Document:

ex10-1.htm

Exhibit 10.1

June 9, 2014

Mr. Billy Meadow President

MV Portfolios, Inc.

I 0752 Deerwood Park, Suite 100

Jacksonville, FL 32256

Dear Mr. Meadow:

We are pleased that MV Portfolios, Inc. ("MV" or the "Company") has decided to retain Maxim Group LLC ("Maxim") to provide general financial advisory and investment banking services to the Company as set forth herein. This letter agreement ("Agreement'') will confirm Maxim's acceptance of such retention and set forth the terms of our engagement.

1.  Retention.  The Company hereby retains Maxim as its non-exclusive financial advisor and investment banker to provide general financial advisory and investment banking services, and Maxim accepts such retention on the terms and conditions set forth in this Agreement. In connection with this Agreement, Maxim may provide certain or all of the following services (collectively referred to as the "Advisory  Services"):

(a)  provide a valuation analysis of the Company including:

I.  Comparable company analysis;

II.  Precedent transaction analysis;

(b)  assist management of the Company and advise the Company with respect to its strategic planning process and business plans including an analysis of markets, positioning, financial models, organizational structure, potential strategic alliances and capital requirements;

(c)  advise the Company on matters relating to its capitalization including a potential up-li sting;

(d)  advise the Company in connection with, and assist the Company in consummating, a private placement or public offering of its securities (the exact terms and conditions regardin g such a contemplated assignment shall be memorialized under a separate agreement) , including but not necessarily in connection with or in anticipation of its uplisting;

(e)  advise the Company in connection with, and assist the Company in obtaining, a bridge financing (the exact terms and conditions regarding such a contemplated  assignment shall be memorialized under a separate agreement), if required , prior to any private placement or public  offering of its securities;

(f)  assist management of the Company with the preparation of the Company's marketing materials and investor presentations;

(g)  assist the Company with strategic introductions;

(h)  work closely with the Company's management team to develop a set of long and short-term goals with special focus on enhancing corporate and shareholder value.  This will include assisting the Company in determining key business actions, including assistance with strategic partnership discussions and review of financing requirement s, intended to help enhance shareholder value and exposure to the investment community;

(i)  advise the Company on potential financing alternatives and merger and acquisition criteria and activity, including facilitation and negotiation of any financial or structural aspects of such alternatives; and

  

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(j)  provide such other financial advisory and investment banking services upon which the parties may mutually agree.

It is expressly understood and agreed that Maxim shall be required to perform only such tasks as may be necessary or desirable in connection with the rendering of its services hereunder and therefore may not perform all of the tasks enumerated above during the term of this Agreement. Moreover , it is further understood that Maxim need not perform each of the above-referenced tasks in order to receive the fees described in Section 3. It is further understood that Maxim's tasks may not be limited to those enumerated in this paragraph.

2.  Information. In connection with Maxim's activities hereunder, the Company will cooperate with Maxim and furnish Maxim upon request with all information regarding the business, operations, properties, financial condition, management and prospects of the Company (all such information so furnished being the "Information") which Maxim deems appropriate and will provide Maxim with access to the Company's officers, directors, employees, independent accountants and legal counsel. The Company represents and warrants to Maxim that all Information made available to Maxim hereunder will be complete and correct in all material respects and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in light of the circumstances under which such statements are or will be made. The Company further represents and warrants that any projections and other forward-looking information provided by it to Maxim will have been prepared in good faith and will be based upon assumptions which, in light of the circumstances under which they are made, are reasonable. The Company recognizes and confirms that Maxim: (i) will use and rely primarily on the Information and on information available from genera lly recogni zed public sources in performing the services contemplated by this Agreement without having independently verified the same; (ii) does not assume responsibility for the accuracy or completeness of the Information and such other information; and (iii) will not make an appraisal of any assets of the Company. Any advice rendered by Maxim pursuant to this Agreement may not be disclosed publicly without Maxim's prior written consent. Maxim hereby acknowledges that certain of the Information received by Maxim may be confidential and/or proprietary, including Information with respect  to the Company's technologies, products, business plans, marketing, and other Information which must be maintained by Maxim as confidential. Maxim agrees that it will not disclose such confidential and/or proprietary Information to any other companies in the industry in which the Company is involved.

3.  Compensation. As consideration for Maxim's services pursuant to this Agreement , Maxim shall be entitled to receive, and the Company agrees to pay Maxim, the following compensation:

(a)  The Company shall pay to Maxim a non-refundable monthly fee of $5,000 (USO) for the term of this Agreement; however in no event shall the Company pay fewer than six (6) monthly fee payments to Maxim. The monthly fee payments are payable at the beginning of each month upon execution of this Agreement until the termination of the Agreement (subject to the minimum six month time period detailed in the preceding sentence). The monthly fee payments shall be payable by wire or other immediately available funds. The fees appea1ing in Exhibit B (hereto, the "Fee Schedule") shall be earned by and paid to Maxim by the Company in connection with any Financings or Transactions (as such terms are defined hereafter) undertaken by the Company, the terms of which will be will be mutually agreed upon under separate advisory, placement agency and/or underwriting agreements. The fees enumerated in Exhibit B are separate and apart from the monthly fee payments enumerated earlier in this paragraph.

(b)  The Company will also issue to Maxim or its designees one million shares of the Company's Common Stock ("Common Stock"), based on a post-split (with California Gold Corp.) projection of fully diluted outstanding shares of 33.4 million of the surviving entity.. The shares of Common Stock will have unlimited piggyback registration rights and the same rights afforded other holders of the Company 's Common Stock.

  

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(c)  The Company and Maxim acknowledge and agree that , in the course of performing services hereunder, Maxim may communicate with (as the Company's advisor) or introduce the Company to third parties who may be interested in providing financing to the Company (a "Financing") or in entering into a transaction with the Company, including, without limitation, a merger, acquisition or sale of stock or assets (in which the Company may be the acquiring or the acquired entity), joint venture, strategic alliance or other similar transaction (any such transaction, a "Transaction"). The Company agrees that if during the term of this Agreement or within twelve (12) months from the effective date of the termination of this Agreement either the Company or any party to whom the Company was introduced by Maxim or who was contacted by Maxim on behalf of the Company in connection with its services for the Company hereunder proposes a Financing or any Transaction  involving the Company, then , if any such Financing or Transaction is consummated, the Company shall pay to Maxim fees in accordance with the Fee Schedule. Such fees shall be payable to Maxim in cash at the closing or closings of the Financing or Transaction to which it relates.

