exv10w1







	 	 	 	 	 



EXHIBIT 10.1




BLUE NILE, INC.




PERFORMANCE BONUS PLAN




EXECUTIVE CASH BONUS PLAN FOR FISCAL YEAR 2011



Purpose:


Blue Nile, Inc. (“Blue Nile” or the “Company”) has designed this Executive Cash
Bonus Plan for Fiscal Year 2011 (the “Bonus Plan”) for designated executive officers. The
Bonus Plan is designed to motivate these executives to achieve the Company’s objectives by
rewarding the executives with cash payments upon the achievement of the Company’s objectives for
fiscal year 2011.


Subject to Performance Bonus Plan:


This Bonus Plan operates under, and is subject to the terms of, the Blue Nile, Inc. Performance
Bonus Plan. The Performance Bonus Plan was approved by Blue Nile’s Board of Directors and Blue
Nile’s stockholders. Any capitalized terms not defined in this Bonus Plan have the meaning set
forth in the Performance Bonus Plan.


Performance Period:


The Performance Period for this Bonus Plan is the Company’s 2011 fiscal year — that is, January 3,
2011 through January 1, 2012.


Eligibility:


On the Target Determination Date, the Committee will designate which executive officers and other
key employees will be Participants. In order to earn any Bonus Award under the Bonus Plan, a
designated executive must remain employed throughout the entire Performance Period. If the
executive’s employment terminates before the end of the Performance Period, the executive will not
be eligible to earn or be paid any Bonus Award, except as provided in an applicable severance plan
or in an individual agreement with an executive and only to the extent such right does not
disqualify such Bonus Award (or any other Bonus Award under this Bonus Plan) as Performance-Based
Compensation. If an executive is on a leave of absence for a portion of the Performance Period,
the executive will be eligible for a Bonus Award based on the actual salary he or she earned from
the Company during the Performance Period for active service (that is, exclusive of any salary
replacement benefits paid during the leave via insurance or otherwise).


The Section 162(m) Performance Goal:


The “Section 162(m) Performance Goal” used to determine the Maximum Award that may be
earned by the Participant for the Performance Period is Adjusted EBITDA. On the Target
Determination Date, the Committee will establish the level of achievement of Adjusted EBITDA that
will result in the crediting to the Participant of the Maximum Award. If the Company does not
achieve this level of Adjusted EBITDA during the Performance Period, no Bonus Award will be earned
or paid to any Participant under this Bonus Plan for the Performance Period.


“Adjusted EBITDA” means earnings before interest, and other income, taxes, depreciation and
amortization adjusted as follows:




	 	•	 	to exclude restructuring and/or other nonrecurring charges;
	 
	 	•	 	to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net
sales and operating earnings;
	 
	 	•	 	to exclude the effects of changes to generally accepted accounting principles required
by the Financial Accounting Standards Board;
	 
	 	•	 	to exclude the effects of any statutory adjustments to corporate tax rates;
	 
	 	•	 	to exclude the effects of any “extraordinary items” as determined under generally
accepted accounting principles;
	 
	 	•	 	to exclude any other unusual, non-recurring gain or loss or other extraordinary item;
	 
	 	•	 	to exclude the effects of stock based compensation and/or the payment of the bonuses
under this Plan and/or any other bonus plans of the Company;
	 
	 	•	 	to respond to, or in anticipation of, any unusual or extraordinary corporate item,
transaction, event or development;
	 
	 	•	 	to respond to, or in anticipation of, changes in applicable laws, regulations,
accounting principles, or business conditions;
	 
	 	•	 	to exclude the dilutive effects of acquisitions or joint ventures;
	 
	 	•	 	to assume that any business divested by the Company achieved performance objectives at
targeted levels during the balance of a Performance Period following such divestiture;
	 
	 	•	 	to exclude or include the effect of any change in the outstanding shares of common stock
of the Company by reason of any stock dividend or split, stock repurchase, reorganization,
recapitalization, merger, consolidation, spin-off, combination or




 









 






	 	 	 	exchange of shares or other similar corporate change, or any distributions to common
stockholders other than regular cash dividends;
	 
	 	•	 	to reflect a corporate transaction, such as a merger, consolidation, separation
(including a spinoff or other distribution of stock or property by a corporation), or
reorganization (whether or not such reorganization comes within the definition of such term
in Section 368 of the Code); and
	 
	 	•	 	to reflect any partial or complete corporate liquidation.




