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Appendix 2 D
Appendix 2 D
Appendix 2 D
1. Purpose. The purpose of this Xyz Corporation Incentive Bonus Plan (this
“Plan”) is to retain and to provide an incentive for members of senior management and other
employees of Xyz Corporation, a Delaware corporation (the “Company”), to achieve their highest
level of performance and to further the Company’s goals, objectives, and strategies.
6. Definitions.
(A) “Administrator” means the Board, or at the discretion of the Board, a committee of
the Board (either taking action as Administrator or by a disinterested majority vote thereof).
(B) “Board” means the Board of Directors of the Company or its successor entity.
(C) “Cause” means (i) willful or gross misconduct or fraud by the Participant in
connection with his or her employment with the Company, including, but not limited to,
misappropriating any funds or property of the Company or attempting to willfully obtain any
personal profit from any transaction in which the Participant has an interest which is adverse to
the interests of the Company; (ii) any other intentional act or omission which materially impairs
the Company’s ability to conduct its ordinary business in its usual manner; (iii) material breach
by the Participant of any provision of any confidentiality, invention assignment, noncompetition
or nonsolicitation agreement with the Company, which breach shall not have been cured by the
Participant within ten (10) days of receipt of written notice of such breach; or (iv) the
Participant’s conviction of, plea of guilty, or plea of nolo contendere to, any crime constituting a
felony under the laws of the United States or any State thereof or any crime of embezzlement,
theft or moral turpitude.
(D) “Common Stock” means the common stock of the Company, $0.001 par value per
share.
(E) “Common Stock Equity Interest” with respect to each Participant means an amount
equal to [(x) minus (y) plus (z)] where:
y = an aggregate amount equal to the sum of the per share exercise price of all
Applicable Options calculated as of the effective date of the Liquidation Event; and
(F) “Incentive Pool” means in connection with a Liquidation Event an amount equal to
the amount by which 15% of the consideration that would be available to be paid to the holders of
capital stock of the Company in connection with the Liquidation Event (disregarding for such
purposes any payment to be made pursuant to this Plan) (the “Consideration Amount”) exceeds
the aggregate Common Stock Equity Interest of all Participants. Notwithstanding the foregoing,
if the Consideration Amount is not sufficient to pay the aggregate liquidation preferences of the
Company’s preferred stock in connection with such Liquidation Event in accordance with the
terms of the Company’s Restated Certificate of Incorporation (the “Aggregate Preferred
Liquidation Preference”), then the amount of the Incentive Pool shall be $0.
(G) “Liquidation Event” means (i) any merger, consolidation or acquisition of the
Company into, with or by another entity (other than a transaction with a subsidiary or affiliate of
the Company) which results in the exchange of outstanding shares of the Company for securities
or other consideration issued or paid or caused to be issued or paid by such other entity or an
affiliate thereof (except if such merger, consolidation or acquisition does not result in the transfer
of more than 50% of the outstanding voting securities of the Company or in which the holders of
the outstanding voting securities of the Company immediately prior to such transaction continue,
by virtue of their holdings of securities of the Company, to hold 50% or more of the outstanding
voting securities of the resulting or surviving corporation after the transaction); (ii) any sale of all
or substantially all the assets of the Company; or (iii) the consummation of any transaction or
series of transactions by the shareholders of the Company whereby such shareholders transfer to
one group or entity (if such group or entity was not a shareholder of the Company prior to such
transaction or transactions) the right to control more than 50% of the outstanding voting securities
of the Company’s capital stock.
(H) “Participant Percentage” with respect to each Participant means the percentage of
the Incentive Pool set forth opposite each Participant’s name on Exhibit A attached hereto. In
determining the Participant Percentage for each Participant, the Administrator shall consider,
among other factors, such Participant’s contribution to the development of the Company and such
Participant’s Common Stock Equity Interest, adjusted to take into account an acceleration of
vesting of options by one year; provided, however, that the relative importance assigned to each
such factor shall be at the Administrator’s sole and absolute discretion. Notwithstanding the
foregoing, the Administrator shall have the right and power to add and remove Participants and to
reallocate the Participant Percentages set forth on Exhibit A attached hereto after the Effective
Date in such manner as the Administrator determines in its sole and absolute discretion. The
Participant Percentage for any Participant not listed on Exhibit A shall be deemed to be 0%.
7. Withholding. The Company shall deduct from any payments made pursuant
to this Plan an amount equal to all or any part of the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Company with respect to such payments; provided that, to
the extent that such payments are made in stock or other securities and if so elected by the
Participant, the Company may, in its sole discretion, deduct from such Participant’s payment an
amount equal to such Participant’s federal, state, local and foreign tax liability with respect to
such payment, assuming that such Participant pays tax at the highest marginal rate in effect for
each applicable tax, and shall remit such amount in cash to the Internal Revenue Service on the
Participant’s behalf as soon as practicable following the Liquidation Event, regardless of whether
such amount exceeds the amount that the Company is required by law to withhold. If the
Company does not withhold an amount from a Participant’s wages, other remuneration or
payments sufficient to satisfy the withholding obligation of the Company, such Participant will
make reimbursement on demand for the amount underwithheld. Notwithstanding the foregoing,
in the event that the payments pursuant to this Plan consist of stock, securities or other form of
consideration for which there is no immediate liquidity to the Participants, the Company, or its
successor, shall pay each affected Participant’s federal, state, local and foreign tax liability with
respect to such payment and shall adjust the consideration to be paid to each Participant such that
such payment shall be net of tax liability.
