Document:

Exhibit 10.1

 

CARDIONET,
INC.

 

MANAGEMENT INCENTIVE
PLAN

 

 

CARDIONET,
INC.

 

MANAGEMENT INCENTIVE PLAN

 

1.                                      Purpose

 

The purpose of the Plan is
to enhance the ability of CardioNet to offer incentive compensation to Key
Associates by rewarding the achievement of corporate goals and specifically
measured individual goals which are consistent with and support the overall
corporate goals of CardioNet.  More
specifically, through this Plan, CardioNet intends to (i) reinforce
strategically important operational objectives; (ii) establish goals
relating to revenue and profitability; (iii) provide rewards based on achieving
significant Employer and individual goals and objectives; (iv) provide
incentives that result in behavior that is consistent with stockholders’ desires
of building a stronger company with a higher potential for increased
profitability; and (v) incorporate an incentive program in the CardioNet
overall compensation program to help attract and retain Key Associates.  Except as otherwise provided, all capitalized
terms shall have the meanings set forth in Section 2 below.

 

2.                                      Definitions

 

(a)                                  “Award” shall mean the incentive award earned by a Key
Associate under the Plan for any Performance Period.

 

(b)                                 “Base Salary” shall mean the Key Associate’s annual base
salary rate in effect at the end of a Performance Period.  Base Salary does not include bonuses
(including Awards under this Plan or any other short-term or long-term
incentive plan), commissions, expatriate premiums, fringe benefits, (including
car allowances), stock option or other equity compensation grants and gains,
imputed income from employee benefit programs such as group-term life insurance,
or non-recurring earnings, such as moving expenses, but is based on salary
earnings before reductions for such items as deferrals under Employer-sponsored
deferred compensation plans, contributions under Code section 401(k) and
contributions to flexible spending accounts under Code section 125.

 

(c)                                  “Board” shall mean CardioNet’s Board of Directors as
constituted from time to time.

 

(d)                                 “CardioNet” shall mean CardioNet, Inc., a Delaware
corporation.

 

(e)                                  “Code” shall mean the Internal Revenue Code of
1986, as amended, or any successor statute thereto.

 

(f)                                    “Committee”
shall mean the Compensation Committee of the Board.

 

(g)                                 “Covered Employee” shall have the meaning ascribed to such term
in Code section 162(m)(3).

 

(h)                                 “Effective Date” shall mean                 
    , 2008.

 

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(i)                                     “Employee” shall mean any individual employed by an Employer
other than an individual (i) employed
in a casual or temporary capacity (i.e., those hired for a specific job
of limited duration), (ii) characterized as a “leased employee” within the
meaning of Code section 414, or (iii) classified by an Employer as a “contractor”
or “consultant,” no matter how characterized by the Internal Revenue Service,
other governmental agency or a court. 
Any change of characterization of an individual by any court or
government agency shall have no effect upon the classification of an individual
as an Employee for purposes of this Plan, unless the Committee determines
otherwise.

 

(j)                                     “Employer” shall mean CardioNet and any United States
subsidiary of CardioNet.

 

(k)                                  “Equity Incentive Plan” shall mean CardioNet’s 2008 Equity Incentive
Plan, as may be amended from time to time.

 

(l)                                     “Financial Goals” means,
for a Performance Period, the one or more corporate financial goals established
by the Committee (in its discretion) to be applicable to a Key Associate with
respect to an Award.  Financial Goals may
be based on Performance Criteria (as defined in the Equity Incentive Plan) or
other criteria in the discretion of the Committee.

 

(m)                               “Achievement Percentage” means, with respect to each Performance Measure,
the extent to which such Performance Measure was achieved as determined by the
Committee, expressed as a percentage.

 

(n)                                 “Individual Objectives” means individual or functional area
performance objectives established by the Committee (in its discretion) to be
applicable to a Key Associate with respect to an Award.

 

(o)                                 “Key Associate”
for any Performance Period, shall mean an Employee who is designated by the
Committee as eligible to participate in the Plan and meets the eligibility
requirements described in Section 3 below.

 

(p)                                 “Overall Achievement Percentage” means, with respect to a Participant, the
aggregate Achievement Percentages for the Performance Measures applicable to a
Performance Period, with each Achievement Percentage multiplied by the
weighting associated therewith, as provided in Section 5(b)(ii).

 

(q)                                 “Payout Date”
means the date on which Awards are paid pursuant to Section 8.

 

(r)                                    “Performance-Based Compensation” means
compensation that is intended to qualify as “performance-based compensation”
within the meaning of Code section 162(m).