Maximum Award:


On the Target Determination Date, the Committee will establish the bonus percentage necessary to
determine each Participant’s Maximum Award. A Participant’s “Maximum Award” is the lesser
of (i) 200% of his or her Target Award and (ii) $3,000,000.


Target Award:


The “Target Award” equals the product of: (a) the actual base salary earned by the
Participant in the Performance Period and (b) a bonus percentage between 0% and 100% designated by
the Committee on the Target Determination Date. A Participant’s bonus percentage may not be
increased during the Performance Period. If the Participant’s bonus percentage is decreased or
salary amount is changed during the Performance Period, the Participant’s Target Award will be
calculated based on the applicable bonus percentage in place at the time the Participant earned the
applicable salary amount.


Determination of Actual Award — Payout Formula:


On the Payout Determination Date, the Committee will determine whether the Company has achieved the
Section 162(m) Performance Goal. If the Company has achieved the Section 162(m) Performance Goal,
each Participant will be credited with a Maximum Award. The Committee will then exercise negative
discretion in respect of the Maximum Award in order to determine the actual award earned by that
executive for the Performance Period (the “Actual Award”), with such negative discretion
based on: (i) achievement against additional EBITDA goals selected by the Committee, as reflected
by the calculation of the Adjusted EBITDA Result (as defined below), (ii) achievement against any
individual performance goals selected by the Committee, as reflected by the calculation of the
Individual Result (defined below), and (iii) any other factors selected by the Committee in its
sole discretion.


Specifically, the Actual Award will be determined as follows:




	1.	 	The product of (i) the Adjusted EBITDA Result and (ii) the Target Award is the “Adjusted
EBITDA Performance Result.”
	 
	2.	 	The product of (i) the Adjusted EBITDA Performance Result and (ii) 50% is the “Financial
Award.”
	 
	3.	 	The product of (i) the Adjusted EBITDA Performance Result,  (ii) 50% and (iii) the
Individual Result is the “Individual Award.”
	 
	4.	 	The sum of (i) the Financial Award, and (ii) the
Individual Award, and subject to any other
factors selected by the Compensation Committee in its sole discretion, is the Actual Award,
and the Maximum Award is reduced by the difference between the Actual Award and the Maximum
Award.




Adjusted EBITDA Result:


On the Payout Determination Date, the Committee will determine a percentage, between 0% and 200%,
which amount is the “Adjusted EBITDA Result.”


Individual Result:


On the Payout Determination Date, the Committee will determine a percentage, between 0% and 200%
(the “Individual Result”), based on the Participant’s achievement during the Performance
Period of the individual goals selected by the Committee for such Participant for the Performance
Period. Each such goal will be weighted in the sole discretion of the Committee on the Payout
Determination Date and performance, as evaluated in the sole discretion of the Committee on the
Payout Determination Date, during the Performance Period.


Administration:


Actual Awards will generally be paid within 60 days after the close of the Performance Period, but
in all cases will be paid not later than March 15 of the year following the year in which they were
earned, in compliance with the short term deferral exception from Section 409A of the Internal
Revenue Code of 1986, as amended. The Company will withhold from any payments under the Bonus Plan
and from any other amounts payable to a Participant by the Company any amount required to satisfy
the income and employment tax withholding obligations arising under applicable federal and state
laws in respect of a Bonus Award.


Participation in the Bonus Plan is at the discretion of the Committee. Designation as a
Participant does not change the at-will nature of employment with the Company.



 









 







Except as otherwise provided in the Performance Bonus Plan, the Committee will have full power and
authority to construe, interpret, and administer the Bonus Plan, including the power to amend or
terminate the Bonus Plan at any time, without the consent of any adversely affected Participant.
The Committee may at any time adopt such rules, regulations, policies, or practices as, in its sole
discretion; it determines to be necessary or appropriate for the administration of, or the
performance of its responsibilities under, the Bonus Plan. Any decision by the Committee that is
not inconsistent with the provisions of the Performance Bonus Plan shall be conclusive and binding
on all persons, and shall be given the maximum deference permitted by law.