EXHIBIT 10.18
CONFIDENTIAL TREATMENT REQUESTED
INTERWOVEN, INC.
2005 EXECUTIVE OFFICER INCENTIVE BONUS PLAN
Interwoven, Inc. ("Interwoven" or the "Company"), a Delaware
corporation, hereby establishes this 2005 Executive Officer Incentive Bonus Plan
(the "Plan") effective as of January 1, 2005, in order to advance the interests
of the Company and its stockholders by providing an incentive for designated
executive officers of the Company to achieve the Company's total revenue and pro
forma operating income (loss) targets for the year ending December 31, 2005 (the
"2005 Year").
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Whenever used herein, the following terms shall have
their respective meanings set forth below:
1.1.1 "ACTUAL PRO FORMA OPERATING INCOME" for any Bonus Period
means the Company's operating income (loss) for such Bonus Period
computed in accordance with generally accepted accounting principles
less the impact of amortization of deferred stock compensation and
intangible assets, restructuring and excess facilities charges,
in-process research and development charges and other non-recurring
items, net of the related tax impact. Actual Pro Forma Operating Income
is after accruing for the Quarterly Bonus and Annual Bonus due
Participants under the Plan. Other non-recurring items to be excluded
from operating income (loss) for purposes of computing actual pro forma
operating income are subject to the review and approval of the Audit
Committee.
1.1.2 "PLAN OPERATING INCOME TARGET" means any one of the Pro
Forma Operating Income (Loss) Targets set forth in Exhibit A hereto.
1.1.3 "ACTUAL REVENUES" for any Bonus Period means the
Company's total license, support, service and training revenues for
such Bonus Period as reported in the Company's Financial Statements.
1.1.4 "ANNUAL BONUS" means the cash bonus payable pursuant to
Section 4.2.
1.1.5 "BONUS PERIOD" means, with respect to the Annual Bonus,
the year ended December 31, 2005 and, with respect to any Quarterly
Bonus, the calendar quarter of 2005 with respect to which such
Quarterly Bonus is to be calculated.
1.1.6 "COMMITTEE" means the Compensation Committee of the
Board of Directors of the Company.
1.1.7 "FINANCIAL STATEMENTS" means, with respect to the Annual
Bonus, the Company's audited consolidated financial statements for the
year ending December 31, 2005 as filed by the Company with the
Securities and Exchange Commission on Form 10-K and, with respect to
any Quarterly Bonus, the Company's unaudited condensed consolidated
financial statements for the calendar quarter with respect to which
such Quarterly Bonus is to be calculated, as filed by the Company with
the Securities and Exchange Commission on Form 10-Q in the case of the
calendar quarters ending March 31, June 30 and September 30, 2005 and
as filed by the Company with the Securities and Exchange Commission on
Form 10-K in the case of the calendar quarter ending December 31, 2005.
1.1.8 "MBO" means those quarterly or annual objectives
established by the Committee or the Company's Chief Executive Officer
for the participant.
1.1.9 "PARTICIPANT" means an executive officer of the Company
who has been designated by the Committee as a Participant in the Plan.
1.1.10 "PLAN REVENUE TARGET" means the plan revenue targets
set forth in Exhibit B hereto.
1.1.11 "QUARTERLY BONUS" means the bonus that is due pursuant
to Section 4.1.
1.1.12 "TARGET BONUS" means the amounts set forth in Exhibit C
hereto. The Target Bonus may be divided into components. The Company
Performance Target Bonus refers to the amount of the Participant's
Target Bonus allocated to computations defined in Section 4 of this
Plan. The MBO Target Bonus refers to the amount of the Participant's
Target Bonus allocated to the Participants' MBO Target Bonus as defined
in Section 5 of the Plan.
2. ADMINISTRATION.
The Plan shall be administered by the Committee. All questions of
interpretation of the Plan shall be determined by the Committee in its sole
discretion, and such determinations shall be final and binding upon all
persons having an interest in the Plan.
3. ELIGIBILITY.
A Participant shall be eligible for a Quarterly Bonus only if he
or she is actively employed by the Company throughout the entirety of the
corresponding Bonus Period. A Participant shall be eligible for a pro rated
Annual Bonus (based on the full quarters that such Participant was
employed) only if he or she is actively employed by the Company for at
least two full quarterly Bonus Periods during 2005, and such Participant is
employed by the Company on December 31, 2005.
