Document:

Unassociated Document

SEPARATION AGREEMENT

 

THIS SEPARATION AGREEMENT (the “Agreement”), entered into as of  May 26, 2011, by and between PETER GORDON (the “Executive”) and NEOGENIX ONCOLOGY, INC., a  Maryland corporation (the “Company”)

 

RECITALS:

 

A.           Executive has been employed by the Company as Chief Financial Officer;

 

B.           The parties wish to provide for separation of Executive’s employment with the Company on mutually satisfactory terms with such termination to be effective on June 1, 2011 (the “Termination Date”);

 

C.           Executive and the Company are parties to an Employment Agreement dated May 5, 2009 as amended pursuant to an Amendment dated as of February 19, 2010 (the “Employment Agreement”); and

 

D.         Executive and the Company wish to memorialize the terms for Executive’s separation of employment and set forth their understandings on certain related matters.

 

Now, therefore, in consideration of the mutual covenants herein contained, the parties hereto, intending to be legally bound, hereby agree as follows:

 

1.           Separation Date.  Executive agrees that his employment with the Company terminated effective as of the Termination Date, and Executive and the Company agree that such termination shall be deemed to be without “Cause” (as defined under the Employment Agreement).

 

2.           Separation Payment to Executive.  Provided that Executive executes the release of claims described in Section 3 of this Agreement and attached hereto as Exhibit A (the “Release Agreement”) and the Release Agreement is not revoked and becomes irrevocable, the Company shall make the following payments and provide the following additional compensation to Executive.

 

(a)           On the 8th day after the Executive signs the Release Agreement, the Company shall pay to Executive, subject to Section 2(f) of this Agreement, $115,000, in a single lump sum, without interest.

 

(b)           Executive shall be entitled to retain use of the vehicle currently provided to him by the Company through May 31, 2012.  The Company shall pay the lease payments and insurance for the vehicle through May 31, 2012.  Executive shall pay all of the other operating costs for such vehicle during such period.  Executive shall return possession of the vehicle in good working condition to the Company by June 1, 2012 unless Executive assumes all of the lease obligations and operating costs for the vehicle and the Company is fully released from any further obligations with respect to the vehicle;

 

  

  

  

 

(c)  The Company shall continue to pay the current amount it contributes for the  premiums for health  insurance coverage for the Executive and his wife provided Executive makes an effective election for continued coverage under COBRA; until the earlier of  May 31, 2012 or until the Executive obtains alternative health insurance coverage.

 

3.  Consulting Services.  The Executive shall provide part time financial and fundraising consulting services to the Company on an as needed basis for the period from June 1, 2011 through May 31, 2012.  In addition, Executive agrees to reasonably cooperate with and assist the Company in the prosecution or defense of any claims arising out of or related to any matters with which Executive was involved or had knowledge of during his employment with the Company (including, without limitation, attendance at out-of-town proceedings for which the Company may require travel).  Such services shall be provided upon request by the Company and shall not exceed an average of  more than 15 hours per week.  The Company and the Executive shall work in good faith to schedule such services at such times and dates as are mutually agreeable to the parties and it is expected such services will be rendered offsite of the Company’s premises.  The Company shall pay $10,000 per month to Executive for such consulting services  on or before the 10th day of each month with the first such payment due on June 10, 2011 and the final payment on May 10, 2012.  The Executive shall be deemed an independent contractor for purposes of providing these consulting services and shall be responsible for payment of all taxes with respect to the consulting payments received by him pursuant to this Section 3.

 

4.  Termination of Stock Options.  The Executive hereby stipulates and agrees that all vested and unvested stock options issued to him by the Company as of the date of this Agreement that have not otherwise expired or terminated shall be deemed automatically forfeited, cancelled and terminated as of  the date hereof.

 

5.  Withholding.  All compensation and other compensatory benefits provided to Executive pursuant to this Agreement shall be subject to any withholdings required or authorized to be withheld by the Company by applicable federal, state and local law.

 

6.           No Additional Benefits.  Executive acknowledges and agrees that the payments and other benefits provided for in this Agreement represent the only compensation and benefits to which Executive is entitled and Executive is not entitled to any other compensation, remuneration, reimbursement, benefits or entitlements, whether pursuant to the Employment Agreement or any option agreement, other than any accrued benefits the Executive may have under the Company’s 401(k) plan.

