Common use of Hypothetical Clause in Contracts

Hypothetical. Vice President X makes a salary of $210,000 and has, under the annual cash incentive plan, a 40% target ($84,000) if Cray makes $30 million of adjusted pre-award operating income (for 50% of his total award) and X meets five defined individual goals (10% each or 50% together of his total award). (X’s target award for the prior year was 35%, or $73,500, with the prior year’s plan structured similarly to the current year’s plan.) If Cray’s adjusted pre-award operating income is $20 million, the plan award is 50% of target; if it is $26 million, the plan award is 75% of target; and if it is $34 million, it is 125% of target. Cray must be profitable for any payment to be made under the cash incentive plan, and a condition to payment is that the officer must be an employee on the date of payment. X has been a Vice President for 30 months and does not accrue any vacation. X has 16,000 options for Cray common stock, of which 4,000 options are vested, and 5,000 shares of restricted stock, of which 2,500 shares are vested.