4.  Expenses. In addition to payment to Maxim of the compensation set forth in Section 3 hereof, the Company shall promptly upon request from time to time reimburse Maxim for all reasonable expenses (including, without limitation, fees and disbursements of counsel and all travel and other out-of-pocket expenses) incurred by Maxim in connection with its engagement hereunder. Maxim will provide the Company an invoice and copies of receipts pursuant to its expenses and such expenses shall not exceed $2,500 without prior authorization of the Company; provided that the foregoing limitation and consent shall not apply to legal fees.

5.  Indemnification. The Company agrees to indemnify Maxim in accordance with the indemnification and other provisions attached to this Agreement as Exhibit A (the "Indemnification Provisions"), which provisions are incorporated herein by reference and shall survive the termination or expiration of this Agreement.

6.  Future Rights. As additional consideration for its services hereunder and as an inducement to cause Maxim to enter into this Agreement, if at any time during the term of this Agreement or within twelve (12) months from the effective date of the termination of this Agreement, the Company proposes to effect a public offering of its securities on a US exchange, private placement of securities or other Financing, the Company shall offer to retain Maxim as lead book running manager of such offering, or as its exclusive agent in connection with such Financing or other matter, upon such terms as the parties may mutually agree, such terms to be set forth in a separate engagement letter or other agreement between the parties. Such offer shall be made in writing in order to be effective. The Company shall not offer to retain any other investment banking firm in connection with any such offering orFinancing, on terms more favorable than those discussed with Maxim without offering to retain Maxim on such more favorable terms. Maxim shall notify the Company within ten (10) days of its receipt of the written offer contemplated above as to whether or not it agrees to accept such retention. If Maxim should decline such retention, the Company shall have no further obligations to Maxim, except as specifically provided for herein.

7.  Other Activities. The Company acknowledges that Maxim has been, and may in the future be, engaged to provide services as an underwriter, placement agent, finder, advisor and investment banker to other companies in the industry in which the Company is involved. Subject to the  confidentiality provisions of Maxim contained in Section 2 hereof, the Company acknowledges and agrees that nothing contained in this Agreement shall limit or restrict the right of Maxim or of any member, manager , officer, employee, agent or representative of Maxim , to be a member, manager, partner, officer, director, employee, agent or representative  of, investor in, or to engage in, any other business, whether or not of a similar nature to the Company 's business, nor to limit or restrict the right of Maxim to render services of any kind to any other corporation, firm, individual or association. Maxim may, but shall not be required to, present opportunities to the Company.

  

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8.  Term and Termination; Survival of Provisions. Either Maxim or the Company may terminate this Agreement at any time upon thirty (30) days' prior written notice to the other party after the six (6) month anniversary of this Agreement. In the event of such termination, the Company shall pay and deliver to Maxim: (i) all compensation earned through the date of such termination ("Termination Date") pursuant to any provision of Section 3 hereof; (ii) all compensation which may be earned by Maxim after the Termination Date pursuant to Section 3 hereof; and (iii) and shall reimburse Maxim for all expenses incurred by Maxim in connection with its services hereunder pursuant to Section 4 hereof . All such fees and reimbursements due to Maxim pursuant to the immediately preceding sentence shall be paid to Maxim on or before the Termination Date (in the event such fees and reimbursements are earned or owed as of the Termination Date) or upon the closing of a Financing or Transaction or any applicable portion thereof (in the event such fees are due pursuant to the terms of Section 3 hereof). Notwithstanding anything expressed or implied herein to the contrary : (i) any other agreement entered into between Maxim and the Company may only be terminated in accordance with the terms thereof, notwithstanding an actual or purported termination of this Agreement, and (ii) the terms and provisions of Sections 3, 4, 5 (including, but not limited to, the Indemnification Provisions attached to this Agreement and incorporated herein by reference), 6, 8, 9, 10, 11, 15 and 17 shall survive the termination of this Agreement.

9.  Notices. All notices will be in writing and will be effective when delivered in person or sent via facsimile and confirmed by letter, to the party to whom it is addressed at the following addresses or such other address as such party may advise the other in writing:

To the Company:               Billy Meadow

              MV Portfolios,Inc.

              10752 Deerwood Park, Suite 100

              Jacksonville, FL 32256

              Telephone: (904) 586-8673

To Maxim:                             James Siegel, Esq.

                Maxim Group LLC

405 Lexington Avenue

New York, NY 10174

Attention: James Siegel

Telephone: (212) 895-3508

Facsimile: (212) 895-3860

Mr. Clifford Teller

Maxim Group LLC

405 Lexington Avenue

New York, NY10174

Attention: Clifford Teller

10.  Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement shall be enforced, governed by and construed in accordance with the l aws of New York without regard to principles of conflict of laws. Any controversy between the parties to this Agreement, or out of shall be resolved by arbitration before the Financial Industry Regulatory Authority ("FINRA") in New York City. The following arbitration agreement should be read in conjunction with these disclosures:

(a)  ARBITRATION IS FINAL AND BINDING ON THE PARTIES ;

(b)  THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO JURY TRIAL;

(c)  PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDING;

(d)  THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDING OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED; AND

 

  

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ARBITRATION AGREEMENT ANY AND ALL CONTROVERSIES, DISPUTES OR CLAIMS BETWEEN THE UNDERSIGNED AND YOU OR  YOUR AGENTS, REPRESENTATIVES, EMPLOYEES , DIRECTORS , OFFICERS OR CONTROL PERSONS, ARISING OUT OF, IN CONNECTION WITH, FROM OR WITH RESPECT TO (a) ANY PROVISIONS OF OR  THE VALIDITY OF THIS AGREEMENT OR ANY RELATED AGREEMENTS, (b) THE RELATIONSHIP OF THE PARTIES HERETO, OR (c) ANY CONTROVERSY ARISING OUT OF YOUR BUSINESS SHALL BE CONDUCTED PURSUANT TO THE CODE OF ARBITRATION PROCEDURE OF FINRA. ARBITRATION MUST BE COMMENCED BY SERVICE OF A WRITTEN DEMAND FOR ARBITRATION OR A WRITTEN NOTICE OF INTENTION TO ARBITRATE. IF YOU ARE A PARTY TO SUCH ARBITRATION, TO THE EXTENT PERMITTED BY THE RULES OF THE APPLICABLE ARBITRATION TRIBUNAL, THE ARBITRATION SHALL BE CONDUCTED IN NEW YORK, NEW YORK. THE DECISION AND AWARD OF THE ARBITRA TORS(S) SHALL BE CONCLUSIVE AND BINDING UPON ALL PARTIES, AND ANY JUDGMENT UPON ANY AWARD RENDERED MAY BE ENTERED IN A COURT HAVING JURISDICTION THEREOF, AND NEITHER PARTY SHALL OPPOSE SUCH ENTRY.

