Document:

exv10w1

	 	 	 	 	 

EXHIBIT 10.1

Blue Nile, Inc.

Performance Bonus Plan

	1.	 	PURPOSE. The Plan is intended to increase stockholder value and the success of the Company
by motivating Participants to achieve the Company’s objectives and initiatives through the
payment of awards hereunder when those objectives and initiatives are achieved. The Company
intends that the Plan will permit the payment of bonuses that may qualify as Performance-Based
Compensation.

	2.	 	DEFINITIONS.

	 	2.1	 	“Board” means the Board of Directors of the Company.
	 
	 	2.2	 	“Bonus Award” means the award, in the amount determined by the Committee, that may be
earned by a Participant based on that Participant’s level of attainment of Performance
Goals established in accordance with this Plan, subject to the Committee’s authority under
the Plan to eliminate or reduce such amount as described below.
	 
	 	2.3	 	“Code” means the Internal Revenue Code of 1986, as amended.
	 
	 	2.4	 	“Committee” means the Compensation Committee of the Board, or a subcommittee thereof,
which shall, with respect to payments hereunder intended to qualify as performance-based
compensation under Section 162(m), consist solely of two or more members of the Board who
are not employees of the Company and who otherwise qualify as “outside directors” within
the meaning of Section 162(m).
	 
	 	2.5	 	“Company” means Blue Nile, Inc., together with each of its subsidiaries (as such term
is defined in Section 424(f) of the Code).
	 
	 	2.6	 	“Fiscal Year” means a fiscal year of the Company.
	 
	 	2.7	 	“Maximum Award” means the maximum Bonus Award that may be earned under the Plan by a
Participant for the Performance Period, which may (but is not required to be) expressed as
a percentage of Participant’s base salary, a specific dollar amount, or a specific number
of shares of Common Stock, as determined by the Committee in accordance with the Plan. In
no event may the Maximum Award payable in cash, as to any Participant for any Performance
Period, exceed $3 million multiplied by the number of complete Fiscal Years contained
within the Performance Period. In addition, in no event may the Maximum Award payable in
shares, as to any Participant for any Performance Period, exceed 300,000 shares of the
Company’s common stock multiplied by the number of complete Fiscal Years contained within
the Performance Period. A Participant may be awarded, and may earn, both a Maximum Award
payable in cash and a Maximum Award payable in shares for the same Performance Period.
	 
	 	2.8	 	“Participant” means any executive officer or key employee of the Company designated by
the Committee, in its sole discretion, to participate in the Plan for a given Performance
Period.
	 
	 	2.9	 	“Payout Determination Date” means the date upon which the Committee determines the
amounts payable under the Plan with respect to any previously completed Performance Period,
in accordance with terms set forth below.
	 
	 	2.10	 	“Payout Formula” means, as to any Performance Period, the formula or payout matrix
established by the Committee pursuant to Section 5 in order to determine the Bonus Awards
(if any) to be paid to Participants. The Payout Formula may be (but is not required to be)
expressed as a percentage (which may be more than 100%) of the Target Award. The Payout
Formula may differ from Participant to Participant and, with respect to any one Participant
in a given Performance Period, there may be a different Payout Formula for his or her
Maximum Award payable in cash than the Payout Formula for his or her Maximum Award payable
in shares.
	 
	 	2.11	 	“Performance-Based Compensation” means compensation that is intended to qualify as
“performance-based compensation” within the meaning of Section 162(m).
	 
	 	2.12	 	“Performance Goals” means the goal(s) (or combined goal(s)) determined by the Committee
(in its discretion) to be applicable to a Participant with respect to a Bonus Award. As
determined by the Committee, the Performance Goals applicable to a Bonus Award may provide
for a targeted level or levels of achievement using one or more of the following measures:
(a) growth in revenue; (b) growth in the market price of stock; (c) operating margin; (d)
gross margin; (e) operating income; (f) pre-tax profit; (g) earnings before interest, taxes
and depreciation; (h) earnings before interest, taxes, depreciation and amortization; (i)
net income; (j) total stockholder return; (k) earnings per share; (l) return on stockholder
equity; (m) return on net assets; (n) expenses; (o) return on capital; (p) economic value
added; (q) market share; (r) operating cash flow or free cash flow (defined as operating
cash flow minus capital expenditures); (s) cash flow, as indicated by book earnings before
interest, taxes, depreciation and amortization; (t) cash flow per share (operating cash
flow or free cash flow); (u) customer satisfaction; (v) implementation or completion of
projects or processes; (w) improvement in or attainment of working capital levels; (x)
stockholders’ equity; (y) internal improvements; (z) business development metrics; (aa)
culture, development, leadership and/or employee metrics; (bb) innovation; and/or (cc)
other measures of performance selected by the Committee, in each case, to the degree such
measure is used in a manner consistent with the requirements of Section 162(m).

