EX-10.3



 Exhibit 10.3 

 
 



 
 Corporate Performance 

Incentive Plan 
 Effective December 31, 2012 
 Performance Period: December 31,
2012 – December 29, 2013 








	I.	Philosophy/Purpose of the Plan 

 The purpose of the Tornier N.V. Corporate Performance Incentive Plan (the “Plan”) is to provide financial reward in addition to base salary, based on achievement of specific performance, to
those who significantly impact the growth and success of the Company. The plan is designed to reward employees for achieving stretch annual goals and to closely align their accomplishments with the interests of the Company’s shareholders. This
is done by providing annual incentives for the achievement of key business and individual performance measures that are critical to the success of the Company while linking a significant portion of an employee’s annual compensation to the
achievement of such measures. 
  

	II.	Eligible Participants 


The Company will determine eligibility criteria for the Plan on an annual basis and in its sole discretion. For 2013, the Plan covers the
following: (i) all regular, salaried, exempt United States employees in Levels 2 and above, inclusive, and (ii) international and expatriate/inpatriate employees who are determined by the Company to be eligible for participation.
Notwithstanding the foregoing, employees in positions covered by sales compensation plans are not eligible Participants in the Plan. 
 The Plan year runs on a fiscal year basis each year, which for 2013 is from December 31, 2012 – December 29, 2013 (the “Plan Year”). Payouts will be made on an annual basis during
the calendar year following the performance year, but prior to March 15th of such calendar year. Participants with less than a full year of service or whose incentive target percent has changed during a Plan Year may be eligible to participate
in the Plan on a prorated basis, determined by the percentage of time they were eligible to participate during that Plan Year under applicable criteria. Plan Participants that were hired on or after November 1 of the Plan Year will not be
eligible to receive an award under the Plan for that Plan Year. 
 To be eligible, Participants must have established and
approved annual individual performance goals by the end of the first quarter of each Plan Year (or, for new employees, within two (2) months of the employee’s start date). Managers are responsible for meeting this deadline. Participants
and Managers who do not complete the annual individual performance goal setting process by such deadlines may become ineligible to participate in the Plan for that Plan Year. 

 

	III.	Administration of the Plan 


The Compensation Committee of the Board of Directors of the Company will administer the Plan. The Compensation Committee, in its sole
discretion, may delegate to the Company’s President and Chief Executive Officer (CEO) activities relating to Plan administration that are not required to be exercised by the Compensation Committee under applicable laws, rules, regulations and
the Compensation Committee Charter. Delegable activities include, but are not limited to, establishing any policies under the Plan, interpreting provisions of the Plan, determining eligibility to participate in the Plan, and approving any final
payouts under the Plan that do not affect Executive Officer level employees. All decisions of the Compensation Committee and the President and CEO will be final and binding upon all parties, including the Company and Plan Participants. 

 

	IV.	Incentive Targets 


Incentive targets have been approved by the Compensation Committee for all eligible Plan Participants based upon their level of
responsibility within the Company and impact on the business. These incentive targets represent the incentive (as a percent of a Plan Participant’s base salary) that a Plan Participant is eligible to receive under the Plan. It is the
Company’s intention to provide significant incentive and reward opportunities to its employees for world-class performance achievement. 

  
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 Each position level (2-11) has an established target bonus, expressed as a percentage of
Base Salary Earned, as illustrated below. 
  

					
	  	  	Level	  	Standard % of Base 
Salary Earned
	 President & CEO
	  	11	  	80%
	 COO
	  	10	  	n/a
	 CFO
	  	9	  	50%
	 Sr. Vice Presidents
	  	8	  	40%
	 Vice Presidents
	  	7	  	30%
	 (Sr.) Director
	  	6	  	25%
	 (Sr.) Managers, Principals
	  	5	  	15%
	 Sr. Level Ind. Contributors, Supervisors, Entry Level Mgr
	  	4	  	12.5%
	 Mid-Level Ind. Contributors, Entry Level Sup.
	  	3	  	10%
	 Entry Level Individual Contributors
	  	2	  	8%
	 Non-exempt
	  	1	  	Not eligible

 The actual incentive is capped at 150% for the Company Performance Measures or may result in 0 bonus
based on achievement. In unusual circumstances, modifications may be made if, in the Compensation Committee’s final judgment the calculations does not accurately reflect performance. 

 

	V.	Individual Performance Measures 

 Individual Performance Measures for a Plan Year are established during the annual goal setting process. Each Plan Year, all Plan Participants are required to develop three to five written, measurable and
specific Management By Objectives (MBOs), which must be agreed to and approved by the Participant and two management levels above the Participant by a specific date set by the CEO or VP of Global Human Resources and will not exceed the end of the
first quarter. For Executives in Grade Level 8 and up, each MBO and targeted achievement levels must be approved by the President and CEO, the VP of Global Human Resources and the Compensation Committee. All MBOs are weighted by agreement, with
areas of critical importance or critical focus weighted most heavily. A rating of 1 to 4 is agreed upon, providing specific achievement levels for each rating. A rating of 3 will always equal “on plan” performance or 100%. 

