Other Expenses of Issuance and Distribution

EX-10.5 12 v28895orexv10w5.htm EXHIBIT 10.5 exv10w5
 

Exhibit 10.5
EXECUTIVE AND SENIOR MANAGEMENT INCENTIVE PLAN
OBJECTIVES: To provide annual and long term incentive plans for both the executive and senior management groups as defined by the Compensation Committee.
-Incentives should be an appropriate mix of cash and stock based incentives
-Incentives whether cash or stock based should be linked to a combination of personal performance, corporate performance and shareholder returns.
METHODOLOGY: Target Overall Compensation Market Positioning based on Mercer compensation survey as follows:
         
 
           Range
CEO +
  -Salary   2nd Quartile
Executive
  -Annual   3rd Quartile
 
  -Long term   4th Quartile
 
       
Senior Mgt
  -Salary   3rd Quartile
 
  -Annual   3rd Quartile
 
  -Long term   3rd Quartile
ASSUMPTIONS/DEFINITIONS
Annual Incentive
- -All personal and performance based incentives (cash and stock based) that vest based on financial performance or employment objectives within first 12 months.
Long Term Incentive
- -All personal and performance based incentives that vest based on financial performance or employment (including time based) objectives beyond 12 months.
PROPOSED INCENTIVE PROGRAM DESIGNS
I. CASH BASED PERFORMANCE INCENTIVE
     Proposed Design
  A)   Target incentive as % of salary
 
  (i)   CEO-25%
 
  (ii)   Other Exec (8)-25%
 
  (iii)   Mid management (3)-25%
 
  B)   50% of cash incentive paid on achievement of current year financial metrics against approved budget

 


 

  (i)   Revenue-90%-120% achievement of annual operating plan-factor-.9-1.20
 
  (ii)   EBITDA-90%-120% achievement of annual operating plan-factor-.9-1.2
 
  (iii)   Operating Plan-90%-120% achievement of annual operating plan-factor-.9-1.2
             
          Total financial metric factor =
  (i)+(ii)+(iii)    
 
    3      
  C)   50% of annual incentive paid on achievement of current year personal objectives as determined by executive team and approved by comp committee
 
  (i)   personal objectives-50%-120% achievement of personal objectives-factor .5-1.2
 
  (ii)   Total personal objective factor = (i)
 
  D)   Total annual incentive award
 
  =   salary x (target annual incentive %)
  x   financial metric factor
  x   total personal objective factor
Note: if either total financial metric factor or personal objective factor = zero then there is no incentive pay out.
II. STOCK BASED PERFORMANCE INCENTIVE
     Proposed Design
  A.   Target stock based performance incentive as a % of salary
  (i)   CEO-420%
 
  (ii)   Exec-300%
 
  (iii)   Senior Mgt-120%
  B.   4 year Restricted Stock (RS) Program
- -Restricted stock may be awarded in the form of restricted stock units (RSUs) or restricted stock awards (RSAs) as determined by the compensation committee and as allowed by the applicable stock incentive plan.
- -The actual amount of the equity incentive award is calculated by first multiplying the target award by the executive’s personal objective factor used for calculating the cash based performance incentive. A personal objective factor below 50% will result in no stock based incentive award. After the personal objective factor is applied to the target, the following factors are applied to determine the actual stock based incentive award.
- -1/3 time vested over 4 years (50% cliff vest 2 years-remaining 50% monthly over years 3 and 4)
- -2/3 current year financial performance based vested over 4 years (I year cliff vesting remaining 75% vesting monthly over years 2, 3, 4)

2


 

    -1/3 revenue current financial performance based
- -1/3 EBITDA current financial performance based
- -1/3 Operating plan current financial performance based

3


 

III. VESTING SCHEDULE
                         
    Annual   Long Term            
    (Year 1)   (Year 2-4)            
CEO   Year   Year   Year   Year   LONG   TOTAL
    1   2   3   4   TERM   INCENTIVE
                    TOTAL   PROGRAM
Cash
  25           25
RS-Time Vesting
    70   35   35   140   140
-Financial Performance
  70   70   70   70   210   280
 
                       
TOTAL
  95   140   105   105   350   445
 
                       
Annual 3Q Target
  75-100%                    
Long Term 4Q Target
                  300-450%   (75th)
                         
    Annual   Long Term            
    (Year 1)   (Year 2-4)            
EXECUTIVE   Year   Year   Year   Year   LONG   TOTAL
    1   2   3   4   TERM   INCENTIVE
                    TOTAL   PROGRAM
Cash
  25             25
RS-Time Vesting
    50   25   25   100   100
-Financial Performance
  50   50   50   50   150   200
 
                       
TOTAL
  75   100   75   75   250   325
 
                       
Annual 3Q Target
  50-75%                    
Long Term 4Q Target
                  200-300%   (75th)
                         
    Annual   Long Term            
    (Year 1)   (Year 2-4)            
SENIOR MANAGEMENT   Year   Year   Year   Year   LONG   TOTAL
    1   2   3   4   TERM   INCENTIVE
                    TOTAL   PROGRAM
Cash
  25           25
RS-Time Vesting
    20   10   10   40   40
-Financial Performance
  20   20   20   20   60   80
 
                       
TOTAL
  45   40   30   30   100   145
 
                       
Annual 3Q Target
  25-50%                    
Long Term 3Q Target
                  (N/A)    

4


 

         
SUMMARY EXPENSE   TOTAL  
Cash Incentive Annual Cost at 100% Target
  $ 525,000  
 
       
Stock Based Incentive Cost (at time of grant)
  $ 4,800,000  
 
     
 
  $ 5,325,000  
 
     

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