11.  Amendments. This Agreement may not be modified or amended except in a writing duly executed by the parties hereto.

12.  Headings. The section headings in this Agreement have been inserted as a matter of reference and are not part of this Agreement.

13.  Successors and Assigns. The benefits of this Agreement shall inure to the parties hereto, their respective successors and assigns and to the indemnified parties hereunder and their respective successors and assigns, and the obligations and liabilities assumed in this Agreement shall be binding upon the parties hereto and their respective successors and assigns.  Notwithstanding anything contained herein to the contrary, neither Maxim nor the Company shall assign any of its obligations hereunder without the prior written consent of the other party.

14.  No Third Party Beneficiaries. This Agreement does not create, and shall not be construed as creating, any rights enforceable by any person or entity not a party hereto, except those entitled to the benefits of the Indemnification Provisions. Without limiting the foregoing, the Company acknowledges and agrees that Maxim is not being engaged as, and shall not be deemed to be, an agent or fiduciary of the Company's stockholders or creditors or any other person by virtue of this Agreement or the retention of Maxim hereunder , all of which are hereby expressly waived.

15.  Waiver. Any waiver or any breach of any of the terms or conditions of this Agreement shall not operate as a waiver of any other breach of such terms or conditions or of any other term or condition, nor shall any failure to insist upon strict performance or to enforce any provision hereof on any one occasion operate as a waiver of such provision or of any other provision hereof or a waiver of the right to insist upon strict performance or to enforce such provision or any other provision on any subsequent occasion. Any waiver must be in writing.

16.  Counterparts. This Agreement may be executed in any number of counterparts and by facsimile transmission, each of which shall be deemed to be an original instrument, but all of which taken together shall constitute one and the same agreement. Facsimile signatures shall be deemed to be original signatures for all purposes.

17.  Disclaimers. Maxim and the Company further agree that neither Maxim nor any of its affiliates or any of its/their respective officers, directors, controlling persons (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act of 1934), employees or agents shall have any liability to the Company, its security holder s or creditors, or any person asserting claims on behalf of or in the right of the Company (whether direct or indirect, in contract, tort, for an act of negligence or otherwise) for any losses, fees, damages, liabilities, costs, expenses or equitable relief arising out of or relating to this Agreement or the Advisory Services rendered herein , except for losses, fees, damages, liabilities, costs or expenses that arise out of or are based on any action of or failure to act by Maxim and that are finally and fully judicially determined to have resulted solely from the gross negligence or willful misconduct of Maxim.

  

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MV Portfolios, Inc.

June 2014

Exhibit A

INDEMNIFICATION PROVISIONS

Capitalized terms used in this Exhibit shall have the meanings ascribed to such tenns in the Agreement to which this Exhibit is attached.

The Company agrees to indemnify and hold harmless Maxim and each of the other Indemnified Parties (as hereinafter defined) from and against any and all losses, claims, damages, obligations , penalties, judgments, awards, liabilities, costs, expenses and disbursements, and any  and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise (including, without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing, pursing or defending any such action, suit, proceeding or investigation (whether or not in connection with litigation in which any Indemnified Party is a party)) (collectively, "Losses"), directly or indirectly, caused by, relating to, based upon, arising out of, or in connection with, Maxim 's acting for the Company, including , without limitation , any act or omission by Maxim in connection with its acceptance of or the performance or non-performance of its obligations under the Agreement between the Company and Maxim to which these indemnification provisions are attached and form a part (the "Agreement"), any breach by the Company of any representation, warranty, covenant or agreement contained in the Agreement (or in any instrument, document or agreement relating thereto, including any Agency Agreement), or the enforcement by Maxim of its rights under the Agreement or these indemnification provisions, except to the extent that any such Losses are found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from the gross negligence or willful misconduct of the Indemnified Party seeking indemnification hereunder. The Company also agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company for or in connection with the engagement of Maxim by the Company or for any other reason, except to the extent that any such liability is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from such Indemnified Party's gross negligence or willful misconduct.

These Indemnification Provision s shall extend to the following persons (collectively, the "Indemnified Parties"): Maxim, its present and former affiliated entities, managers, members, officers, employees, legal counsel, agents and controlling persons (within the meaning of the federal securities laws), and the officers, directors, partners, stockholders, members, managers, employees , legal counsel, agents and controlling persons of any of them. These indemnification provisions shall be in addition to any liability which the Company may otherwise have to any Indemnified Party.

If any action, suit, proceeding or investigation is commenced, as to which an Indemnified Party proposes to demand indemnification, it shall notify the Company with reasonable promptness; provided, however , that any failure by an Indemnified Party to notify the Company shall not relieve the Company from its obligations hereunder. An Indemnified Party shall have the right to retain counsel of its own choice to represent it, and the fees, expenses and disbursements of such counsel shall be borne by the Company. Any such counsel shall, to the extent consistent with its professional responsibilities, cooperate with the Company and any counsel designated by the Company. The Company shall be liable for any settlement of any claim against any Indemnified Party made with the Company 's written consent. The Company shall not, without the prior written consent of Maxim , settle or compromise any claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent (i) includes, as an unconditional term thereof, the giving by the claimant to all of the Indemnified Parties of an unconditional release from all liability in respect of such claim, and (ii) does not contain any factual or legal admission by or with respect to an Indemnified Party or an adverse statement with respect to the character, professionalism,

  

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If the terms of our engagement as set forth in this letter are satisfactory to you, please confirm by signing and returning one copy of this letter, together with a check or wire for $5,000 representing the initial monthly payment in connection with the Agreement.

Very truly yours,

MAXIM GROUP LLC

By:  /s/ John H. Shaw, III

John H. Shaw, III

Managing Director, Investment Banking

By:  /s/ Clifford Teller

Clifford Teller

Executive Managing Director, & Head of Investment Banking

Agreed to and accepted this 9th day of June, 2014

MV PORTFOLIOS, INC.

/s/ Billy Meadow

Name:  Mr. Billy Meadow

Title:  President

  

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MV Portfolios, Inc.

June 2014

Exhibit B

FEE SCHEDULE

Capitalized term s used in this Exhibit shall have the meanings ascribed to such tem1s in the Agreement to which this Exhibit is attached.