 

(s)                                  “Performance Measures” means the Financial Goals and Individual
Objectives.

 

(t)                                    “Performance Period” shall mean the fiscal year of CardioNet.

 

(u)                                 “Plan” shall mean this CardioNet, Inc. Management
Incentive Plan, as from time to time amended and in effect.

 

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(v)                                 “Target Award Percentage” shall mean with respect to any Performance
Period, the percentage of the Key Associate’s Base Salary that the Key
Associate would earn as an Award for that Performance Period if the targeted
level of performance was achieved for each of the Performance Measures for that
Key Associate for the Performance Period.

 

(w)                               “Target Determination Cutoff Date” means the latest
possible date, as determined by the Committee, that the Committee may set the
Financial Goals and Target Awards.  For
Awards that intend to qualify as “performance-based compensation” under Code Section 162(m),
this date will be March 30 of the year in which the Performance Period
occurs.

 

3.                                      Eligibility and Participation

 

All Key Associates employed
by an Employer as of January 1 of each Performance Period shall be eligible
to participate in the Plan.  In addition,
Employees who are newly hired or are promoted and designated as Key Associates after
January 1 of a Performance Period, but prior to October 1 of such
Performance Period, will be eligible to participate in the Plan for the portion
of the Performance Period following their hiring or promotion, on a prorata
basis based on their first day of employment or date of promotion, as
applicable.

 

Employees who are newly
hired or are promoted and designated as Key Associates on or after October 1
of a Performance Period shall not be eligible to participate in the Plan for
such Performance Period.

 

Unless
specifically excepted, a Key Associate must be actively employed on the Payout
Date to be eligible to receive a payment hereunder.  No person shall be automatically entitled to
participate in the Plan.

 

4.                                      Administration

 

The administration of the
Plan shall be consistent with the purpose and the terms of the Plan.  The Plan shall be administered by the
Committee, to the extent authority is delegated to the Committee directly or
through the Committee charter, or by the Board (in which case all references in
this Plan to the Committee shall be deemed to refer to the Board).  The Committee shall have full authority to
establish the rules and regulations relating to the Plan, to interpret the
Plan and those rules and regulations, to select Key Associates in the
Plan, to determine each Key Associate’s Target Award Percentage, to approve all
of the Awards, to decide the facts in any case arising under the Plan and to
make all other determinations, including factual determinations, and to take
all other actions necessary or appropriate for the proper administration of the
Plan, including the delegation of such authority or power, where appropriate; provided, however, that with
respect to Covered Employees, the Committee shall have final decision-making
authority.  All powers of the Committee shall
be executed in its sole discretion, in the best interest of CardioNet, not as a
fiduciary, and in keeping with the objectives of the Plan and need not be
uniform as to similarly situated individuals.

 

Awards may be made
conditional upon the Key Associate’s acknowledgement, in writing or by
acceptance of the Award, that all decisions and determination of the Committee
shall be final and binding on the Key Associate, his or her beneficiaries and
any other person having or claiming an interest under such Award.  The Committee’s administration of the Plan,
including 

 

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all such rules and
regulations, interpretations, selections, determinations, approvals, decisions,
delegations, amendments, terminations and other actions, shall be final and
binding on CardioNet, the Employer and all Employees of the Employer,
including, the Key Associates and their respective beneficiaries.

 

5.                                      Performance Measures

 

(a)                                  Performance Measures.  Each
Award shall be tied to the achievement of Financial Goals and Individual
Objectives as follows:

 

(i)                                     Financial Goals.  Employer performance shall be measured based upon the Financial Goal(s) established
by the Committee for the Performance Period. 
The Committee shall approve the Financial Goals, the method for
measuring the Financial Goals and the method for determining the Achievement
Percentage with respect to the Financial Goals on or before the later of the Target
Determination Cutoff Date and the time of the Key Associate’s
participation in the Plan.

 

(ii)                                  Individual Objectives.  Individual performance shall be measured by the achievement of
specified Individual Objectives established by the Committee for the
Performance Period.  The Committee shall
approve the Individual Objectives, the method for measuring the achievement of
the Individual Objectives and the method for determining the Achievement
Percentage with respect to the Individual Objectives on or before the later of
the Target
Determination Cutoff Date and the time of the Key Associate’s
participation in the Plan.

