Exhibit 10.1


 





 


	
  Executive Incentive Plan

  	
   

  	
  February
  11, 2004

  	
   

  



 


Overview


 


The EXACT Sciences
Executive Incentive Plan has been designed to assist the Company in focusing
management on the company’s short term, 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 goals for both the company and each individual
participant.  As a financial incentive,
participants in the plan 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.


 


Methodology


 


The Company believes that many executive incentive
programs are ineffective, particularly in early stage companies that lack clear
revenue or profit metrics and formulae upon which to base performance
payouts.  The reason for this is
generally that the underlying goals are vague and overly subjective, if
identified at all, or change without being updated.  This makes assessing performance against
these “goals” difficult and awards become made on a largely subjective
basis.  The end result is that management
receives a cash incentive for unclear reasons, underlying critical corporate
objectives remain under-achieved and after a short time the plan becomes a
deferred compensation plan with “expected” cash versus “incentive” cash.  Not surprisingly, these companies often under-perform
and have little or no return-on-investment to show for their incentive expense.


 


The Company believes that
a well-constructed and managed executive incentive plan will drive both
performance and shareholder value and represents an effective investment of its
cash resources. To ensure this result, the EXACT plan has been designed with
the following components:


 


Goals


 


Critical to the success
of any incentive plan is the ability to set specific and measurable goals that
are tied to key success factors for the company.  To drive performance, it is also important
that these goals “stretch” the envelope at target, but are still
attainable.  Finally, the goals must not
be so numerous that they diminish focus.


 


The EXACT Executive
Incentive plan involves setting goals for both the Company and for each
executive individually.  The Board of
Directors reviews and approves corporate goals for the fiscal year.


 


Achievement of these
goals drives the corporate component of the plan.  Working with the CEO, each executive will
prepare their individual functional unit goals using a similar form and will be
a key basis for any cash payments under the plan.


 


It is also important to
recognize that EXACT Sciences is still an early stage company and may be
subject to some volatility.  Plans and
goals may change dynamically and need to be updated.  Also, achievements of great worth may occur
that were not initially envisioned, but which nonetheless prove to be very
important.  These factors will also be
considered as the plan and performance against functional goals is reviewed at
year-end.


 


1





















 


Performance Assessment


 


Each quarter, the Board
of Directors will review corporate performance against goals and the
Compensation Committee will review individual 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.  At the individual executive level, performance
will be assessed by the CEO with recommendations made 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 goals and by subjective performance assessment.


 


Payouts


 


In order to achieve any
payouts under the plan, it is first necessary for the company to hit at least
70% of its corporate goals.  Upon
achieving this threshold, payouts are then divided into two distinct, but
related components.


 


Individual Performance


 


For assessment,
individual performance that qualifies for a payout under the plan 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 generally 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

  	
   

  



 










*
all amounts in ‘000’s


 


Corporate Performance


 


For assessment, corporate
performance that qualifies for a payout under the plan is divided into three
levels of 70%, 85% or 100% of goals achieved.  
The Compensation Committee may recommend to the full Board to vary
payout formulae to reflect corporate accomplishments if they determine
appropriate.


 


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


 


	
  Performance Level

  	
   

  	
   

  	
   

  
	
  Corporate

  	
   

  	
  Calculation for Value of Stock Grant

  	
   

  
	
  100%

  	
   

  	
  2.5 times Individual
  Cash Payout

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  85%

  	
   

  	
  2.0 times Individual
  Cash Payout

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  70%

  	
   

  	
  No Multiplier of Cash
  Payout

  	
   

  



 


2





















 


The stock grants under
this part of the plan will vest 50% immediately upon the date of the grant and,
provided that the Company meets its accession rate target for the 2005 fiscal
year to be set forth in the 2005 Executive Incentive Plan, 50% on the first
anniversary of the grant.  The formula to
calculate the number of shares to be granted on each vest date is as
follows:  Total Value of Grant ÷ 2 ÷
closing price of the Corporation’s common stock on the vesting date.


 


There are no restrictions
upon the sale of the stock except for quiet periods and other regulatory
restrictions.  If an employee terminates
before the second portion of the grant is vested, the unvested portion is forfeited.


 


If in any given year it
is the decision of the management team, in concurrence with the Board, that the
financial resources of the Company are inadequate to support the plan
regardless of performance, payouts may be restructured using equity or deferred
to such future date when financial resources can appropriately accommodate
them.


 


Total Compensation


 


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


 


	
  Performance Level

  	
   

  	
  CEO

  	
   

  	
  EVP

  	
   

  	
  VP

  	
   

  
	
  Corp

  	
   

  	
  Individual

  	
   

  	
  Cash $

  	
   

  	
  Stock $

  	
   

  	
  Total $

  	
   

  	
  Cash $

  	
   

  	
  Stock $

  	
   

  	
  Total $

  	
   

  	
  Cash $

  	
   

  	
  Stock $

  	
   

  	
  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

  	
   

  



 










*
all amounts in ‘000’s


 


The following example
shows a potential representative total compensation calculation for a Vice
President:


 


Assumptions:                     Company
achieves 85% of goals

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)

  



 


3





















	
  2004 Corporate Objectives

  
	
   

  
	
  [REDACTED] tests accessioned during FY04

  
	
   

  
	
  Clear indication of pending inclusion of fecal DNA
  testing into [REDACTED] screening guidelines, evidenced by [REDACTED]

  
	
   

  
	
  Acceptance of the MCS by [REDACTED] by 12/31/04

  
	
   

  
	
  Proof of concept of either [REDACTED] sensitivity for
  CRC or [REDACTED] sensitivity for clinically relevant adenomas in [REDACTED]

  
	
   

  
	
  Reduction in the cost of the PreGen Plus assay to
  [REDACTED] while demonstrating no loss in performance as demonstrated by
  analysis of [REDACTED] previously informative cancers from stool and
  [REDACTED] previously identified colonoscopy negative stools

  
	
   

  
	
  Raise at least [REDACTED] of new cash

  
	
   

  
	
  Submit completed NCD package to CMS within 2 weeks of
  acceptance for publication of MCS paper