1.  For any Financing, the Company shall:

(i)  pay Maxim a cash fee of eight percent (8.0%) of the amount of capital raised, invested or committed; and

(ii)  pay Maxim a cash fee for unallocated expenses of one percent(l.0%) of the amount of capital raised, invested or committed; and

(iii)  deliver a warrant to Maxim (the "Agent Warrant") to purchase shares of the Company's common stock (the "Common Stock") equal to nine percent (9.0%) of the number of shares of Common Stock underlying the securities issued in the Financing. Such Agent Warrant will be issued at each Closing and shall provide, among other things, that the Agent Warrant shall (i) be exercisable at an exercise price of 110% to the price of the securities (or the exercise price of the securities) issued to the investors in the Financing, (ii) expire five (5) years from the date of issuance, (iii) contain any anti-dilution protection provided to the investors in the Financing, if any, (iv) include customary registration rights, including the registration rights provided to the investors, (v) contain provision s for cashless exercise and (vi) include such other terms as are normal and customary for warrants of this type.

2.  Transaction Fees:

The Transaction Fees shall be payable to Maxim in cash at the closing or closings of the Transaction to which it relates and shall be equal to three percent (3%) of Transaction consideration and defined below.  The amount of consideration paid in a Transaction shall include, for purposes of calculating such fee, all forms of consideration paid or received, directly or indirectly, by the Company and/or its stockholders in such Transaction, including, without limitation, cash, securities, notes or other evidences of indebtedness, assumption of liabilities (whether by operation of law or otherwise), or any combination thereof.  If all or portion of the consideration paid in the Transaction is other than cash or securities, then the value of such non­cash consideration shall be the fair market value thereof on the date the Transaction is consummated as mutually agreed upon in good faith by the Company and Maxim.  If such non­cash consideration consists of common stock, options, warrants or rights for which a public trading market existed prior to the consummation for the Transaction , then the value of such securities shall be determined based upon the closing or last sales price thereof on the date of the consummation of the Transaction. If such non-cash consideration consists of newly-issued, publicly-traded common stock, options, warrants or rights for which no public trading market existed prior to the consummation of the Transaction, then the value thereof shall be the average of the closing prices for the twenty (20) trading days subsequent to the fifth trading day after the consummation of the Transaction. In such event, the fee payable to Maxim pursuant to this Section 3 shall be paid on the thirtieth (301h) trading day subsequent to consummation of the Transaction.  If no public market exists for the common stock, options, warrants or other rights issued in the Transaction, then the value thereof shall be as mutually agreed upon in good faith by the Company and Maxim. If the non-cash consideration paid in the Transaction consists of preferred stock or debt securities (regardless of whether a public trading market existed for such preferred stock or debt securities prior to consummation of the Transaction or exists thereafter), the value thereof shall be the maximum liquidation value (without regard to accrued dividends) expertise or reputation of any Indemnified Party or any action or inaction of any Indemnified Party.

  

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In order to provide for just and equitable contribution, if a claim for indemnification pursuant to these indemnification provisions is made but it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that such indemnification may not be enforced in such case, even though the express provisions hereof provide for indemnification in such case, then the Company shall contribute to the Losses to which any Indemnified Party may be subject (i) in accordance with the relative benefit s received by the Company and its stockholders, subsidiaries and affiliates, on the one hand, and the Indemnified Party, on the other hand, and (ii) if (and only it) the allocation provided in clause (i) of this sentence is not permitted by applicable law, in such proportion as to reflect not only the relative benefits, but also the relative fault of the Company, on the one hand , and the Indemnified Party, on the other hand, in connection with the statements, acts or omissions which resulted in such Losses as well as any relevant equitable considerations. No person found liable for a fraudulent misrepresentation shall be entitled to contribution from any person who is not also found liable for fraudulent misrepresentation. The relative benefits received (or anticipated to be received) by the Company and it stockholders, subsidiaries and affiliates shall be deemed to be equal to the aggregate consideration payable or receivable by such parties in connection with the transaction or transactions to which the Agreement relates relative to the amount of fees actually received by Maxim in connection with such transaction or transactions. Notwithstanding the foregoing, in no event shall the amount contributed by all Indemnified Parties exceed the amount of fees previously received by Maxim pursuant to the Agreement.

Neither termination nor completion of the Agreement shall affect these Indemnification Provisions which shall remain operative and in full force and effect. The Indemnification Provisions shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Indemnified Parties and their respective successors, assigns, heirs and personal representatives.a50960096ex10_1.htm

Exhibit 10.1

 

 

NIC Inc.

Management Annual Incentive Plan for Senior Executives

(as approved October 9, 2014)

Objective – The Management Annual Incentive Plan for Senior Executives  ("MAIPSE" or "Plan") is intended (i) to attract, retain, and reward key executives of NIC Inc. ("NIC" or "the Company") (ii) to promote execution against annual performance goals and (iii) with respect to any Potential Covered Employee, to operate as a Plan within or under an "umbrella" plan previously adopted and titled the NIC Inc. Executive Incentive Plan ("Executive Incentive Plan").  The Plan is designed to:

	
·  

	
   Reinforce strategically important operational and financial objectives;

	
·  

	
   Contribute to competitive compensation opportunities; and

	
·  

	
   Align the interests of Participants with those of NIC's stockholders.

Definitions – Certain terms are defined in Attachment A for the purposes of the Plan.

Administration – The Plan shall be administered by the Compensation Committee of the Board of Directors (the "Committee"); provided, however, that the Committee, in its discretion, may delegate to certain officers or employees of the Company the responsibility for handling certain day-to-day operational aspects of the Plan.  Any reference to the Plan Administrator hereinafter which relates to administration of the Plan will refer to the Committee and/or any officer(s) or employee(s) to whom the Committee has delegated responsibilities or powers, except to the extent such delegation of a responsibility or power would cause an Award that the Committee intends to qualify as "performance-based compensation," as described in Code Section 162(m)(4)(C), to fail to qualify as such.

The Committee has discretion, subject to the provisions of this Plan and the Executive Incentive Plan, and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board of Directors, to (i) interpret the Plan; (ii) prescribe, amend, and rescind any rules and regulations necessary or appropriate for the administration of the Plan; and (iii) make such other determinations and take such other action as it deems necessary or advisable.  Without limiting the generality of the foregoing sentence, the Committee may, in its sole discretion, treat all or any portion of any period during which a Participant is on military leave or on an approved leave of absence (as defined by the Committee) from the Company as a period of employment of such Participant by the Company for the purpose of this Plan.  Any interpretation, determination, or other action made or taken by the Committee shall be final, binding, and conclusive on all interested parties.