8. Restrictions. Any stock or other securities received pursuant to this Plan may
be subject to a right of first refusal, lock-up or any other restriction as required by the agreement
between the Company and its successors or assigns that effectuate the Liquidation Event.
10. Amendment and Termination of this Plan . This Plan may be amended by the
Administrator or its successor, provided that no amendment shall materially adversely affect the
rights of the Participants hereunder without the written consent of the Participants who are
entitled to a majority of the interests in the Plan at the time of the proposed amendment. This
Plan shall terminate and no amounts shall be payable hereunder as of and effective on the earliest
of (a) the closing date of the initial public offering of the Company’s Common Stock pursuant to
an effective registration statement on Form S-1 (or similar form), or (b) the payment of the
Incentive Bonus to each person who is a Participant.
11. Administration. The Administrator shall have the power from time to time
(i) to construe and interpret this Plan and to establish, amend and revoke rules and regulations for
the administration of this Plan (including, but not limited to, correcting any defect, supplying any
omission, or reconciling any inconsistency in this Plan) in the manner and to the extent it shall
deem necessary or advisable to make this Plan fully effective; (ii) to exercise its discretion with
respect to the powers and rights granted to it as set forth in this Plan; and (iii) generally, to
exercise such powers and to perform such acts as are deemed necessary or advisable to promote
the best interests of the Company with respect to this Plan. All decisions and interpretations of
the Administrator relating to this Plan shall be binding on all persons, including the Company, the
Company’s shareholders and all Participants. The Administrator, and all agents of the
Administrator, shall not be personally liable for any action, omission, determination or
interpretation made in good faith with respect to this Plan and the Administrator, and all agents of
the Administrator, shall be fully indemnified by the Company with respect to any claim, loss,
damage, or expense arising from such action, omission, determination or interpretation to the full
extent permitted by law, provided that any such claim, loss, damage or expense did not result
from the gross negligence, willful misconduct, bad faith or recklessness of the Administrator or
agents of the Administrator.
12. Limitation of Liability. Nothing contained in this Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a fiduciary relationship between
the Company (or any person connected therewith) and any Participant, employee or other person.
In no event shall the Company (or any person connected therewith) be liable to any person for the
failure of any Participant to be entitled to any particular tax consequences with respect to this
Plan or distribution therefrom.
13. Employment Rights. The adoption of this Plan does not confer upon any
Participant any right to continued employment or service with the Company or interfere in any
way with the right of the Company to terminate the Participant’s employment or service at any
time.
14. Effect on Other Benefits. Any payments made pursuant to this Plan shall not
be counted as compensation for purposes of any other employee benefit plan, program or
agreement sponsored, maintained or contributed to by the Company unless expressly provided for
in such employee benefit plan, program or agreement.
15. Unfunded, Unsecured Obligation. This Plan shall at all times be entirely
unfunded and no provisions shall at any time be made with respect to segregating assets of the
Company for payment of any benefits hereunder. Additionally, nothing contained herein shall be
construed as giving a Participant, his or her beneficiary, or any other person, any equity or other
interest of any kind in any assets of the Company or creating a trust of any kind or a fiduciary
relationship of any kind between the Company and any such person. As to any claim for any
unpaid amounts under this Plan, a Participant, his or her beneficiary, and any other person having
a claim for payment shall be unsecured creditors.
16. Nonexclusive. Adoption of this Plan shall not be construed as creating any
limitations on the power of the Company to adopt such other incentive arrangements as it may
deem desirable.
18. Headings. The headings used herein are intended only for convenience in
finding the subject matter and do not constitute part of the text of this Plan and shall not be
considered in the interpretation of this Plan.
19. Arbitration. Any dispute or claim to enforce the terms of this Plan will be
settled by binding arbitration in Wilmington, Delaware. The Company and the affected party
shall, together, select the arbitrator. If the parties are unable to agree on an arbitrator within ten
(10) business days after a request for arbitration has been made, then the parties shall request the
American Arbitration Association to submit a list of five (5) arbitrators, with the arbitrator being
selected by each party alternately striking a name until one person remains who shall be the
arbitrator. The party requesting the arbitration shall strike first. The arbitration proceedings shall
be conducted under the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association in effect at the time a demand for arbitration was made. The
arbitrator shall maintain the confidentiality of the arbitration to the maximum extent allowed
under the National Rules. A decision and award of the arbitrator made under the National Rules
shall be exclusive, final and binding on both parties, their heirs, executors, administrators,
successors, and assigns. The arbitrator shall have no authority to award punitive damages against
the Company or a Participant or to add to, alter, amend or refuse to enforce any portion of this
Plan. The arbitrator is authorized to award any party or parties such sums as he or she shall deem
proper for the time and expense of arbitration; provided that no party shall be entitled to recover
legal fees paid to enforce or defend a claim pursuant to this Section 19 unless the arbitrator
determines that such party is the prevailing party.
20. Governing Law. This Plan shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to the conflict of law principles thereof.
21. Effective Date. This Plan is effective on _______ (the “Effective Date”), the
date on which the Board and shareholders of the Company approved this Plan.
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