Document:

a2018annualincentivecomp

 95689521.11 0059466-00001  Profire Energy, Inc. 2018 Executive Incentive Plan    1. Purpose.  The purpose of this 2018 Executive Incentive Plan (the “Plan”) is to enable Profire Energy, Inc., a Nevada corporation (the “Company”), to attract, retain, motivate and reward management employees by providing them with the opportunity to earn annual incentive bonuses linked to Company performance.  2. Effective Date and Performance Period.  The effective date of the Plan is January 1, 2018.  The performance period under the Plan will commence on January 1, 2018 and terminate on December 31, 2018.  3. Administration.  The Plan is being entered into pursuant to the Company’s 2014 Equity Incentive Plan (the “2014 Plan”) as a Performance Award.  Under the 2014 Plan, the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”) may make incentive grants subject to certain additional terms and conditions (not inconsistent with the 2014 Plan). The Committee, acting under the authority of the Board, shall administer and interpret the Plan.  The Plan shall conform in all respects to the terms of the 2014 Plan and the Board’s interpretations and determinations under the Plan shall be final and conclusive.  4. Participation.  The Committee has determined the management employees eligible to participate in the Plan (the “Participants”) and the target bonus amounts determined as a percentage of the Participant’s base salary (the “Target Bonus Amount”) of each Participant as set forth in Exhibit A.  5. Bonus Calculation.  The Committee shall determine bonuses to Participants under the Plan as follows:    (a) Performance Objectives.  The distribution of bonuses shall be determined based on the achievement of the following three target performance objectives (the “Performance Objectives”):  Performance Objectives for fiscal year 2018 Weight Target Level 1.  Revenue 33%  $40,422,635 2.  Net Income 33%  $5,553,117 3.  Free Cash Flow (Adjusted EBITDA - Capex) 33%  $6,262,906  100%   (i)  “Net Income” means NET INCOME (LOSS) as presented on the Company’s Statement of Operations and Other Comprehensive Income (Loss) in accordance with U.S. generally accepted accounting principles and filed with the U.S. Securities and Exchange Commission (“SEC”).  (ii)  “Adjusted EBITDA” means net income for that year as adjusted by adding thereto, to the extent deducted in calculating net income for the year, net interest 

 

95689521.11 0059466- 00001                                                                   2  expense, taxes, depreciation, amortization, noncash charges for equity-related compensation, and other noncash charges as agreed with the Committee.  Calculation of all components of Adjusted EBITDA shall be in accordance with GAAP and based on the consolidated financial statements of the Company for fiscal 2018 or otherwise determined from the Company’s accounting records on a consistent basis.   (iii) “Capex” means an amount which is the greater of (A) zero and (B) the net amount from the Company’s Statement of Cash Flows as filed with the SEC for the applicable period of (x) purchases of fixed assets and (y) proceeds from sales of equipment.  (iv)  “Free Cash Flow” means an amount equal to Adjusted EBITDA less Capex. Adjustments to the definitions of “Net Income”, “Adjusted EBITDA” and “Capex” may be made by the Committee in the event of the occurrence of extraordinary, unusual or non-recurring circumstances and for non-cash items that, in the judgment of the Committee, would cause such definition to fail to fairly reflect the performance of the Company.  These circumstances may include acquisitions, divestitures, joint ventures, regulatory developments, tax law changes, accounting changes, restructuring or other special charges, other occurrences and non-cash items.  The Committee shall make the final determination as to the calculations of “Net Income”, “Adjusted EBITDA”, “Capex”, and the amounts up to the Maximum Payout Amount (as defined below) to be paid to Participants.    (b) Performance Ratio.  The “Performance Ratio” for any Performance Objective shall be the ratio expressed as a percentage resulting from dividing (x) the actual amount achieved for such Performance Objective in fiscal 2018 by (y) the Target Level specified in Section 5(a) for such Performance Objective for fiscal 2018.  (c) Calculation.  Subject to any limitations set forth in Section 6 relating to the 2014 Plan and the Maximum Payout Amount (as defined in Section 6), a Participant’s bonus under the Plan shall be calculated as the sum of the following for each Performance Objective (for each, the “Performance Objective Payout Amount”):   (i) if the Performance Ratio for such Performance Objective is less than 85%, then the Performance Objective Payout Amount is zero ($0);  (ii) if the Performance Ratio for such Performance Objective is at least 85% but not greater than 115%, then the Performance Objective Payout Amount is the amount which is (A) the Performance Ratio times (B) the applicable Performance Objective Weight (as stated in Section 5(a)) times (C) the Target Bonus Amount for such Participant; and  (iii) if the Performance Ratio for such Performance Objective is greater than 115%, then the Performance Objective Payout Amount is the sum of (A) (w) 115% times (x) the applicable Performance Objective Weight times (y) the Target Bonus Amount for such Participant, plus (B) (w) the 