7.           Release.  In consideration of the payments and mutual promises contained herein, Executive and the Company hereby execute the Release Agreement attached hereto as Exhibit A.

8.           Resignation as Employee and Officer and  from Board of Directors.  Executive hereby resigns, effective as of June 1, 2011, from all employment, director and officer positions he holds with the Company.

9.           Restrictive Covenants.  Notwithstanding the provisions of this Agreement, Executive hereby reaffirms and agrees that all of the terms, restrictions and covenants of Executive set forth in Sections 5, 6, 7 and 8 of the Employment Agreement shall remain in full force and effect in accordance with their terms, without waiver, amendment, or release.

 

  

- 2 -

  

10.           Return of Company Property.  Executive acknowledges that all files, records, documents, computer disks, drawings, specifications, equipment, keys, credit cards and other property of the Company, including copies thereof, have been returned to the Company.  Notwithstanding the foregoing, Executive shall be entitled to retain the laptop computer previously provided by the Company and the vehicle as described in Section 2(b).

 

11.           Non-Disparagement.  The Executive agrees that he shall not take any actions or make any verbal or written statements to the public, or to the Company’s employees and customers, that disparage the Company, and its officers and directors.

12.           Miscellaneous Provisions.

 

(a)           Waiver.  No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company.  No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

 

(b)           Non-Reliance.  Executive acknowledges and agrees that in signing this Agreement, he does not rely and has not relied on any representation or statement by the Company or by its directors, officers, agents, representatives or attorneys with regard to the subject matter, basis or effect of this Agreement.

 

(c)           Whole Agreement.  No agreements, representations or understandings (whether oral or written and whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof.  Effective as of the date hereof, this Agreement amends and modifies the Employment Agreement.

 

(d)           No Admission of Wrongdoing.   This Agreement is not an admission by the Company or Executive of any liability or wrongdoing.

 

(e)           Choice of Law.  This Agreement shall be deemed a contract made under, and for all purposes the validity, interpretation, construction and performance of this Agreement shall be governed by, the laws of the Maryland, without reference to principles of conflicts of laws, except to the extent superseded by applicable federal law.

(f)           No Assignment.  The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this Subsection (f) shall be void.

 

  

- 3 -

  

(g)           Successors and Assigns.  This Agreement will be binding upon and inure to the benefit of the Executive and his beneficiaries, heirs, executors, successors and assigns; and the Company, its affiliates, subsidiaries, successors and assigns.

(h)           Confidentiality of Agreement.  Executive agrees to keep strictly confidential the existence and terms of this Agreement and to not disclose them to any person or entity, other than to Executive’s immediate family, attorney, financial advisor, or except through confidential due diligence investigations or as required by law or except with respect to matters that have been publicly disclosed by the Company in filings with the Securities and Exchange Commission or otherwise publicly disclosed by the Company.

(i)           Section 409A.  This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and shall be interpreted accordingly.

 

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized representative, as of the day and year first above written.

 

 

NEOGENIX ONCOLOGY, INC.

	 	 	 	 	 	 
	By	
/s/ Philip Arlen

	 	Date:	
5/27/11

	 
	Title:   	
President and CEO

	 	 	
 

	 
	 	 	 	 	 	 
	 	
 

	 	 	
 

	 
	
PETER GORDON

	 	 	 	 
	 	 	Date:	5/26/2011	 
	/s/ Peter Gordon	 	 	 	 

 

  

- 4 -

  

 

EXHIBIT A

RELEASE AGREEMENT

This Release Agreement (the “Release Agreement”) is made this 1st day of June, 2011, by and between  PETER GORDON (the “Executive”) and NEOGENIX ONCOLOGY, INC.,  a Maryland corporation (together, the “Company”)

Recitals:

Executive and the Company are parties to a Separation Agreement dated May__, 2011 (the “Separation Agreement”) pursuant to which Executive is entitled to certain payments and benefits and in consideration for granting a release of claims to the Company and the parties wish to state the terms of such release in this Release Agreement.

