Document:

Rural/Metro Management Incentive Plan Progam Summary

 Exhibit 10.1 
  

			
	

	  	 Rural/Metro Management Incentive
 Program
Summary

  
 Purpose of Plan 
  
 Rural/Metro’s Management Incentive Program (MIP) is an annual cash incentive plan for
the key executive positions as designated below. The MIP is designed to promote, recognize, and financially reward exceptional performance. This is accomplished by: 
  

	 	•	 	Establishing goals to encourage and influence superior performance and a high degree of accountability 

  

	 	•	 	Communicating to eligible employees the importance of performance excellence, of substantially exceeding budget expectations, and of achieving other objectives annually agreed to as
“soft goals” 

  

	 	•	 	Aligning executive accountability and corporate goals 

  
 Discretionary Nature of Plan 
  
 This Plan summary document does not establish enforceable employee rights, contractual or otherwise, and does not establish an employment relationship enforceable
by the participant. The annual amounts, budgeted expectations, and soft goals require review and approval by the Board of Directors. Further, the MIP is discretionary and subject to change or termination by the Board of Directors at any time without
notice. 
  
 Sliding Scale 
  
 In an effort to maximize participant performance, the Company has established a base award,
as reflected in the 100% “Percentage of Goal” row in the table below, with adjustments to the base award via a “sliding scale” award system. The amount of incentive compensation that can be earned by application of the sliding
scale is determined by performance relative to hard goals, currently “Budgeted Net Income from Continuing Operations”, in the case of corporate executives and “Regional Budgeted Operating Income from Continuing
Operations”, in the case of Group Presidents. 
  

 1 

 The application of the sliding scale to the portion of a participant’s incentive compensation that is based upon
achievement of hard goals is shown in the table below. The application of the sliding scale to soft goals is illustrated under the heading “Application of Sliding Scale: Soft Goals” below. 
  

																			
	Percentage
of Goal *

	  	CEO

	 	 	 Executive
 Vice
President

	 	 	 Senior
 Vice
President

	 	 	 Corporate
 Vice
President

	 	 	 Group
 Presidents

	 	 	Managing
Director

	 
	90%	  	50.00	%	 	31.00	%	 	31.00	%	 	28.00	%	 	28.00	%	 	25.00	%
	100%	  	80.00	%	 	50.00	%	 	50.00	%	 	45.00	%	 	45.00	%	 	40.00	%
	125%	  	100.00	%	 	62.50	%	 	62.50	%	 	56.25	%	 	56.25	%	 	50.00	%
	150%	  	125.00	%	 	75.00	%	 	75.00	%	 	67.50	%	 	67.50	%	 	60.00	%

  

	*	The budget is considered a stretch goal for the company. Eighty percent of budget is considered to be meeting expectations as defined by the bank covenant requirements; ninety
percent and above is considered to be exceeding expectations. 

  
 The potential award is adjusted incrementally for goal achievements between 90% and 150%. 
  
 Application of the Sliding Scale: Soft Goals 
  
 If a participant’s award is partially based upon achievement of hard goals and partially upon achievement of soft goals, and the portion of the award based upon achievement of the hard goals is adjusted based on application of the
“sliding scale” as illustrated above, then a similar adjustment shall be applied to the portion of the award that is based upon achievement of soft goals. However, no award is payable to a participant based upon achievement of soft goals
unless a participant is entitled to receive an award based upon the participant’s achievement of hard goals. 
  
 For example: If the Company achieved 125% of goal in a plan year when a Senior Vice-President’s base award is 50% (divided into 70% defined as hard goals and
30% defined as soft goals), the portion of the SVP’s award based upon achievement of hard goals would be calculated as the base award of 50% multiplied by the hard goal 70% multiplied by the 125%, which would equal 43.75%. Similarly – and
assuming the SVP accomplished all of the soft goals – the portion of the SVP’s award based upon achievement of soft goals would be calculated as the base award 50% multiplied by the soft goal 30% multiplied by the 125%, which would equal
18.75%. These two calculations would be combined bringing the total award to 62.50%. 
  
 Administration 
  

	 	•	 	The Compensation Committee of the Board of Directors, under the leadership of the Chair, is responsible for the overall administration of the MIP. The Compensation Committee is,
therefore, defined as the “Plan Administrator”. 

  

	 	•	 	The CEO and the company’s Vice President & Treasurer serve as staff to the Plan Administrator to provide reports, make recommended design modifications, and ensure
accuracy of reporting. 

  

	 	•	 	The Plan Administrator resolves any disputes concerning the plan, including payout disputes. 

