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Exhibit 10.10  


 
 

BONUS INCENTIVE COMPENSATION PLAN
  PART I    
    


SECTION 1.    PURPOSE  


        The purpose of the Executive Incentive Compensation Plan ("the plan") is to enhance and reinforce the goals of Natrol, Inc. and its subsidiaries (the
"Company") for profitable growth and continuation of a sound overall condition. This will be accomplished by providing key employees with additional financial rewards for attainment of such growth and
stable financial and operating condition. Final approval of the payment of any awards made under the Plan is subject to the discretion of the Board of Directors. 


SECTION 2.    DEFINITIONS  


	2.1
	Definitions
of terms as used throughout this Plan document are as follows:



	(a)
	"Award
Year" means the twelve-month period coinciding with the organization's annual accounting period,
January 1st—December 31st.



	(b)
	"Committee"
means a Committee established by the Board of Directors of the Organization to administer the Plan.



	(c)
	"Participant"
means an eligible employee, all of whom have been selected without regard to race, color, religion, sex, gender, marital status, age, national origin, sexual
orientation, physical or mental disability, medical condition, veteran status, or any basis protected by law. 






SECTION 3.    ELIGIBILITY  


        Bonuses under the Bonus Plan may be granted to those key employees of the Company, including officers of the Company, whether or not they are directors of the
Company. 


SECTION 4.    ADMINISTRATION  


        The Compensation Committee of the Board of Directors of the Company shall administer the Plan. This Committee shall be comprised of not less than three members as
shall be appointed from time to time by the Board of Directors. 


        The
committee has full power and authority to select participants from among those eligible, to determine the amount of funds included in the bonus pool upon Board approval of the budget
plan, to determine the amount and timing of individual awards, and to adopt and revise such rules and procedures as it shall deem necessary for the administration of the Plan. 


	4.1
	Resolution of Disputes & Awards. The decision of the Committee with respect to any question or disputes arising out of
participation in "the plan", or the individuals selected for awards, and the interpretation of the provisions of this Plan shall be final, conclusive and binding on all parties with no right of court,
jury or other review. 





SECTION 5.    PARTICIPATION  


        Participation in the Plan shall be limited to regular salaried employees of the Company, including officers as recommended by management and approved by the
Committee. In selecting Participants, the Committee shall consider an individual's position and potential impact on the Company's business results and performance. The selection of Participants, and
their respective incentive awards, shall be determined annually by the Committee and communicated to Participants as soon as possible. The 


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Committee
selection of participants shall be final, conclusive and binding on all parties with no right of court, jury or other review. 


SECTION 6.    AWARDS COMPUTATION—GENERAL  


        The Committee should establish the performance criteria for the award of the Incentive Bonus Compensation (criteria) at the beginning of each calendar year. 



        The
Committee should establish the performance criteria for the award of the Incentive Bonus Compensation (criteria) at the beginning of each year. 


	6.1
	The
Committee shall establish all operating rules and criteria for the plan by the first quarter of each calendar year. 



It is expected that during any bonus plan year, there could be unusual and/or non-recurring significant revenue or expenses that the Committee believes should be
considered for exclusion for determination of bonus compensation. The Committee will evaluate these occurrences and decide whether the resulting effect on earnings will be excluded or included from
the Company's results of operations ("qualifying earnings").


Plan participants will be given timely notice of any such material changes or events that alter the "qualifying earnings".


	6.2
	The
participants immediate supervisor should be consulted prior to any award being made to verify that the participant is in good standing and qualifies for inclusion in the plan.



	6.3
	Each
Bonus participant shall achieve the percentage of Bonus to be received by the participant for each level of achievement of the Performance Goal, and such other terms and
conditions as the Committee, in its sole discretion, shall determine. Part II, Section 3, includes guidelines that will be followed to measure results. 



SECTION 7.    PAYMENT OF AWARDS  


	7.1
	Normal Payment. Awards shall be earned as of the last business day of the Award Year. As soon as reasonably practicable following the
end of a Measurement Period, but in no event later than ninety (90) days following the fiscal year end close, the Compensation Committee shall certify in writing the level of achievement of
each Performance Goal established by the Compensation Committee with respect to such Measurement Period. 