Now therefore, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Executive and the Company hereby agree as follows:

1.           Executive Release of Claims.  In consideration for Executive’s right to receive the payments and benefits in the amount, manner and time of payment described in Section 2 of the Separation Agreement, Executive hereby agrees to the following release of claims (the “Executive Release”):

 

(a)           Release by Executive.  Executive, for himself and his heirs, executors and administrators, voluntarily, knowingly and willingly agrees to release the Company, together with its direct and indirect parents, subsidiaries, affiliates, predecessors and successors and assigns, past and present directors, managers, officers, executives, agents, clients, accountants, attorneys, and servants (collectively, the “Company Releasees”) from any and all claims, charges, complaints, promises, agreements, controversies, liens, demands, causes of action, obligations, damages, expenses (including attorneys’ fees and costs) and liabilities of any nature whatsoever (“Executive Claims”), known or unknown, which Executive, or his heirs, executors or administrators ever had, now have, or may hereafter claim to have against any of the Company Releasees arising out of or relating to: (i) any matter, cause or thing whatsoever arising from the beginning of time to the date of this Executive Release, (ii) Executive’s employment relationship with the Company or any of the Company Releasees or the separations thereof including, but not limited to, any such rights or claims arising under any statute or regulation including the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the Employee Retirement Income Security Act of 1974, the Delaware Equal Accommodations Law, the Virginia Human Rights Act, each as amended, or any other federal, state or local law, regulation, ordinance or common law, or (iii) any policy, agreement, understanding or promise, written or oral, formal or informal, between Executive on the one hand and the Company or any of the Company Releasees on the other hand, provided, however, that notwithstanding the foregoing, nothing contained in this Executive Release shall in any way terminate, modify or release (1) Executive’s right to enforce the terms of this Release Agreement and the Separation Agreement, and (2) the rights, if any, that the Executive may have, from and after the date the Executive Release is executed, under the any  applicable Directors and Officers insurance policy that the Company may currently have in force, provided that the foregoing shall not preclude the amendment or termination of such policies from time to time in accordance with their respective terms (collectively, the “Executive Excluded Claims”).  Executive acknowledges that the amounts referred to in Section 2 of the Separation Agreement are in lieu of and in full satisfaction of any amounts that might otherwise be payable under any contract, agreement (oral or written), plan, policy or practice, past or present, of the Company or any of the Company Releasees.

 

  

  

  

 

(b)           Representations of Executive.  Executive hereby makes the following representations and acknowledgements:

 

(i)           Executive understands and agrees that, except for the Executive Excluded Claims, he has knowingly relinquished, waived and forever released any and all rights to any personal recovery in any action or proceeding that may be commenced on Executive's behalf arising out of the Executive Claims that are released under the Executive Release, including, without limitation, Executive Claims for back pay, front pay, liquidated damages, compensatory damages, general damages, special damages, punitive damages, exemplary damages, costs, expenses and attorneys' fees.

(ii)           Executive represents that he has no claims, complaints, charges or lawsuits pending against the Company or any of the Company Releasees.

(iii)           Executive acknowledges and agrees that he has had a sufficient period of time of up to 21 days within which to review the Separation Agreement and this Executive Release, including, without limitation, with Executive's attorney, and that Executive has done so to the extent desired.

(iv)           Executive understands and agrees that the severance and benefits set forth in Section 2 of the Separation Agreement are the only consideration for the Executive's signing the Executive Release and no promise or inducement has been offered or made to induce the Executive to sign the Executive Release, except as expressly set forth therein.

           (v)                      Executive understands and agrees that the Executive Release shall not become effective until the 8th day after the Executive signs this Executive Release and the Executive may at any time before the effective date revoke the Executive Release by hand delivering or sending via overnight mail a written notice of revocation to the Company: Neogenix Oncology Inc., 9700 Great Seneca Highway Suite 317 Rockville, MD  20850, Attention: Dr. Phil Arlen, President and Chief Executive Officer.  If Executive elects to revoke the Executive Release as provided above, this Release Agreement and the Separation Agreement shall automatically terminate without liability or obligation to either party.

 

  

- ii -

  

 

2.           Choice of Law.  This Agreement shall be deemed a contract made under, and for all purposes the validity, interpretation, construction and performance of this Agreement shall be governed by, the laws of the state of Maryland, without reference to principles of conflicts of laws, except to the extent superseded by applicable federal law.

