2005 Executive Officer Bonus Plan
|||Align the interests of employees and shareholders in the future growth and success of ArthroCare Corporation (the Company) by rewarding employee performance.|
|||Up to 100% of the Total Bonus Potential of all Eligible Participants during the period of January 1, 2005 through December 31, 2005 (the Bonus Period). The Total BonusPotential for an Eligible Participant will be the Eligible Participants Bonus Potential, whereby 25% of the Eligible Participants Bonus Potential will be paid at midyear. For example, the Total Bonus Potential for an Eligible Participant(other than the Companys CEO) with a base salary of $100,000 shall be $50,000. The Total Bonus Potential of an Eligible Participant, other than the Chief Executive Officer, may be increased or decreased at the sole discretion of the ChiefExecutive Officer of the Company. The Total Bonus Potential of the Chief Executive Officer may be increased or decreased at the sole discretion of the Board of Directors of the Company.|
|||All executive officers of the Company from the period of January 1, 2005 through the payment date of a bonus (the Bonus Payment Date) who began employment with theCompany on or before December 31, 2005 and are not ineligible due to performance issues, as approved by the Compensation Committee of the Companys Board of Directors. Pro rata eligibility for executive officers who start after January1, 2005 and remain employed by the Company through the Bonus Payment Date.|
|||50% of base salary for fiscal year end December 31, 2005 for Section 16 Vice Presidents|
|||60% of base salary for fiscal year end December 31, 2005 for Chief Executive Officer|
|||In the event the Company achieves at least 85% (the Minimum Achievement Level) of the Sales Goal, and Earnings before Income Tax Depreciation Amortization and equityCompensation (EBIT-DAC) Goal, a bonus will be due to each Eligible Participant. The Sales Goal, and EBIT-DAC Goal shall be as set forth in the Companys operating budget for the period of January 1, 2005 through December 31, 2005, as approvedby the Companys Board of Directors.|
|||Each of the Sales Goal, and EBIT-DAC Goal shall be ascribed a percentage weight totaling 100% in the aggregate, as follows:|
Sales Goal 70%
EBITDAC Goal 30%
|||The Minimum Achievement Level is determined by adding the weighted average of the Sales Goal (i.e., Sales Goal Achieved (as defined below) multiplied by 70%), plus the weightedaverage of the EBIT-DAC Goal (same formula). If the sum of these percentages is equal to or greater than 85%, a bonus is payable.|
|||If the Bonus Achievement Level is between 85% and 100%, then Eligible Participants are eligible for the percentage of their Total Bonus Potential actually achieved. For example, ifthe Bonus Achievement Level is 90%, then Eligible Participants are eligible for 90% of their Total Bonus Potential.|
|||If the Bonus Achievement Level is in excess of 100%, then Eligible Participants are eligible for 100% of their Total Bonus Potential, plus a percentage of their Total BonusPotential equal to three times the portion in excess of 100%. For example, if the Bonus Achievement Level is 110%, then Eligible Participants are eligible for 100% of their Total Bonus Potential, plus 30% of the Total Bonus Potential.|
Sales shall mean the amount of ArthroCare products sold from theperiod of January 1, 2004 through March 31, 2005.
EBITDACshall mean Earnings before Income Tax, Depreciation, Amortization and equity Compensation.
Sales Goal Achieved shall mean the percentage determined by dividing Sales by the Sales Goal.
EBITDAC Goal Achieved shall mean the percentage determined bydividing the EBITDAC by the EBITDAC Goal.
BonusAchievement Level shall mean the actual level of bonus achieved.
Anybonuses payable under this 2005 Bonus Plan are subject to the approval of the Companys Board of Directors. The Company has the right to make changes in plan participation, the bonus pool or any other aspect of this plan at any time and withoutprior notice.