Bonus
payments shall be made from the general funds of the Company and no special or separate fund shall be established or other segregation of assets made to assure payment. No participant or other
person shall have under any circumstances any interest in any particular property or assets of the Company. 



	7.2
	Payment Under Conditions of Termination. If termination of employment occurs during an Award Year on account of death, total
disability, or approved leave of absence, such Participant terminating employment shall be deemed to have earned a proportionate (prorated) share of that would otherwise be that Award Year's actual
bonus. 



The
amount of such Award shall be the amount that would have been earned had the Participant been employed by the Company during the full Award Year, multiplied by a fraction, the numerator of which
is the number of days that the Participant was employed by the Company, and the denominator of which is the number of days in that full Award Year. 



	7.3
	Participant Transfer. If a Participant is transferred to another Subsidiary affiliated with the Company during an Award Year, and is
determined to be eligible for payments under one or both 


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of
the Subsidiary's plans, partial awards will be made under each Plan based on a pro rata determination as described in the preceding paragraph. 




If
termination of employment occurs for any reason other than death, total disability, or approved leave of absence, no award shall be deemed earned for the Award Year in which such termination
occurs. 




SECTION 8.    DISSOLUTION OR MERGER  


        If the Company should be liquidated and/or dissolved, or if the Company should become a party to a merger or consolidation in which it is not the surviving
corporation, the value of the bonus fund shall be determined in accordance with paragraph 7.2 and on the date of such dissolution or merger. 


SECTION 9.    AMENDMENT OR TERMINATION  


        The Board of Directors of the Company or the Compensation Committee of the Board of Directors, if and to the extent authorized, in absolute discretion of the body
so acting and without notice, may at any time amend or terminate the Plan, provided that no such amendment or termination shall adversely affect the rights of any participation under any award
previously granted. 


SECTION 10.    OTHER CONDITIONS  


	10.1
	Right of Assignment. No right or interest of any Participant in the Plan shall be assignable or transferable, or subject to any lien,
directly, by operation of law, or otherwise including levy, garnishment, attachment, pledge, and bankruptcy. In the event of a Participant's death, payment shall be made to the Participant's
designated beneficiary, or in the absence of such designation, to the Participant's estate.



	10.2
	Right of Employment. The receipt of an award under this Plan shall not give any employee any right to continued employment by the
Company, and the right to dismiss any employee is specifically reserved to the Company. The receipt of an award in any year shall not give an employee the right to receive an award in any subsequent
year.



	10.3
	Withholding for Taxes. The Company shall have the right to deduct from all payments under this Plan any federal or state taxes
required by law to be withheld with respect to such payments. 



SECTION 11.    EFFECTIVE DATE  


        The effective date of this Plan shall be January 1, 2004 as adopted by the Board of Directors of the Company. 


PART II. OPERATING RULES  



SECTION 1.    GENERAL  


        The following Incentive Compensation Plan Operating Rules will be in effect during January 1, 2004-December 31, 2004. These operating rules are
subject to change by the Committee before the start of the Plan Year, with the approval of the Board of Directors. It is anticipated that the rules will be revised only when significant changes occur,
or other pertinent factors affect the operation of the Plan. Changes from year to year will be minimized in order to maintain the basic continuity of the Plan. 



SECTION 2.    PLAN PARTICIPANTS  


        Plan Attachment II.1 lists the current Plan Year Participant names, titles, organizational and/or
responsibilities. Plan Participants are selected prior to the start of the Plan Year. New participants may 


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be
added at a later date, e.g., newly hired employee, PROVIDED they meet qualifying criteria guidelines (Job Grades) and will be subject to a pro-rated percent of award, should criteria be
met. 


SECTION 3.    INCENTIVE FORMULAS  


        Instructions for calculating the bonus pool are included in Attachment II.2. Attachment
II.3 includes the formulas for calculating the individual incentive compensation awards. The attachments include additional definitions of terms and descriptions of the
calculations. 


SECTION 4.    EFFECTIVE DATE  


        The effective date of the Incentive Compensation Plan shall be January 1, 2004. 


