2012 Executive Bonus Plan

 

1.           The terms of the Plan have been established to attract, motivate, retain and reward the Company’s executive officers and other officers of the Company for driving the Company to achieve specific corporate objectives.

 

2.           The Plan provides for the payment of quarterly cash bonuses based upon Company financial targets and individual performance target objectives.

1.             Those eligible to participate in the Plan are the officers of the Company subject to Section 16 of the Securities Exchange Act of 1934, as amended and any other officers of the Company designated by the Compensation Committee (each, an “Officer” and collectively, the “Officers”).

1.           The Compensation Committee has determined that each individual Officer will have an “Individual Bonus Percentage” and an “Individual Target Bonus” as defined below, which will vary depending on such Officer’s position and responsibilities in the Company.

 

2.           Bonuses payable will be determined based upon achievement of corporate financial targets (the “Corporate Targets”) and individual targets established for each Officer (the “Individual Targets”).  Achievement of the Corporate Targets will represent 70% of the total bonus, and achievement of the Individual Targets will represent 30% of the total bonus. The Corporate Targets shall be comprised of four financial targets: (1) total revenue (“Total Revenue Target”), (2) gross profit (“Gross Profit Target”), (3) operating expense (“Operating Expense Target”) and (4) net income (“Net Income Target”).  The actual quarterly Corporate Targets are set forth in the operating plan for the year ending December 31, 2012, and approved by the Board of Directors (the “2012 Operating Plan”).

 

3.           The Corporate Targets are weighted 10% for each of the Total Revenue Target, Gross Profit Target and Operating Expense Target, and 40% for the Net Income Target, for a total of 70% of the total bonus. The Individual Bonus Earned (as defined below) for each quarter will depend on the “Corporate Target Achievement Multiplier” which shall equal the sum of: (a) actual total revenue for such quarter divided by the Total Revenue Target for the quarter multiplied by 0.1; (b) actual gross profit for such quarter divided by the Gross Profit Target for the quarter multiplied by 0.1; (c) actual operating expense for such quarter divided by Operating Expense Target multiplied by 0.1; and (d) actual net income for such quarter divided by the Net Income Target multiplied by 0.4 (subject to Section 6 below).

 

 

4.            The determination of the quarterly bonus based on the achievement of the Total Revenue Target, Gross Profit Target and Operating Expense Target shall be subject to the following:

4.           The determination of the quarterly bonus based on the achievement of the Net Income Target shall be subject to the following:

5.           The determination of the quarterly bonus shall also be subject to the following:

6.           Achievement of the Individual Targets, representing 30% of the Plan, shall be determined each quarter by the Chief Executive Officer for all Officers other than the Chief Executive Officer, pursuant to objectives established by the Chief Executive Officer for each such Officer. Achievement of the Individual Targets by the Chief Executive Officer shall be determined each quarter by the Compensation Committee, based upon objectives established by the Compensation Committee each quarter for the Chief Executive Officer.

D.	Individual Target Percentages

1.           “Individual Bonus Percentage” means the percentage of a respective Officer’s base salary that is targeted as a bonus payment under the Plan assuming exactly one hundred percent achievement by the Company of each of the Corporate Targets and Individual Targets (as defined below). The Individual Bonus Percentage for each Officer is set as a percentage of base salary and varies based upon the Officer’s position and responsibilities. The Individual Bonus Percentage for each Officer under the Plan is as follows:

2.           “Individual Target Bonus” for each fiscal year means the amount equal to a respective Officer’s base salary multiplied by such Officer’s Individual Bonus Percentage. The “Quarterly Individual Target Bonus” shall be the Individual Target Bonus divided by four. The “Individual Bonus Earned” means the amount equal to Individual Target Bonus multiplied by the Corporate Target Achievement Multiplier.

3.           In the 2012 Plan, the Individual Targets would represent 30% (increased from 20% in the 2011 Plan) of the total bonus. The Compensation Committee wanted a focus of 10% allocated to management on Cash Flow performance. As per the 2012 Operating Plan approved by the Board of Directors on December 19, 2011, the net increase in cash and cash equivalents is shown as $856,344. The Compensation Committee has set the Cash Flow target at a net increase of $6.2 million dollars, and would pay 10% bonus. If Management achieves a net increase of $4.2 million dollars or less, no bonus would be paid out. Any net increase above $4.2 million dollars up to $6.2 million dollars would be on a sliding scale from 0% to 10%. The Cash Flow portion of the bonus would be calculated and paid out on an annual basis only, for the Cash Flow performance for each calendar year.

E.	Plan Changes

1.           The Board or the Compensation Committee may modify the financial performance goals at any time based on changes in business conditions during the year and may grant bonuses to Officers even if the financial performance goals are not met. In its discretion, the Compensation Committee may, either at the time it grants an award under the Plan or at any time thereafter, provide for the adjustment of the award formula applicable to an award granted to any participant under the Plan to reflect such participant’s individual performance in his or her position with the Company or such other factors as the Compensation Committee may determine. Notwithstanding the attainment of any performance goal under the Plan, the Compensation Committee shall have the discretion, on the basis of such criteria as it may establish, to reduce the amount of or to eliminate any final award that would otherwise be paid, and retains the absolute discretion to amend, modify or terminate the Plan at any time.

 

2.           Nothing in this Plan will interfere with or limit in any way the right of the Company or the right of any individual to terminate the employment relationship at any time, with or without cause.