If the Committee determines that a Participant may be a Covered Employee at the end of the Company's fiscal year during which the value of an Award is to be paid pursuant to the terms of the Plan and recognized as income to the Participant for federal income tax purposes (a "Potential Covered Employee"), the Committee may determine to make the Award qualify as "performance-based compensation" under Code Section 162(m)(4)(C). If so, the Committee shall exercise its powers under this Plan in a manner consistent with Code Section 162(m) and Treas. Reg. § 1.162-27.

Term of the Plan – The Plan will be considered in effect as of the start of the Plan Year, subject to approval of the Committee and ratification of the Board of Directors of the Company (the "Board"). The Plan will be effective for one Plan Year unless terminated earlier by action of the Board or Committee.  Awards granted hereunder prior to such termination will continue to be effective in accordance with the terms and conditions of the Plan. NIC anticipates that a successor to the Plan will be established each year, but has no obligation to establish any such successor plan.

 

  

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Eligibility – The Plan covers select employees of the Company, as determined by the Committee.  Eligibility under the Plan or participation in the Plan is not a guarantee of employment, and does not guarantee eligibility or participation in any successor plan.  To be eligible for the full Award under the Plan, a Participant must remain in the Company's employ for the entire Plan Year, except as otherwise provided in this Plan or the Participant's employment agreement with the Company.

 

 

For individuals that are not eligible under the Plan at the start of the Plan Year, the following guidelines apply:

	
1.  

	
Newly-hired Employee

At the sole discretion of the Committee, a newly-hired employee shall be eligible for an Award if the individual commences employment with the Company at or prior to the first day of the third quarter of the Plan Year (i.e., minimum six months of employment for the Plan Year).  No Award under the Plan shall be granted if employment commences more than six months after commencement of the Plan Year.

	
2.  

	
Mid-period Promotion

At the sole discretion of the Committee, an employee who is promoted into eligibility during the Plan Year shall be eligible if the promotion becomes effective at or prior to the first day of the third quarter of the Plan Year (i.e., promotion becomes effective a minimum of six months prior to the end of the Plan Year).  No Award shall be granted if the promotion becomes effective less than six months prior to the end of the Plan Year.

	
3.  

	
Establishment of Performance Goals

If the Committee intends the Award to qualify as "performance-based compensation" under Code Section 162(m)(4)(C), the Committee may establish a Section 162(m) Performance Goal specifically for the individual, or may apply the limitations and requirements of such "performance-based compensation" directly to the Award, using performance measures and goals authorized in the Executive Incentive Plan. Any performance goal intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C) shall be substantially uncertain as of time the goal is established, and shall be established before 25% of the performance period applicable to the Participant has elapsed.

Termination of Service – In the event a Participant separates from service to the Company prior to the end of a Plan Year, the Award made to the Participant will be treated as follows:

	
1.  

	
Death or Disability

If the applicable performance goals are ultimately satisfied, a Participant who dies or experiences a Disability during the Plan Year will receive (or the Participant's estate will receive) a pro rata Award based on actual days worked during the Plan Year, based on actual performance as measured at the end of the Plan Year.  Accordingly, for the avoidance of doubt, such award will be made only if the performance goals are attained. The Award will be paid as soon as practicable following certification of attainment of the applicable performance goals.

	
2.  

	
Retirement

If the applicable performance goals are ultimately satisfied, a Participant who retires during a given Plan Year will receive a pro rata Award based on actual performance as measured at the end of the Plan Year, subject to any required severance agreement.  Accordingly, for the avoidance of doubt, such award will be made on account of a Participant's retirement only if the performance goals are attained. The Award will be paid as soon as practicable following certification of attainment of the applicable performance goals.

	
3.  

	
Other Termination

All other termination events will be treated in accordance with the provisions set forth in a Participant's employment agreement; provided, however, that any provision of an employment agreement that requires vesting of any portion of an Award for a Covered Employee shall have no effect if the Committee intends such Award to qualify as "performance-based compensation" under Code Section 162(m)(4)(C) (unless such vesting occurs as the result of the Participant’s death or Disability).

 

  

  

  

 

Incentive Opportunity – The Committee will establish incentive opportunities under the Plan for each Participant during the "applicable period," which is no later than 90 days after the start of the Plan Year (or if shorter, before 25% of the performance period applicable to the Participant has elapsed for Awards subject to Code Section 162(m)). The Committee will, in its sole discretion and within the applicable period, establish Threshold, Target, and Superior goals associated with each performance measure and determine the weighting of each measure for the purposes of incentive opportunities under the Plan.  Generally, incentive opportunities will be established as a percentage of a Participant's base salary, and the Award percentage earned will be applied to a Participant's base salary (as described in this Plan under "Award Payout"). At the end of the Plan Year, a Participant may earn an Award equal to, greater than, or lesser than (including zero) the target opportunity, subject to Threshold, Target, and Superior levels of performance, as established by the Committee in its sole discretion.  No payments will be awarded if threshold performance is not achieved, and no additional payments above the maximum incentive amount will be awarded for performance in excess of the Superior level, except as determined by the Committee, in its sole discretion, subject to limitations required to maintain the intended purpose of the Plan and of any particular Award, including prohibitions on discretionary increases applicable to Awards that the Committee intends to qualify as "performance-based compensation," as described in Code Section 162(m)(4)(C).

Performance Measurement Period – Except as otherwise provided in the Plan, the measurement period is the Plan Year, coinciding with the Company's fiscal year beginning on January 1 and ending on December 31.

Performance Measures and Goals – The Committee will establish the performance measures and associated weightings for incentive calculations under the Plan.  The Committee may modify the definition of performance measures under the Plan and/ or substitute new measures for new Plan Years.

