Document:

2012 Comp Program for Non-employee Directors 2012-Q2 EX. 10.2

Exhibit 10.2
Blue Nile, Inc.
Compensation Program for Non-Employee Directors (the “2012 Program”)
Effective Date:   April 30, 2012
Annual Cash Compensation
Retainer: $40,000 (may elect to receive stock in lieu of cash)
Committee Fee: $3,000
Audit Committee Chair Fee: $10,000                
Compensation Committee Chair Fee: $5,000
Nominating and Corporate Governance Committee Fee: $5,000
Non-Employee Chair Fee: $100,000

Retainer.  The $40,000 retainer (the “Retainer”) is earned in quarterly installments, with each quarterly installment of the Retainer becoming fully vested and payable on the date of the first regular Board meeting of that quarter, subject to continued service on the Board as of such date.  In lieu of cash, and prior to the start of each fiscal year, a director may elect to receive 100% of the Retainer for that next fiscal year as four quarterly fully vested stock awards under our 2004 Equity Incentive Plan (the “EIP”), with each award covering a number of shares that have a Fair Market Value (as defined in the EIP) on the date of grant equal to $10,000.  The stock award is granted on the third trading day following our quarterly public announcement of our financial earnings, subject to continued service through such date. 

Committee Fee.  A single $3,000 committee fee is earned in quarterly installments, each quarterly installment of such fee becoming fully vested and payable on the date of the first regular Board meeting of that quarter, subject to continued service on the Board as of such date, to each non-employee director who serves on one or more committees in that quarter.     

Committee Chair Fees.  Due to the time commitment involved in serving as a chair of a committee, in addition to the $3,000 committee fee, each committee chair receives an additional fee that is earned in quarterly installments, with each quarterly installment of such fee becoming fully vested and payable on the date of the first regular Board meeting of that quarter, subject to continued service on the Board as of such date.  The Audit Committee Chair fee is $10,000 annually, and the Compensation Committee Chair fee and the Nominating and Corporate Governance Committee Chair fee are each $5,000 annually.  

Non Employee Board Chair Fee.  Due to the time commitment involved in serving as the non-employee Chairman of the Board, the non-employee Chairman of the Board receives an additional $100,000 fee annually, and such fee is earned in quarterly installments, with each quarterly installment of such fee becoming fully vested and payable on the date of the first regular Board meeting of that quarter, subject to continued service on the Board as of such date. 

Prorated Payments for New Directors:  Each non-employee director who is elected or appointed after the start of the fiscal year will earn and be paid quarterly amounts of the Retainer and applicable committee or Chairman fees for each quarter in which he or she attends at least one regular Board meeting, with such amount(s) paid on the date of the first such meeting such Director attends in that quarter. No payments will be made for quarters prior to the first day of service.  

Equity Compensation
Annual Equity Grant: an award with a value of $63,000
Annual Non-Employee Board Chair Grant: an award with a value of $100,000 
Initial Option Grant: 11,250 shares One Time Stock Option Grant Upon Full Vesting of Initial Option Grant: 9,000 shares

Annual Equity Grant.  Each non-employee director will be granted an annual equity grant for a number of shares having a value equal to $63,000 on the first trading day following the first regular Annual Meeting of stockholders for that year.  The annual grant vests every three (3) months from the date of the grant for one year.  These grants cease vesting as of the date a non-employee director no longer serves on the Board of Directors.    

Each Non-Employee Director must elect, prior to the start of the fiscal year in which the Annual Meeting is to take place, to receive the Annual Equity Grant in the form of either (i) 100% as RSUs or (ii) 100% as Options.  In the absence of a timely election, the Annual Stock Retainer will be granted as 100% Options.  The number of shares subject to the RSUs will be equal to the value of the Annual Stock Retainer divided by the Fair Market Value as of the grant date.  The number of shares subject to the Options will be equal to the number of shares having a grant date fair value equal to the value of the Annual Stock Retainer, as calculated in accordance with Topic 718 of the Financial Accounting Standards Board Accounting Standards Codification.  

Annual Non-Employee Board Chair Grant.  The non-employee Chairman of the Board will be granted an annual equity grant for a number of shares having a value equal to $100,000 on the first trading day following the first regular Annual Meeting of stockholders for that year.  The annual grant vests every three (3) months from the date of the grant for one year and ceases vesting as of the date a non-employee director no longer serves on the Board of Directors.  

The non-employee Chairman of the Board must elect, prior to the start of the fiscal year in which the Annual Meeting is to take place, to receive this grant in the form of either (i) 100% as RSUs or (ii) 100% as Options.  In the absence of a timely election, this grant will be granted as 100% Options.  The number of shares subject to the RSUs will be equal to the value of the Annual Stock Retainer divided by the Fair Market Value as of the grant date.  The number of shares subject to the Options will be equal to the number of shares having a grant date fair value equal to the value of the Annual Stock Retainer, as calculated in accordance with Topic 718 of the Financial Accounting Standards Board Accounting Standards Codification.

Initial Option Grant.  Each director will be granted, on the date of his or her election or appointment, an initial stock option covering 11,250 shares. This initial grant vests monthly from his or her election or appointment date, with respect to 1/30th of the shares subject to the grant for the first 12 months following the date of grant and 1/60th of the shares subject to the grant for the subsequent 36 months.   These option grants cease vesting as of the date a non-employee director no longer serves on the Board of Directors.  

One Time Stock Option Grant Upon Full Vesting of Initial Option Grant.  On the fourth anniversary of the grant of an initial stock option grant, such non-employee director will be granted a new stock option covering 9,000 shares.  This grant vests monthly from the date of the grant for four years.  These options cease vesting as of the date a non-employee director no longer serves on our Board of Directors.  

