Exhibit 10.1

 

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Executive Incentive Plan

 

 

Adopted, as amended,

 

July 29, 2005

 

Overview

 

The EXACT Sciences Executive Incentive Plan has been designed to be an effective
management tool that will bring focus to the company’s, fiscal year objectives
and incentivize performance to not just meet, but accelerate and overachieve the
accomplishment of those objectives.  The plan is based on specific and
measurable objectives for both the company and each individual participant, with
performance against those to be weighted equally.  As a financial incentive,
each executive will have a significant percentage of their annual total
compensation tied to meeting the corporate and individual objectives that have
been established for the year with the opportunity to receive greater payouts
for overachievement.

 

Participation

 

In order to be eligible to participate in the Executive Incentive Plan for a
given plan year, an executive must meet the following criteria:

 

•                  Be an employee of EXACT Sciences and hold the position of CEO
or Vice President

 

•                  Have a hire date not later than July 1st for such year and
have worked at least 1040 hours of a given plan year

 

•                  Be an employee in good standing as of December 31st of a
given plan year

 

•                  Executives hired between February 1st and June 30th of a
given plan year will have bonus amounts earned, if any, prorated to the number
of full months of employment during the plan year

 

•                  If an executive does not meet the preceding criteria, they
may still be allowed to participate in the plan under any such terms as approved
by the Compensation Committee

 

Methodology

 

Objectives

 

The EXACT Executive Incentive plan includes setting objectives for both the
corporation and for each executive individually.  The Board of Directors reviews
and approves corporate objectives for the fiscal year.  Achievement of these
objectives drives the corporate component of the plan.  Working with the CEO,
each executive will prepare their individual functional unit objectives using a
similar form and will be a key basis for any cash payments under the plan.  It
is understood that plans and objectives may change

 

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dynamically and need to be updated and that key achievements may occur that were
not initially envisioned.  Such factors will be considered as the plan is
reviewed at year-end.

 

Performance Assessment

 

Each quarter, the Board of Directors will review overall corporate performance
against objectives, with the Compensation Committee doing biannual reviews of
individual executive performance.  After the end of each fiscal year, the
Compensation Committee working with the full Board will make a determination of
the level of corporate performance for the year.  The CEO will assess the
performance of each executive and make a recommendation regarding a payout under
this plan to the Compensation Committee for approval.  CEO performance will be
determined by the Compensation Committee and the Board of Directors.
  Individual performance is determined both against written functional area
objectives and by subjective performance assessment.

 

Payouts

 

In order to achieve any payouts under the plan, it is first necessary for the
company to hit approximately 70% of its corporate objectives.  Upon achieving
this threshold, payouts are then divided into two distinct, but related
components.  The Compensation Committee may recommend to the full Board to vary
payout formulae to reflect corporate accomplishments as they determine
appropriate.  Specifically, the Compensation Committee may determine that
despite achieving or not achieving any number of individual corporate
objectives, the overall performance or status of the Company is such that
payouts may be increased, reduced or eliminated altogether.

 

Corporate Performance

 

For assessment, corporate performance is divided into three levels of
approximately 70%, 85% or 100% of objectives achieved.

 

Payouts for corporate performance may be made in cash or common stock at the
discretion of the Compensation Committee.  The amount of the payout for
corporate performance will be based on a value calculated as a multiple of an
executive’s individual performance cash payout according to the following
matrix:

 

Performance Level
Corporate

 

Calculation for Value of Payout

 

100% (i.e., 6/6 objectives achieved)

 

2.5 times Individual Cash Payout

 

85% (i.e., 5/6 objectives achieved)

 

2.0 times Individual Cash Payout

 

70% (i.e., 4/6 objectives achieved)

 

No Multiplier of Cash Payout

 

 

In the event that that the Compensation Committee determines to use common stock
for payouts for corporate performance, the stock grants will be made pursuant to
the corporation’s stock option and incentive plan as follows:  50% immediately
and 50% on the first anniversary thereafter.  The formula to calculate the
number of shares to be granted on each applicable date is as follows:  Total
Value of Grant ÷ 2 ÷ closing price of the Corporation’s common stock on the date
of the grant. It is intended that there be

 

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no restrictions upon the sale of the stock except for quiet periods and other
restrictions that may be imposed by applicable securities laws.  If an employee
terminates his or her employment before the date of grant of any stock or cash
award, the stock or cash award is forfeited.

