the benefit of such family members and to partnerships in
which such family members and/or trusts are the only partners; provided that, (i) as
a condition thereof, the transferor and the transferee must execute a written
agreement containing such terms as specified by the Administrator, and (ii) the
transfer is pursuant to a gift or a domestic relations order to the extent
permitted under the General Instructions to Form S-8.  Except to the extent specified otherwise in
the agreement the Administrator provides for the Grantee and transferee to
execute, all vesting, exercisability and forfeiture provisions that are
conditioned on the Grantee’s continued employment, performance or service shall
continue to be determined with reference to the Grantee’s employment, performance
or service (and not to the status of the transferee) after any transfer of an
Award pursuant to this Section 14, and the responsibility to pay any taxes
in connection with an Award shall remain with the Grantee notwithstanding any
transfer other than by will or intestate succession.  Any attempted sale, transfer, pledge,
assignment, alienation or hypothecation of an Award by a Participant in
violation of this Section 14 shall result in forfeiture of such Award.

 

15.          Suspension or Termination of Awards

 

Except
as otherwise provided by the Administrator, if at any time (including after a
notice of exercise has been delivered or an award has vested) the Chief
Executive Officer or any other person designated by the Administrator (each
such person, an “Authorized Officer”) reasonably believes that a Participant
may have committed any act constituting Cause for termination of employment, or
a violation of any non-competition covenant, the Authorized Officer,
Administrator or the Board may suspend the Participant’s rights to exercise any
Option, to vest in an Award, and/or to receive payment for or receive Shares in
settlement of an Award pending a determination of whether such an act has been
committed.

 

If
the Administrator or an Authorized Officer determines a Participant has
committed any act constituting Cause for termination of employment or a
violation of any non-competition covenant, then except as otherwise provided by
the Administrator, (a) neither the Participant nor

 

13

 

his or her estate nor transferee shall be entitled to exercise any
Option or Stock Appreciation Right whatsoever, vest in or have the restrictions
on an Award lapse, or otherwise receive payment of an Award, (b) the
Participant will forfeit all outstanding Awards and (c) the Participant
may be required, at the Administrator’s sole discretion, to return and/or repay
to the Company any then unvested Shares previously issued under the Plan.  In making such determination, the
Administrator or an Authorized Officer shall give the Participant an
opportunity to appear and present evidence on his or her behalf at a hearing
before the Administrator or its designee or an opportunity to submit written
comments, documents, information and arguments to be considered by the
Administrator.

 

16.          Compliance with Laws and Regulations

 

This
Plan, the grant, issuance, vesting, exercise and settlement of Awards
thereunder, and the obligation of the Company to sell, issue or deliver Shares
under such Awards, shall be subject to all applicable foreign, federal, state
and local laws, rules and regulations, stock exchange rules and
regulations, and to such approvals by any governmental or regulatory agency as
may be required.  The Company shall not
be required to register in a Participant’s name or deliver any Shares prior to
the completion of any registration or qualification of such shares under any
foreign, federal, state or local law or any ruling or regulation of any
government body which the Administrator shall determine to be necessary or
advisable.  To the extent the Company is
unable to or the Administrator deems it infeasible to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company’s
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, the Company and its Subsidiaries shall be relieved of any liability
with respect to the failure to issue or sell such Shares as to which such
requisite authority shall not have been obtained.  No Option shall be exercisable and no Shares
shall be issued and/or transferable under any other Award unless a registration
statement with respect to the Shares underlying such Award is effective and
current or the Company has determined that such registration is unnecessary.

 

In
the event an Award is granted to or held by a Participant who is employed or
providing services outside the United States, the Administrator may, in its
sole discretion, modify the provisions of the Plan or of such Award as they
pertain to such individual to comply with applicable foreign law or to
recognize differences in local law, currency or tax policy.  The Administrator may also impose conditions
on the grant, issuance, exercise, vesting, settlement or retention of Awards in
order to comply with such foreign law and/or to minimize the Company’s
obligations with respect to tax equalization for Participants employed outside
their home country.