 

 

	 	 	 	The Performance Goals may be based on absolute target numbers or growth in one or more such
categories compared to a prior period. The Performance Goals may relate to the Company,
one or more of its or its divisions or units, or departments or functions, or any
combination of the foregoing, and may be applied on an absolute basis and/or be relative to
one or more peer group companies, indices, prior periods, or any combination thereof, all
as the Committee shall determine. In addition, to the degree consistent with Section
162(m), in establishing the Performance Goals, the Committee may provide, not later than
the Target Determination Cutoff Date, that the attainment of the Performance Goals shall be
measured by appropriately adjusting the evaluation of Performance Goal performance as
follows: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to exclude
exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and
operating earnings; (iii) to exclude the effects of changes to generally accepted
accounting principles required by the Financial Accounting Standards Board; (iv) to exclude
the effects of any statutory adjustments to corporate tax rates; (v) to exclude the effects
of any “extraordinary items” as determined under generally accepted accounting principles;
(vi) to exclude any other unusual, non-recurring gain or loss or other extraordinary item;
(vii) 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; (viii) to respond to, or in
anticipation of, any unusual or extraordinary corporate item, transaction, event or
development; (ix) to respond to, or in anticipation of, changes in applicable laws,
regulations, accounting principles, or business conditions; (x) to exclude the dilutive
effects of acquisitions or joint ventures; (xi) 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; (xii) 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;
(xiii) 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 (xiv) to reflect any partial or complete corporate
liquidation. The Performance Goals, and the manner of calculating such goals, may differ
from Participant to Participant.
	 
	 	2.13	 	“Performance Period” means any Fiscal Year or such other period as determined by the
Committee in its sole discretion.
	 
	 	2.14	 	“Plan” means the Blue Nile, Inc. Performance Bonus Plan.
	 
	 	2.15	 	“Plan Year” means the Company’s Fiscal Year.
	 
	 	2.16	 	“Section 162(m)” means Section 162(m) of the Code, or any successor section thereto, as
that Section may be interpreted from time to time by the Internal Revenue Service, whether
by regulation, notice or otherwise.
	 
	 	2.17	 	“Target Award” means the target Bonus Award that may be earned under the Plan by a
Participant for the Performance Period at target levels of performance, which may (but is
not required to be) expressed as a percentage of Participant’s base salary, a specific
dollar amount, or a specific number of shares of Common Stock, as determined by the
Committee in accordance with the Plan.
	 
	 	2.18	 	“Target Determination Cutoff Date” means the latest possible date that will not
jeopardize a Bonus Award’s qualification as Performance-Based Compensation.
	 
	 	2.19	 	“Target Determination Date” means the date upon which the Committee sets the Target
Award, Maximum Award, any threshold award and the Payout Formula with respect to any
Performance Period, in accordance with the Plan.

	3.	 	ELIGIBILITY. Participants in the Plan shall be selected by the Committee for each
Performance Period from those executive officers and key employees of the Company whose
efforts are anticipated to contribute materially to the success of the Company. No employee
shall be a Participant unless he or she is selected by the Committee, in its sole discretion.
No employee shall at any time have the right to be selected as a Participant nor, having been
selected as a Participant for one Performance Period, to be selected as a Participant in any
other Performance Period. Unless specifically stated otherwise in a Participant’s Bonus Award
agreement (and then only to the extent consistent with deductibility of Performance-Based
Compensation under Section 162(m)), a Participant must be actively employed on the last day of
the Performance Period to be eligible to receive a payment hereunder.