Additional Terms and Conditions

Election Timing:  Solely with respect to grants made in 2012 on or after the Effective Date of the 2012 Program by individuals who are directors as of the Effective Date, all elections as to the form of the Equity Compensation piece of the annual compensation (that is, as to Options or RSUs) must be made on or before May 17, 2012, that is the day prior to the first regular Annual Meeting of stockholders in 2012 and the election made by each director in November 2011 as to the form of the cash Retainer will control the form of payment for quarterly Retainer installments that become vested and payable after the Effective Date of the 2012 Program (that is, as to cash or fully vested stock awards).  For individuals who become non-employee directors on or after May 17, 2012, such election must be made on or before the date he or she is appointed or elected as a non-employee director. 
All options will be granted with an exercise price equal to the Fair Market Value of the Common Stock on the date of grant, will have a 10 year term and a general post-termination exercise period of 12 months, subject to earlier termination or extension as provided in the EIP and the Applicable Award Agreement.The vesting of the equity awards granted to non-employee directors under this 2012 Program will become fully vested as of the earlier to occur of: (x) the date of 

the Non-Employee Director's termination of service due to death or Disability and (y) immediately prior to a Change in Control (subject to continued service as of such time).  The unvested portions of any RSUs or Options are forfeited upon any other termination.
Section 409A:  Notwithstanding anything to the contrary in this 2012 Program, if a Director is deemed by the Company at the time of such director's Separation from Service to be a “specified employee” for purposes of Code Section 409A(a)(2)(B)(i), and if any of the payments upon Separation from Service set forth herein and/or under any other agreement with the Company are deemed to be “deferred compensation,” then to the extent delayed commencement of any portion of such payments is required to avoid a prohibited distribution under Code Section 409A(a)(2)(B)(i) and the related adverse taxation under Code Section 409A, such payments shall not be provided to such Director prior to the earliest of (i) the date that is six months and one day after the date of such Director's Separation from Service, (ii) the date of the Director's death, or (iii) such earlier date as permitted under Code Section 409A without the imposition of adverse taxation.  On the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments deferred pursuant to this paragraph shall be paid in a lump sum to the Director, and any remaining payments due shall be paid as otherwise provided herein or in the applicable agreement.
Capitalized Terms:  Capitalized terms that are not defined herein will have the meaning set forth in the EIP, and, if not defined therein, in the Applicable Award Agreement.
Forms of Award Agreement:  On or before May 16, 2012, the General Counsel of the Company will make such clarifying changes to the form of stock option agreement and restricted stock unit award agreement as are necessary to conform such forms for use under this 2012 Program. 

DEADLINE FOR ELECTIONS
Elections for the Annual Equity Grant must be made on the 2012 Election Form.  This 2012 Election Form must be submitted by May 16, 2012.  Once the Election Form is submitted, the elections made are irrevocable.  Non-Employee Directors will receive a new Election Form in late 2012 in order to make an election for the Annual Board Retainer to be earned for service from and after the 2013 Meeting.
To ensure compliance with Internal Revenue Service Circular 230, you are hereby notified that any discussion of tax matters set forth in this notice was written in connection with the promotion or marketing of the transactions or matters addressed herein and was not intended or written to be used, and cannot be used by you, for the purpose of avoiding tax-related penalties under federal, state or local tax law.  You should seek advice based on your particular circumstances from an independent tax advisor.Option Grant Notice 2012-Q2 EX. 10.3

Exhibit 10.3
Blue Nile, Inc.
Stock Option Grant Notice (Non-Employee Director)
(2004 Equity Incentive Plan)
Blue Nile, Inc. (the “Company”), pursuant to its 2004 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of shares of the Company's Common Stock set forth below.  This option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement and the Plan, each of which is incorporated herein in their entirety.
	
		
	Optionholder:
	 

	Date of Grant:
	 

	Type of Grant:
	 

	Vesting Commencement Date:
	 

	Number of Shares Subject to Option:
	 

	Exercise Price (Per Share):
	 

	Total Exercise Price:
	 

	Expiration Date:
	 

	Grant #:
	 

		
	Type of Grant:
	Nonstatutory Stock Option

		
	Exercise Schedule:
	Same as Vesting Schedule      

		
	Vesting Schedule: 
	Subject to the Optionholder's Continuous Service, 1/12th of the shares vest monthly from the Vesting Commencement Date over one year.  In addition, this Award will become fully vested as of immediately prior to a Change in Control, subject to Participant's Continuous Service as of such time.

		
	Payment: 
	By one or a combination of the following items (described in the Stock Option Agreement):

ü    By cash or check
ü    Pursuant to a Regulation T Program if the Shares are publicly traded
ü    By delivery of already-owned shares if the Shares are publicly traded
Additional Terms/Acknowledgements: Optionholder acknowledges acceptance of, and understands and agrees to, this Stock Option Grant Notice, the Stock Option Agreement, the Plan and the stock plan prospectus for this Plan.  Optionholder further acknowledges that as of the Date of Grant, this Stock Option Grant Notice, the Stock Option Agreement and the Plan set forth the entire understanding between Optionholder and the Company regarding this Award and supersede all prior oral and written agreements on that subject with the exception of any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law. By accepting this Award, Optionholder consents to receive Plan documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
	
		
	Blue Nile, Inc.
	 

	By:
	 

	Signature
	 

	 
	 

	Title:
	 

	Date:
	 

The 2004 Stock Option Agreement; the 2004 Equity Incentive Plan; the 2004 Equity Incentive Plan Prospectus; and our most recent Annual Report and Proxy Statement for the Annual Meeting of Stockholders have been previously provided to you.   If you would like an additional copy of these documents, please contact Lauren Neiswender via telephone at (206) 336-6790 or via email at lauren@bluenile.com.

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