 

(b)                                 Weighting.  For
each Performance Period, prior to the later of the Target Determination Cutoff Date and
the time of the Key Associate’s participation in the Plan, the Committee will
determine what portion of each Key Associate’s Overall Achievement Percentage
will be determined by reference to each of the Performance Measures specified
for such Key Associate.  Such Key
Associate’s Overall Achievement Percentage will then be determined by
multiplying the Key Associate’s Achievement Percentage for each of the
Performance Measures specified for such Key Employee by the portion of the
Target Award relating to such Performance Measure.

 

6.                                      Determination of Awards

 

(a)                                  Setting Target Awards.  Prior
to the Target Determination Cutoff Date of a Performance Period (or later for
any Employee who first becomes a Key Associate after the Target Determination
Cutoff Date), the Committee shall determine and document (I) the Employees
who shall be Key Associates during that Performance Period (which may be
amended during the Performance Period for new Key Associates), (II) each such
Key Associate’s Target Award Percentage for that Performance Period, and (III) the
Financial Goals and Individual Objectives (and how they are measured and weighted
and, for each Performance Measure, how the corresponding Achievement Percentage
is calculated) for that Performance Period. 
The Employer shall notify each Key Associate of the Key Associate’s
Target Award Percentage and the applicable Performance Measures for the
Performance Period as soon as administratively practicable after the time the
Target Award Percentage and Performance Measures are established for such
Performance Period.  The Performance Measures
that are 

 

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established
may be (but need not be) different each Performance Period and different Performance
Measures may be applicable to different Key Associates.

 

(b)                                 Earning An Award.  A Key
Associate’s Award shall equal the product of the Key Associate’s Overall
Achievement Percentage multiplied by the Key Associate’s Target Award
Percentage, multiplied by the Key Associate’s Base Salary.

 

7.                                      Changes to the Target

 

At any time prior to the
Target Determination Cutoff Date and, except with respect to Awards to Covered
Employees that the Committee intends to qualify as Performance-Based
Compensation, at any time prior to the final determination of Awards, the
Committee may:

 

(a)                                  change the Target Award Percentage of any Key
Associate or assign a different Target Award Percentage to a Key Associate to
reflect any change in the Key Associate’s responsibility level or position
during the course of the Performance Period; and

 

(b)                                 change the Performance Measures to reflect a
change in corporate capitalization, such as a stock split or stock dividend, or
a corporate transaction, such as a merger, consolidation, separation,
reorganization or partial or complete liquidation, or to equitably reflect the
occurrence of any extraordinary event, any change in applicable accounting rules or
principles, any change in CardioNet’s or the Employer’s method of accounting,
any change in applicable law, any change due to any merger, consolidation,
acquisition, reorganization, stock split, stock dividend, combination of shares
or other changes in CardioNet’s or the Employer’s corporate structure or
shares, or any other change of a similar nature.

 

8.                                      Payment of Awards

 

Within 30 days following the
approval by CardioNet’s Audit Committee of the Board of CardioNet’s year-end
audited financial statements, the Committee will determine and approve the
Awards, if any, that will be paid based on the financial results for the
Performance Period and each Key Associate’s attainment of his or her Individual
Objectives for the Performance Period.  The
Committee will announce the Awards that will be paid under the Plan for the
Performance Period to each Key Associate as soon as administratively practicable
following such approval by the Committee.  Subject to the provisions of Sections 9
and 10 below, payment of the Awards shall be made in a single lump sum cash
payment.

 

9.                                      Limitations on Rights to Payment of Awards

 

(a)                                  Employment.  No Key
Associate shall have any right to receive payment of an Award under the Plan
for a Performance Period unless the Key Associate remains in the employ of the
Employer through the Payout Date of such Award; provided, however, that the
Committee may (in its sole and absolute discretion) provide for exceptions to
this rule in such circumstances and upon such terms as the Committee deems
appropriate.

 

(b)                                 Accelerated Payment.  Unless
the Committee determines otherwise, in no event will payment be made to any Key
Associate with respect to an Award prior to the end of the Performance Period
to which it relates.

 

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10.                               Deferred Awards

 

                                                Notwithstanding
any provision to the contrary herein, the Committee may permit a Key Associate
to defer receipt of an Award that would otherwise be payable to the Key
Associate.  The Committee shall establish
rules and procedures for such deferrals, if any, consistent with the
applicable requirements of Code section 409A.

 

11.                               Amendments

 

The Board or the Committee may
at any time amend (in whole or in part) this Plan.  No such amendment which adversely affects any Key
Associate’s rights to or interest in an Award earned prior to the date of the
amendment shall be effective unless the Key Associate shall have agreed
thereto.

 

12.                               Termination

 

The Board or the Committee
may terminate this Plan (in whole or in part) at any time.