4. COMPANY PERFORMANCE BONUS AND PAYMENT.
The portion of the Participant's Target Bonus allocated to the
Company Performance Bonus is designated on Exhibit C to this Plan.
4.1 QUARTERLY BONUSES.
4.1.1 Subject to the provisions of Section 4.4 below,
each Participant who meets the bonus eligibility requirements of
Section 3 above shall receive a Quarterly Bonus for each calendar
quarter in 2005 equal to twenty percent (20%) of the Participant's
Company Performance Target Bonus multiplied by the applicable
bonus percentage determined under Section 4.3 below.
4.1.2 Each Quarterly Bonus shall be paid on the basis of
results shown in the Company's press release announcing its
financial results for such quarter, in cash, in a single lump sum,
subject to all applicable employment and income tax withholding,
within thirty (30) days after both of the following conditions
have occurred: (a) the Company's external auditors have completed
a review of the Company's records for the Bonus Period and have
submitted a report thereon to the Audit Committee of the Company's
Board of Directors, and (b) the Company has issued a press release
announcing its financial results for such quarter.
4.1.3 In the event that the results set forth in the
Financial Statements for a quarterly Bonus Period are different
than those that formed the basis for the calculation of the
Quarterly Bonus for such Bonus Period pursuant to Section 4.1.2
above, the amount of the Quarterly Bonus for such Bonus Period
shall be adjusted using the results set forth in the Financial
Statements for such Bonus Period and (a) each Participant shall be
required to return to the Company within thirty (30) days of
receiving notice from the Company of such adjustment, any amount
that has become an over-payment as a result of the adjustment, net
of applicable taxes, and (b) the Company shall pay within thirty
(30) days of determining any such adjustment, any amounts that
ought to have been made to each Participant.
4.1.4 The maximum Quarterly Bonus payment for any such
quarterly Bonus Period is limited to 150% of the quarterly
allocation of the Company Performance Target Bonus for each
Participant. To the extent that the Quarterly Bonus earned is
greater than 150% ("Excess Quarterly Bonus"), the amount due in
excess of 150% will be deferred pending the announcement of
financial results for the full year. If the Annual Bonus is equal
to or greater than a 100% Annual Bonus pay-out (computed based on
actual results without regards to the 150% cap), the Excess
Quarterly Bonus will be added to the Annual Bonus and paid with
the Annual Bonus in accordance with the provisions of Section 4.2.
If the Annual Bonus is computed
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to be less than a 100% pay-out (computed based on actual results
without regards to the 150% cap), the Excess Quarterly Bonus will
be forfeited.
4.2 ANNUAL BONUS.
4.2.1 Each Participant who meets the bonus eligibility
requirements of Section 3 above shall receive an Annual Bonus
equal to twenty percent (20%) of the Participant's Company
Performance Target Bonus multiplied by the applicable bonus
percentage determined under Section 4.3 below. The Annual Bonus
will be the sum of the (Q1 Applicable Bonus Percentage times 25%)
plus (Q2 Applicable Bonus Percentage times 25%) plus (Q3
Applicable Bonus Percentage times 25%) plus (Q4 Applicable Bonus
Percentage times 25%).
4.2.2 Each Annual Bonus shall be paid upon the
announcement of the Company's press releases for its fourth
quarter and annual financial results for the year ending December
31, 2005, in cash, in a single lump sum, subject to all applicable
employment and income tax withholding, within thirty (30) days
after both of the following have occurred: (a) the Company's
external auditors have completed an audit of the Company's
financial results for the year ending December 31, 2005 and have
submitted a report thereon to the Audit Committee of the Company's
Board of Directors, and (b) the Company has issued a press release
announcing its financial results for such year.
4.2.3 In the event that the results set forth in the
Financial Statements for the annual Bonus Period are different
than those that formed the basis for the calculation of an Annual
Bonus pursuant to 4.2.2 above, the amount of the Annual Bonus
shall be adjusted using the results set forth in the Financial
Statements and (a) each Participant shall be required to return to
the Company within thirty (30) days of receiving notice from the
Company of such adjustment, any amount that has become an
over-payment as a result of the adjustment, and (b) the Company
shall pay within thirty (30) days of determining any such
adjustment, any amounts that ought to have been made to each
Participant.