 

95689521.11 0059466- 00001                                                                   3  Performance Ratio minus 115%, times (x) two-and-a-half (2.5) times (y) the applicable Performance Objective Weight times (z) the Target Bonus Amount for such Participant.  (d) Payout Split.  Bonus amounts earned under the Plan shall be paid out 50% in cash (the “Cash Portion”) and 50% in shares of the Company’s common stock (the “Stock Portion”).  In determining the number of shares of common stock to be issued to the Participant for the Stock Portion, the Company shall divide (x) 50% of such Participant’s aggregate bonus amount by (y) the volume weighted average price per share of the Company’s common stock over the five trading days prior to the date of the Committee’s final determination of the bonus amount (the “Bonus Determination Date”).    6. Compliance with 2014 Plan and Bonus Amount Limitations.    (a) Compliance with 2014 Plan.  In no event shall bonuses paid out under the Plan exceed the limitations set forth in the 2014 Plan.  In the event this Plan conflicts with the terms of the 2014 Plan, this Plan shall be modified to the extent necessary to comply with the terms of the 2014 Plan.     (b) Additional Limitations.  In addition to the limitations set forth in Section 6(a) above, in no event shall a Participant receive a bonus under the Plan that is in excess of 200% of such Participant’s Target Bonus Amount (the “Maximum Payout Amount”).    7. Payment of Bonuses.  The payment of the Cash Portion and the Stock Portion of the bonus amount shall be made to Participants as soon as practicable following the Bonus Determination Date and in any event by the 15th day of the third month following the end of the fiscal year 2018 (the “Bonus Delivery Date”), subject to a Participant’s satisfaction of all required tax withholding obligations as set forth in the Plan.   Provided a Participant has satisfied all required tax withholding obligations in respect of the Stock Portion of the bonus amount, the Company shall cause to be issued and delivered to the Participant by the Bonus Delivery Date a certificate or certificates evidencing the applicable number of shares of the Company’s common stock registered in the name of the Participant (or in the name of the Participant’s legal representatives, beneficiaries or heirs, as the case may be) or to instruct the Company’s transfer agent to electronically deliver such Shares to Participant (or applicable representative, beneficiary or heir).  If it is administratively impracticable to issue such shares within the time frame described above because issuances of shares are prohibited or restricted pursuant to the policies of the Company that are reasonably designed to ensure compliance with applicable securities laws or stock exchange rules, then such issuance shall be delayed until such prohibitions or restrictions lapse.  8. Termination of Employment.  If a Participant’s employment with the Company is terminated by the Company with Cause or by the Participant without Good Reason (both as defined in the Participant’s employment agreement), the Participant (a) shall not be entitled to receive any bonus payment for the fiscal year during which the termination of employment occurred and (b) shall be entitled to receive the bonus payment for any prior fiscal year for which the bonus payment has not been paid, with such amount payable at the same time the applicable bonus payments are made to the other Participants.  If a Participant’s employment with the 

 

