Exhibit 10.2


 



Approved by the Compensation Committee of the Board March 7, 2007


 


Scientific Learning Corporation


2007 Management Incentive Plan


Purpose 


To provide significant cash awards to participants for the achievement and over-achievement of Scientific Learning’s collective financial goals, as well as each participant’s individual goals and overall performance in adding value for shareholders, customers and employees. 


Participants


All members of the Leadership Team, director-level employees and selected manager-level employees. The total number of participants at March 2007 is approximately 35 persons. The regional sales directors who are included in sales incentive compensation plans are excluded from this Plan.   


Target Incentive Awards


Intended to deliver market average incentive compensation at 100% achievement of goals. Awards increase for overachievement.





	
            
 
 Title
 	
            Target Award 
 (% of Base Salary Awarded at
  100% Achievement of Goals)
 	
            Max Award
 (Max % of Base Salary Awarded
  on Overachievement)
 
	
            CEO
 	
            50%
 	
            100%
 
	
            VP, Sales K-12 
 	
            50%
 	
            100%
 
	
            CFO
 	
            40%
 	
            80%
 
	
            Other Senior VPs, General Counsel 
 	
            35% 
 	
            70%
 
	
            Chief Ed. Officer, Other VPs
 	
            30%
 	
            60%
 
	
            Directors
 	
            20%
 	
            40%
 
	
            Managers
 	
            10%
 	
            20%
 





Goals 


All participants in the Plan will have shared Company financial goals and individual goals closely related to the individual’s own area of responsibility.


Shared Goals


Shared goals for the 2007 Plan are: 


 





	
             
 	
            Hurdle Level
  (Minimum for
  Payment of Bonus)
 	
            Target Level
  (100% Goal
  Achievement)
 	
            Maximum
  Overachievement 
 Level
 
	
            Revenue 
 	
            $49 million 
 	
            $52 million 
 	
            $56 million 
 
	
            Net profit 
 	
            $3.7 million 
 	
            $4.6 million 
 	
            $6.6 million 
 









	
            Individual Goals  
 





Individual goal performance under the 2007 Plan is based on both the following: 





	
             
 	
            •
 	
            Achievement of agreed-upon individual goals closely related to the individual’s area of responsibility. These goals will be agreed in writing between the participant and his/her manager.  
 









	
             
 	
            •
 	
            Contribution to adding value for shareholders, customers and employees. 
 









	
             
 	
            •
 	
            Hurdle level for individual goals is 80%. Maximum overachievement level is 200%.
 






 





	
            SLC Confidential
 	
            Page 1 of 3
 





 






 


Approved by the Compensation Committee of the Board March 7, 2007


 



Weighting of Shared Goals and Individual Performance  


 





	
            Goal
 	
            % of Target Award Allocated to Goal
 
	
            Net profit
 	
            35%
 
	
            Revenue
 	
            35%
 
	
            Individual performance
 	
            30%
 





 


Note: For managers and director-level employees, the CEO has discretion to allocate the bonus opportunity differently among the various goals to reflect the priorities and responsibilities of that particular person. 


Hurdles and Scaling 


The bonus payout starts for each goal when the specified hurdle level for that goal is achieved.  At the hurdle level, 50% of that goal’s portion of the target award is earned. At 100% of the goal, 100% of that goal’s target award is earned.  Between the hurdle level and 100% achievement of the goal, the portion of the award earned is scaled ratably. 


Overachievement





	
             
 	
            •
 	
            Participants in the Plan can double their bonus through overachievement. 
 









	
             
 	
            •
 	
            The overachievement potential is divided among the goals in the same percentage as the bonus for achievement. 
 









	
             
 	
            •
 	
            The maximum overachievement award is paid at the maximum overachievement levels specified above.  
 









	
             
 	
            •
 	
            Between 100% achievement and the maximum bonus overachievement level, each goal’s portion of the award is scaled ratably. 
 






Illustration 


The attached chart illustrates, for particular positions, the percentage of base salary payable for each goal, at the hurdle, at 100% and at maximum overachievement levels.  


Timing


Awards will be paid in the first quarter of 2008, following the completion of the 2007 audit, provided that all awards shall be paid within two and one-half months following the end of the calendar year in which the awards are no longer subject to substantial risk of forfeiture. Plan participants must be employed at Scientific Learning in a position that is eligible for an award under this Plan when the awards are paid in order to receive an award.  Participants hired or promoted into a MIP eligible position prior to October 1, 2007 will be eligible for a pro-rated award (unless otherwise agreed to, in writing, at the time of the employment action).


Compensation Committee Discretion


The Compensation Committee has discretion to pay awards to reflect achievement even if specific goals are not met and to interpret the terms of the Plan.


 






	
             
 	
            SLC Confidential
 	
            Page 2 of 3
 





 






 


Approved by the Compensation Committee of the Board March 7, 2007


 


% of Base Salary Available as MIP Award at Specified Levels of Achievement of Goals


 


 





	
             
 	
            % of Base Salary Available as Bonus
 
	
             
 	
            Operating Income 
 	
            Booked Sales 
 	
            Individual Goals
 	
            Total
 
	
             
 	
            At Hurdle
 	
            100%
 	
            Max Over
 	
            At Hurdle
 	
            100%
 	
            Max Over
 	
            At Hurdle
 	
            100%
 	
            Max Over
 	
            At Hurdle
 	
            100%
 	
            Max Over
 
	
            CEO, VP Sales  
 	
            8.75%
 	
            17.5%
 	
            35%
 	
            8.75%
 	
            17.5%
 	
            35%
 	
            7.5%
 	
            15%
 	
            30%
 	
            25%
 	
            50%
 	
            100%
 
	
            CFO
 	
            7%
 	
            14%
 	
            28%
 	
            7%
 	
            14%
 	
            28%
 	
            6%
 	
            12%
 	
            24%
 	
            20%
 	
            40%
 	
            80%
 
	
            Other Senior VPs, General Counsel
 	
            6.125%
 	
            12.25%
 	
            24.5%
 	
            6.125%
 	
            12.25%
 	
            24.50%
 	
            5.25%
 	
            10.50%
 	
            21%
 	
            17.5%
 	
            35%
 	
            70%
 
	
            Chief Ed Officer, other VPs
 	
            5.25%
 	
            10.5%
 	
            21%
 	
            5.25%
 	
            10.5%
 	
            21%
 	
            4.5%
 	
            9%
 	
            18%
 	
            15%
 	
            30%
 	
            60%
 
	
            Directors*
 	
            3.5%
 	
            7%
 	
            14%
 	
            3.5%
 	
            7%
 	
            14%
 	
            3%
 	
            6%
 	
            12%
 	
            10%
 	
            20%
 	
            40%
 
	
            Managers*
 	
            1.75%
 	
            3.5%
 	
            7%
 	
            1.75%
 	
            3.5%
 	
            7%
 	
            1.5%
 	
            3%
 	
            6%
 	
            5%
 	
            10%
 	
            20%
 





 


* Subject to adjustment by the CEO, as described above. 


 





	
             
 	
            SLC Confidential
 	
            Page 3 of 3