These performance measures can be one or more of the following consolidated (company-wide) or subsidiary, division or operating unit financial measures; provided that for any Award that is intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C), either (a) payment of any amount pursuant to the Award will be subject to achieving the Section 162(m) Performance Goal established by the Committee for the Participant under the Executive Incentive Plan, or (b) the performance measures shall be one or more of those measures described in section 4 of the NIC Executive Incentive Plan: (1) pre-tax or after-tax income (before or after allocation of corporate overhead and bonus), (2) net income (before or after taxes), (3) reduction in expenses, (4) pre-tax or after-tax operating income, (5) earnings (including earnings before taxes, earnings before interest and taxes, or earnings before interest, taxes, depreciation and amortization,  (6) gross revenue, (7) working capital, (8) profit margin or gross profits, (9) share price, (10) cash flow or cash flow per share (before or after dividends), (11) cash flow return on investment or cash flow return on invested capital,  (12) return on capital (including return on total capital or return on invested capital), (13) return on assets or net assets, (14) market share, (15) pre-tax or after-tax earnings per share, (16) pre-tax or after-tax operating earnings per share,  (17) total stockholder return, (18) growth measures, such as revenue growth or operating income growth, as compared with a peer group or other benchmark, (19) economic value-added models or equivalent metrics, (20) comparisons with various stock market indices, (21) improvement in or attainment of expense levels or working capital levels, (22) operating margins, gross margins or cash margins, (23) year-end cash, (24) debt reductions, (25) stockholder equity, (26) regulatory achievements, (27) implementation, completion or attainment of measurable objective with respect to research, development, products or projects, production volume levels, acquisitions and divestitures and recruiting and maintaining personnel,  (28) customer satisfaction, (29) operating efficiency, productivity ratios, (30) strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market penetration, geographic business expansion goals (including accomplishing regulatory approval for projects), cost or cost savings targets, accomplishing critical milestones for projects, and goals relating to acquisitions or divestitures, or any combination thereof (in each case before or after such objective income and expense allocations or adjustments as the Committee may specify within the applicable period).

 

  

  

  

 

Performance goals may be expressed on an absolute and/ or relative basis, may be based on or otherwise employ comparisons based on current internal targets, the past performance of the Company or the performance of one or more subsidiaries, divisions or operating units of the Company or the past or current performance of other companies, or any combination thereof and in the case of earnings-based measures, may use or employ comparisons relating to capital (including, but not limited to, the cost of capital), stockholders' equity and/ or shares outstanding, or to assets or net assets.  Regardless of whether the Participant is a Covered Employee, and as described in Treas. Reg. § 1.162-27(e), (a) the performance goals shall be objective, (b) the achievement of such goals be "substantially uncertain" at the time that they are established, and (c) the Award’s compensation formula shall be defined in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the performance goal has been met and what amount of compensation would be paid as a result. Notwithstanding the foregoing, the Committee shall have the right to apply “negative discretion,” within the meaning of Treas. Reg. § 1.162-27(e)(2)(iii), to reduce or eliminate the compensation payable as a result of such performance.

The Committee, in its sole discretion, may determine during the applicable period to specifically exclude any or all of the following from performance calculations under the Plan: effects of extraordinary, unusual, special, or one-time events; effects of legal, accounting, or regulatory changes; effects of events that are outside of management's control; effects of events that are not reflective of a decision made (or area overseen) by management; effects of "preventive" measures taken by management; effects from the disposal of a business segment; or effects of tax adjustments. The Committee may also, in its sole discretion, specifically exclude any or all of the foregoing events or effects after the end of the applicable period, to the extent such events or effects were not reasonably anticipated to occur; provided, however, that the Committee’s discretion to exclude such events or effects after the end of the applicable period shall be limited to “negative discretion,” within the meaning of Treas. Reg. § 1.162-27(e)(2)(iii), to the extent necessary for any Award that is intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C) to maintain such qualification.

Performance measures, their weightings, and associated goals for the Plan Year are set forth in Attachment B.

Award Payout - Awards will be paid to Participants as soon as practicable in the year following the Plan Year, after the Committee certifies results of the performance measures. No interest shall accrue or be paid on any Awards, even if payment is substantially delayed.  Awards that are determined as a percentage of a Participant's base salary will be calculated using the Participant’s actual base salary as of May 1st for the Year in which the performance goals are established and the Performance Award is payable, unless the Award is intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C).

If the Award is intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C), then either (a) the Award will be calculated as a percentage of the Participant's actual base salary as of the time the performance goal was established, or (b) if a Section 162(m) Performance Goal applies to the Participant, the compensation payable to Participant under the Award shall be limited by the Section 162(m) Performance Goal Formula based upon the Participant's actual base salary as of the time the performance goal was established.

Payment under the Plan is subject to compliance by the Participant with any written agreement between the Participant and the Company, including an employment agreement, non-compete agreement, or other agreement relating to confidential information.  If the Participant breaches any such agreement, he/ she shall immediately forfeit his/ her right to receive any unpaid amounts earned under the Plan.

The Company has the right to deduct from all net amounts paid under the Plan any federal, state, or local taxes required by law to be withheld with respect to such payments.

 

  

  

  

 

Miscellaneous Provisions

	
1.  

	
The Plan may be amended or discontinued by the Committee at any time without prior notification to Participants.  However, no amendment may adversely affect an outstanding Award made under the Plan.

	
2.  

	
The Committee maintains sole discretion to adjust Awards under the Plan downward for legitimate and reasonable performance reasons.

	
3.  

	
The Committee will, to the extent permitted by law, have the sole and absolute authority to make retroactive adjustments to any Awards paid to Participants where the payment was predicated upon the achievement of erroneous financial or strategic business results, or where the Participant engaged in intentional misconduct that increased his/ her incentive income. Where applicable, the Company will seek to recover any amount determined to have been inappropriately received by a Participant under the Plan.

	
4.  

	
The Committee may obtain such agreements or undertakings, if any, as the Committee may deem necessary or advisable to assure compliance with any law or regulation of any governmental authority.  The Plan and any Award made hereunder shall be subject to all applicable federal and state laws, rules and regulations, and to such approvals by any government or regulatory agency as may be required.

	
5.  

	
No member of the Board or Committee, nor any officer or employee of the Company acting on behalf of the Board or Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan.  All members of the Board or Committee, and each and any officer or employee of the Company acting on their behalf will, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation.

	
6.  

	
The interests of Participants under the Plan are not subject to claims, indebtedness, attachment, execution, garnishment, or other legal or equitable process.  Participant interests under the Plan may not be transferred or assigned, other than by will or by the laws of descent and distribution.  If the Participant attempts to alienate, assign, pledge, hypothecate, or otherwise dispose of Awards or other rights under the Plan, except as provided for in this Plan, or in the event of any levy, attachment, execution, or similar process upon the right or interest conferred by this Plan, the Board may terminate the Participant's Award by notice to him/ her, and it shall thereupon become null and void.

 

 

  

  

  

Attachment A – Definitions

	
         1.  

	
"Award" means, a performance compensation opportunity granted to a Participant under (and subject to the terms of) this Plan, which provides for a cash payment if specified performance criteria are satisfied and the Participant complies with all other criteria under the Plan.

	
         2.  

	
"Code" means the Internal Revenue Code of 1986, as amended, and any Internal Revenue Code adopted in the future to replace the Internal Revenue Code of 1986.

	
         3.  