3.           Successors and Assigns.  This Agreement will be binding upon and inure to the benefit of the Company Releases and their successors and assigns.

 

IN WITNESS WHEREOF, each of the parties has executed this Release Agreement, in the case of the Company by its duly authorized representative, as of the day and year first above written.

 

 

NEOGENIX ONCOLOGY, INC.

	 	 	 	 	 	 
	By	
/s/ Philip Arlen

	 	Date:	
5/27/11

	 
	Title:   	
President and CEO

	 	 	
 

	 
	 	 	 	 	 	 
	 	
 

	 	 	
 

	 
	
PETER GORDON

	 	 	 	 
	 	 	Date:	5/26/2011	 
	/s/ Peter Gordon	 	 	 	 

  

- iii -2011 Senior Executive Incentive Plan

Background and Objectives

The overall executive compensation strategy of The Edelman Financial Group Inc. (formerly Sanders Morris Harris Group Inc.) (“TEFG” or the “Company”) is to provide key executives with targeted total cash pay opportunities that generally are competitive with median total cash pay opportunities in wealth and asset management companies of similar size.  The two primary elements of the TEFG cash compensation program are base salary and the 2011 Senior Executive Incentive Plan (the “Plan” or “SEIP”).  TEFG base salaries are designed to be broadly competitive with industry standards and are used to reward an executive’s job performance over time.  All awards under the Plan are determined and awarded at the sole discretion of the Compensation Committee of the TEFG Board of Directors (the “Committee”).

The Plan provides annual incentive compensation opportunity for key executives for achieving critical financial and other goals of and for TEFG.  The following document defines Plan eligibility, the size of potential award opportunities, performance measurement and adjustments, form and timing of award payments, administrative guidelines, and definitions for ongoing Plan management.

The Plan does not include potential equity-based awards, which are covered by the Company’s separate Restricted Stock Unit Plan a sub-plan under the TEFG Long-Term Incentive Plan.

Capitalized terms that are used but not defined in the Plan shall have the meaning ascribed to them in the TEFG Long-Term Incentive Plan.

Eligibility

Employees who are eligible to participate in the Plan (“Participants”) will be proposed by the Chairman of the Board, Chief Executive Officer, President, and Chief Financial Officer of the Company (the “Plan Committee”) and approved by the Compensation Committee at the beginning of each performance/award period.  Generally, Participants will be selected from senior executives who primarily are responsible for the annual growth and profitability of TEFG, i.e., generally members of the Company’s Management Committee.  For 2011, seven senior officers and executives are proposed as Participants.

Targeted Award Opportunities

At the beginning of each fiscal year, each Participant will be assigned a targeted award opportunity proposed by the Plan Committee and approved by the Committee that can increase or decrease in value, based on actual performance achievement.  Targeted award opportunities for Participants for 2011 are shown in Exhibit 1.  Plan targeted award opportunities may be re-defined from time to time by the Plan Committee, as modifications are made in TEFG’s executive compensation strategy.

On or before March 31, 2012, (a) each Participant’s salary rate at December 31, 2011, will be multiplied by his or her actual SEIP award percentage earned (determined by applying the performance measures set forth below) to determine a provisional award and (b) the provisional award will be adjusted by the ROE adjustment (determined as set forth below), to determine the dollar value of the award for the prior performance cycle.

Performance Measures

Four Plan financial performance measures, totaling 80% by weight of all performance measures, are proposed for the 2011 performance period, as follows:

	
·

	
Adjusted cash flow from operations1 (“ACF”) — weighted 30% (target — 110% of 2010 ACF).

	
1

	
Cash flow from operations will be adjusted by excluding from the calculation any cash flow items related to (a) discontinued operations of the Company, (b) marketable securities owned, (c) securities sold, not yet purchased, and (d) other non-recurring and extraordinary items.

 

  

  

  

 

	
Sanders Morris Harris Group

	
Page 2 of 7

	
2011 Executive Incentive Plan

	  

 

	
·

	
Client investment results — weighted 20% (target — change in adjusted 60/402 in 2011).

	
·

	
Net new client money — weighted 20% (target— 4% increase over 2010 year-end client assets).