95689521.11 0059466- 00001                                                                   4  Company is terminated by the Company without Cause or by the Participant with Good Reason,  the Participant (or the Participant’s beneficiary) shall be entitled to receive (a) a pro rata bonus payment for the fiscal year during which the termination of employment occurred equal to the amount the Participant would have received if employed for the entire fiscal year multiplied by a fraction, the numerator of which is the number of days in the fiscal year the Participant was employed and the denominator of which is 365, which amount shall be payable at the same time the applicable bonus payments are made to the other Participants and (b) the bonus payment for any prior fiscal year for which the bonus payment has not been paid, with such amount payable at the same time the applicable bonus payments are made to the other Participants.    9. General Provisions.   (a) Termination; Amendment.  Subject to the terms of the 2014 Plan, the Board or the Committee may at any time amend the Plan, except that any amendment applicable to the Plan made after the Board or Committee has determined the Participants and the Target Bonus Amounts shall apply only to Participants who have agreed in writing to the amendment.      (b) No Employment Rights.  Nothing in this Plan confers upon any Participant any right to continue in the employment of the Company or any of its subsidiaries or to be selected as a Participant in any subsequent year.   (c) Nonalienation of Benefits.  Except as expressly provided herein or otherwise required by applicable law, no Participant or beneficiary may alienate, transfer, anticipate, sell, assign, pledge, attach, or otherwise encumber the Participant’s interest under the Plan.   (d) Withholding.  The Cash Portion of any bonus payable to a Participant or a beneficiary under the Plan will be subject to any applicable federal, state and local income and employment taxes and any other amounts that the Company or a subsidiary is required at law to deduct and withhold from such Cash Portion of the bonus.  Regarding the Stock Portion of any bonus payable to a Participant or a beneficiary under the Plan, such Participant acknowledges that, not later than the Bonus Delivery Date, the value of the delivered shares of common stock will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on this income amount.  The Company will notify the Participant of the required withholding amount at least ten days prior to the Bonus Delivery Date.  Concurrently with or prior to the delivery of the shares of common stock as set forth in Section 7, the Participant, at his or her election (which election must be made on or before the Bonus Delivery Date), shall (x) pay to the Company the required withholding amount for the Stock Portion in cash or (y) notify the Company that the Participant requests the Company to reduce the number of shares otherwise deliverable for the Stock Portion by a sufficient number to cover the applicable withholding obligations for the Stock Portion.  If a Participant elects to pay the withholding for the Stock Portion by a reduction in shares received, the Company shall pay to the Participant in cash the amount of any resulting over payment ascribed to such shares retained to cover withholding obligations.  (e) Plan Unfunded.  The entire cost of the Plan shall be paid from the general assets of the Company.  The rights of any Participant or beneficiary to receive an award under the Plan shall be only those of a general unsecured creditor, and neither the Company nor the 

 

95689521.11 0059466- 00001                                                                   5  Board shall be responsible for the adequacy of the general assets of the Company to meet and discharge Plan liabilities.   (f) Severability.  If any provision of the Plan is held unenforceable, the remainder of the Plan will continue in full force and effect without regard to such unenforceable provision and will be applied as though the unenforceable provision were not contained in the Plan.   (g) Governing Law.  The Plan will be construed in accordance with and governed by the laws of the State of Utah, without reference to the principles of conflict of laws.   (h) Headings.  Headings are inserted in the Plan for convenience of reference only and are to be ignored in any construction of the provisions of the Plan.  (i) Section 409A.  This Plan and the payments contemplated herein are intended to be exempt from or in compliance with Section 409A and shall be interpreted and administered consistent with such intent. 

 

 95689521.11 0059466-00001  Exhibit A  Participant   Target Bonus  Brent Hatch   $400,000  Ryan Oviatt   $87,500  Cameron Tidball $81,900 Jay Fugal   $40,000a2018ltippsuryanoviatt

95724938.3 0059466-00001  PROFIRE ENERGY, INC. 2014 EQUITY INCENTIVE PLAN RESTRICTED STOCK UNIT AWARD AGREEMENT This RESTRICTED STOCK UNIT AWARD AGREEMENT Agreement made this 2nd day of March, 2018 Effective Date Profire Energy, Inc., Company Participant used herein but not defined herein shall have the meanings given to them in the Profire Energy, Inc. 2014 Equity Plan  1. Award.  The Company hereby grants to Participant a restricted stock unit award (the Award to 70,4231 Shares share, of the Company according to the terms and conditions set forth herein and in the Plan.  Unit vesting requirements of this Agreement and the terms of the Plan.  The Units are granted under Section 6(c) of the Plan.  A copy of the Plan will be furnished upon request of Participant. 2. Performance Metrics and Vesting.   (a) Except as otherwise provided in this Agreement, the number of Units granted under this Award that actually vest will be vested on the date (the Vesting Date Committee certifies that the Company has achieved the following performance metrics (each a Performance Metric  Performance Metric Weight Target Above Target Outstanding Three Year Average Revenue Growth Rate 33% 25% 30% 35% Operating Income as a Percentage of Revenue (Three Year Target) 33% 15% 20% 25% Return on Invested Capital (Three Year Target) 33% 20% 30% 42%  (b) Performance Period 1, 2018 and terminate on December 31, 2020. The Committee shall certify whether the Company has achieved the Performance Metrics as soon as administratively feasible following the end of the Performance Period, but in no event later than 90 days following the end of the Performance Period.  The Committee, in its sole discretion, shall have the right to determine how the Performance Metrics are defined and whether they have been achieved. (c) The vesting of the Award will be weighted 33% for each of the three Performance Metrics. Separately from the other Performance Metrics, each Performance Metric will                                                  1  