	4.	 	ADMINISTRATION. The Committee shall be responsible for the general administration and
interpretation of the Plan and for carrying out its provisions. Subject to the requirements
for qualifying compensation as Performance-Based Compensation, the Committee may delegate
specific administrative tasks to Company employees or others as appropriate for proper
administration of the Plan. Subject to the limitations on Committee discretion imposed under
Section 162(m), the Committee shall have such powers as may be necessary to discharge its
duties hereunder, including, but not by way of limitation, the following powers and duties,
but subject to the terms of the Plan:

	 	•	 	determining eligibility for participation,
	 
	 	•	 	determining the Payout Formula,
	 
	 	•	 	establishing the Maximum Award and Target Award,

 

 

	 	•	 	establishing Performance Goals for each Participant,
	 
	 	•	 	calculating and/or determining the level of attainment of the Performance Goals,
	 
	 	•	 	certifying performance against the Performance Goals, and
	 
	 	•	 	calculating the Bonus Award payable to each Participant based upon such level of
attainment.

	 	 	Except as otherwise herein expressly provided, full power and authority to construe, interpret,
and administer the Plan shall be vested in the Committee, including the power to amend or
terminate the Plan as further described in Section 10. The Committee may at any time adopt such
rules, regulations, policies, or practices as, in its sole discretion, it shall determine to be
necessary or appropriate for the administration of, or the performance of its respective
responsibilities under, the Plan. The Committee may at any time amend, modify, suspend, or
terminate such rules, regulations, policies, or practices. Any rule or decision by the Committee
that is not inconsistent with the provisions of the Plan shall be conclusive and binding on all
persons, and shall be given the maximum deference permitted by law.

	5.	 	BONUS AWARDS.

	 	5.1	 	On the Target Determination Date, the Committee, in its sole discretion, shall
establish the Performance Goals for each Participant for the Performance Period, including
setting forth the manner for calculating achievement against the Performance Goals. Such
Performance Goals shall be set forth in writing on or prior to the Target Determination
Cutoff Date.
	 
	 	5.2	 	On the Target Determination Date, the Committee, in its sole discretion, shall
establish a Target Award for each Participant. Each Target Award shall be set forth in
writing on or prior to the Target Determination Cutoff Date.
	 
	 	5.3	 	On the Target Determination Date, the Committee, in its sole discretion, shall
establish the Payout Formula for purposes of determining the Bonus Award that may be earned
by each Participant. Each Payout Formula (a) shall be set forth in writing on or prior to
the Target Determination Cutoff Date, (b) shall provide for the payment of a Participant’s
Bonus Award if the Performance Goals for the Performance Period are achieved, and (c) may
provide for a Bonus Award payment greater than or less than the Participant’s Target Award
(i.e., a Maximum Award and a threshold award), depending upon the extent to which the
Performance Goals are achieved. Notwithstanding the preceding, in no event shall a
Participant’s Bonus Award for any Performance Period exceed the Maximum Award.
	 
	 	5.4	 	On the Payout Determination Date, the Committee shall certify in writing (which may be
by approval of the minutes in which the certification was made) the extent to which the
Performance Goals applicable to each Participant for the Performance Period were achieved
or exceeded. The Bonus Award for each Participant shall be determined by applying the
Payout Formula to the level of actual performance that has been certified by the Committee.
Notwithstanding any contrary provision of the Plan, the Committee, in its sole discretion,
may eliminate or reduce the Bonus Award payable to any Participant below that which
otherwise would be payable under the Payout Formula.
	 
	 	5.5	 	Each Bonus Award under the Plan shall be paid solely from the general assets of the
Company. Nothing in this Plan shall be construed to create a trust or to establish or
evidence any Participant’s claim of any right to payment of a Bonus Award other than as an
unsecured general creditor with respect to any payment to which he or she may be entitled.
	 
	 	5.6	 	The Company shall distribute any earned Bonus Award to the Participant in cash or
shares, as applicable. For any Bonus Awards payable in shares, these shares will be issued
under and subject to the terms of one of the Company’s stockholder-approved equity plans.
	 