	
·

	
Expenses adjusted for non-recurring and extraordinary items as a percentage of revenue — weighted 10% (target — no greater than 2010

The Plan performance targets will be proposed by the Plan Committee and approved by the Committee as soon as possible after the beginning of each fiscal year.

The final 20% portion of the performance measures will be determined on a discretionary basis by the Committee for the Chief Executive Officer and by the Plan Committee for the other Participants and will be based on the degree to which the executive has mastered the primary duties and responsibilities of his or her present job.

TEFG performance calculations for the Plan shall exclude nonrecurring and extraordinary items, which are defined at the sole discretion of the Committee.  Performance goals for SEIP awards may be adjusted during the year if a major change occurs in the Company’s operations or capital structure, e.g., an acquisition or merger.  In addition to the SEIP targets, the Committee and the Plan Committee jointly will establish minimum acceptable and outstanding Plan goals, which are currently as follows:

	
·

	
Minimum Acceptable — The TEFG performance level at or below which no incentive will be paid is 75% of the SEIP performance measure target;

	
·

	
Target — The TEFG performance level where the Plan adjustment factor is 1X, with “X” equal to the target incentive, is 100% of the SEIP performance measure target; and

	
·

	
Outstanding — The TEFG performance level at or above which the Plan adjustment factor is 2X, with “X” equal to the target incentive is 125% of the SEIP performance measure target.

SEIP awards will be interpolated for actual performance falling closest to the nearest 5% increment between any of the foregoing goals.

Exhibit 2 presents the performance matrix for calculating SEIP awards.  This performance matrix may be revised by the Plan Committee with approval of the Committee if the Company’s business strategy and performance focus changes.

ROE Adjustment

The provisional SEIP awards as determined above will be adjusted depending on the ratio of the Company’s net income from continuing operations before income taxes to average total equity (i.e., net income from continuing operations before income taxes divided by average total equity, the return on equity or “ROE”); provided that net income may exclude extraordinary items (including, but not limited to, goodwill impairment charges, expenses related to growth and acquisition activities, and other extraordinary charges) as determined by the Plan Committee, and average total equity will be the average of total equity at December 31, 2010 and December 31, 2011.  If ROE is less than 5.0%, the grant of SEIP awards will be purely in the discretion of the Plan Committee.  If ROE is equal to or greater than 5.0% but less than 12.5%, SEIP awards will be paid at the percentage shown below applied to each individual’s provisional award but only up to a maximum of 100% of an individual’s targeted award opportunity.  Only if ROE equals or exceeds 12.5% may SEIP awards be paid at levels above 100% of the targeted award opportunities.

	
2

	
Investment performance of portfolio invested 60% in Standard & Poors 500 Index and 40% in Barclay’s Capital U.S. Aggregate Bond Index from January 1, 2011 to December 31, 2011, less 50 basis points.

 

  

  

  

 

	
Sanders Morris Harris Group

	
Page 3 of 7

	
2011 Executive Incentive Plan

	  

 

	
ROE

	 	
Maximum % of Provisional Award

	 
	
12.5% or greater

	 	
No Limit

	 
	
10.0%, but less than 12.5%

	 	 	100.0	%3
	
9.0%, but less than 10.0%

	 	 	90.0	%3
	
8.0%, but less than 9.0%

	 	 	80.0	%3
	
7.0%, but less than 8.0%

	 	 	70.0	%3
	
6.0%, but less than 7.0%

	 	 	60.0	%3
	
5.0%, but less than 6.0%

	 	 	50.0	%3
	
less than 5.0%

	 	
Discretionary

	 

SEIP award adjustments will be interpolated for actual ROE falling closest to the nearest 0.1% increment between any of the foregoing goals for ROE falling in the 5% to 10% range.

Form and Timing of Awards

SEIP award calculations will be finalized on or before Mach 30, 2012.  All SEIP awards will be paid in cash in quarterly installments in the year immediately following a performance cycle, as follows:

	
·

	
50% of the final award on March 31, 2012

	
·

	
25% of the final award on August 15, 2012

	
·

	
25% of the final award on November 30, 2012

In no event will any payment of an award be made subsequent to December 31, 2012.

