2007 Executive Team Bonus Plan - Constant Contact Inc.
CONSTANT CONTACT
2007 EXECUTIVE TEAM BONUS PLAN
Under Constant Contact's Executive Team Bonus Plan, executives can receive a
portion of their compensation based on the attainment of financial targets and /
or personal MBOs. In 2007, the financial targets used for incentive purposes
will be "Average Monthly Revenue Growth" (AMRG) and EBITDA. The AMRG and EBITDA
targets will be established by the Compensation Committee of the Board of
Directors and the individuals' specific MBOs will be agreed to by the CEO.
The objectives of the Bonus Plan are:
- To link our reward system for the executive team to the success of the
company in achieving its financial and business objectives;
- To provide competitive pay in the marketplace as a part of attracting,
motivating and retaining the most qualified and talented individuals.
Payouts under the plan, which occur quarterly, must be approved by the
Compensation Committee of the Board of Directors.
This plan can be changed by management at their discretion at any time during
the year.
ELIGIBILITY
All executives are eligible to participate in the Executive Team Bonus
Plan.
NEW PARTICIPANTS
New hires or newly promoted employees who become members of the Executive Team
will be eligible to receive a pro-rated payment for their first full quarter
with the company.
BONUS CALCULATION
The amount each participant can receive as a bonus is a function of two or three
variables:
1. Financial targets by quarter:
a. Average Monthly Revenue Growth (AMRG)
b. EBITDA
2. MBOs - mutually agreed upon quarterly MBOs
The Bonus Plan target percentage attainment is allocated by quarter:
Quarter Percentage
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First Quarter 15% of target
Second Quarter 25% of target
Third Quarter 25% of target
Fourth Quarter 35% of target
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The Financial Performance targets are also allocated by component:
Quarter Based on AMRG Based on EBITDA
------- ------------- ---------------
First Quarter 90% 10%
Second Quarter 90% 10%
Third Quarter 90% 10%
Fourth Quarter 90% 10%
For example, someone who has a 70/30 split between the two metrics (70%
Financial & 30% MBOs) and a targeted annual bonus of $20,000 would have a
quarterly target incentive breakdown as follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- -------- ------- -------
Target Total Incentive $3,000 $5,000 $5,000 $7,000
Target Financial Incentive $2,100 $3,500 $3,500 $4,900
AMRG Portion $1,890 $3,150 $3,150 $4,410
EBITDA Portion $ 210 $ 350 $ 350 $ 490
Target MBO Incentive $ 900 $1,500 $1,500 $2,100
AMRG incentive payouts start at 80% of the AMRG achievement and increase
linearly up to 100%. For example, if the company achieved 86% of the AMRG
target; the payout would be 86% x $1,890, plus any EBITDA and MBO based
incentives. If the company achieved 95% of the AMRG target; the payout would be
95% x $1,890, plus any EBITDA and MBO based incentives.
Accelerators are earned when the AMRG achievement percentage is >100% up to
200%.
Accelerator Payout Table Q1 Q2 Q3 Q4
------------------------ ---------- ---------- ---------- ----------
1% =1% 100% - 115% 100% - 115% 100% - 115% 100% - 110%
1% =1.5% 115% - 130% 115% - 130% 115% - 125% 110% - 120%
1% =2% 130% + 130% + 125% + 120% +
If the company achieves in excess of 100% of its AMRG target, the AMRG payout
percentage is also applied to any EBITDA and / or MBO payouts. See Example 1.
Whereas, if the company generates less than 100% of its AMRG target, the AMRG
payout percentage is only applied to the AMRG target incentive. Any EBITDA and /
or MBO payouts would be paid out independent of the AMRG. See Example 2.
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EXAMPLE 1
Annual Target Incentive $ 20,000
Q1 Target Incentive $ 3,000 (Annual Target Incentive x 15%)
Financial Breakdown
AMRG $ 1,890 (Q1 Target x 70% x 90%)
EBITDA $ 210 (Q1 Target x 70% x 10%)
MBO $ 900 (Q1 Target x 30%)
AMRG Actual $ 89,149
AMRG Target $ 84,487
Achievement % 106% (AMRG Actual/AMRG Target)
EBITDA Actual ($900,000) Pass
EBITDA Target ($995,000)
MBO Achievement % 90% (Determined by manager)
MBO Payout Incentive $ 810 (MBO Amount x MBO Achievement %)
Total Incentive Payout $ 3,085 (AMRG target + EBITDA target (if
achieved) + MBO Incentive payout) x
achievement percentage
EXAMPLE 2
Annual Target Incentive $ 20,000
Q1 Target Incentive $ 3,000 (Annual Target Incentive x 15%)
Financial Breakdown
AMRG $ 1,890 (Q1 Target x 70% x 90%)
EBITDA $ 210 (Q1 Target x 70% x 10%)
MBO $ 900 (Q1 Target x 30%)
AMRG Actual $ 80,263
AMRG Target $ 84,487
Achievement % 95% (AMRG Actual/AMRG Target)
EBITDA Actual ($900,000) Pass
EBITDA Target ($995,000)
MBO Achievement % 100% (Determined by manager)
MBO Payout Incentive $ 900 (MBO Amount x MBO Achievement %)
Total Incentive Payout $ 2,906 (AMRG target x achievement percentage) +
EBITDA target (if achieved) + MBO
Incentive payout
For those members of the executive team who do not have MBOs, their incentive
calculation will be based 100% on the company's quarterly financial performance.
ANNUAL REVIEW AND PAYOUT PROCESS
In December of each year, the bonus parameters will be established for the
following year.
Typically, payouts are made on a quarterly basis in the last pay period of the
month following the end of the quarter (i.e. payout will be made on April 30th
for Q1 performance).
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Employees who are either on salary continuation (severance or separation pay),
or who have left the Company at the time of payout are not eligible to receive a
payout.
Employees who leave the company as eligible retirees or who have died during the
calendar year will be entitled to a pro-rated bonus payout for the portion of
the year that they were active employees.
For new employees, the prorated quarterly payment will be based upon the number
of months of service. A month will be counted if they are a regular, full-time
employee of the company as of the 15th of that month.
An employee on corrective action may not be eligible to receive a payout.
An employee who is out on short-term disability during the plan year (up to 90
days); will be eligible to receive full bonus payout during that period of time.
The MBO portion of the bonus is unlikely to be met.
Participation in the Bonus Plan does not imply a contract of employment for a
specific term or any right of continued employment and can be changed by
management at their discretion at any time during the year.