	
"Covered Employee" means Covered Employee as defined in the NIC Executive Incentive Plan.

	
         4.  

	
"Disability" means except as otherwise provided by the Committee, that the Participant has become eligible to receive long-term disability benefits under a Company-sponsored long-term disability plan, if any.

	
         5.  

	
"Employee" refers to any person who is employed by the Company, is on the Company's payroll, and whose wages are subject to withholding under the Federal Insurance Contributions Act, codified in Code § 3121.

	
         6.  

	
"Participant" shall mean an Employee of the Company to whom an Award is granted under this Plan.

	
         7.  

	
"Plan Administrator" means the individual or committee appointed or designated by the Committee to administer the Plan, if not the Committee itself.

	
         8.  

	
"Plan Year" refers to the active twelve-month period of performance under the Plan, which is the same period as NIC’s fiscal year.

	
         9.  

	
"Potential Covered Employee" means a Participant the Committee determines may be a Covered Employee at the end of the Company's fiscal year during which the value of an Award is to be paid pursuant to the terms of the Plan and recognized as income by the Participant for federal income tax purposes.

	
10.  

	
"Retirement" means a Participant's date of termination which is designated by the Committee as a "Retirement" for purposes of the Plan or, if applicable, a Participant's date of termination after the normal retirement date specified in a plan maintained by the Company under which the Participant is covered, and which is qualified under section 401(a) of the Code.

	
11.  

	
"Section 162(m) Performance Goal" means the Plan Year performance goal established by the Committee under the Executive Incentive Plan, no later than 90 days after the start of the Plan Year, which must be achieved and certified by the Committee in order for a Participant who was designated by the Committee as subject to such goal to receive any amount of compensation pursuant to his or her Award under this Plan. The Committee shall set forth the generally applicable Section 162(m) Performance Goal for the Plan Year in Attachment C to this Plan.

	
12.  

	
"Termination of Service" occurs when a Participant ceases to serve as an Employee of the Company, for any reason.

Attachment B – Performance Measures and Weightings

For [Year], designated Participants shall be subject to a Section 162(m) Performance Goal that must be achieved in order for payment of an Award under this Plan to occur. The designated Participants and the applicable Section 162(m) Performance Goal are set forth in Attachment C.

For [Year], all Participants will be evaluated based on the Company's consolidated operating results.  The Committee has determined the following three measures will be used for Plan purposes, each with the assigned weightings as described:

 

  

  

  

	
·  

	
Operating Income

	
  

	
[%] of a Participant's opportunity under the Plan – The definition of Operating Income is consistent with that term defined in generally accepted accounting principles and will be derived directly from the face of the consolidated statements of income included in the Company's Annual Reports on Form 10-K for the year ending December 31, [Year]

	
·  

	
Total Revenue

	
  

	
[%] of a Participant's opportunity under the Plan – The definition of Total Revenue is consistent with that term defined in generally accepted accounting principles and will be derived directly from the face of the consolidated statements of income included in the Company's Annual Reports on Form 10-K for the year ending December 31, [Year]

	
·  

	
Cash Flow Return on Invested Capital – excluding taxes paid

	
  

	
[%] of a Participant's opportunity under the Plan – Cash Flow Return on Invested Capital is defined as consolidated cash flow from operating activities plus income taxes paid minus capital expenditures, the difference of which is divided by the difference between total assets and non-interest bearing current liabilities.  Consolidated cash flow from operating activities and capital expenditures will be derived from the face of the consolidated statements of cash flows included in the Company's Annual Report on Form 10-K for the year ending December 31, [Year].  Total assets and non-interest bearing liabilities will be derived from the face of the consolidated balance sheets included in the Company's Annual Reports on Form 10-K for the year ending December 31, [Year].

For the [Year] Plan Year, the Committee determined a "Target" performance level for the Company for each of the above three performance criteria.  Performance of the Company at the Target level will result in an annual cash incentive for the Chief Executive Officer ("CEO") that is [%] of the executive's base salary and for the Chief Financial Officer ("CFO"), Chief Operating Officer ("COO") and Executive Vice President ("EVP") that is [%] of each executive’s base salary.  The Committee also determined a range of possible cash incentives above and below Target performance for the CEO, ranging from [%] of base salary for achieving "Threshold" performance to [%] of base salary for achieving "Superior" performance, and for each of the CFO, COO and EVP, ranging from [%] of base salary for achieving “Threshold” performance to [%] of base salary for achieving “Superior” performance.  For each of the CEO, CFO, COO and EVP, the maximum multiple of target (as a % of base salary) for each performance criteria at the “Superior” performance level is two (2) times target; however, the overall maximum incentive payout for all three performance criteria is limited to [ _ ] times target.  No payments are awarded under the plan if Threshold performance is not achieved, and except as otherwise provided in this Attachment B, no additional payments are awarded for performance in excess of the Superior level.  To the extent an Award is intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C), then either: (a) the Award will be calculated as a percentage of the Participant's actual base salary as of the time the performance goal was established, or (b) if a Section 162(m) Performance Goal applies to the Participant, the compensation payable to Participant under the Award shall be limited by the Section 162(m) Performance Goal Formula based upon the Participant's actual base salary as of the time the performance goal was established.

 

 

  

  

  

The following table sets forth threshold, target and superior Company performance levels for the performance criteria included in the Plan for the [Year] Plan Year and the performance levels for Annual Cash Incentives as described above:

 

	 	
Performance Levels

	
Performance Criteria

	
Threshold

	 	
Target

	 	
Superior

	 	 	 	 	 	 
	
Operating income ([%] of opportunity)

	
[%] of budget

	 	
Budget

	 	
[%] of Budget

	 	 	 	 	 	 
	
Total revenue ([%] of opportunity)

	
[%] of budget

	 	
Budget

	 	
[%] of Budget

	 	 	 	 	 	 
	
Cash flow return on invested capital – excluding taxes ([%] of opportunity)

	[%]	 	[%]	 	[%]

 

 

	 	
Performance Levels

	
Performance Levels Annual Cash Incentive as a Percentage of Base Salary

	
Threshold

	 	
Target

	 	
Superior

 

	
Chief Executive Officer

 

	[%]	 	[%]	 	
[%] (in the aggregate)

([%] of [%])

	  	 	 	 	 	  
	
     Any one or more measures (subject to aggregate limit)

	 	 	 	 	
[%]

([%] of [%])

	  	 	 	 	 	  
	
Chief Financial Officer,

Chief Operating Officer,

Executive Vice President

	[%]	 	[%]	 	
[%](in the aggregate)

([%] of [%])

	  	 	 	 	 	  
	
     Any one or more measures (subject to aggregate limit)

	 	 	 	 	
[%]

([%] of [%])

	  	 	 	 	 	  
	
Discretionary range of ± 20% of the above percentages at each performance level; provided, however, that for any Award intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C), then (a) if no Section 162(m) performance goal applies, there shall be no discretion to increase the range of the above percentages at any performance level; and (b) if a Section 162(m) Performance Goal applies, then the discretion to increase the range of the above percentages at any performance level shall be limited so that the compensation payable for the Award cannot exceed the amount of compensation payable pursuant to the Section 162(m) Performance Goal Formula.