 

Individual Performance

 

For assessment, individual performance is divided into three levels:
Outstanding, Above Expectations, and Effective.  Under the plan, an individual
must perform to be rewarded and no incentive payouts will be made to individuals
who do not achieve at least an effective level of performance regardless of the
level of corporate performance.

 

Payouts for individual performance are made in cash according the following
matrix:

 

Performance Level

 

 

 

 

 

 

 

Individual

 

CEO

 

EVP

 

VP

 

Outstanding

 

$60-$70

 

$40-$50

 

$30-$35

 

Above

 

$50-$55

 

$30-$35

 

$20-$25

 

Effective

 

$15-$35

 

$7.5-$25

 

$5-$15

 

 

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* all amounts in ‘000’s

 

Total Compensation

 

The following table shows the range of total compensation available under the
plan:

 

 

 

CEO

 

EVP

 

VP

 

Performance Level

 

Ind. Award

 

Corp. award

 

 

 

Ind.

 

Corp Award

 

 

 

Ind. Award

 

Corp Award

 

 

 

Corp

 

Individual

 

$

 

$

 

Total $

 

Award $

 

$

 

Total $

 

$

 

$

 

Total $

 

 

 

Outstanding

 

60-70

 

150-175

 

210-245

 

40-50

 

100-125

 

140-175

 

30-35

 

75-87.5

 

105-122.5

 

100

%

Above

 

50-55

 

125-137.5

 

175-193

 

30-35

 

75-87.5

 

105-122.5

 

20-25

 

50-62.5

 

70-87.5

 

 

 

Effective

 

15-35

 

37.5-87.5

 

52.5-122.5

 

7.5-25

 

18.8-62.5

 

26-87.5

 

5-15

 

12.5-37.5

 

17.5-52.5

 

 

 

Outstanding

 

60-70

 

120-140

 

180-210

 

40-50

 

80-100

 

120-150

 

30-35

 

60-70

 

90-105

 

85

%

Above

 

50-55

 

100-110

 

150-165

 

30-35

 

60-70

 

90-105

 

20-25

 

40-50

 

60-75

 

 

 

Effective

 

15-35

 

30-70

 

45-105

 

7.5-25

 

15-50

 

22.5-75

 

5-15

 

10-30

 

15-45

 

 

 

Outstanding

 

60-70

 

0

 

60-70

 

60-70

 

0

 

60-70

 

30-35

 

0

 

30-35

 

70

%

Above

 

50-55

 

0

 

50-55

 

50-55

 

0

 

50-55

 

20-25

 

0

 

20-25

 

 

 

Effective

 

15-35

 

0

 

15-35

 

15-35

 

0

 

15-35

 

5-15

 

0

 

5-15

 

 

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* all amounts in ‘000’s

 

The following example shows a potential total compensation calculation for a
Vice President assuming that corporate performance awards are made in common
stock:

 

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Assumptions:

 

Company achieves 85% of objectives

 

 

Individual performance is rated as Outstanding at highest end of cash payout
range

 

 

Common stock price on first vest date is $10.00

 

 

Common stock price on second vest date is $20.00

 

Cash Payout:

 

$35,000

 

 

 

 

 

 

 

Stock Payout:

 

$70,000 Total Value

 

 

 

 

 

 

 

Total Compensation:

 

$105,000

 

 

 

 

 

 

 

# of Shares Granted:

 

3,500 on first vest date

 

($70,000 ÷ 2 ÷ $10.00)

 

 

1,750 on second vest date

 

($70,000 ÷ 2 ÷ $20.00)

 

Timing

 

It is anticipated that the Compensation Committee will review corporate and
individual performance under this plan with the Board of Directors at its
January meeting.  After that review and pending final approval of awards by the
Committee, cash awards under this plan, if any, will be made as of the third
Thursday in February of the year following the applicable fiscal year.  Awards
made in stock will have a first vesting date of the third Thursday in
February of the year following the applicable fiscal year and a second vesting
date of the third Thursday in February of the following year.  Share amounts
will be calculated using the closing price of EXACT Sciences common stock on the
day previous to the vesting date.  The Compensation Committee may elect to alter
this schedule at it deems appropriate.

 

Plan Changes

 

At any time in any given plan year, the CEO with the approval of the
Compensation Committee or the Compensation Committee acting in its sole
discretion may alter any terms of the Executive Incentive Plan.  In particular,
if the financial resources of the company are inadequate to support the plan
regardless of performance, payouts may be restructured using equity, deferred to
such future date when financial resources can appropriately accommodate them or
eliminated altogether.

 

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