Exhibit 10.2

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EXECUTIVE COMPENSATION PLAN 2005

 

 

EFFECTIVE DATE: JANUARY 1, 2005

 

 

 

SUMMARY OF TERMS

 

 

 

 

 

Name:

 

Dana Kammersgard

Title:

 

President

Base Salary

 

$350,000

On-Plan Bonus Target (as% of Base)

 

70%

Total On-Plan Cash Compensation Target:

 

$595,000

 

PURPOSE

 

The objectives of this Plan are:

 

                        To maintain focus on retaining revenue related to sales
to Sun Microsystems and the profitability of delivering product to Sun;

                        To reward for diversification of Dot Hill’s customer
base, while maintaining reasonable margin requirements

                        To reward for over-achievement of financial goals

 

REPLACEMENT OF EXHIBIT C

 

By signing this Executive Compensation Plan 2005(“Plan”), you hereby agree that
the terms of this Plan shall be in addition to the terms of the Employment
Agreement between you and Dot Hill dated August 2, 1999 (“Employment
Agreement”), and shall replace and supercede the terms of Exhibit C of the
Employment Agreement with respect to your base salary and bonus for the year
2005.  Otherwise, the terms of your Employment Agreement remain unchanged.  For
any period of time after December 31, 2005, your base salary and bonus shall be
subject to change, as determined by Dot Hill’s Board of Directors and/or
Compensation Committee (“BOD”).

 

BONUS MEASUREMENTS

 

The metrics used to calculate earned bonus are as follows:

 

Bonus Component

 

Overall Bonus Weighting

 

Your Bonus Target

 

Financial Goals Related to Sun Microsystems

 

50

%

122,500

 

Financial Goals Related to Non-Sun Customers

 

50

%

122,500

 

Total

 

100

%

245,000

 

 

1

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Financial Goals Related to Sun Microsystems

 

The below matrix will be used to determine the percentage to be applied to your
bonus target to derive the bonus earned.

 

 

% of Targeted Bonus Paid for Sun Financial Management

 

% of Budgeted Sun
Revenue Attained

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Above 115%

 

Above
$262,499

 

0

%

30

%

45

%

60

%

66

%

69

%

72

%

115%

 

$262,499

 

0

%

29

%

43

%

58

%

63

%

66

%

69

%

110%

 

$251,086

 

0

%

28

%

41

%

55

%

61

%

63

%

66

%

105%

 

$239,673

 

0

%

26

%

39

%

53

%

58

%

60

%

63

%

100%

 

$228,260

 

0

%

25

%

38

%

50

%

55

%

58

%

60

%

95%

 

$216,847

 

0

%

20

%

30

%

40

%

44

%

46

%

48

%

90%

 

$205,434

 

0

%

19

%

28

%

38

%

41

%

43

%

45

%

85%

 

$194,021

 

0

%

13

%

19

%

25

%

28

%

29

%

30

%

Below 85%

 

Below
$194,021

 

0

%

0

%

0

%

0

%

0

%

0

%

0

%

 

 

 

 

21

%

22

%

23

%

24

%

25

%

26

%

27

%

 

Gross Margin on Sun Revenue

 

 

Financial Goals Not Related to Sun Microsystems

 

As it is imperative for the long-term success of Dot Hill to diversify its
customer base, this Plan is intended to motivate and reward the executive team
for obtaining new customers.