 

17.          Withholding

 

To
the extent required by applicable federal, state, local or foreign law, a
Participant shall be required to satisfy, in a manner satisfactory to the
Company, any withholding tax obligations that arise by reason of an Option
exercise, disposition of Shares issued under an Incentive Stock Option, the
vesting of or settlement of an Award, an election pursuant to Section 83(b) of
the Code or otherwise with respect to an Award. 
To the extent a Participant makes an election under Section 83(b) of
the Code, within ten days of filing such election with the Internal Revenue
Service, the Participant must notify the Company in writing of such
election.  The Company and

 

14

 

its Subsidiaries shall not be required to issue Shares, make any
payment or to recognize the transfer or disposition of Shares until all such
obligations are satisfied.  The
Administrator may provide for or permit these obligations to be satisfied
through the mandatory or elective sale of Shares and/or by having the Company
withhold a portion of the Shares that otherwise would be issued to him or her
upon exercise of the Option or the vesting or settlement of an Award, or by
tendering Shares previously acquired.

 

18.          Administration of the Plan

 

(a)           Administrator
of the Plan.  The Plan shall
be administered by the Administrator who shall be the Compensation Committee of
the Board or, in the absence of a Compensation Committee, the Board
itself.  Any power of the Administrator
may also be exercised by the Board, except to the extent that the grant or
exercise of such authority would cause any Award or transaction to become
subject to (or lose an exemption under) the short-swing profit recovery
provisions of Section 16 of the Securities Exchange Act of 1934 or cause
an Award designated as a Performance Award not to qualify for treatment as
performance-based compensation under Section 162(m) of the Code.  To the extent that any permitted action taken
by the Board conflicts with action taken by the Administrator, the Board action
shall control.  The Compensation Committee
may by resolution authorize one or more officers of the Company to perform any
or all things that the Administrator is authorized and empowered to do or
perform under the Plan, and for all purposes under this Plan, such officer or
officers shall be treated as the Administrator; provided, however, that the
resolution so authorizing such officer or officers shall specify the total
number of Awards (if any) such officer or officers may award pursuant to such
delegated authority, and any such Award shall be subject to the form of Award
Agreement theretofore approved by the Compensation Committee.  No such officer shall designate himself or
herself as a recipient of any Awards granted under authority delegated to such
officer.  The Compensation Committee
hereby designates the Secretary of the Company and the head of the Company’s
human resource function to assist the Administrator in the administration of
the Plan and execute agreements evidencing Awards made under this Plan or other
documents entered into under this Plan on behalf of the Administrator or the
Company.  In addition, the Compensation
Committee may delegate any or all aspects of the day-to-day administration of
the Plan to one or more officers or employees of the Company or any Subsidiary,
and/or to one or more agents.

 

(b)           Powers
of Administrator.  Subject to
the express provisions of this Plan, the Administrator shall be authorized and
empowered to do all things that it determines to be necessary or appropriate in
connection with the administration of this Plan, including, without limitation:
(i) to prescribe, amend and rescind rules and regulations relating to
this Plan and to define terms not otherwise defined herein; (ii) to
determine which persons are Participants, to which of such Participants, if
any, Awards shall be granted hereunder and the timing of any such Awards; (iii) to
grant Awards to Participants and determine the terms and conditions thereof,
including the number of Shares subject to Awards and the exercise or purchase
price of such Shares and the circumstances under which Awards become
exercisable or vested or are forfeited or expire, which terms may but need not
be conditioned upon the passage of time, continued employment, the satisfaction
of performance criteria, the occurrence of certain events (including a Change
of Control), or other factors; (iv) to establish and verify the extent of
satisfaction of any performance goals or other conditions applicable to the
grant, issuance, exercisability, vesting and/or ability to retain any Award; (v) to
prescribe and amend the terms of the agreements or

 