ATTACHMENT II.1—Plan Participants (By title only)  


Salary Grade Level 51—62 (Vice President & Above)  



	Name
 
	 	Title

	 	 	President/CEO
	 	 	Chief Operating Officer
	 	 	Executive Vice President/Chief Financial Officer
	 	 	Vice President, Product Development
	 	 	Vice President, Sales
	 	 	Vice President, Retail Sales
	 	 	Vice President, General Counsel
	 	 	Vice President, Marketing
	 	 	Vice President, Senior Counsel
	 	 	Vice President, EPI/Director of Manufacturing
	 	 	Vice President, QA/QC




Total Represented Salary Grades 51-62: $2,865,000
  Estimated Maximum Accrual: $716,250.  


Salary Grade Levels: 46 - 48(By title only)  



	 	 	Director, QC
	 	 	Director, Marketing
	 	 	Director, IT
	 	 	Director, Finance
	 	 	Director, Alternative Sales
	 	 	Director, Human Resources
	 	 	Director, Planning, Inventory Control, Purchasing
	 	 	Director, Warehouse/Plant Operations
	 	 	Director, Purchasing
	 	 	Director, Communication




Total Represented Salary Grades 46-48: $943,176 est.
  Estimated Maximum Accrual: $141,476  


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Salary Grade Levels 40 -45 (By titleonly)  



	 	 	Sr. Manager of Trade Marketing
	 	 	Sr. Compliance Manager
	 	 	Facility Manager, Prolab
	 	 	Product Development Manager
	 	 	Data Insights Manager
	 	 	Brand Manager
	 	 	Sr. Manager Sales & Marketing Administration*
	 	 	Senior Manager, Paralegal
	 	 	Product Development Manager
	 	 	Manufacturing Supervisor
	 	 	Inventory Control Manager
	 	 	Maintenance Supervisor
	 	 	Production Manager
	 	 	Brand Manager Natrol Core
	 	 	Executive Assistant
	 	 	Associate Brand Manager
	 	 	Product Development Manager
	 	 	Assistant Controller
	 	 	A/R Manager
	 	 	A/P Manager
	 	 	Facility Administrator
	 	 	Consumer Services Manager
	 	 	Consumer Services Manager
	 	 	Office Manager
	 	 	Packaging Supervisor
	 	 	Shipping Manager
	 	 	Packaging Supervisor




Total Represented Salary Grades 40-45: $1,657, 925 est
  (*Salary Grade Sales 32 equivalent to Salary Grade 44)
 Estimated Maximum Accrual: $165,792.50  


ATTACHMENT II.2—Instructions for Calculating Bonus Pool  


        A target bonus fund shall be established equal to 10%-25% of the annual base salary of the Plan Participants as called out below. Employees based upon
their salary grade, will be eligible for an annual incentive bonus as a percentage of their base salary. 



	Salary Grade Level
 
	 	Bonus Fund

	51 - 62	 	25% of Base Salary
	46 - 48	 	15% of Base Salary
	40 - 45	 	10% of Base Salary






        The
incentive program shall be based on "qualifying income" as defined in paragraph 6.1 and corporate earnings. The 2004 target to receive 100% of the eligible incentive bonus is
$5,000,000 before bonuses, interest and income taxes. The Compensation Committee of the Board has agreed to pay a portion of the eligible incentive bonus based on partial milestones achieved, as well
as exceeding the corporate target. 


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Chart for percentage of eligible schedule    
    



	 
	 	Target
	 	Award

	 	 	10,000,000	 	150%
	 	 	9,000,000—9,999,999	 	140%
	 	 	8,000,000—8,999,999	 	130%
	 	 	7,000,000—7,999,999	 	120%
	 	 	6,000,000—6,999,999	 	110%
	*Corporate Goal	 	5,000,000—5,999,999	 	100% of eligible bonus
	 	 	4,000,000—4,999,999	 	75%
	 	 	3,000,000—3,999,999	 	50%
	 	 	2,000,000—2,999,999	 	25%
	 	 	Less than 2,000,000	 	0%







*Before
Bonuses, Interest and Income Taxes 


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BONUS INCENTIVE COMPENSATION PLAN PART I

Chart for percentage of eligible schedule