	 	5.7	 	In addition, in the sole discretion of the Committee, and only to the extent consistent
with deductibility of Performance-Based Compensation under Section 162(m), any Bonus Award
earned under the Plan that was denominated in cash may be paid in shares of the Company’s
common stock. In general, shares paid in satisfaction of a cash Bonus Award will be issued
on the same date that the Bonus Award would otherwise be paid in cash, and the number of
shares issuable will be determined by converting the cash value of the Bonus Award into
shares using the “Fair Market Value” (as defined in the applicable equity plan) of such
shares on the date of issuance.
	 
	 	5.8	 	The Company will withhold from any payments under the 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. Without limiting the forgoing, the Company may, in it sole
discretion, satisfy the tax withholding obligations by withholding from any shares of stock
otherwise issuable to a Participant pursuant to the Plan a number of whole shares having a
Fair Market Value as of the date of payment, not in excess of the minimum amount of tax
required to be withheld by law. The Company may require the Participant to satisfy any
remaining amount of the tax withholding obligations by tendering a cash payment. Each
Participant is encouraged to contact his or her personal legal or tax advisors with respect
to the benefits provided by the Plan. Neither the Company nor any of its employees,
directors officers or agents are authorized to provide any tax advice to Participants with
respect to the benefits provided under the Plan.

 

 

	6.	 	PAYMENT OF BONUS AWARDS. Subject to Section 11 below, the Company shall distribute amounts
payable to Participants as soon as is practicable following the determination and written
certification of the Bonus Award for a Performance Period, but in no event later than 2 and
1/2 months after the end of the applicable Performance Period. Bonus Award amounts earned but
not yet paid will not accrue interest.

	7.	 	INDEMNIFICATION. Our Board and its Committee are generally indemnified by the Company for
any liability arising from claims relating to the Plan.

	8.	 	NO CLAIM OR RIGHT TO PLAN PARTICIPATION. No employee or other person shall have any claim or
right to be selected as a Participant under the Plan. Neither the Plan nor any action taken
pursuant to the Plan shall be construed as giving any employee any right to be retained in the
employ of the Company.

	9.	 	SECTION 409A OF THE CODE. Generally, the Plan and Bonus Awards granted hereunder are
intended to be exempt from the application of Code Section 409A under Treasury Regulation
1.409A-1(b)(4) (except for any awards intentionally deferred pursuant to a Participant
deferral election made under Section 11 below), and this Plan shall be interpreted and
administered in compliance therewith the greatest extent possible.

	10.	 	AMENDMENT AND TERMINATION. The Committee may amend, suspend or terminate the Plan, in whole
or in part, at any time, including the adoption of amendments deemed necessary or desirable to
correct any defect or supply omitted data or reconcile any inconsistency in the Plan or in any
award granted thereunder. The Committee may amend or modify the Plan in any respect, or
terminate the Plan, without the consent of any affected Participant. Notwithstanding any of
the foregoing, no amendment, alteration, suspension or discontinuation shall be made which
would (i) increase the amount of compensation payable pursuant to a Bonus Award, except in
connection with an increase in base salary in accordance with Section 162(m) or (ii) cause
compensation that is, or may become, payable hereunder to fail to qualify as Performance-Based
Compensation. To the extent necessary or advisable under applicable law, including Section
162(m), Plan amendments shall be subject to stockholder approval. At no time before the actual
distribution of funds to Participants under the Plan shall any Participant accrue any vested
interest or right whatsoever under the Plan except as otherwise stated in this Plan.

	11.	 	DEFERRALS. The Committee may defer payment of Bonus Awards, or any portion thereof, as the
Committee, in its discretion, determines to be necessary or desirable to preserve the
deductibility of such amounts under Section 162(m). In addition, the Committee, in its sole
discretion, may permit a Participant to defer receipt of the payment of cash that would
otherwise be delivered to a Participant under the Plan. Any such deferral elections shall be
subject to such rules and procedures as shall be determined by the Committee in its sole
discretion.

	12.	 	BONUS PLAN BENEFITS. Future benefits under the Bonus Plan are not determinable because
awards under the Bonus Plan are determined based on actual future performance.

	13.	 	EFFECTIVE DATE. The Plan is effective as of the date first approve by the Board, that is,
February 9, 2010 (the “Effective Date”), subject to approval by the Company’s stockholders.
The Plan shall first apply to the 2010 Plan Year. The Plan shall terminate with respect to all
Plan Years unless it is approved at the 2010 annual meeting of the Company’s stockholders.
Once approved by the Company’s stockholders, the Plan shall continue until the earlier of (a)
the date as of which the Committee terminates the Plan and (b) the last day of the Plan Year
ending in 2014 (provided that Bonus Awards, if any, for such Plan Year shall be paid in
accordance with the terms of the Plan) unless the Plan again shall be approved by the
Company’s stockholders prior to such day.