15

 

other documents evidencing Awards made under this Plan (which need not
be identical) and the terms of or form of any document or notice required to be
delivered to the Company by Participants under this Plan; (vi) to
determine the extent to which adjustments are required pursuant to Section 12;
(vii) to interpret and construe this Plan, any rules and regulations
under this Plan and the terms and conditions of any Award granted hereunder,
and to make exceptions to any such provisions if the Administrator, in good
faith, determines that it is necessary to do so in light of extraordinary
circumstances and for the benefit of the Company; (viii) to approve corrections
in the documentation or administration of any Award; (ix) subject to any
stockholder approval required in accordance with Section 19, to reduce the
exercise price of any Option or Stock Appreciation Right to the Fair Market
Value of the Shares at the time of the reduction if the Fair Market Value of
the Shares covered by that Option or Stock Appreciation Right has declined
since the date it was granted, either directly or through cancellation and
regrant of the Option or Stock Appreciation Right; (x) subject to any
stockholder approval required in accordance with Section 19, to exchange
Options and Stock Appreciation Rights for other Awards; (xi) to cause the
Company to purchase outstanding Options and Stock Appreciation Rights for cash
or other consideration; (xii) to require or permit Participant elections
and/or consents under this Plan to be made by means of such electronic media as
the Administrator may prescribe; and (xiii) to make all other determinations
deemed necessary or advisable for the administration of this Plan.  The Administrator may, in its sole and
absolute discretion, without amendment to the Plan, waive or amend the
operation of Plan provisions respecting exercise after termination of employment
or service to the Company or a Company Affiliate and, except as otherwise
provided herein, adjust any of the terms of any Award.  The Administrator may also (A) accelerate
the date on which any Award granted under the Plan becomes exercisable or (B) accelerate
the vesting date or waive or adjust any condition imposed hereunder with
respect to the vesting or exercisability of an Award, provided that the
Administrator, in good faith, determines that such acceleration, waiver or
other adjustment is necessary or desirable in light of extraordinary
circumstances.

 

(c)           Determinations
by the Administrator.  All
decisions, determinations and interpretations by the Administrator regarding
the Plan, any rules and regulations under the Plan and the terms and
conditions of or operation of any Award granted hereunder, shall be final and
binding on all Participants, beneficiaries, heirs, assigns or other persons
holding or claiming rights under the Plan or any Award.  The Administrator shall consider such factors
as it deems relevant, in its sole and absolute discretion, to making such
decisions, determinations and interpretations including, without limitation,
the recommendations or advice of any officer or other employee of the Company
and such attorneys, consultants and accountants as it may select.

 

(d)           Subsidiary
Awards.  In the case of a
grant of an Award to any Participant employed by a Subsidiary, such grant may,
if the Administrator so directs, be implemented by the Company issuing any
subject Shares to the Subsidiary, for such lawful consideration as the
Administrator may determine, upon the condition or understanding that the
Subsidiary will transfer the Shares to the Participant in accordance with the
terms of the Award specified by the Administrator pursuant to the provisions of
the Plan.  Notwithstanding any other
provision hereof, such Award may be issued by and in the name of the Subsidiary
and shall be deemed granted on such date as the Administrator shall determine.

 

16

 

19.          Amendment of the Plan or Awards

 

The
Board may amend, alter or discontinue this Plan and the Administrator may amend
or alter any agreement or other document evidencing an Award made under this
Plan but, except as provided pursuant to the provisions of Section 12, no
such amendment shall, without the approval of the stockholders of the Company:

 

(a)           increase the maximum number of Shares
for which Awards may be granted under this Plan;

 

(b)           reduce the price at which Options may
be granted below the price provided for in Section 6(b);

 

(c)           change the class of persons eligible
to be Participants; or

 

(d)           otherwise amend the Plan in any
manner requiring stockholder approval by law or under stock exchange listing
requirements.

 

No
amendment or alteration to the Plan or an Award or Award Agreement shall be
made which would impair the rights of the holder of an Award, without such
holder’s consent, provided that no such consent shall be required if the
Administrator determines in its sole discretion and prior to the date of any
Change of Control that such amendment or alteration either is required or
advisable in order for the Company, the Plan or the Award to satisfy any law or
regulation or to meet the requirements of or avoid adverse financial accounting
consequences under any accounting standard.