  

	 	•	 	The Board of Directors approves any or all recommendations made by the Compensation Committee before they are considered to be adopted. 

  
 Duration of the Plan 
  
 The MIP is measured in terms of hard and soft goals. Hard goals are measured from July 1st to June 30th of the
respective fiscal year, and soft goals are measured from January 1st to November 

  

 2 

 
30th of the respective
calendar year. The MIP is, by design and intent, fully discretionary and the provisions may be modified at any time to meet specific business objectives of the Company. 
  
 The MIP is designed as a calendar year plan; however, audited June 30th fiscal year–end financial statements available by
September 30th are utilized to substantiate hard goal achievements. 
  
 Eligibility 
  
 To participate in the MIP, certain eligibility
requirements apply in addition to the position titles designated above, i.e., throughout the duration of the specific MIP period as defined above, the participant must: 
  

	 	•	 	Not be functioning under any corrective action plan; 

  

	 	•	 	Not terminate (or give notice to terminate) his/her employment with the company (unless otherwise agreed to in a separate employment agreement); and 

  

	 	•	 	Unless specifically exempted by the Plan Administrator, have continuously functioned in an eligible position until the MIP payout date. 

  
 Determination of Scoring Criteria 
  

	 	•	 	Awards are calculated utilizing the predetermined relative value scoring criteria established for each annual goal. Ultimately, however, the eligibility for, and payment of, any and
all incentive compensation under the MIP is entirely discretionary and subject to the recommendation of the Plan Administrator and approval of the Board of Directors. 

  

	 	•	 	The MIP allows the Chief Executive Officer in conjunction with the Compensation Committee to recommend an incentive award that may be in excess of 100% of the projected relative
value scoring criteria based on individual achievements of hard and soft goals. 

  

	 	•	 	Participants who are hired, transferred or promoted into or out of an eligible position or whose employment ends due to death, disability, retirement or separation under the
Corporation’s Severance Policy, may, but need not be, considered for a prorated incentive award based on the actual number of months worked. 

  

	 	•	 	In the case of a participant transferring from one eligible position to another eligible position, past performance is considered in determining an award. 

 
 Development of Scoring Criteria 
  

	 	•	 	Unless otherwise stipulated by an employment agreement, each participant develops, in cooperation with their Supervisor, specific scoring criteria including hard and soft goals. The
‘percentage of goal’ to be applied is primarily based on “Net Income from Continuing Operations”, or in the case of Group Presidents on “Regional Operating Income from Continuing Operations” as adjusted for cost of
capital and goodwill impairment charges, if any. The Board of Directors, at its discretion, can adjust the Consolidated Net Income from Continuing Operations calculation to consider Board actions taken in the best long-term interest of the Company.
Hard goals are then weighted at 70% and soft goals are weighted at 30% of the overall award. Soft goals are specific to regional or corporate directives with emphasis on accountability related to each individual participant.

  

 3 

	 	•	 	The Plan Scoring Criteria Form (“PSCF”) outlines specific goals with an assigned relative value weighting. This relative value weighting is reviewed and recommended by the
Plan Administrator with final approval of the Board of Directors. 

  

	 	•	 	It is envisioned that the MIP relative value scoring criteria will total 100%; however, at the recommendation of the Plan Administrator and by approval of the Board of Directors
this award may exceed 100%. 

  
 Payout Conditions 

 

	 	•	 	A preliminary report is given to the Board of Directors in October presenting the audited numbers for the hard goals and the preliminary expectations on the soft goals. The majority
of the soft goals are completed by October, therefore, it is possible to provide a reasonable estimate. Any necessary updates on soft goals completed after the October Board meeting will be provided during the December meeting.

  

	 	•	 	It is the intention of this Plan that the Board of Directors will receive the appropriate information at the December Board Meeting to review and approve the awards and the awards
would be paid as soon as possible after each December Board Meeting but in no case later than December 31st.

  

	 	•	 	Incentive awards are calculated using the participants’ annual base pay at the time of the award payout. 

  

	 	•	 	Incentive awards are subject to normal payroll withholding. 

  

 4Form of Stock Option Agreement for Non-Employee Directors

 EXHIBIT 10.6 
  
 FORM OF STOCK OPTION AGREEMENT FOR NON-EMPLOYEE DIRECTORS 
  
 STOCK OPTION AGREEMENT made as of the     
day of             ,              between NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC., a Delaware corporation
(the “Company”), and                              (the “Optionee”). 
  