4.3 APPLICABLE BONUS PERCENTAGE. The applicable bonus percentage
shall be calculated as follows:
50% (Revenue Achievement Percentage) + 50% (Operating Income
Achievement Percentage)
4.3.1 The Revenue Achievement Percentage for any Bonus
Period shall be a function of the extent to which Actual Revenues
for the period meet or exceed the Plan Revenue Target for the
period, determined as follows:
- ------------------------------------------------------------ ---------------------------------------------------------
IF ACTUAL REVENUES ARE: THE APPLICABLE BONUS PERCENTAGE IS:
- ------------------------------------------------------------ ---------------------------------------------------------
Less than 90% of the Plan Revenue Target 0%
- ------------------------------------------------------------ ---------------------------------------------------------
90% of the Plan Revenue Target 60%
- ------------------------------------------------------------ ---------------------------------------------------------
90% to 95% of the Plan Revenue Target 60% plus 2% for each 1% by which Actual Revenues
exceed 90% of the Plan Revenue Target.
- ------------------------------------------------------------ ---------------------------------------------------------
96% to 100% of the Plan Revenue Target 70% plus 6% for each 1% by which Actual Revenues
exceed 95% of the Plan Revenue Target.
- ------------------------------------------------------------ ---------------------------------------------------------
101% to 105% of the Plan Revenue Target 100% plus 2% for each 1% by which Actual Revenues
exceed 100% of the Plan Revenue Target.
- ------------------------------------------------------------ ---------------------------------------------------------
106% to 110% of the Plan Revenue Target 110% plus 5% for each 1% by which Actual Revenues
exceed 105% of the Plan Revenue Target.
- ------------------------------------------------------------ ---------------------------------------------------------
110% or greater of the Plan Revenue Target 135% plus 7.5% for each 1% by which Actual Revenues
exceed 110% of the Plan Revenue Target, up to 300%. In
no event will the Revenue Achievement Percentage exceed
300%.
- ------------------------------------------------------------ ---------------------------------------------------------
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4.3.2 The Operating Income Achievement Percentage for any
Bonus Period shall be a function of the extent to which Actual Pro
Forma Operating Income for the period meet or exceed the Plan
Operating Income Target for the period, determined as follows:
- ------------------------------------------------------------ ---------------------------------------------------------
IF ACTUAL PRO FORMA OPERATING INCOME IS: THE APPLICABLE BONUS PERCENTAGE IS:
- ------------------------------------------------------------ ---------------------------------------------------------
Greater than $800,000 below the Plan Operating Income 0%
Target.
- ------------------------------------------------------------ ---------------------------------------------------------
At $800,000 below the Plan Operating Income Target. 60%
- ------------------------------------------------------------ ---------------------------------------------------------
$800,000 below to $400,000 below the Plan Operating Income 60% plus 3.75% for each full $100,000 increment by
Target. which Actual Pro Forma Operating Income exceed $800,000
below the Plan Operating Income Target.
- ------------------------------------------------------------ ---------------------------------------------------------
$400,000 below to the Plan Operating Income Target. 75% plus 6.25% for each full $100,000 increment by
which Actual Pro Forma Operating Income exceed $400,000
below the Plan Operating Income Target.
- ------------------------------------------------------------ ---------------------------------------------------------
At Plan Operating Income Target plus each full increment 100% plus 1% for each $100,000 full increment by
of $100,000 in excess of Operating Income which Actual Pro Forma Operating Income exceed 100%
Target up to $400,000 above plan. the Plan Operating Income Target.
- ------------------------------------------------------------ ---------------------------------------------------------
At $400,000 above Plan Operating Income Target plus each 104% plus 2% for each $100,000 full increment by which
full increment of $100,000 in excess of Operating Income Actual Pro Forma Operating Income exceed $400,000 above
Target up to $800,000 above plan. the Plan Operating Income Target.
- ------------------------------------------------------------ ---------------------------------------------------------
At $800,000 or greater above Plan Operating Income Target 112% plus 4% for each $100,000 full increment by which
plus each full increment of $100,000 in excess of Actual Pro Forma Operating Income exceed $800,000 above
Operating Income Target. the Plan Operating Income Target, up to 300%. In no
event will the Operating Income Achievement Percentage
exceed 300%.
- ------------------------------------------------------------ ---------------------------------------------------------
4.3.3 Percentages used in the computation of the Revenue
Achievement Percentage and the Operating Income Achievement
Percentage shall be rounded to the nearest whole percentage.