 

20.          No Liability of Company

 

The
Company and any Subsidiary or affiliate which is in existence or hereafter
comes into existence shall not be liable to a Participant or any other person
as to: (i) the non-issuance or sale of Shares as to which the Company has
been unable to obtain from any regulatory body having jurisdiction the
authority deemed by the Company’s counsel to be necessary to the lawful
issuance and sale of any Shares hereunder; and (ii) any tax consequence
expected, but not realized, by any Participant or other person due to the
receipt, exercise or settlement of any Award granted hereunder.

 

21.          Non-Exclusivity of Plan

 

Neither
the adoption of this Plan by the Board nor the submission of this Plan to the
stockholders of the Company for approval shall be construed as creating any
limitations on the power of the Board or the Administrator to adopt such other
incentive arrangements as either may deem desirable, including without
limitation, the granting of restricted stock or stock options otherwise than
under this Plan or an arrangement not intended to qualify under Code Section 162(m),
and such arrangements may be either generally applicable or applicable only in
specific cases.

 

17

 

22.          No Right to Employment, Reelection or Continued Service

 

Nothing
in this Plan or an Award Agreement shall interfere with or limit in any way the
right of the Company, its Subsidiaries and/or its affiliates to terminate any
Participant’s employment, service on the Board or service for the Company at
any time or for any reason not prohibited by law, nor shall this Plan or an
Award itself confer upon any Participant any right to continue his or her
employment or service for any specified period of time.  Neither an Award nor any benefits arising
under this Plan shall constitute an employment contract with the Company, any
Subsidiary and/or its affiliates. 
Subject to Sections 4 and 19, this Plan and the benefits hereunder
may be terminated at any time in the sole and exclusive discretion of the Board
without giving rise to any liability on the part of the Company, its
Subsidiaries and/or its affiliates.

 

23.          Unfunded Plan

 

The
Plan is intended to be an unfunded plan. 
Participants are and shall at all times be general creditors of the
Company with respect to their Awards.  If
the Administrator or the Company chooses to set aside funds in a trust or
otherwise for the payment of Awards under the Plan, such funds shall at all
times be subject to the claims of the creditors of the Company in the event of
its bankruptcy or insolvency.

 

24.          Section 409A of the Code

 

It
is intended that any Incentive and Nonqualified Stock Options, Stock
Appreciation Rights, and Restricted Stock issued pursuant to this Plan and any
Award Agreement shall not constitute “Deferrals of Compensation” within the
meaning of Section 409A of the Code and, as a result, shall not be subject
to the requirements of Section 409A of the Code. It is further intended
that any Restricted Stock Units and Incentive Bonuses issued pursuant to this
Plan and any Award Agreement (which may or may not constitute “deferrals of
compensation,” depending on the terms of each Award) shall avoid any “plan
failures” within the meaning of Section 409A(a)(1) of the Code. The
Plan is to be interpreted and administered in a manner consistent with these
intentions. However, no guarantee or commitment is made that the Plan or any
Award Agreement shall be administered in accordance with the requirements of Section 409A
of the Code, with respect to amounts that are subject to such requirements, or
that the Plan or any Award Agreement shall be administered in a manner that
avoids the application of Section 409A of the Code, with respect to
amounts that are not subject to such requirements.

 

25.          Required Delay in Payment on Account of a Separation from
Service

 

Notwithstanding
any other provision in this Plan or any Award Agreement, if any Award recipient
is a “specified employee,” as defined in Treasury Regulations section 1.409A-1(i),
as of the date of his or her “Separation from Service” (as defined in
authoritative IRS guidance under Section 409A of the Code), then, to the
extent required by Treasury Regulations section 1.409A-3(i)(2), any payment
made to the Award recipient on account of his or her Separation from Service
shall not be made before a date that is six months after the date of his or her
Separation from Service. The Administrator may elect any of the methods of
applying this rule that are permitted under Treasury Regulations section
1.409A-3(i)(2)(ii).

