Exhibit 10.6
FINE HOST CORPORATION
ANNUAL INCENTIVE COMPENSATION PLAN
ARTICLE I
PURPOSE
The purpose of the Annual Incentive Compensation Plan (the "Plan") is to provide
incentive compensation to executives of Fine Host Corporation (the "Company") in
recognition of their significant contributions to the growth, profitability and
success of the Company from year to year.
The Company intends that certain performance-based compensation payable under
the Plan will qualify for deduction under Section 162(m) of the Internal Revenue
Code of 1986, as amended.
Subject to approval by the Company's stockholders, the Plan will be effective
January 1, 1998.
ARTICLE II
DEFINITIONS
2.1 Annual Incentive Pool: For any Fiscal Year, the amount equal to the
percentage of Earnings determined by the Board at the beginning of the Fiscal
Year, subject to the condition that Earnings meet the Corporate Threshold for
the Fiscal Year.
2.2 Board: The Board of Directors of the Company.
2.3 Code: The Internal Revenue Code of 1986, as amended from time to
time.
2.4 Committee: The Compensation Committee of the Board, which is
comprised solely of two or more "outside directors" within the meaning of
Section 162(m) of the Code.
2.5 Company: Fine Host Corporation, a Delaware corporation, and its
consolidated subsidiaries, or any successors thereto.
2.6 Corporate Threshold: For any Fiscal Year, 80 percent of budgeted
Earnings, which is the minimum amount of Earnings that the Company must achieve
in order to establish an Annual Incentive Pool for that Fiscal Year.
2.7 Disability: Disability, as defined in a Participant's employment
agreement with the Company, or, absent an agreement, in the Company's group
disability insurance contract.
2.8 Earnings: For any Fiscal Year, net income of the Company, on a
consolidated basis, determined in accordance with generally accepted accounting
principles, as reported in the Company's audited consolidated financial
statements for that Fiscal Year.
2.9 Fiscal Year: The 52- or 53-week period beginning on the Thursday
after the last Wednesday in December of one year and ending on the last
Wednesday in December of the next year.
2.10 Incentive Allocation: For any Fiscal Year, a Participant's formulated
share of the Annual Incentive Pool, determined by the Committee in accordance
with Sections 6.3 and 6.4.
2.11 Incentive Award: For any Fiscal Year, the amount of compensation
payable under the Plan to a Participant, determined by the Committee in
accordance with Section 6.5.
2.12 Participant: For any Fiscal Year, an executive of the Company
designated by the Committee to participate in the Plan.
2.13 Performance Goals: For any Fiscal Year, the performance measures
applicable to a Participant, established by the Committee in accordance with
Article V.
2.14 Plan: The Fine Host Corporation Annual Incentive Compensation Plan,
as herein set forth and as it may be amended from time to time.
2.15 Target Allocation: For any Fiscal Year, a Participant's share of the
Annual Incentive Pool for achievement of his or her Performance Goals for the
Fiscal Year, determined by the Committee in accordance with Section 6.1.
2.16 Termination Without Cause: Termination of a Participant's employment
by the Company without "Cause," as defined in the Participant's employment
agreement with the Company, or, absent an agreement defining "Cause,"
termination of the Participant's employment by the Company for any reason other
than (i) continuing and material failure to fulfill his or her employment
obligations or willful misconduct or gross neglect in the performance of such
duties, (ii) commission of fraud, misappropriation or embezzlement in the
performance of such duties, or (iii) conviction of a felony, which, as
determined in good faith by the Board, constitutes a crime involving moral
turpitude and may result in material harm to the Company.
ARTICLE III
ADMINISTRATION
3.1 The Plan shall be administered by the Committee. For any Fiscal Year,
the Committee shall (i) designate the executives of the Company who shall
participate in the Plan, (ii) establish Performance Goals for each Participant
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and certify the extent of their achievement and (iii) determine each
Participant's Target Allocation, Incentive Allocation and Incentive Award.