 WHEREAS, the Optionee is a non-employee Director of the Company or a
subsidiary thereof; 
  
 WHEREAS, the Company desires to
provide to the Optionee an additional incentive to promote the success of the Company; 
  
 NOW, THEREFORE, in consideration of the foregoing, the Company hereby grants to the Optionee (the “Grant”) the right and option to purchase Common Shares of the Company under and pursuant to the terms
and conditions of the 1999 Stock Option Plan, as amended, (the “Plan”) and upon and subject to the following terms and conditions: 
  
 1. GRANT OF OPTION. The Company hereby grants to the Optionee the right and option (the “Option”) to purchase up to
             (    ) Common Shares of the Company (the “Option Shares”) during the following periods: 
  
 (a) All or any part of (    ) Common Shares may be
purchased during the period commencing one year from the date hereof and terminating at 5:00 P.M. on             , 2012 (the “Expiration Date”). 
  
 (b) All or any part of an additional
             (    ) Common Shares may be purchased during the period commencing two years from the date hereof and terminating at 5:00 P.M. on the Expiration
Date. 
  
 (c) All or any part of an additional
             (    ) Common Shares may be purchased during the period commencing three years from the date hereof and terminating at 5:00 P.M. on the Expiration
Date. 
  
 (d) All or any part of an additional
             (    ) Common Shares may be purchased during the period commencing four years from the date hereof and terminating at 5:00 P.M. on the Expiration
Date. 
  
 2. NATURE OF OPTION. Such Options to
purchase the Option Shares are not intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended, relating to “incentive stock options”. 
  
 3. EXERCISE PRICE. The exercise price of each of the Option Shares shall be
             (    ) (the “Option Price”). The Company shall pay all original issue or transfer taxes on the exercise of the Option. 

 4. EXERCISE OF OPTIONS. The Option shall be exercised in accordance with the provisions of
the Plan. As soon as practicable after the receipt of notice of exercise (in the form annexed hereto as Exhibit A) and payment of the Option Price as provided for in the Plan, the Company shall tender to the Optionee certificates issued in the
Optionee’s name evidencing the number of Option Shares covered thereby. 
  
 5. TRANSFERABILITY. The Option shall not be transferable other than by will or the laws of descent and distribution and, during the Optionee’s lifetime, shall not be exercisable by any person other
than the Optionee. 
  
 6. INCORPORATION BY
REFERENCE. The terms and conditions of the Plan are hereby incorporated by reference and made a part hereof. 
  
 7. NOTICES. Any notice or other communication given hereunder shall be deemed sufficient if in writing and hand delivered or sent by
registered or certified mail, return receipt requested, addressed to the Company, 26 Harbor Park Drive, Port Washington, New York 11050, Attention: Secretary and to the Optionee at the address indicated below. Notices shall be deemed to have been
given on the date of hand delivery or mailing, except notices of change of address, which shall be deemed to have been given when received. 
  
 8. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns. 
  
 9.
ACCELERATION. In the event of any (i) consolidation or merger of the Company with or into another company where the Company is not the survivor and the directors of the Company immediately prior to the consolidation or merger do
not constitute a majority of the board of directors subsequent to the consolidation or merger, or (ii) conveyance of all or substantially all of the assets of the Company to another company, (such consolidation, merger or conveyance of assets a
“Change in Control”) each then outstanding Option (x) shall, immediately prior to the effective date of the Change in Control, become fully exercisable, provided that no acceleration of exercisability shall occur with respect to an
outstanding Option if and to the extent such Option is, in connection with the Change in Control, to be assumed or otherwise continued in full force or effect by the successor entity (or parent thereof) pursuant to the terms of the Change in Control
transaction, and (y) shall upon exercise thereafter entitle the holder thereof to such number of shares of Common Stock or other securities or property to which a holder of shares of Common Stock of the Company would have been entitled upon
such Change in Control. 
  
 10. ENTIRE AGREEMENT.
This Agreement, together with the Plan, contains the entire understanding of the parties hereto with respect to the subject matter hereof and may be modified only by an instrument executed by the party sought to be charged. 

 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above
written. 
  

	
	NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
	
	By:
	  
  

 Jonathan Friedman, Chief Legal Officer and Secretary

	  
  

 Signature of Optionee

	  
  

 Name of Optionee

	  
  

 Address of Optionee

 EXHIBIT A 
  

NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. 
  
 OPTION EXERCISE FORM 
  
 The undersigned hereby irrevocably elects to exercise the within Option dated
                     to the extent of purchasing
                     Common Shares of National Medical Health Card Systems, Inc. The undersigned hereby makes a payment of
$                     in payment therefor. 
  

	
	  
 Name of
Optionee

	
	  
 Signature of
Optionee

	
	  
 Address of
Optionee

	
	  
 Date

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}]]