	 	 	 	 	  
	  	 	 	 	 	  

 

Target performance levels for operating income and total revenues are based upon the Company's fiscal [Year] annual budget approved by the Board of Directors on  [Date], [Year].  Target performance for cash flow return on invested capital is based on the Company's [Year] return on invested capital and the expected average for  [Year] based on the Company’s fiscal [Year] annual budget.  Threshold and Superior performance levels in the table above were recommended by management and approved by the Committee based on the Company's past performance with respect to these metrics generally and relative to budget.

 

  

  

  

 

At the end of each Plan Year, the Committee shall have the option to evaluate actual Company performance against (i) Target expectations and (ii) broader market performance and/or the performance of the Company’s peer group used for executive compensation benchmarking, and consider adjustments to the annual cash incentive, if appropriate.  For example, in periods where the Company achieves Target performance and outperforms the market, the Committee may determine it appropriate to pay more than if the Company were to achieve Target performance but underperform the market.  The intent of this approach is to provide the Committee the option to adjust the annual cash incentive upward or downward with primary consideration to absolute performance against Target and secondary consideration to performance against market. The Committee may adjust the annual cash incentive component downward by up to 20% with respect to any Award, and may adjust the annual cash incentive component upward by up to 20% provided, however, that for any Award intended to qualify as "performance-based compensation" under Code Section 162(m)(4)(C), then (a) if no Section 162(m) Performance Goal applies, there shall be no discretion to increase the range of the above percentages at any performance level; and (b) if a Section 162(m) Performance Goal applies, then the discretion to increase the range of the above percentages at any performance level shall be limited so that the compensation payable for the Award cannot exceed the amount of compensation payable pursuant to the Section 162(m) Performance Goal Formula.

 

Example 1:

 

The CEO's annual cash incentive is being calculated.  The Company meets the Superior performance level for Operating Income, the Target performance level for Total Revenues and the Threshold performance level for Cash Flow Return on Invested Capital.

 

The CEO's annual cash incentive is computed as follows, and is subject to an achieved Section 162(m) Performance Goal:

 

	
Measure

	 	
% of 

Opportunity

	 	
Performance 

Level 

Attained

	 	
Cash Incentive 

as % of Base 

Salary

	 	
Award as 

% of Base 

Salary

	  	 	 	 	  	 	 	 	 
	
Operating Income

	 	[%]	 	
Superior

	 	[%]	 	[%]
	
Total Revenue

	 	[%]	 	
Target

	 	[%]	 	[%]
	
Cash Flow Return on Invested Capital

	 	[%]	 	
Threshold

	 	[%]	 	[%]
	
Total Cash Incentive

	 	 	 	  	 	 	 	[%]
	 	 	 	 	 	 	 	 	 
	
Total Cash Incentive subject to ± 20% adjustment for a range of [%] to [%] of base salary; provided, however, that total award cannot exceed the amount payable pursuant to the Section 162(m) Performance Goal Formula.

 

 

  

  

  

Example 2:

 

The CEO's annual cash incentive is being calculated.  The Company meets the Superior performance level for all three measures of Operating Income, Total Revenues and Cash Flow Return on Invested Capital.

 

The CEO's annual cash incentive is computed as follows, for an Award intended to qualify as "performance-based compensation," as described in Code Section 162(m)(4)(C):

 

	
Measure

	
% of 

Opportunity

	
Performance 

Level 

Attained

	
Cash Incentive 

as % of Base 

Salary

	
Award as 

% of Base 

Salary

	  	  	  	  	  
	
Operating Income

	
[%]

	
Superior

	
[%]

	
[%]

	
Total Revenue

	
[%]

	
Superior

	
[%]

	
[%]

	
Cash Flow Return on Invested Capital

	
[%]

	
Superior

	
[%]

	
[%]

	  	  	  	  	  
	
Total cash incentive - Preliminary (in excess of aggregate limit)

	
[%]

	  	  
	
Total cash incentive – Final, reduced to

	
[%]

	  	  	  	  	  
	
Total Cash Incentive subject to ± 20% adjustment for a range of [%] to [%] of base compensation; provided, however, that no adjustment to increase the compensation payable can occur unless the Award is also subject to an achieved Section 162(m) Performance Goal, and the amount payable pursuant to the Award cannot exceed the amount of compensation payable pursuant to the Section 162(m) Performance Goal Formula.

 

  

  

  

 

Attachment C – Section 162(m) Performance Goal

For Participants subject to a Section 162(m) Performance Goal, (a) no compensation will be paid pursuant to a Plan Award unless the Participant’s Section 162(m) Performance Goal is achieved, as certified by the Committee; and (b) no compensation paid pursuant to an Award may exceed the amount of compensation payable pursuant to the Section 162(m) Performance Goal Formula.

 

The following Participants are subject to the Section 162(m) Performance Goal established under the Executive Incentive Plan:

 

All Covered Employees

 

Except as otherwise specified in writing for any designated Participant, the Section 162(m) Performance Goal for [Year], as established under the Executive Incentive Plan, by the Committee no later than 90 days after the start of the [Year] fiscal year, shall be the following:

 

[Section 162(m) Performance Goal]

 

In determining the foregoing Section 162(m) Performance Goal, the following events or effects shall be excluded: [none].

 

If the Participant’s Section 162(m) Performance Goal is not achieved, no payment will owed pursuant to the Section 162(m) Performance Goal and no payment may be made pursuant to this Plan. If the Section 162(m) Performance Goal is attained (as certified by the Committee), the “Section 162(m) Performance Goal Formula” will be the lesser of (a) 200% of the Participant’s base salary at the time the Section 162(m) Performance Goal is established, or (b) $2 million (unless the Committee has, in writing, established a different formula for any Participant. In addition, however, the Committee shall exercise its ability to use “negative discretion” to reduce the amount payable under the Section 162(m) Performance Goal Formula, pursuant to the rules set forth in this Plan.

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