3.2 Subject to the provisions of the Plan, the Committee shall have full
power and authority to (i) interpret the Plan, (ii) adopt rules and regulations
relating to the conduct of its business and to the Plan and (iii) make all
determinations necessary or advisable for the administration of the Plan.
Determinations of the Committee in the administration of the Plan shall be
conclusive and binding on the Participants and all other parties concerned.
ARTICLE IV
PARTICIPATION
4.1 Only executives of the Company who, in the Committee's judgment, have
contributed, or have the capacity to contribute, in a substantial measure to the
successful performance of the Company for a given Fiscal Year, shall be eligible
to participate in the Plan for that Fiscal Year.
4.2 In selecting Participants for any Fiscal Year, the Committee shall
take into account such factors as the individual's position, experience,
knowledge, responsibilities, advancement potential and past and anticipated
contribution to Company performance.
ARTICLE V
PERFORMANCE GOALS
5.1 Not later than 90 days after the beginning of any Fiscal Year, the
Committee shall establish Performance Goals for each Participant for that Fiscal
Year.
5.2 Performance Goals established by the Committee for any Fiscal Year
may differ among Participants. The Performance Goals of individual
Participants shall be based on one or more of the following categories, as
may be applicable: (i) Earnings, (ii) the contribution of business unit
earnings to Earnings and (iii) individual job performance, taking into
account pre-set goals and objectives; provided, however, that the Performance
Goals established with respect to any amount payable under the Plan that is
intended to qualify as performance-based compensation under Section 162(m) of
the Code shall not include category (iii).
5.3 In establishing Performance Goals, the Committee shall determine,
from among the categories specified in Section 5.2, the categories to be used
in measuring each Participant's performance and the percentage allocation for
each of the categories, the sum of which allocations shall equal 100 percent.
The Committee shall also determine for each Participant for the same Fiscal
Year a threshold level of performance below which no Incentive Award will be
payable and a maximum incentive opportunity.
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ARTICLE VI
TARGET ALLOCATION, INCENTIVE ALLOCATION AND INCENTIVE AWARD
6.1 Not later than 90 days after the beginning of each Fiscal Year, the
Committee shall determine each Participant's Target Allocation for the Fiscal
Year as a percentage of his or her salary for the Fiscal Year, assuming that
the Performance Goals for the Participant are fully met.
6.2 When the Committee has determined the Target Allocation and range of
incentive opportunity for a Participant for any Fiscal Year and the
performance categories to be used in establishing his or her Performance
Goals for that Fiscal Year, it shall communicate this information to the
Participant.
6.3 As soon as practicable following verification by the Company's
independent public accountants of Earnings for any Fiscal Year and receipt of
information regarding the actual performance of Participants against their
respective Performance Goals for the Fiscal Year, the Committee shall certify
(i) the amount, if any, by which Earnings for the Fiscal Year exceeded the
Corporate Threshold for the Fiscal Year and (ii) the extent to which each
Participant achieved his or her Performance Goals for the Fiscal Year.
6.4 Based on the information certified in accordance with Section 6.3,
the Committee shall determine each Participant's Incentive Allocation for the
Fiscal Year by multiplying his or her Target Allocation for the Fiscal Year
by the percentage representing the extent of achievement of his or her
Performance Goals for the Fiscal Year.
6.5 The amount of a Participant's Incentive Allocation as finally
determined by the Committee shall constitute his or her Incentive Award for
the Fiscal Year; provided, however, that no Incentive Award for any
Participant for any Fiscal Year shall exceed 6 percent of Earnings for that
Fiscal Year.
6.6 The Committee shall not be obligated to apply the entire Annual
Incentive Pool for any Fiscal Year to Participants' Incentive Awards. Any
amount not so applied shall remain part of the general assets of the Company
and shall not be carried over to the Annual Incentive Pool for any subsequent
Fiscal Year.
ARTICLE VII
PAYMENT OF INCENTIVE AWARDS
7.1 Except as provided in Section 7.2, a Participant's Incentive Award
for any Fiscal Year shall be paid in a cash lump sum as soon as practicable
following the Committee's determination of the amount in accordance with
Article VI.
