Exhibit 10.2
May 12, 2007
Xx. Xxxx Xxxxx
BellaVista Capital
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000
Re: 2007 Compensation Agreement
Dear Xxxx:
This letter will confirm your Compensation Agreement for 2007. Outlined below
you will find the various components:
1. Base Salary - $150,000: Your Base Salary will remain $150,000 per
year.
2. Annual Bonus for Performance to Plan: You will be eligible to
earn an annual bonus based on the company's performance relative
to certain performance metrics as established on an annual basis
by the Board of Directors. For 2007 the three (3) components of
this Performance Bonus will be based on the annual NRV; the
performance of completed investments in the portfolio; and Loan
Servicing. Outlined in the three (3) areas below are the trigger
points for achieving the various components of this Performance
Bonus. The actual amount earned for each component will be
calculated based on interpolating between the points listed
below.
The Plan Bonus will be paid in the quarter following the calendar
year end in order to ensure that the calendar year-end NRV, and
evaluation of the expenses and Loan portfolio are complete. In
addition, you must be a full time employee of the company in good
standing with your performance rated as fully meeting
expectations as determined by the Board of Directors.
A NRV - Target $37,500:
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NRV less than $5.04 or 10% growth: 0
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NRV equal to $5.04 or 10%: $7,500
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NRV equal to $5.08 or 11%: $21,000
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NRV equal to or greater than $5.12 or 12%: $37,500
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D. Performance of Closed Investments - Target $10,000:
At the end of the calendar year we will evaluate the actual
performance of all investments that have completed and paid
off during the year. The evaluation criteria will be annual
Return on Investment (ROI). The annual ROI will be
determined by total income earned divided by the monthly
average investment amount and annualizing the result. We
will compare achieved ROI to the targeted ROI for each
investment type: First TD; Subordinated Debt; and Equity.
The analysis will be computed according to the following
example. First, determine the achieved weighted average ROI
within each Investment Type:
Exhibit 10.2
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Weighted ROI Weighted
Investment Average
Amount Average Achieved ROI
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First TD #1 $ 7,255,000 44.2% 10.0% 4.4%
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First TD #2 7,000,000 42.7% 16.0% 6.8%
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First TD #3 2,150,000 13.1% 12.0% 1.6%
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Total First TD 16,405,000 12.8%
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Subordinated #1 4,553,000 44.3% 20.0% 8.9%
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Subordinated #1 1,000,000 9.7% 19.0% 1.8%
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Subordinated #1 3,000,000 29.2% 15.0% 4.4%
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Subordinated #1 1,730,000 16.8% 20.0% 3.4%
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Total Subordinated 10,283,000 18.5 %
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Equity Investment #1 3,150,000 43.4% 20.0% 8.7.0%
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Equity Investment#2 4,100,000 56.6% 25.0% 14.1.0%
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Total Equity 7,250,000 22.8%
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Total Investments $33,938,000 16.7%
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A weighted average target ROI will be calculated as follows:
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Weighted
Target Total Average
ROI Investments Target ROI
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First TD 10% 16,405,000 4.8%
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Subordinated Debt 18% 10,283,000 5.5%
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Equity 22% 7,250,000 4.7%
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Total 33,938,000 15.0%
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The achieved weighted average ROI will be compared with the
weighted average Target ROI and the bonus will be determined
based on the following table:
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Target ROI minus 2 percentage points (13.0%) $0
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Target ROI minus 1 percentage point (14.0%) $5,000
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Target ROI (15.0%) $10,000
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Target ROI plus 1 percentage point (16.0%) $15,000
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Target ROI plus 2 percentage points (17.0%) $20,000
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The actual amount earned will be calculated based on
interpolating between the points listed above. Using the
example data above, the calculated amount of the 2007 bonus
would be $18,500 (Achieved ROI of 16.7% and Target ROI of
15.0%).
E. Management of Loan Portfolio - Target $2,500:
The loans considered will be all loans that are active at any
point during 2007. The criteria considered to earn this bonus
will include subjective measures related to an assessment of
your diligence in monitoring the loans. Objective measures
related to the performance of the loans compared to loan
proforma will also be considered.
3. 2007 NRV Overplan Performance Bonus - $25,000: You will be
eligible to earn an additional one-time bonus of up to $25,000 if
the Company's NRV exceeds $5.12 at December 31, 2007. The amount
of the bonus will be determined by multiplying $961.54 for every
Exhibit 10.2
$0.01 that the NRV at December 31, 2007 exceeds $5.12, up to a
maximum of $25,000. For purposes of determining the Overplan
Performance Bonus, the NRV at December 31, 2007 will not include
any increases resulting from share repurchases made at a discount
to NRV.
