Document:

Exhibit
10.17

NATROL, INC.

2007 BONUS INCENTIVE
COMPENSATION PLAN

Adopted by the Compensation Committee on May 2, 2007

and Ratified by
the Board of Directors on May 3, 2007

Effective Date:
January 1, 2007

PART I

SECTION 1.         PURPOSE

The purpose of this 2007 Bonus Incentive
Compensation Plan (the “Plan”) is to enhance and reinforce the goals of Natrol,
Inc. and its subsidiaries (the “Company”) for profitable growth and
continuation of a sound overall condition. 
This will be accomplished by providing key employees with additional
financial rewards for attainment of such growth and stable financial and
operating condition.  Final approval of
the payment of any awards made under the Plan is subject to the discretion of
the Board of Directors.

SECTION 2.         DEFINITIONS

2.1         Definitions of terms as used throughout this
Plan document are as follows:

(a)          “Award Year” means the twelve-month period
coinciding with the organization’s annual accounting period, January 1st —
December 31st.

(b)         “Committee” means the Compensation Committee
of the Board of Directors.

(c)          “Participant” means an eligible employee, all
of whom have been selected without regard to race, color, religion, sex,
gender, marital status, age, national origin, sexual orientation, physical or
mental disability, medical condition, veteran status, or any basis protected by
law.

SECTION 3.         ELIGIBILITY

Bonuses under the Plan may be granted to those key
employees of the Company, including officers of the Company, whether or not
they are directors of the Company.

SECTION 4.         ADMINISTRATION

The Committee shall administer the Plan.  This Committee shall be comprised of not less
than three members as shall be appointed from time to time by the Board of
Directors.

The Committee has full power and authority to
annually select participants from among those eligible, to determine the amount
of funds included in the bonus pool upon Board approval of the budget plan, to
determine the amount and timing of individual awards, and to adopt and revise
such rules and procedures as it shall deem necessary for the administration of
the Plan.

 

4.1 
Resolution of Disputes & Awards

The decision of the Committee with respect to any
question or disputes arising  out
of participation in “the Plan”, or the individuals selected for awards, and the
interpretation of the provisions of this Plan shall be final, conclusive and
binding on all parties with no right of court, jury or other review.

SECTION 5.         PARTICIPATION

Participation in the Plan shall be limited to
regular salaried employees of the Company, including officers as recommended by
management and approved by the Committee. 
In selecting participants, the Committee shall consider an individual’s
position and potential impact on the Company’s business results and
performance.  The selection of
participants, and their respective incentive awards, shall be determined
annually by the Committee and communicated to Participants as soon as
possible.  The Committee selection of
participants shall be final, conclusive and binding on all parties with no
right of court, jury or other review.

SECTION 6.         AWARDS
COMPUTATION — GENERAL

The Committee should establish the performance
criteria for the award of the Incentive Bonus Compensation (criteria) at the
beginning of each calendar year.

6.1
 The Committee
shall establish all operating rules and criteria for the Plan no later than the
second quarter of each calendar year.

It is expected that during any bonus plan year, there
could be unusual and/or non-recurring significant revenue or expenses that the
Committee believes should be considered for exclusion for determination of
bonus compensation.  The Committee will
evaluate these occurrences and decide whether the resulting effect on earnings
will be excluded or included from the Company’s results of operations (“qualifying
earnings”).

Plan participants will be given timely notice of any
such material changes or events that alter the “qualifying earnings”.

6.2  The
participant’s immediate supervisor should be consulted prior to any award being
made to verify that the participant is in good standing and qualifies for
inclusion in the Plan.  Eligibility for
an award does not automatically guarantee that a reward will be granted to the
Participant at any level or if at all. 
Any decision by the Committee to otherwise reduce a bonus award and/or
exclude the Participant from a bonus award entirely shall be final, conclusive
and binding on all parties with no right of court, jury or other review.  The fact that a particular Participant is not
under any type of employment reprimand (e.g., probation, warning, etc.) does
not preclude the Committee from awarding a particular employee a reduced award
or no bonus award entirely.

6.3  Each Bonus Participant is eligible for the
percentage of Bonus for each level of achievement of the Performance Goal, and
such other terms and conditions as the Committee, in its sole discretion, shall
determine.  Part II, Section 3, includes
guidelines that will be followed to measure results.

 

SECTION
7.                            PAYMENT OF
AWARDS

7.1  Normal
Payment

Awards shall be earned as of the last business day
of the Award Year.  As soon as reasonably
practicable following the end of a Measurement Period, but in no event later
than ninety (90) days following the fiscal year end close, the Compensation
Committee shall certify in writing the level of achievement of each Performance
Goal established by the Compensation Committee with respect to such Measurement
Period.