	14.	 	SECTION 162(M) CONDITIONS; BIFURCATION OF PLAN. It is the intent of the Company
that the Plan, and all payments made hereunder, satisfy and be interpreted in a manner that, in the case of
 Participants who are persons whose compensation is subject to Section 162(m), qualify as Performance-Based
 Compensation under Section 162(m). Any provision, application or interpretation of the Plan inconsistent with
this intent to satisfy the requirements of Section 162(m) shall be disregarded. However, notwithstanding anything to the
contrary in the Plan, the provisions of the Plan may at any time be bifurcated by the Board or the Committee in any manner
so that certain provisions of the Plan or any payment intended (or required in order) to satisfy the applicable requirements
of Section 162(m) are only applicable to persons whose compensation
is subject to the limitations on deductibility of compensation
 provided under 

Section 162(m).exv10w2

EXHIBIT 10.2

BLUE NILE, INC.

PERFORMANCE BONUS PLAN

EXECUTIVE CASH BONUS PLAN FOR FISCAL YEAR 2010

Purpose:

Blue Nile, Inc. (“Blue Nile” or the “Company”) has designed this Executive Cash
Bonus Plan for Fiscal Year 2010 (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 2010.

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 in February
2010 and will be submitted for stockholder approval at the 2010 annual meeting of the Blue Nile’s
stockholders. If the Company’s stockholders do not approve the Performance Bonus Plan at the 2010
annual meeting, no Bonus Awards may be earned or paid under this Bonus Plan for fiscal year 2010.
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 2010 fiscal year — that is, January 4,
2010 through January 2, 2011.

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 each 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 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. Upon determination of the Maximum Award,
the Committee will determine the actual award earned by that executive for the Performance Period
(the “Actual Award”) by reducing the Maximum Award based on: (i) achievement against
additional EBITDA goals selected by the Committee, as reflected by the calculation of the EBITDA
Result (as defined below), (ii) achievement against any additional Company financial goals selected
by the Committee, as reflected by the calculation of the Financial Result (defined below), (iii)
achievement against any individual performance goals selected by the Committee, as reflected by the
calculation of the Individual Result (defined below), and (iv) any other factors selected by the
Committee in its sole discretion.

Specifically, the Payout Formula shall be:

	1.	 	The product of (i) Maximum Award and (ii) EBITDA Result is the “EBITDA Performance Result.”

	2.	 	The product of (i) 50% and (ii) the EBITDA Performance Result and (iii) the Financial Result
is the Financial Bonus.

	3.	 	The product of (i) 50% and (ii) the EBITDA Performance Result and (iii) the Individual Result
is the Individual Bonus.

	4.	 	The sum of (i) the Financial Bonus and (ii) the Individual Bonus, reduced by any other
factors selected by the Committee in its sole discretion, is the Actual Award.

EBITDA Result:

On the Payout Determination Date, the Committee will determine a percentage, between 0% and 100%,
which amount is the “EBITDA Result”.

Financial Result:

On the Payout Determination Date, the Committee will determine a percentage, between 0% and 100%
(the “Financial Result”), based on the Company’s achievement during the Performance Period
of the following three financial goals selected by the Committee:

(a) net sales (that is, GAAP net sales) (“Revenue”);

(b) free cash flow (that is, GAAP cash flows from operating activities, less outflows for
purchases of fixed assets, including internal-use software and website development)
(“Free Cash Flow”); and

(c) adjusted earnings per share (that is, GAAP earnings per share, adjusted 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, split or recapitalization) (“Adjusted EPS”).

Achievement of Revenue, Free Cash Flow and Adjusted EPS is determined by reference to the
respective targets for such measures established by the Compensation Committee. Each goal will be
weighted in the sole discretion of the Committee on the Payout Determination Date.

 

 

Individual Result:

On the Payout Determination Date, the Committee will determine a percentage, between 0% and 100%
(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.

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