 

18Exhibit 10.1

 

SUMMARY
OF 2010 INCENTIVE COMPENSATION PLAN

 

On
March 25, 2010, the Compensation Committee of the Board of Directors of
Comfort Systems USA, Inc. (the “Compensation Committee”) authorized
certain equity grants under the Company’s Long-term Incentive Plan.  The Named Executive Officers are Mr. William
F. Murdy, Chairman of the Board of Directors and Chief Executive Officer; Mr. Brian
E. Lane, President and Chief Operating Officer; Mr. William George, III,
Executive Vice President and Chief Financial Officer; Ms. Julie S. Shaeff,
Senior Vice President and Chief Accounting Officer; and Mr. Trent T.
McKenna, Vice President and General Counsel.

 

2010 Incentive Compensation Plan for Executive Officers

 

The
annual incentive compensation for the Named Executive Officers is provided
under a shareholder approved plan intended to satisfy the requirements for
deductibility of performance-based compensation under Section 162(m) of
the Internal Revenue Code.  The plan
consists of two distinct elements.  The first
element of the plan rewards the senior executives of the Company for obtaining
certain earnings per share (“EPS”) target thresholds (the “Objective Bonus”).  The second element of the plan rewards the
achievement of certain performance metrics individualized for each executive
(the “Subjective Bonus”).

 

For
the Objective Bonus, the Compensation Committee has set a bonus range based on
a target that is correlated with the Company’s annual EPS.  The range for the Objective Bonus for Messrs. Murdy,
Lane and George will be 20 percent to 150 percent of 90 percent of their
respective annual base salaries.  For Ms. Shaeff
and Mr. McKenna, the range for the Objective Bonus will be 20 percent to
150 percent of 30 percent of their respective annual base salaries.  The Objective Bonus is zero until a certain
EPS threshold is met, it then scales from 20 percent to 50 percent on a
straight-line basis as it moves from 77 percent of the EPS target to 100
percent of the EPS target.  Should the
Company’s performance exceed the EPS target, it then scales from 50 percent to
150 percent on a straight-line basis as it moves from 100 percent of the EPS
target to 172 percent of the EPS target. 
With regard to the Subjective Bonus, each executive is reviewed
individually and at the sole discretion of the Compensation Committee is
awarded a bonus within a set range of potential outcomes based on a percentage
of annual base salary.  For Messrs. Murdy,
Lane, and George, the range is 0 to 100 percent of 10 percent of annual base
salary; for Ms. Shaeff and Mr. McKenna, the range is 0 to 100 percent
of 20 percent of annual base salary.

 

Long-term Incentive Plan Grants

 

The
Compensation Committee further determined grants under the Company’s Long-term
Incentive Plan.  These grants were determined
based on the closing price of the Company’s common stock on March 25, 2010,
the date the Compensation Committee met to approve the grants.  These grants consisted of an award of
performance stock as well as a grant of options.  The performance stock awards have both tenure
and performance vesting requirements. They are granted on a three-year equal
vesting schedule and vests only if the Company meets certain performance
requirements prior to each of the three vesting periods.  If the performance threshold is met, the
performance stock awards vest on a sliding scale from 0 to 100 percent of the
portion of the award scheduled to vest on a straight-line basis.  The number of shares vesting may also be
reduced by the Compensation Committee on a discretionary basis.  The option grants vest on a three-year
schedule and do not have a performance vesting requirement.

 

 

The
2010 awards were granted to the following executives for the purpose of
providing an incentive for those individuals to work for the Company’s
long-term success:  Mr. Murdy was
granted 52,277 shares of performance stock and 43,564 options.  Messrs. Lane and George were granted 22,948
shares of performance stock and 19,124 options respectively.  Ms. Shaeff and Mr. McKenna were granted
9,119 shares of performance stock and 7,599 options.

 

Succession
Bonus

 

On March 25, 2010,
the Compensation Committee also approved a bonus award to Mr. Murdy in
connection with the succession transition of the Chief Executive Officer role.
The bonus award was provided to Mr. Murdy on April 1, 2010, and
consisted of a combination of cash and equity with a combined value of $500,000
USD. As previously disclosed, Mr. Murdy will receive a second payment of
$1,000,000 USD (in either cash or equivalent equity) upon the actual election
by the Board of Directors of the successor candidate to Chief Executive Officer
of the Company.

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