Bonus payments shall be made from the general funds
of the Company and no special or separate fund shall be established or other
segregation of assets made to assure payment. 
No participant or other person shall have under any circumstances any
interest in any particular property or assets of the Company.

7.2  Payment
Under Conditions of Termination

(a) If termination of employment occurs during an
Award Year on account of death, total disability, or approved leave of absence,
such Participant terminating employment shall be deemed to have earned a
proportionate (prorated) share of that would otherwise be that Award Year’s
actual bonus.

(b) The amount of such Award shall be the amount
that would have been earned had the Participant been employed by the Company
during the full Award Year, multiplied by a fraction, the numerator of which is
the number of days that the Participant was employed by the Company, and the
denominator of which is the number of days in that full Award Year.

7.3  Participant
Transfer

If a Participant is transferred to another
Subsidiary affiliated with the Company during an Award Year, and is determined
to be eligible for payments under one or both of the Subsidiary’s plans,
partial awards will be made under each Plan based on a pro rata determination
as described in the preceding paragraph.

If termination of employment occurs for any reason
other than death, total disability, or approved leave of absence, no award
shall be deemed earned for the Award Year, as the Participant must be an
employee at the time awards are certified by the Compensation Committee.

SECTION 8.         DISSOLUTION
OR MERGER

If the Company should be liquidated and/or
dissolved, or if the Company should become a party to a merger or consolidation
in which it is not the surviving corporation, the value of the bonus fund shall
be determined in
accordance with paragraph 7.2 (b) and on the date of such dissolution or merger.

SECTION 9.         AMENDMENT
OR TERMINATION

The Board of Directors of the Company or the
Compensation Committee of the Board of Directors, if and to the extent
authorized, in absolute discretion of the body so acting and without notice,
may at any time amend or terminate the Plan, provided that no such amendment or
termination shall adversely affect the rights of any participation under any
award previously granted.

SECTION 10. OTHER CONDITIONS

10.1 Right of Assignment

No right or interest of any Participant in the Plan
shall be assignable or transferable, or subject to any lien, directly, by
operation of law, or otherwise including levy, garnishment, attachment, pledge,
and bankruptcy.  In the event of a Participant’s
death, payment shall be made to the Participant’s designated beneficiary, or in
the absence of such designation, to the Participant’s estate.

10.2 Right of Employment

The receipt of an award under this Plan shall not
give any employee any right to continued employment by the Company, and the
right to dismiss any employee is specifically reserved to the Company.  Similarly, employment status does not
guarantee the Participant the granting of a bonus award in any amount, if at
all.  The receipt of an award in any year
shall not give an employee the right to receive an award in any subsequent
year.

10.3 Withholding for Taxes

The Company shall have the right to deduct from all
payments under this Plan any federal or state taxes required by law to be withheld
with respect to such payments.

SECTION 11.       EFFECTIVE
DATE

The effective date of this Plan shall be January 1,
2007 as adopted by the Compensation Committee of the Board of Directors of the
Company.

PART II. OPERATING RULES

SECTION 1.         GENERAL

The following Plan Operating Rules will be in effect
during January 1, 2007 — December 31, 2007. 
These Operating Rules are subject to change by the Committee before the
start of the Plan Year, with the approval of the Board of Directors.  It is anticipated that the rules will be
revised only when significant changes occur, or other pertinent factors affect
the operation of the Plan.  Changes from
year to year will be minimized in order to maintain the basic continuity of the
Plan.

SECTION 2.         PLAN
PARTICIPANTS

Plan Attachment II.1 lists the current Plan Year
Participant names and titles.  Plan
Participants are selected prior to the start of the Plan Year.  New participants may be added at a later
date, e.g., newly hired employee, provided they meet qualifying criteria
guidelines and will be subject to a prorated percent of award, should criteria
be met.

SECTION 3.         INCENTIVE
FORMULAS

Instructions for calculating the bonus pool are
included in Attachment II.2.  Attachment
II.3 includes the formulas for calculating the individual incentive
compensation awards.  The attachments
include additional definitions of terms and descriptions of the calculations.

SECTION 4.         EFFECTIVE
DATE

The effective date of the Plan Operating Rules shall
be January 1, 2007.