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7.2 From time to time, the Committee, in its discretion (under uniform
rules applicable to all Participants), may offer Participants the opportunity
to defer receipt of all or a portion of the Incentive Award for any Fiscal
Year. Any election to defer shall be made prior to the beginning of the
Fiscal Year except for the first Fiscal Year that the Plan is in effect.
Deferrals shall be in increments of 10 percent of the Participant's Target
Allocation for the Fiscal Year.
Deferred amounts are not forfeitable and will be paid after
termination of employment with the Company. They constitute unfunded general
obligations of the Company.
Deferred amounts shall be credited with an interest equivalent
amount until the time of final payment at a rate determined by the Committee
from time to time. The sum of the amount deferred for any Fiscal Year plus
all interest equivalents shall be paid in a single sum or in up to 15
installments, as specified by the Participant when making the deferral
election.
7.3 Each Participant shall designate, in a manner prescribed by the
Committee, a beneficiary to receive payments due under the Plan in the event
of his or her death. If a Participant dies prior to the date of payment of
his or her Incentive Award for any Fiscal Year or to receipt of all amounts,
if any, that were deferred, and if no properly designated beneficiary
survives the Participant, the Incentive Award or any other amount due shall
be paid to his or her estate or personal representative.
ARTICLE VIII
TERMINATION OF EMPLOYMENT
8.1 If a Participant's employment with the Company terminates by reason
of retirement on or after attainment of age 65, death, Disability or
Termination Without Cause, or for any other reason specifically approved in
advance by the Committee, the Committee shall determine the Participant's
Incentive Award as if he or she were employed for the entire Fiscal Year, and
the Participant shall be entitled to receive the Incentive Award prorated to
the date of his or her termination of employment.
8.2 If a Participant's employment with the Company terminates for any
reason other than as provided in Section 8.1, he or she forfeits any right to
receive an Incentive Award for the Fiscal Year in which the termination
occurs.
ARTICLE IX
TERMINATION AND AMENDMENT OF THE PLAN
9.1 The Company reserves the right, by action of the Committee, to
terminate the Plan at any time. Subject to such earlier termination, the
Plan shall have a term of five years from its effective date.
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9.2 The Plan may be amended at any time, and from time to time, by a
written document adopted by the Committee. No amendment shall be effective
prior to approval by the Company's stockholders to the extent such approval
is required by Section 162(m) of the Code or otherwise required by law.
ARTICLE X
GENERAL PROVISIONS
10.1 Nothing in the Plan shall confer upon any employee a right to
continue in the employment of the Company or affect any right of the Company
to terminate a Participant's employment.
10.2 A Participant may not alienate, assign, pledge, encumber, transfer,
sell or otherwise dispose of any rights or benefits awarded hereunder prior
to the actual receipt thereof; and any attempt to alienate, assign, pledge,
sell, transfer or assign prior to such receipt, or any levy, attachment,
execution or similar process upon any such rights or benefits shall be null
and void.
10.3 The Plan shall at all times be entirely unfunded, and no provision
shall at any time be made to segregate assets of the Company for payment of
any amounts hereunder. No Participant, beneficiary or other person shall
have any interest in any particular assets of the Company by reason of the
right to receive incentive compensation under the Plan. Participants and
beneficiaries shall have only the rights of a general unsecured creditor of
the Company.
10.4 The Plan shall be governed by and construed in accordance with the
laws of the State of Connecticut without reference to principles of conflict
of laws.
10.5 The Company shall be authorized to withhold from any award or
payment it makes under the Plan to a Participant the amount of withholding
taxes due with respect to such award or payment and to take such other action
as may be necessary in the opinion of the Company to satisfy all obligations
for the payment of such taxes.
10.6 Nothing in the Plan shall prevent the Board from adopting other or
additional compensation arrangements, subject to stockholder approval as may
be necessary, and such arrangements may be either generally applicable or
applicable only in specific cases.
10.7 Participants shall not be required to make any payment or provide
any consideration for awards under the Plan other than the rendering of
services.
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