In the case of a Change in Control (as defined in the Company’s Long-Term Incentive Plan prior to November 15, 2012, all SEIP awards shall be paid in cash on the effective date of such Change in Control.

Administrative Guidelines and Definitions

 

The Plan operates at the discretion of the Committee.  The Committee may exercise considerable discretion and judgment in interpreting the Plan, and adopting, from time to time, rules and regulations that govern the administration of the Plan. Once the Compensation Committee approves Plan participants, award targets, and performance goals, the Plan Committee is delegated authority to administer the Plan. All decisions of the Committee and the Plan Committee are final, conclusive, and binding on all parties, including the Company, its stockholders, and employees.

	
·

	
Employee Termination —

Termination during 2011. Except as expressly set forth below, in the event a Participant’s employment with TEFG terminates for any reason prior to the end of the workday on December 31, 2011, such Participant will be ineligible for any award under the Plan. In other words, if a Participant is employed according to Company records through the end of the workday on December 31, 2011, the Participant will, subject to the following provisions, be eligible for any award earned under the Plan for 2011.

    

Any Participant (or his or her estate) who ceases to be employed by the Company prior to January 1, 2012, due to the Participant’s death, Disability, or Retirement (as such terms are defined in the TEFG Long-Term Incentive Plan), subject to the Participant’s execution of a waiver and release of claims in a form and manner satisfactory to the Company, will be eligible to receive a SEIP award based on an adjusted annual base salary amount, but otherwise in the same manner, to the same extent, and at the same time as the Participant would have received such SEIP award if such Participant’s employment had continued through December 31, 2011 (i.e., based on achievement of applicable performance measures).  The Participant’s annual base salary will be the result of the following formula: X × Y/12, where:

	 	
X =

	
the Participant’s annual base salary as in effect as of the date of termination of employment; and

	 	
Y =

	
the number of calendar months the Participant was actively employed by the Company during 2011, rounded up for any partial month.

	
3

	
% of Target Award Earned (Exhibit 2) may not exceed 100%.

 

  

  

  

 

	
Sanders Morris Harris Group

	
Page 4 of 7

	
2011 Executive Incentive Plan

	  

 

Termination on or after January 1, 2011. Except as expressly set forth below, a Participant who ceases to be employed by TEFG for any reason on or after January 1, 2012, will forfeit any unpaid SEIP award.  Any Participant (or his or her estate) who ceases to be employed by the Company subsequent to December 31, 2011, but prior to November 30, 2011, due to the Participant’s death, Disability, or Retirement, subject to the Participant’s execution of a waiver and release of claims in a form and manner satisfactory to the Company, will be eligible to be paid all unpaid SEIP awards in the same manner, to the same extent, and at the same time as the Participant would have been paid such SEIP awards if such Participant’s employment had continued through November 30, 2012.

	
·

	
New Hires — Employees must have a minimum of six months of service to be eligible for an award, unless waived by the Plan Committee.  SEIP awards for new hires are earned on a pro-rata basis, based on their date of employment.

	
·

	
Base Salary Rate — Base salary for SEIP award calculations shall be the annualized base rate in effect on December 31, 2011.

	
·

	
Support Documentation — The Chief Financial Officer of the Company shall be responsible for maintaining all necessary support documentation regarding performance and bonus calculations under the Plan.

Amendment

The Committee may at any time suspend, terminate, modify, waive, or amend any or all of the provisions of this Plan; provided, however, that no such action shall, without the written consent of the affected Participants, reduce the Company’s obligation for the payment of any outstanding awards under the Plan with respect to such Participants, or further defer the payment of such awards, or accelerate the payment of such awards in a manner that subjects such awards to the tax imposed under Section 409A of the Internal Revenue Code of 1986, as amended and the regulations thereunder (“Section 409A”).

 

Governing Law

The Plan is governed by the laws of the State of Texas.

Withholding Taxes

The Company has the right to make such provisions as it deems necessary or appropriate to satisfy any obligations it may have under law to withhold federal, state or local income or other taxes incurred by reason of payments pursuant to the Plan.

Section 409A

Notwithstanding anything to the contrary contained herein, this Plan is intended to satisfy the requirements of Section 409A.  Accordingly, all provisions herein, or incorporated by reference, shall be construed and interpreted to satisfy the requirements of Section 409A.  Further, for purposes of Section 409A, each payment of compensation under this Agreement shall be treated as a separate payment of compensation.