 

ATTACHMENT II.1 Plan Participants 

Tier I

 

	
  Name

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
  Elliott Balbert

  	
   

  	
  Executive Chairman of the Board

  
	
   

  	
   

  	
   

  
	
  Wayne Bos

  	
   

  	
  Chief Executive Officer & President

  
	
   

  	
   

  	
   

  
	
  Dennis Jolicoeur

  	
   

  	
  Executive Vice President, Chief Financial Officer
  & Treasurer

  
	
   

  	
   

  	
   

  
	
  Craig Cameron

  	
   

  	
  Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
  Steven Spitz

  	
   

  	
  Vice President & General Counsel

  
	
   

  	
   

  	
   

  
	
  Michael Surmeian

  	
   

  	
  Vice President, Sales

  
	
   

  	
   

  	
   

  
	
  [names intentionally
  omitted]

  	
   

  	
   

  

 

	
  Total Represented Salary:

  	
   

  	
  $

  	
  3, 377,
  600

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Estimated Maximum
  Accrual:

  	
   

  	
  $

  	
  844, 400

  	
   

  

 

 

Tier II

 

	
  Name

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
  [names intentionally
  omitted]

  	
   

  	
   

  

 

 

 

 

 

 

 

 

	
  Total Represented Salary:

  	
   

  	
  $

  	
  510,
  240

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Estimated Maximum
  Accrual:

  	
   

  	
  $

  	
  63, 780

  	
   

  

 

 

 

Tier III

 

	
  Name

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
  [names intentionally
  omitted]

  	
   

  	
   

  

 

 

 

 

 

 

	
  Total Represented Salary: 

  	
   

  	
  $

  	
  711,
  760

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Estimated Maximum
  Accrual:

  	
   

  	
  $

  	
  53, 382

  	
   

  

 

 

Tier IV

 

	
  Name

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
  [names intentionally
  omitted]

  	
   

  	
   

  

 

 

 

 

 

	
  Total Represented Salary:

  	
   

  	
  $

  	
  1,127,360

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Estimated Maximum
  Accrual:

  	
   

  	
  $

  	
  56,368

  	
   

  

 

 

ATTACHMENT
II.2 — Instructions for Calculating Bonus Pool

A target bonus fund shall be
established equal to 5%-25% of the annual base salary of the Plan Participants
as called out below.  “Base
salary” for the purposes of this Plan is defined as
the particular Participant’s W-2 earnings for the calendar year attributed only
to his/her annual salary rate, and does not include any other Company benefits,
distributions, bonuses paid to a Participant in any particular years or other
sources of income.  Employees based upon
their title as stated on Attachment II.1 will be eligible for an annual
incentive bonus as a percentage of their base salary.

 

	
  

  	
   

  	
  Bonus Fund

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tier I

  	
   

  	
  25%
  of base salary

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tier II

  	
   

  	
  12.5%
  of base salary

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tier III

  	
   

  	
  7.5%
  of base salary

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tier IV

  	
   

  	
  5% of base salary

  	
   

  

 

 

ATTACHMENT
II.3 — Formulas for Calculating the Individual Incentive Compensation Awards

The incentive program shall be
based on “qualifying earnings” as defined in paragraph 6.1 and corporate
earnings.  The 2007 target to receive
100% of the eligible incentive bonus is $5,100,000 before bonuses, interest and
income taxes.  The Compensation Committee
of the Board has agreed to pay a portion of the eligible incentive bonus based
on partial milestones achieved, as well as exceeding the corporate target.

No bonuses shall be awarded if
the Company’s qualifying earnings is less than $2,000,000.  At that amount, 33% of the 100% eligible
incentive bonus would be earned.  From
$2,000,001 to $5,100,000 the remaining 67% of the 100% eligible incentive bonus
would be proportionally earned.  Above
the target of $5,100,000, 20% of the qualifying earnings will be earmarked for
incentive bonuses on a pro-rata basis up to a cap of 200% of the eligible
incentive bonus.Exhibit
10.18

Summary of Amendment to Change of
Control Bonus Plan

Upon a “change of control” involving the company,
Dennis R. Jolicoeur, Chief Financial Officer, Treasurer and Executive Vice
President; Steven S. Spitz, Vice President and General Counsel; and Michael S.
Surmeian, Vice President of Sales, will be paid a change of control bonus equal
to one year’s base salary, if:

·                  the executive officer is terminated
within eighteen (18) months of the date of the change of control; or

·                  the company
relocates its present offices outside of Los Angeles County and the executive
is asked and/or required to move in order to perform his duties.

A “change
of control” means:

·                  the dissolution
or liquidation of the company;

·                  the sale of all
or substantially all of the assets of the company on a consolidated basis to an
unrelated person or entity;

·                  a merger,
reorganization or consolidation in which the holders of the company’s
outstanding voting power immediately prior to such transaction do not own a
majority of the outstanding voting power of the surviving or resulting entity
immediately upon completion of such transaction;

·                  the sale of all
of the common stock of the company to an unrelated person or entity;  or

·                  any other
transaction in which the owners of the company’s outstanding voting power prior
to such transaction do not own at least a majority of the outstanding voting
power of the relevant entity after the transaction.

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