For 2013, there is a funding gate that requires Tornier to achieve at least the “Minimum” or threshold Adjusted EBITDA metric
in order to fund Vice President’s and above Individual Metrics (MBO) payouts. In other words, if the threshold Adjusted EBITDA corporate performance goals is not achieved, then Participants at Level 7 and above will not receive any payout under
this Plan for individual performance. 
  

	VI.	Company Performance Measures 

 For each Plan Year, the Board, upon recommendation of the Compensation Committee, will approve Company Performance Measures, including the specific financial objectives and weightings for both the
corporate performance measures and the divisional performance measures. In recommending Company Performance Measures, the Compensation Committee and the VP of Global Human Resources, together with input from the Company’s President and CEO,
will identify critical Company Performance Measures. The 2013 Company Performance Measures are: 
  

	 	•	 	 Adjusted Revenue in Constant Currency 


  

	 	•	 	 Adjusted EBITDA 


  

	 	•	 	 Adjusted Free Cash Flow 


 In recommending the specific financial objectives and weightings, the finance team, VP of Global Human Resources and the President and CEO will establish specific financial objectives for the Company
Performance Measures, which will be tied to the Company’s approved operating plan. All 

  
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objectives will be assigned a specific weighting, with areas of critical importance or critical focus weighted most heavily. In addition, for each Company Performance Measure minimum, target and
maximum achievement levels will be established. Achieving target performance levels will result in 100% achievement. The Company’s Performance Measures are capped at 150%. 

 

	VII.	Bonus Calculation 

 All
Plan performance measures and objectives are based on percent achievement and they are weighted based on relative importance in order to obtain a weighted performance rating for each objective. All weighted performance ratings are added together to
obtain an overall rating for each Participant. 
 For each Participant the actual results are multiplied by each weighted
performance rating and then the combined result is multiplied by the target bonus percentage and the Base Salary Earnings (as defined below) for that Plan Year to calculate the award, e.g. 100% actual incentive percentage times 20% target bonus
equals an award of 20% of earned base salary. 
 For new or newly eligible Participants who join the Plan during the Plan Year,
the award may be calculated by using the Participant’s Base Salary Earnings from the Plan Year. 
 “Base Salary
Earnings” are defined as earnings received within the Plan Year to include regular base salary earnings, vacation pay, and sick pay and to exclude, but not limited to the following; disability pay, commissions, bonuses, gifts, auto allowance,
housing allowance, relocation and RSU/stock option exercise earnings. 
  

	VIII.	Individual Incentive Payment Criteria, Calculation, and Payout 

 A Plan Participant must remain actively employed by the Company past the last day of the Plan Year to be eligible for an incentive payment under the Plan for that Plan Year. 

The incentive payment under the Plan for any eligible Plan Participant for a particular Plan Year will vary depending upon the approved
individual objectives and company performance measures, the Plan Participant’s Base Salary Earnings of that Plan Year, and the Plan Participant’s incentive target for that Plan Year. 

In the following cases, the final incentive payout will be prorated. If the Plan Participant was on a Leave of Absence for part of the
Plan Year, their bonus will be pro-rated based upon the Base Salary Earnings within the Plan Year. If the Plan Participant works less than a full-time schedule (40 hours/week), the incentive payout will be prorated and determined on their Base
Salary Earnings for the Plan Year or if the Plan Participant has a change to a full-time status throughout the year, their incentive payout will likewise be prorated for the portion of the year in which they worked a part-time schedule and again be
based on Base Salary Earnings for the Plan Year. If the Plan Participant received a promotion during the year with a change in target incentive, the final payout will be prorated for the time spent at each incentive target using the Base Salary
Earnings from each of the periods within that Plan Year. 
 At the end of the Plan Year, each Participant will review their
MBO’s and results with their direct manager to determine the rating earned for each MBO objective. Each MBO objective rating will be combined to calculate an overall rating for the individual objectives. In addition, as soon as practicable
after the appropriate financial and other data has been compiled, the finance department will calculate the results for the Corporate Performance Measures. The achievement from the Corporate Performance Measures and MBOs will be combined together
per the applicable weighting factors to determine the final payout for each individual Plan Participant. Individual incentive payments under the Plan will be made in a lump sum, less applicable withholding taxes, as soon as reasonably practicable
after the determination of such payments, during the calendar year following the performance year and ending on March 15 of such calendar year. 

  
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 Participant must have a total weighted MBO rating of 1.75 or greater in order to eligible
for a MBO payout. 
 In all cases, recommendations for final incentive awards are submitted to the VP of Global Human Resources
and the President and CEO for approval, with final approval by the Compensation Committee. 
 In the event that a Participant is
on a Performance Improvement Plan (PIP) for all or part of the plan year, Tornier reserves the right to withhold all or partial bonus payment from the Participant. 
 The President and CEO and/or the Compensation Committee may make a recommendation to modify an award by plus/minus 20% if, in its subjective judgment, the Participant has not been equitably treated by the
mechanics of the incentive plan. Such modifications of awards should only be used in truly exceptional cases. 
  