 

 determine the vesting for 23,4742 Units subject to this Award. The number of Units that will vest for each Performance Metric on the Vesting Date shall be determined as follows: (i) if the 50% of the Units relating to such Performance M for such Performance Metric is achieved, 75% of the Units relating to such Performance Metric the Units relating to such Performance Metric will vest. 3. Restrictions on Transfer.  Until the Units vest pursuant to Section 2 hereof or unless the Committee determines otherwise, none of the Units may be transferred other than by will or by the laws of descent and distribution and no Units may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate.  The Committee may establish procedures as it deems appropriate for Participant to designate a person or persons, as beneficiary or beneficiaries, to exercise the rights of Participant and receive any property  4. Forfeiture.  Except as otherwise determined by the Committee, termination of providing service as an Eligible Person for the Company or any Affiliate Service ee) prior to vesting of the Units pursuant to Section 2 hereof, all unvested Units held by such Participant at such time shall be forfeited and reacquired by the Company; provided, however, that the Committee may waive in whole or in part any or all remaining restrictions with respect to the unvested Units. Upon forfeiture, Participant will no longer have any rights relating to the unvested Units.   5. Miscellaneous (a) Issuance of Shares.  As soon as administratively practicable following the Vesting Date, and later than 60 days following the Vesting Date), the Company shall cause to be issued and delivered to Participant a certificate or certificates evidencing Shares registered in the name of Participant (or applicable representative, beneficiary or heir).  The number of Shares issued shall equal the number of Units vested, reduced as necessary to cover applicable withholding obligations in accordance with Section 5(c) hereof.  If it is administratively impracticable to issue Shares within the time frame described above because issuances of Shares are prohibited or restricted pursuant to the policies of the Company that are reasonably designed to ensure compliance with applicable securities laws or stock exchange rules, then such issuance shall be delayed until such prohibitions or restrictions lapse. (b) No Rights as Shareholder.  Units are not actual Shares, but rather, represent a right to receive Shares according to the terms and conditions set forth herein and the terms of the Plan.                                                   2 Insert a number equal to 33% of the Award Shares. 

 

 Accordingly, the issuance of a Unit shall not entitle Participant to any of the rights or benefits generally accorded to shareholders unless and until a Share is actually issued under Section 5(a) hereof.   (c) Taxes.  Participant hereby agrees to make adequate provision for any sums required to satisfy the applicable federal, state, local or foreign employment, social insurance, payroll, Withholding Obligations connection with this Agreement.  The Company may establish procedures to ensure satisfaction of all applicable Withholding Obligations arising in connection with this Agreement, including any means permitted in Section 8 of the Plan.  Participant hereby authorizes the Company, at its sole discretion and subject to any limitations under applicable law, to satisfy any such Tax Obligations by (1) withholding a portion of the Shares otherwise to be issued in payment of the Units having a value equal to the amount of Withholding Obligations in accordance with such rules as the Company may from time to time establish; provided, however, that the amount of the Shares so withheld shall not exceed the amount necessary to satisfy the required Withholding Obligations using applicable minimum statutory withholding rates; (2) withholding from the wages and other cash compensation payable to Participant or by causing Participant to tender a brokerage firm determined acceptable to the Company for such purpose) a portion of the Shares issued in payment of the Units as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the Withholding Obligations; provided, however, that if Participant is a Section 16 officer of the Company under the Exchange Act, then the Committee shall establish the method of withholding from the above alternatives and, if the Committee does not exercise its discretion prior to the withholding event, then Participant shall be entitled to elect the method of withholding from the alternatives above.  Participant shall be responsible for all brokerage fees and other costs of sale, and Participant further agrees to indemnify and hold the Company harmless from any losses, costs, damages or expenses relating to any such sale.  The obligations in connection with the Withholding Obligations described in this paragraph. (d) Plan Provisions Control.  This Award is subject to the terms and conditions of the Plan, but the terms of the Plan shall not be considered an enlargement of any benefits under this Agreement.  In addition, this Award is subject to the rules and regulations promulgated pursuant to the Plan, now or hereafter in effect.  A copy of the Plan will be furnished upon request of Participant.  In the event that any provision of the Agreement conflicts with or is inconsistent in any respect with the terms of the Plan, the terms of the Plan shall control.  This Agreement (and any addendum hereto) and the Plan together constitute the entire agreement between the parties hereto with regard to the subject matter hereof. (e)  No Right to Employment.  The issuance of the Award shall not be construed as giving Participant the right to be retained in the employ, or as giving a director of the Company or an Affiliate the right to continue as a director of the Company or an Affiliate, nor will it affect in any way the right of the Company or an Affiliate to terminate such employment or position at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss Participant from employment, or terminate the term of a director of the Company or an Affiliate, free from any liability or any claim under the Plan or the Agreement. Nothing in the Agreement shall confer on any person any legal or equitable right against the Company or any 