4. Deferred Compensation if NRV growth is between 10% and 13%
Compounded Annually over the 3-year period beginning January 1,
2006 to December 31, 2008: You have the potential to earn up to
70,588 shares of restricted stock based on the NRV achieving a
compounded annual growth rate of 13% over this 3-year period. The
number of shares of restricted stock earned will be calculated
and vest based on the NRV as of 12/31/08. 25% of the shares of
the restricted stock will be earned and vest if the NRV at
12/31/08 is determined to be $5.67 per share. If the NRV at
12/31/08 is determined to be $6.12 per share, 100% of restricted
stock will vest. If the NRV falls between $5.67 per share and
$6.12 per share, the number of shares of earned and vested
restricted stock will be calculated based on a straight-line
interpolation between those percentages and NRVs. For the purpose
of this Item No. 4 no shares will be earned/vested for
performance below a 10% compounded annual return ($5.67) and no
additional shares will be earned/vested for performance above a
13% compounded annual growth rate ($6.12).
5. Deferred Compensation if compounded growth of NRV Exceeds the 13%
target as of 12-31-08: In addition to the deferred compensation
outlined in item No. 4 above, you may earn a discretionary bonus
based on an NRV increase greater than the $6.12 per share at
12/31/08. As a basis for this discretionary bonus, the Board of
Directors will consider awarding you a number of shares equal to
8% of the marginal stock value increase above $6.12. The number
of shares granted would be calculated by taking the determined
NRV per share at 12/31/08 and subtracting $6.12 per share,
multiplying that result by the number of shares outstanding to
arrive at the Marginal Realizable Value Increase above $6.12.
This Marginal Realizable Value Increase is then multiplied by 8%
with the result then be divided by the NRV per share at 12/31/08
to arrive at the number of shares subject to the discretionary
award. The actual number of shares awarded will be determined at
the sole discretion of the Board of Directors taking into account
the risk profile of the portfolio and the overall management of
the company. The Board of Directors will contact a compensation
specialist in an attempt to structure any and all deferred
compensation in order to minimize the tax consequence to you.
6. Termination of Employment Without Cause: In the event that your
employment with BellaVista is terminated without cause, the
number of shares of any restricted stock granted under the
Deferred Compensation in Item No. 4 would be determined according
to the following calculation: The NRV from the last publicly
filed report prior to your termination will be used to determine
a compounded annual growth rate based on the NRV per share of
$4.25 at December 31, 2005. The granted percentage of stock
(prior to the proration for time below) will be calculated based
on this compounded annual growth rate by interpolating from the
vesting percentages described in Item No. 4. The vesting
percentage is then multiplied by 70,588 shares to determine the
number of shares pre-time-proration. In order to determine the
actual number of shares granted, the pre-time-proration number of
shares is then multiplied by a fraction, the numerator of which
is the number of days from January 1, 2006 to the date of notice
of termination and the denominator of which is 1,095 days. In
addition, you will receive as sole compensation and consideration
6 months severance in the form of salary continuation for that
6-month period. Issuance of these shares and payment of this
severance is contingent upon your signing a written release of
all claims against the company related in any way to your
employment, your termination or your shareholdings. .
7. Termination of Employment With Cause: In the event that your
employment is terminated for cause, you will receive any salary
and accrued vacation earned as of the date of your termination.
All claims to all bonuses, annual or long term will be forfeited.
For the purposes of this Agreement, "Cause" shall mean the
commission of a felony or a crime involving moral turpitude or
the commission of any other material act or omission involving
dishonesty, disloyalty or fraud with respect to the Company;
conduct which tends to bring the Company into substantial public
disgrace or disrepute; a substantial failure to perform duties as
reasonably directed by the Board of Directors in writing, or a
second occurrence of insubordination; gross negligence or willful
misconduct with respect to material duties to the Company; or any
other material breach of this Agreement.
Exhibit 10.2
8. Voluntary Termination: In the event that you voluntarily
terminate your employment with BellaVista, you agree to provide
30-day written notice to the Chairman of the Board of Directors.
You will receive salary and accrued vacation earned as of the
date of your voluntary termination. All claims for severance pay,
annual bonuses or any deferred compensation will be forfeited.
This 2007 Compensation Agreement supercedes any and all previous agreements and
there are no terms or conditions in effect that are not reflected in this 2007
Compensation Agreement. Your employment is at will. BellaVista and you agree
that either you or BellaVista may at any time, with or without cause and with no
advance notice, terminate the employment relationship.
Please indicate your acceptance of this Agreement by signing in the indicated
space below. It would be appreciated if you would then forward a copy of the
executed Agreement to me and to our Chairman of the Board, Xx. Xxxxxxx
Xxxxxxxxx.
Sincerely,
/s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, President
BellaVista Capital
Accepted: /s/ Xxxx Xxxxx
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Xxxx Xxxxx