	IX.	Plan Discretion 

 All
benefits payable under the Plan are discretionary and no Plan Participant shall have any right to payment under the Plan until actually paid. 
 To the extent necessary with respect to any Plan Year, in order to avoid any undue windfall or hardship due to external causes, the Compensation Committee may without the consent of any affected Plan
Participant, revise one or more of the Company Performance Measures, or otherwise make adjustments to payouts under the Plan to take into account any acquisition or disposition by the Company not planned for at the time the Company Performance
Measures were established, any change in accounting principles or standards, or any extraordinary or non-recurring event or item, so as to equitably reflect such event or events, such that the criteria for evaluating whether a Company Performance
Measure has been achieved will be substantially the same (as determined by the Compensation Committee) following such event as prior to such event. 
  

	X.	Recoupment 

 Any payments
under the Plan are subject to recoupment under certain circumstances. The Company will, to the full extent permitted by applicable law, have the sole and absolute authority to require that each executive officer agree to reimburse the Company for
all or any portion of any cash bonuses or incentive based compensation if: (a) the payment was predicated upon the achievement of certain financial results that were subsequently the subject of a material financial restatement, (b) in the
Committee’s view, the executive officer engaged in fraud, or misconduct that caused or partially caused the need for a material financial restatement by the Company, and (c) a lower payment would have occurred based upon the restated
financial results. In each such instance, the Company will, to the extent practicable and allowable under applicable laws, require reimbursement of any bonus or incentive based compensation awarded to the executive officer in the amount by which the
individual executive officer’s annual bonus or incentive based compensation for the relevant period exceeded the lower payment that would have been made based on the restated financial results, provided that the Company will not seek to recover
bonuses or incentive based compensation paid more than months prior to the date the applicable restatement is disclosed. 
 Any
recoupment under this Plan may be in addition to any other actions or remedies that may be available to the Company under applicable law and any other policies of the Company, including disciplinary actions up to and including termination of
employment. 
 For purposes of this Plan, the term “executive officer” means any officer who has been designated an
executive officer by the Board. For purposes of this Plan, the term “misconduct” means any material violation of the Tornier Inc. Code of Business Conduct, the Tornier Inc. Code of Ethics for Senior Executive and Financial Officers or
other illegal or unethical activity, as determined by the Compensation Committee. 

  
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	XI.	Termination, Suspension, or Modification 

 The Company may terminate, suspend, modify and if suspended, may reinstate or modify, all or part of the Plan at any time, with or without notice to the Plan Participants. Exceptions to the eligibility of
or the extent to which the Plan applies to, any particular Plan Participant must be approved, on a case-by-case basis, by the Compensation Committee for officer Participants, or in the case of non-officer Participants, the President and CEO or the
VP of Global Human Resources. 
  

	XII.	Limitation of Liability 


No member of the Company’s Board of Directors, the Compensation Committee, any officer, employee, or agent of the Company, or any
other person participating in any determination of any question under the Plan, or in the interpretation, administration, or application of the Plan, shall have any liability to any party for any action taken, or not taken, in good faith under the
Plan. 
  

	XIII.	No Right to Employment 


This document sets forth the terms of the Plan and it is not intended to be a contract or employment agreement between any Plan
Participant and the Company. Nothing contained in the Plan (or in any other documents related to the Plan) shall confer upon any employee or Plan Participant any right to continue in the employ or other service of the Company or constitute any
contract or limit in any way the right of the Company to change such person’s compensation or other benefits or to terminate the employment or other service of such person with or without cause or notice. 

 

	XIV.	Non-Assignability 

 Except
for the designation of a beneficiary (ies) to receive payments of benefits for a particular Plan year following a Plan Participant’s death after the completion of such Plan Year, no amount payable at any time under the Plan shall be subject to
sale, transfer, assignment, pledge, attachment, or other encumbrance of any kind. Any attempt to sell, transfer, assign, pledge, attach, or otherwise encumber any such benefits, whether currently or thereafter payable, shall be void. 

 

	XV.	Withholding Taxes 

 The
Company is entitled to withhold and deduct from any payments made pursuant to the Plan or from future wages of a Plan Participant (or from other amounts that may be due and owing to the Plan Participant from the Company), or make other arrangements
for the collection of, all legally required amounts necessary to satisfy any and all federal, state, and local withholding and employment-related tax requirements attributable to any payment made pursuant to the Plan. 

 

	XVI.	Unfunded Status of Plan 


The Plan shall be unfunded. No provisions of the Plan shall require the Company, for the purpose of satisfying any obligations under the
Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets. Plan Participants shall have no rights under the Plan other than as unsecured general creditors of the
Company. 
  

	XVII.	Other 

 Except to the
extent in connection with other matters of corporate governance and authority (all of which shall be governed by the laws of the Company’s jurisdiction of incorporation), the validity, construction, interpretation, administration and effect of
the Plan and any rules, regulations, and actions relating to the Plan will be governed by and construed exclusively in accordance with the internal, substantive laws of the State of Minnesota, without regard to the conflict of law rules of the State
of Minnesota or any other jurisdiction. 

  
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