Proofpoint, Inc.         Executive Bonus Program

Exhibit 10.12

[executivebonusplan201_image1.jpg]

Executive Bonus Program
2012

Page 1    

--------------------------------------------------------------------------------

Proofpoint, Inc.         Executive Bonus Program

Plan Objective
•
Align key executives to key metrics driving the growth and success of the
business.

Plan Administration
•
The reviewing body of the plan will be the Compensation Committee.

•
Plan structure and payout will be approved by the Compensation Committee based
upon the recommendations of the Chief Executive Officer (“CEO”).

•
This bonus plan is non-contractual and discretionary.

Bonus Design Philosophy
•
Plan year is defined as January 1 to December 31.

•
Bonus percentage levels will be reviewed and approved by the Compensation
Committee annually.

•
Bonus opportunity is calculated using the employee’s base salary and the bonus
rate that is effect at that time.

Ex. From 1/1/2012 to 7/31/2012 (30 weeks total or 58% of the year) base salary =
$100,000 with a 10% bonus = $10,000; from 8/1/2012 to 12/31/2012 (22 weeks or
42% of the year) base salary is $105,000 with a 10% bonus = $10,500. Bonus
opportunity for 2012 = $10,210 ($10,000 x 58% + $10,500 x 42%).
•
Incentive plan design is intended to provide for total compensation consistent
with the market and and target compensation philosophy when company and
individual performance meets expectations.

•
Design should encourage teamwork and cross functional communication to
accomplish goals.

•
Employees should focus on satisfying financial expectations as well as internal
business goals.

•
Bonuses should depend on factors that can be influenced by employees.

•
Program will be based and funded on achieving company performance metrics.

Design Characteristics
•
Two key company metrics will be set annually by the CEO and approved by the
Compensation Committee.

•
The bonus pool will be funded if the Company threshold performance metrics meet
the minimum targets.

•
Bonus plan provides for upside opportunity if company performance exceeds target
levels/expectations

•
Final bonus payment will be dependent on a combination of corporate and
individual performance

•
Individual performance metrics will be based on three to five weighted
measurable goals.

•
Bonuses will be based on long-term performance (annual) and payable at the end
of the fiscal year, approximately 90 days after the close of the fiscal year.

•
Company and individual performance metrics will not change during the year,
regardless of changes in the business environment. However, the CEO retains the
ability to review and approve recommendations for changes to individual
performance metrics.

•
The CEO will retain final approval authority over all bonus recommendations to
the Compensation Committee.

•
Employees are only eligible for up to 100% of their funded bonus rate.

•
Management reserves the right at its discretion with or without notice, to
review, change amend or cancel the Plan, at any time.

Employee Eligibility
•
All regular full-time employees at a Vice President level reporting to the CEO
not covered on any other compensation plan.

•
The CEO has complete discretion to add other individuals to the plan.

•
Must be an active regular employee in good standing through the end of the plan
year and a regular active employee in good standing at the time of payout to
receive any bonus.

•
Employee must be in the plan for at least 3 months.

•
Employees on an approved Leave of Absence, will have their bonus period adjusted
for the time they were on leave and payout pro-rated based upon the number of
full weeks of employment/eligibility in the plan period however the employee
must be in the plan for at least 3 months to qualify.

•
For those in the plan for more than 4 months, individual performance metrics
must be completed and approved by their manager no later than 3 months into the
plan year. If completed after 3 months, the bonus period may be adjusted to
include the time from which the goals are completed and approved to the end of
the plan year.

Page 2    

--------------------------------------------------------------------------------

Proofpoint, Inc.         Executive Bonus Program

•
For those in the plan for 4 months or less, individual performance metrics must
be completed and approved by their manager no later than 1 month into the plan
year. If completed after 1 month, the bonus period may be adjusted to include
the time from which the goals are completed and approved to the end of the plan
year.

•
New hires and/or employees newly eligible for bonuses will have the bonus
pro-rated based on the number of full weeks of employment/eligibility in the
plan period.

Page 3    

--------------------------------------------------------------------------------

Proofpoint, Inc.         Executive Bonus Program

Process to Add an Employee to the Bonus Plan

1.
Upon hire or eligibility to the Executive Bonus Program, the Head of Department
/ Hiring Manager / Manager indicates to HR the bonus effective date via an
approved “Request for Offer Letter” form or a “Personnel Action Notice” (PAN).

2.
The employee will receive a copy of the Executive Bonus Plan Document and Annual
Goals and Objectives Summary form to review, complete, and discuss with their
manager. The employee’s Annual Goal & Objectives will provide a basis to measure
and determine the employee’s bonus payout.

3.
Once the “Annual Goals & Objectives Summary” has been signed off, the Manager
submits the final signed document to Human Resources.

Annual Process of Bonus Plan Attainment and Payment

1.
The CEO will set the Company performance metrics each year

2.
These metrics will be presented to and approved by the Compensation Committee

3.
Employee must be in the plan for at least 3 months. For those in the plan for
more than 4 months, individual performance metrics must be completed and
approved by their Manager no later than 3 months into the plan year. If
completed after 3 months, the bonus period may be adjusted to include the time
from which the goals are completed and approved to the end of the plan year. For
those in the plan for 4 months or less, individual performance metrics must be
completed and approved by their Manager no later than 1 month into the plan
year. If completed after 1 month, the bonus period may be adjusted to include
the time from which the goals are completed and approved to the end of the plan
year.

4.
The manager will review progress regularly of the stated goals and objectives.
As tasks are completed, indicate completion on the form

5.
At mid-year, managers will review and assess performance against the objectives
and submit recommendations to the Head of Department. These will be consolidated
by HR for review by the CEO.

6.
Upon conclusion of the fiscal year, the Finance organization will determine the
company performance levels and funding.

7.
At the end of plan year, the Manager will review and assess performance against
the objectives and submit recommendations to their manager, who will review and
submit to their manager. This continues until all recommendations are with the
Head of Department. Human Resources will summarize all bonus payments for final
review and approval by the CEO.

8.
Recommendations of attainment and final bonus payment amount will be presented
for approval to the Compensation Committee.

9.
Upon approval by the Compensation Committee, the manager reviews attainment and
final signed forms are submit to Human Resources for processing.

10.
Human Resources will submit final approved bonuses to Payroll for processing.

Page 4    

--------------------------------------------------------------------------------

Proofpoint, Inc.         Executive Bonus Program

Questions and Answers

Q.
If the company meets its thresholds, and the plan is funded, will I
automatically receive the bonus?

While the plan may fund for the year, bonus targets are guidelines only and
payment is based upon individual and company performance metrics. The CEO will
review and discuss with you your performance against your objectives. The
Finance organization will determine the company performance levels for
Proofpoint for funding. Combined these factors will determine your bonus payout.

Q.
If I achieve my individual results but the company does not, will I receive my
bonus?

If Proofpoint under-performs based upon the annual metrics, the bonus plan will
not be funded for that plan year.

Q.
What if I leave the company? Will I receive a bonus for the portion of the year
I was here?

You must be an active regular employee in good standing when bonuses are paid.
Employees on a leave of absence at the time of the payout will receive payment
upon return to active status provided they meet the eligibility requirements
noted above.

Q.
At the end of the bonus period, how are decisions made about my individual
contribution? Who approves my bonus amount?

The CEO will be responsible for approving your bonus based upon your individual
performance against your objectives. A final review of all bonus payments will
be conducted by the CEO and Human Resources prior to final approval by the
Compensation Committee.

Page 5