 

It is also important to manage the margin related to new customers.  As such, we
will use the following matrix to determine the portion of the bonus

 

 

% of Targeted Bonus Paid for NON-Sun Financial Management

 

% of Budgeted NON Sun
Revenue Attained

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Above 115%

 

Above
$88,000

 

0

%

50

%

75

%

100

%

125

%

150

%

200

%

200%

 

$88,000

 

0

%

38

%

56

%

75

%

94

%

113

%

150

%

150%

 

$66,000

 

0

%

35

%

53

%

70

%

88

%

105

%

140

%

125%

 

$55,000

 

0

%

31

%

47

%

63

%

78

%

94

%

125

%

100%

 

$44,000

 

0

%

25

%

38

%

50

%

63

%

75

%

100

%

95%

 

$41,800

 

0

%

20

%

30

%

40

%

50

%

60

%

80

%

90%

 

$39,600

 

0

%

19

%

28

%

38

%

47

%

56

%

75

%

85%

 

$37,400

 

0

%

13

%

19

%

25

%

31

%

38

%

50

%

below 85%

 

Below
$37,400

 

0

%

0

%

0

%

0

%

0

%

0

%

0

%

 

 

 

 

19

%

20

%

21

%

22

%

23

%

24

%

25

%

 

Gross Margin on NON Sun Revenue

 

 

The maximum bonus earnable by participants is 72% (maximum for Sun related
financial results) plus 200% (maximum for non-Sun related financial results), or
272% of the targeted bonus.

 

2

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EXAMPLE

 

(This is a sample only and does not necessarily reflect an actual situation. 
This is used only for illustrative purposes and the actual Plan wording applies,
not this example.)

 

ASSUMPTIONS

 

•                  Incentive Target is $100,000

•                  Sun revenue for the year ending Dec 31, 2005 is $220,000,000

•                  Margin on Sun revenue is 27%

•                  Non-Sun revenue for the year ending Dec 31, 2005 is
$50,000,000

•                  Margin on Non-Sun revenue is 21%

 

CALCULATION

 

•                  Using the Sun Financial Results Table, intersection between
$220M and 27% is:  44%

•                  Using the Non Sun Financial Results Table, intersection
between $50M and 21% is: 47%

•                  44% + 47% = 91%

•                  $100,000 x 91% = $91,000

 

 

PAYMENT PROCESS AND TIMING

 

The Company must be profitable inclusive of bonus accrual in order for the bonus
to be paid.

 

Bonus is paid annually as soon as practicable after an audit of the Company’s
fiscal year 2005 results has been completed and after the Dot Hill Board of
Directors and/or Compensation Committee (“BOC”) has approved the payment.

 

CHANGES

 

This Plan is subject to change at any time at the Company’s sole discretion. 
The Company will endeavor to provide reasonable advance notice, but is no
obligation to do so.

 

TERMINATION

 

You must be an employee in good standing on the last day of the fiscal year to
be eligible for bonus payout.

 

ENTIRE AGREEMENT AND GENERAL

 

This Plan is governed by the laws of the State of California, excluding choice
of law principles.  This Agreement shall be binding upon, and inure to the
benefit of, the successors and assigns of the parties.  If any provision of this
Plan is found to be invalid or unenforceable, this Plan shall be deemed amended
to delete or modify, as necessary, the invalid or unenforceable provision to
render it consistent with the original intent of the parties.  The failure of a
party to require performance of any obligations under this Plan shall not be
deemed a waiver and shall not affect its right to enforce any provision of this
Agreement at a subsequent time.

 

This Plan constitutes the entire understanding and agreement of the parties with
respect to its subject matter and supersedes all prior and contemporaneous
agreements or understandings between the parties.

 

This Plan does not guarantee payment of any actual amount since it is
conditioned on the factors noted above.

 

This Plan does not modify or amend in any manner the “at-will” status of the
Participant and both parties reaffirm that the employment relationship between
the Company and you as the Participant is one of employment “at-will” with
either party having the right to terminate the relationship at any time with or
without cause.

 

3

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Any term or provision of the Plan may be amended, and the observance of any term
of this Agreement may be waived, only by a writing signed by you and both the
CEO and the Chairman of the Compensation Committee

 

Acknowledged and agreed as the Effective Date.

 

/s/ Dana Kammersgard

 

Dana Kammersgard

 

 

 

 

 

/s/ Jim Lambert

 

Jim Lambert, CEO

 

 

4

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