 

13.                               Miscellaneous Provisions

 

(a)                                  No Employment Right.  This
Plan is not a contract between CardioNet or the Employer and the Employees or
the Key Associates.  Neither the
establishment of this Plan, nor any action taken hereunder, shall be construed
as giving any Employee or any Key Associate any right to be retained in the
employ of CardioNet or the Employer.  CardioNet
is under no obligation to continue the Plan.  Nothing contained in the Plan shall limit or
affect in any manner or degree the normal and usual powers of management,
exercised by the officers and the Board or committees thereof, to change the
duties or the character of employment of any Employee of the Employer or to
remove the individual from the employment of the Employer at any time, all of
which rights and powers are expressly reserved.

 

(b)                                 No Assignment.  A Key
Associate’s right and interest under the Plan may not be assigned or
transferred and any attempted assignment or transfer shall be null and void and
shall extinguish, in CardioNet’s sole discretion, CardioNet’s obligation under
the Plan to pay Awards with respect to the Key Associate.

 

(c)                                  Unfunded Plan.  The
Plan shall be unfunded.  Neither CardioNet
nor any Employer shall be required to establish any special or separate fund,
or to make any other segregation of assets, to assure payment of Awards.

 

(d)                                 Withholding Taxes.  The Employer
shall have the right to deduct from Awards paid any taxes or other amounts required
by law to be withheld.  Each Key
Associate shall be responsible for the payment of all individual tax
liabilities relating to any such Award.

 

(e)                                  Type of Plan.  This
Plan is intended solely to be an annual bonus plan and is not intended to be a
plan subject to the requirements of the Employee Retirement Income Security Act
of 1974, as amended.

 

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(f)                                    Code Section 409A.  The
Plan is intended to be exempt from Code section 409A by paying Awards within
the “short-term deferral” period set forth at Treas. Reg. §1.409A-1(b)(4).  If and to the extent that any Award is deemed
to be deferred compensation subject to the requirements of Code section 409A,
payment of such Award shall be made under the Plan only upon an event and in a
manner permitted by Code section 409A. 
If a payment is not made by the designated Payout Date, the payment
shall be made by December 31 of the calendar year in which the designated Payout
Date occurs.  To the extent that any
provision of the Plan would cause a conflict with the requirements of Code
section 409A, or would cause the administration of the Plan to fail to satisfy
the requirements of Code section 409A, such provision shall be deemed null and
void to the extent permitted by applicable law. 
In no event shall a Key Associate, directly or indirectly, designate the
calendar year of payment.

 

(g)                                 Governing Law.  The
validity, construction, interpretation and effect of the Plan shall exclusively
be governed by and determined in accordance with the laws of the Commonwealth
of Pennsylvania.

 

7Exhibit 10.2

 

CARDIONET, INC.

LONG TERM INCENTIVE PLAN

 

SECTION 1                               PLAN ESTABLISHMENT AND OBJECTIVES

 

1.1                               Objectives of the Plan

 

The
objectives of this CardioNet, Inc. (the “Company”) Long Term Incentive
Plan (the “Plan”) are:

a.               To drive growth in shareholder value for the
Company;

b.              To reward key employees for demonstrated
value creation;

c.               To provide a retention incentive for key
employees;

d.              To build equity ownership among the executive
team;

e.               To focus executives on multi-year operating
performance.

 

Awards
granted under the Plan (the “Awards”) are intended to share the success of the
Company with key employees to the extent warranted by performance.

 

1.2                               Awards Under 2008 Equity
Incentive Plan

 

Awards will be granted pursuant to the Company’s
2008 Equity Incentive Plan (“EIP”) and will be administered by the Compensation
Committee of the Company’s Board of Directors (the “Committee”) pursuant to the
terms of the EIP.

 

SECTION 2                               ELIGIBILITY

 

2.1                               Eligibility

 

All
executive officers and other employees selected by the Committee (the “Key
Employees”) are eligible to receive Awards.

 

SECTION 3                               INCENTIVE AWARDS

 

3.1                               Award Grant Process

 

Under
the Plan, each Key Employee shall receive a set of annual Awards consisting of
a stock option Award and restricted stock Award.  The process for granting Awards shall be as
follows:

 

 

A.                                    During the first three months of each fiscal
year (or, with respect to 2008, at the time of the adoption of the Plan), the
Committee will determine a target dollar value (the “Dollar Value”) for each
Key Employee.  Unless otherwise
determined by the Compensation Committee, the Dollar Value will be equal to a
percentage (the “Applicable Percentage”) of each Key Employee’s Base Salary (as
that term is defined in the Company’s Management Incentive Plan).  The Applicable Percentage may differ from Key
Employee to Key Employee and may be equal to, greater than or less than 100% of
the Key Employee’s Base Salary.