Non-transferability of Awards

No award under this Plan, and no rights or interests therein, will be assignable or transferable by a Participant (or legal representative).

Effective Date

This Plan is effective as of January 1, 2011, and continues until terminated, suspended, modified, or amended by the Committee.

  

  

  

 

	
Sanders Morris Harris Group

	
Page 5 of 7

	
2011 Executive Incentive Plan

	  

 

Exhibit 1

Proposed 2011 Participants and Award Targets

	
Title

	
Targeted Award

	
Chairman

	
60% of SMH salary

	
Chief Executive Officer

	
60% of SMH salary

	
President (if not also CEO)

	
60% of SMH salary

	
EVP Wealth Management

	
80% of SMH salary

	
Corporate Chief Financial Officer

	
50% of SMH salary

	
EVP Corporate

	
50% of SMH salary

	
EFS Chairman Chief Executive Officer

	
60% of EFS salary

	
Chief Information Officer

	
50% of SMH salary

	
EFS  Chief of Staff (w/Operations responsibility)

	
50% of EFS salary

  

  

  

 

	
Sanders Morris Harris Group

	
Page 6 of 7

	
2011 Executive Incentive Plan

	  

 

Exhibit 2

Proposed 2011 Performance Goals and Weights

Versus Award Opportunity Earned

	
Level of

Performance

Achievement

	 	
Adjusted

Cash Flow

from

Operations

	 	 	
Client

Investment

Results

	 	 	
Net New

Client

Money

	 	 	
Expenses

as

Percentage

of Revenue

	 	 	
% of Target

Award Earned

	 	 	
Discretionary

	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
(Weight)

	 	 	(30	)%	 	 	(20	)%	 	 	(20	)%	 	 	(10	)%	 	 	 	 	 	(20	)%
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Outstanding

	 	 	125	%	 	 	125	%	 	 	125	%	 	 	75	%	 	 	200	%	 	 	100	%
	  	 	 	120	%	 	 	120	%	 	 	120	%	 	 	80	%	 	 	180	%	 	 	 	 
	  	 	 	115	%	 	 	115	%	 	 	115	%	 	 	85	%	 	 	160	%	 
	  	 	 	110	%	 	 	110	%	 	 	110	%	 	 	90	%	 	 	140	%	 
	  	 	 	105	%	 	 	105	%	 	 	105	%	 	 	95	%	 	 	120	%	 
	
Target

	 	 	100	%	 	 	100	%	 	 	100	%	 	 	100	%	 	 	100	%	 
	  	 	 	95	%	 	 	95	%	 	 	95	%	 	 	105	%	 	 	80	%	 
	  	 	 	90	%	 	 	90	%	 	 	90	%	 	 	110	%	 	 	60	%	 
	  	 	 	85	%	 	 	85	%	 	 	85	%	 	 	115	%	 	 	40	%	 
	  	 	 	80	%	 	 	80	%	 	 	80	%	 	 	120	%	 	 	30	%	 
	
Min Acceptable

	 	 	75	%	 	 	75	%	 	 	75	%	 	 	125	%	 	 	20	%	 
	  	 	
>75

	% 	 	
>75

	% 	 	
>75

	% 	 	
<125

	% 	 	 	0	%	 	 	0	%

  

  

  

 

	
Sanders Morris Harris Group

	
Page 7 of 7

	
2011 Executive Incentive Plan

	  

 

Exhibit 3

Sample Award Calculation

Assumptions:

Executive’s current salary is $200,000.

Targeted Plan award is 40% of salary or 80,000.

Targeted SMH performance goals achieved:

	
•

	
110% of Cash Flow target, providing 140% of targeted award segment;

	
•

	
100% of Client Investment Results target, providing 100% of targeted award segment;

	
• 

	
90% of Net New Client Money target, providing 60% of targeted award segment;

	
• 

	
90% of Expenses as Percentage of Revenue target, providing 140% of targeted award segment; and

	
• 

	
Plan Committee awards 100% of targeted amount based on personal goal achievement;

	
• 

	
ROE as adjusted is 9.1%.