 

 Affiliate, directly or indirectly, or give rise to any cause of action at law or in equity against the Company or an Affiliate. The Award granted hereunder shall not form any part of the wages or salary of Participant for purposes of severance pay or termination indemnities, irrespective of the reason for termination of employment. Under no circumstances shall any person ceasing to be an employee of the Company or any Affiliate be entitled to any compensation for any loss of any right or benefit under the Agreement or Plan which such employee might otherwise have enjoyed but for termination of employment, whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise. By participating in the Plan, Participant shall be deemed to have accepted all the conditions of the Plan and the Agreement and the terms and conditions of any rules and regulations adopted by the Committee (as defined in the Plan) and shall be fully bound thereby. (f) Governing Law.  The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan and the Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Nevada. (g) Severability.  If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect. (h) No Trust or Fund Created.  Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and Participant or any other person. (i) Section 409A Provisions.  The payment of Shares under this Agreement are intended to be exempt from the application of section 409A of the Internal Revenue Code, as Section 409A he short-term deferral exemption set forth in Treasury Regulation §1.409A-1(b)(4).  Notwithstanding anything in the Plan or this Agreement to the cipant under section 409A of the Internal Revenue Code, as amended Section 409A on payable or distributable to Participant by reason of such circumstance unless the Committee determines in good faith that (i) the circumstances giving rise to such disability or separation from service meet the definition of disability, or separation from service, as the case may be, in Section 409A(a)(2)(A) of the Code and applicable final regulations, or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A by reason of the short-term deferral exemption or otherwise (including, but not limited to, a payment made pursuant to an involuntary separation arrangement that is exempt from Section 409A under the - would be made to a Participant who is a specified employee (as determined by the Committee in 

 

 good faith) on account of separation from service may not be made before the date which is six Section 409A by reason of the short term deferral exemption or otherwise. (j) Headings.  Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof. (k) Securities Matters. The Company shall not be required, and shall not have any liability for failure, to deliver Shares until the requirements of any federal or state securities or other laws, rules or regulations (including the rules of any securities exchange) as may be determined by the Company to be applicable are satisfied. (l) Consultation with Professional Tax and Investment Advisors. Participant acknowledges that the grant, exercise, vesting or any payment with respect to this Award, and the sale or other taxable disposition of the Shares acquired pursuant to the exercise thereof, may have tax consequences pursuant to the Internal Revenue Code of 1986, as amended, or under local, state or international tax laws. Participant further acknowledges that Participant is relying respect to any and all such matters (and is not relying, in any manner, on the Company or any of its employees or representatives). Finally, Participant understands and agrees that any and all tax consequences resulting from the Award and its grant, exercise, vesting or any payment with respect thereto, and the sale or other taxable disposition of the Shares acquired pursuant to the Plan, is solely and exclusively the responsibility of Participant without any expectation or understanding that the Company or any of its employees or representatives will pay or reimburse Participant for such taxes or other items.  [Signature page follows] 

 

 IN WITNESS WHEREOF, the Company and Participant have executed this Agreement as of the Effective Date. PROFIRE ENERGY, INC.   By:   Name: Brenton W. Hatch Title: Chief Executive Officer  PARTICIPANT:    Ryan W. Oviatt

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