4.4 The Company's Chief Executive Officer ("CEO") may review each
Participant's performance during the applicable Bonus Period and may recommend
to the Committee increasing or decreasing the Participant's Quarterly Bonus or
Annual Bonus. The determination of whether to make any recommended adjustment
shall be in the sole discretion of the Committee.
5. MBO BONUS AND PAYMENT.
The portion of the Participant's Target Bonus allocated to the MBO
Target Bonus is designated on Exhibit C to this Plan. MBO's may be established
on a quarterly or annual basis. Either the Company's Chief Executive Officer or
Chief Financial Officer is responsible for monitoring MBOs and reporting
completed MBOs to the Committee. Bonus amounts associated with MBO's will
generally be paid with any Quarterly Bonus or Annual Bonus due under Section 4.1
and Section 4.2 above. If no Quarterly or Annual Bonus is due, the bonus amount
due under this Section will be paid no later than 45 days following the end of
the quarterly period in which the MBO was successfully completed.
6. AMENDMENT OF PLAN.
The Plan may be modified or amended at any time by the Committee
or the Company's Board of Directors; provided, however, that no amendment may
increase any Plan Revenue Target, or increase any Operating Income Target
without the consent of the Participants.
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7. MISCELLANEOUS.
7.1 NO ASSIGNMENT. The right of any Participant or any other
person to the payment of any benefits under this Plan shall not be assigned,
transferred, pledged or encumbered.
7.2 SUCCESSORS. This Plan shall be binding upon and inure to the
benefit of the Company, its successors and assigns and the Participant and his
or her heirs, executors, administrators and legal representatives.
7.3 NO EMPLOYMENT AGREEMENT. Nothing contained herein shall be
construed as conferring upon any Participant the right to continue in the employ
of the Company as an employee.
7.4 ARBITRATION. Any dispute or claim relating to or arising out
of this Plan shall be fully and finally resolved by binding arbitration
conducted by the American Arbitration Association in San Mateo County,
California.
7.5 GOVERNING LAW. This Plan shall be construed in accordance with
and governed by the laws of the State of California.
7.6 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties regarding the subject matter hereto and supercedes
any prior or contemporaneous agreements, whether oral or written regarding such
subject matter.
Adopted by the Compensation Committee, effective as of January 1, 2005.
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EXHIBIT A
PRO FORMA OPERATING INCOME TARGETS FOR 2005
PRO FORMA
OPERATING
PERIOD INCOME TARGET
------ -------------
Quarter ended March 31, 2005 $ [***]
Quarter ended June 30, 2005 [***]
Quarter ended September 30, 2005 [***]
Quarter ended December 31, 2005 [***]
--------
Year ended December 31, 2005 $ [***]
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EXHIBIT B
PLAN REVENUE TARGETS FOR 2005
PERIOD PLAN REVENUE TARGET
------ -------------------
(in millions)
Quarter ended March 31, 2005 $ [***]
Quarter ended June 30, 2005 [***]
Quarter ended September 30, 2005 [***]
Quarter ended December 31, 2005 [***]
-------
Year ended December 31, 2005 $ [***]
=======
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EXHIBIT C
TARGET BONUSES FOR 2005
COMPANY
PERFORMANCE MBO
TARGET TARGET TARGET COMMISSION
PARTICIPANT BONUS BONUS BONUS PLAN
----------- ----- ----- ----- ----
John Bara $100,000 $100,000 $ - $ -
Martin Brauns $350,000 $350,000 $ - $ -
John Calonico $100,000 $100,000 $ - $ -
Max Carnecchia (1) $275,000 $ - $ - $275,000
Doug Jones $ 85,000 $ 85,000 $ - $ -
Steve Martello (2) $125,000 $ 25,000 $ - $100,000
David Nelson-Gal $100,000 $100,000 $ - $ -
Rafiq Mohammadi $100,000 $100,000 $ - $ -
Doreena Ross (3) 42,000 GBP 42,000 GBP $ - $ -
(1) Mr. Carnecchia's Target Bonus is based on a separate Sales Compensation
Plan.
(2) Of Mr. Martello's Target Bonus, $25,000 is based on Company Performance as
defined in Section 4 above and $100,000 is based on a separate Sales
Compensation Plan.
(3) Ms. Ross' incentive compensation is based in British Pounds.
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