Calculations:

Current Salary:   $200,000

Incentive Target Percent:     x .40                      

Incentive Target Amount:    $80,000

	
A.    Component for SMH Cash Flow:

	 	 	 	 	 	 	 	 	 
	
Incentive Target:

	 	$	80,000	 	 	 	 	 	 	 
	
Cash Flow Performance Adjustment:

	 	 	x 1.40	 	 	 	 	 	 	 
	
Non-weighted Cash Flow Allocation:

	 	 	 	 	 	$	112,000	 	 	 	 
	
Cash Flow Weighting:

	 	 	 	 	 	 	x .30	 	 	 	 
	
Weighted SMH Cash Flow Component:

	 	 	 	 	 	 	 	 	 	$	33,600	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
B.    Component for Client Investment Results (CIR):

	 	 	 	 	 	 	 	 	 	 	 	 
	
Incentive Target:

	 	$	80,000	 	 	 	 	 	 	 	 	 
	
CIR Performance Adjustment:

	 	 	x 1.00	 	 	 	 	 	 	 	 	 
	
Non-weighted CIR Allocation:

	 	 	 	 	 	$	80,000	 	 	 	 	 
	
CIR Weighting:

	 	 	 	 	 	 	x .20	 	 	 	 	 
	
Weighted CIR Component:

	 	 	 	 	 	 	 	 	 	$	16,000	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
C.    Component for Net New Client Money:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Incentive Target:

	 	$	80,000	 	 	 	 	 	 	 	 	 
	
New Client Money Performance Adjustment:

	 	 	x .60	 	 	 	 	 	 	 	 	 
	
Non-weighted New Client Money Allocation:

	 	 	 	 	 	$	48,000	 	 	 	 	 
	
New Client Money Weighting:

	 	 	 	 	 	 	x .20	 	 	 	 	 
	
Weighted Net New Client Money Component:

	 	 	 	 	 	 	 	 	 	$	9,600	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	

D.    Component for Non-Recurring & Extraordinary Item (NREI) Expense Ratio:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Incentive Target:

	 	$	80,000	 	 	 	 	 	 	 	 	 
	
NREI Performance Adjustment:

	 	 	x 1.40	 	 	 	 	 	 	 	 	 
	
Non-weighted NREI Allocation:

	 	 	 	 	 	$	112,000	 	 	 	 	 
	
NREI Weighting:

	 	 	 	 	 	 	x .10	 	 	 	 	 
	
Weighted NREI Expense Ratio Component:

	 	 	 	 	 	 	 	 	 	$	11,200	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	

E.    Component for Personal Goal (PG) Achievement:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Incentive Target:

	 	$	80,000	 	 	 	 	 	 	 	 	 
	
PG Performance Adjustment:

	 	 	x 1.00	 	 	 	 	 	 	 	 	 
	
Non-weighted PG Allocation:

	 	 	 	 	 	$	80,000	 	 	 	 	 
	
PG Weighting:

	 	 	 	 	 	 	x .20	 	 	 	 	 
	
Weighted Personal Goal Component:

	 	 	 	 	 	 	 	 	 	$	16,000	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
F.     Total Prospective Plan Award:

	 	 	 	 	 	 	 	 	 	$	86,400	 
	
Percent of Targeted Award Opportunity:

	 	 	 	 	 	 	 	 	 	 	108	%
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
G.    ROE Adjustment:

	 	 	 	 	 	 	 	 	 	 	 	 
	
ROE, as adjusted  9.1%

	 	 	 	 	 	 	 	 	 	 	 	 
	
ROE Adjustment factor 91%

	 	 	 	 	 	 	 	 	 	 	 	 
	
Total Plan Award, as adjusted:

	 	 	 ($86,400/108% * 100%)* 91%	 	$	72,800	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
H.    Payout Schedule:

	 	 	 	 	 	 	 	 	 	 	 	 
	
First Installment on March 31, 2012

	 	 	 	 	 	$	36,400	 	 	 	 	 
	
Second Installment on August 15, 2012:

	 	 	 	 	 	$	18,200	 	 	 	 	 
	
Third Installment on November 30, , 2012:

	 	 	 	 	 	$	18,200	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	$	72,800

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00190-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00190-of-00352.parquet"}]]