 

B.                                    During the first three months of each fiscal
year (or, with respect to 2008, at the time of the adoption of the Plan), the
Committee will also determine an annual corporate earnings per share goal (the “Financial
Target”).

 

C.                                    At the beginning of the next fiscal year
following the determinations made in paragraphs (A) and (C) above,
within 30 days following the approval of the Company’s year end audited
financial statements by the Audit Committee of the Company’s Board of Directors
(the “Audit Committee”) for the fiscal year just ended, the Committee will
adjust (up or down) the Dollar Value for the purpose of making prospective
awards as set forth in paragraph (D) below (which adjustment shall not
effect any prior awards granted under this Plan).  The adjusted value shall be referred to as
the “Adjusted Dollar Value” and shall be determined as follows:

 

1.                                      The Committee shall adjust the Company’s GAAP
earnings per share as necessary, in the Committee’s sole discretion, to account
for the effect of non-operational items such as taxes and interest income (such
adjusted earnings per share, the “Adjusted EPS”).

 

2.                                      The Committee shall calculate the percentage
(the “Goal Achievement Percentage”) by which the Adjusted EPS differs from the
Financial Target.  The Goal Achievement
Percentage shall be positive in the event that the Adjusted EPS exceeds the
Financial Target and negative in the event that the Adjusted EPS is less than
the Financial Target.  In no case shall
the Goal Achievement Percentage be higher than 20% or lower than -20%.

 

3.                                      The  Committee
shall determine a performance modifier (the “Performance Modifier”) equal to
two (2) times the Goal Achievement Percentage.  In no case shall the Performance Modifier be
higher than 40% or lower than -40%.

 

4.                                      The Adjusted Dollar Value will equal (A) the
Dollar Value plus (B) the product of (i) the Dollar Value times (ii) the
Performance Modifier.

 

2

 

E.                                      After the Committee determines the Adjusted
Dollar Value, the Committee will grant a stock option Award and a restricted
stock Award to each Key Employee as follows:

 

1.                                      One half of the value of the Adjusted Dollar
Value will be converted into a stock option Award.  The number of shares underlying the stock
option Award will be determined by dividing (a) one-half of the Adjusted
Dollar Value by (b) the Black-Scholes value of an option covering one
share of stock to determine the number of options.  Each such stock option Award will vest
one-fourth at the end of each year, will have a 10-year exercise period, will
be granted pursuant to a form of stock option agreement under the EIP and will
have an exercise price equal to the fair market value of the Company’s common
stock on the date of grant as determined under the EIP. If the Key Employee
terminates employment prior to a vesting date, then all unvested options will
be forfeited.

 

2.                                      One half of the value of the Adjusted Dollar
Value will be converted into a restricted stock Award.  The number of shares underlying the
restricted stock Award will be determined by dividing (a) one-half of the
Adjusted Dollar Value by (b) fair market value of the Company’s common
stock on the date of grant, as determined in the EIP.  Shares of the Company’s common stock shall be
issued upon grant of the restricted stock Award, subject to a reacquisiton
right in favor of the Company that lapses in full on the third year anniversary
of the date of grant.  If the Key
Employee terminates employment prior to the third anniversary of the date of
grant, all restricted stock and related dividends associated with such grant
will be forfeited and automatically reacquired by the Company for no
consideration.  Restricted stock will be
granted pursuant to a form of restricted stock agreement under the EIP.

 

3.2                               Tax Withholding

 

The
Company may withhold, or require the withholding from any payment which it is
required to make, any federal, state, or local taxes required by law to be
withheld with respect to such payment and such sum as the Company may
reasonably estimate as necessary to cover any taxes for which the Company may be
liable and which may be assessed with regard to such payment.

 

SECTION 4                               ADMINISTRATION

 

4.1                               General Provisions

 

The
Committee will have oversight of the Plan. 
The Committee shall have authority to delegate responsibility for
performance of administrative functions necessary for the Plan and the Awards
to the Human Resources, Finance and Accounting Departments of the Company.

 

3

 

4.2                               Modifications of the
Plan;  At-Will Employment

 

The
Company reserves the right to change, modify or terminate this Plan without
notice.  Nothing in this document is
intended to, nor does, alter the existing at-will employment relationship.  Key Employees are free to resign at any time,
for any reason.  Similarly, the Company
is free to end the employment relationship of any Key Employee at any time with
or without cause.

 

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