Scientific Learning Corporation 2007 Management Incentive Plan
Exhibit 10.2
Approved by the Compensation Committee of the Board March 7, 2007
Scientific Learning Corporation
2007 Management Incentive Plan
Purpose
To provide significant cash awards to participants for the achievement and over-achievement of Scientific Learning’s collective financial goals, as well as each participant’s individual goals and overall performance in adding value for shareholders, customers and employees.
Participants
All members of the Leadership Team, director-level employees and selected manager-level employees. The total number of participants at March 2007 is approximately 35 persons. The regional sales directors who are included in sales incentive compensation plans are excluded from this Plan.
Target Incentive Awards
Intended to deliver market average incentive compensation at 100% achievement of goals. Awards increase for overachievement.
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| Target Award | Max Award |
| CEO | 50% | 100% |
| VP, Sales K-12 | 50% | 100% |
| CFO | 40% | 80% |
| Other Senior VPs, General Counsel | 35% | 70% |
| Chief Ed. Officer, Other VPs | 30% | 60% |
| Directors | 20% | 40% |
| Managers | 10% | 20% |
Goals
All participants in the Plan will have shared Company financial goals and individual goals closely related to the individual’s own area of responsibility.
Shared Goals
Shared goals for the 2007 Plan are:
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| Hurdle Level | Target Level | Maximum |
| Revenue | $49 million | $52 million | $56 million |
| Net profit | $3.7 million | $4.6 million | $6.6 million |
| Individual Goals |
Individual goal performance under the 2007 Plan is based on both the following:
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| • | Achievement of agreed-upon individual goals closely related to the individual’s area of responsibility. These goals will be agreed in writing between the participant and his/her manager. |
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| • | Contribution to adding value for shareholders, customers and employees. |
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| • | Hurdle level for individual goals is 80%. Maximum overachievement level is 200%. |
| SLC Confidential | Page 1 of 3 |
Approved by the Compensation Committee of the Board March 7, 2007
Weighting of Shared Goals and Individual Performance
| Goal | % of Target Award Allocated to Goal |
| Net profit | 35% |
| Revenue | 35% |
| Individual performance | 30% |
Note: For managers and director-level employees, the CEO has discretion to allocate the bonus opportunity differently among the various goals to reflect the priorities and responsibilities of that particular person.
Hurdles and Scaling
The bonus payout starts for each goal when the specified hurdle level for that goal is achieved. At the hurdle level, 50% of that goal’s portion of the target award is earned. At 100% of the goal, 100% of that goal’s target award is earned. Between the hurdle level and 100% achievement of the goal, the portion of the award earned is scaled ratably.
Overachievement
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| • | Participants in the Plan can double their bonus through overachievement. |
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| • | The overachievement potential is divided among the goals in the same percentage as the bonus for achievement. |
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| • | The maximum overachievement award is paid at the maximum overachievement levels specified above. |
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| • | Between 100% achievement and the maximum bonus overachievement level, each goal’s portion of the award is scaled ratably. |
Illustration
The attached chart illustrates, for particular positions, the percentage of base salary payable for each goal, at the hurdle, at 100% and at maximum overachievement levels.
Timing
Awards will be paid in the first quarter of 2008, following the completion of the 2007 audit, provided that all awards shall be paid within two and one-half months following the end of the calendar year in which the awards are no longer subject to substantial risk of forfeiture. Plan participants must be employed at Scientific Learning in a position that is eligible for an award under this Plan when the awards are paid in order to receive an award. Participants hired or promoted into a MIP eligible position prior to October 1, 2007 will be eligible for a pro-rated award (unless otherwise agreed to, in writing, at the time of the employment action).
Compensation Committee Discretion
The Compensation Committee has discretion to pay awards to reflect achievement even if specific goals are not met and to interpret the terms of the Plan.
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| SLC Confidential | Page 2 of 3 |
Approved by the Compensation Committee of the Board March 7, 2007
% of Base Salary Available as MIP Award at Specified Levels of Achievement of Goals
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| % of Base Salary Available as Bonus | |||||||||||
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| Operating Income | Booked Sales | Individual Goals | Total | ||||||||
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| At Hurdle | 100% | Max Over | At Hurdle | 100% | Max Over | At Hurdle | 100% | Max Over | At Hurdle | 100% | Max Over |
| CEO, VP Sales | 8.75% | 17.5% | 35% | 8.75% | 17.5% | 35% | 7.5% | 15% | 30% | 25% | 50% | 100% |
| CFO | 7% | 14% | 28% | 7% | 14% | 28% | 6% | 12% | 24% | 20% | 40% | 80% |
| Other Senior VPs, General Counsel | 6.125% | 12.25% | 24.5% | 6.125% | 12.25% | 24.50% | 5.25% | 10.50% | 21% | 17.5% | 35% | 70% |
| Chief Ed Officer, other VPs | 5.25% | 10.5% | 21% | 5.25% | 10.5% | 21% | 4.5% | 9% | 18% | 15% | 30% | 60% |
| Directors* | 3.5% | 7% | 14% | 3.5% | 7% | 14% | 3% | 6% | 12% | 10% | 20% | 40% |
| Managers* | 1.75% | 3.5% | 7% | 1.75% | 3.5% | 7% | 1.5% | 3% | 6% | 5% | 10% | 20% |
* Subject to adjustment by the CEO, as described above.
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| SLC Confidential | Page 3 of 3 |
