Attached files
Exhibit 10.5 – Summary of Executive Bonus
Management Incentive Bonus Plan
Revised F2010
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Management Incentive Bonus Plan (“MIBP”)
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The Management Incentive Bonus Plan (“MIBP”) is the same for all of the executives. The MIBP has three components; MBOs, operating income bonus and a revenue versus plan bonus. These components will be paid quarterly. The components are weighted as shown below.
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Specifics
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MIBP Allocation of Total Bonus:
A third of the total bonus amount is allocated to MBOs, Operating Income and Revenue versus Plan. The bonus amount for each category is spread and paid over four quarters. See the example below:
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Example:
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Annual1
Bonus Amount equals $30,000 |
% of Total Bonus
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Q1
25%
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Q2
25%
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Q3
25%
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Q4
25%
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MBOs
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$10,000 | 33.0 | % | $2,500 | $2,500 | $2,500 | $2,500 | |||||||||||||||||
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Operating Income Bonus
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$10,000 | 33.0 | % | $2,500 | $2,500 | $2,500 | $2,500 | |||||||||||||||||
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Revenue vs Plan
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$10,000 | 33.0 | % | $2,500 | $2,500 | $2,500 | $2,500 | |||||||||||||||||
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MBOs
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MBOs will be assigned and agreed upon by the President & CEO and the executive. Performance against these objectives will be determined by the CEO. MBOs will be paid quarterly.
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Operating Income and Revenue versus Plan
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1 Example: amount of bonus differs for each executive.
F2010 – Revised Compensation Plan – Executives
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Operating Income Bonus2
The operating income bonus pays at the first break point of 90% based on the formula in the table below. If revenue versus plan is not met, the operating income bonus is capped at 100%.
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% of Bonus up to 1st Break
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1st Break Point
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% of Bonus up to 2nd Break
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2nd Break Point
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% of Bonus up to 100% of Plan |
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% of Bonus at and after 100%
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Operating Income
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0%
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90% of Plan
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15% + 5.0% for each
1% over 90%
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95% of Plan
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60% + 5.0% for
each 1% over 95%
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100% + 1.0% for each
1% over 100%; if
revenue under 100%
this bonus is capped
at 100%
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Revenue versus Plan3
The revenue bonus pays at the first break point of 80% and increases as the revenue versus Plan increases based on the formula below.
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% of Bonus up to 1st Break
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1st Break Point |
% of Bonus up to 2nd Break
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2nd Break Point |
% of Bonus up to 100% of Plan
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% of Bonus @ 100%-104%
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% of Bonus @ 105%-109%
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% of Bonus if revenue over 110%
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Revenue
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0%
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80% of Plan
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15% + 2.5% for each
1% over 80%
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90% of Plan
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60% + 2.5% for
each 1% over
90%
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100% + 2.5%
each 1% over
100%
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100% + 5% each 1% over 100% | 200% of all
bonuses for
that quarter
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Examples
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Assuming $40,000 annual bonus paid at $10,000 per quarter in equal portions for MBOs, Operating Income and Revenue.
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Bonus Allocation Example
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Annual Bonus Amount equals $30,000 |
% of Total Bonus
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Q1
25%
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Q2
25%
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Q3
25%
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Q4
25%
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MBOs
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$10,000 | 33.00 | % | $2,500 | $2,500 | $2,500 | $2,500 | |||||||||||||||||
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Operating Income Bonus
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$10,000 | 33.00 | % | $2,500 | $2,500 | $2,500 | $2,500 | |||||||||||||||||
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Revenue vs Plan
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$10,000 | 33.00 |
%
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$2,500 | $2,500 | $2,500 | $2,500 | |||||||||||||||||
2 Operating income bonus is based on year to date targets.
3 The revenue versus plan bonus is based on year to date targets.
F2010 – Revised Compensation Plan – Executives
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In Example 1, the Q2 year to date actuals for operating income were 186% of plan. The revenue versus plan is 96% of plan. The operating income bonus is limited to 100% because the revenue is less than 100% of plan. The revenue bonus is paid out per the plan formula. This example assumes MBO attainment at 100%. The resulting bonus paid would be 92% of total eligible bonus.
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Example 1
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Qtrly Bonus Amount
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Performance % Actual vs Plan
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Payment
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MBOs
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$ | 2,500 | 100 | % | $2,500 |
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Operating Income Bonus
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$ | 2,500 | 186 | % | $2,500 |
bonus is capped at 100% if revenue less that 100%
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Revenue vs Plan
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$ | 2,500 | 96 | % | $1,875 |
60% + 2.5% for each 1% over 90%
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Total
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$ | 7,500 | 92 | % | $6,875 | ||||||||||
In Example 2, the year to date actuals for operating income were 105% of plan. The revenue versus plan is 100% of plan. The operating income bonus is paid at 105% based on the plan formula due. The revenue bonus is paid at 100% per the plan formula.
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Example 2
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Qtrly Bonus Amount
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Performance % Actual vs Plan
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Payment
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MBOs
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$ | 2,500 | 100 | % |
$2,500
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Operating Income Bonus
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$ | 2,500 | 105 | % |
$2,625
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100% + 1% for each over 1% over 100%; if revenue at 100%
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Revenue vs Plan
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$ | 2,500 | 100 | % |
$2,500
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100% + 5% for each over 1% over 100%
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Total
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$ | 7,500 | 102 | % |
$7,625
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In Example 3, the year to date actuals for operating income were 130% of plan. The revenue versus plan is 110% of plan. All bonus amounts double.
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Example 3
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Qtrly Bonus Amount
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Performance % Actual vs Plan
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Payment
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MBOs
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$ | 2,500 | 100 | % |
$2,500
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bonus doubles 110% revenue
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Operating Income Bonus
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$ | 2,500 | 130 | % |
$3,250
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bonus doubles 110%
revenue |
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Revenue vs Plan
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$ | 2,500 | 110 | % |
$2,500
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bonus doubles 110%
revenue |
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Total
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$7,500 | 110 | % |
$8,250
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Pays 200%
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$16,500
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Using Q2 as an example, 100% of revenue budget would generate approximately $573,000 in incremental sales or $458,000 incremental gross margin dollars.
F2010 – Revised Compensation Plan – Executives
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Budget Targets for FY10
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Operating income:
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Q1 | Q2 | Q3 | Q4 | |||||||||||||
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Per Quarter
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$123,257 | $234,192 | $308,324 | $565,930 | |||||||||||||
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YTD
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$123,257 | $357,449 | $665,773 | $1,231,703 | |||||||||||||
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Total Operating Income $1,231,703
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Revenue:
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Q1 | Q2 | Q3 | Q4 | |||||||||||||
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Per Quarter
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$5,533,944 | $5,727,492 | $5,823,609 | $5,950,970 | |||||||||||||
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YTD
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$5,533,944 | $11,261,436 | $17,085,045 | $23,036,015 | |||||||||||||
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Total Revenue $23,036,015
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Addendum to Plan for Brian E. Dearing:
1. M&A/Alliance Transaction – 25% paid in the quarter the event occurs.
$29,750
2. Re-Financing the CBT Loan – 25% paid in the quarter the event occurs. My objective here is to find a way to re-pay the portion of the CBT loan that would trigger the interest going from 10% to 14%. The savings to ARI if we can finance the loan at 10% is over $800K so paying $30K for doing that is a bargain imo.
$29,750
3. F&I Business Unit Performance – 10% paid quarterly for achieving its revenue objectives (half of the dollars) and for achieving its operating income target. The targets are the FY10 approved plan.
1. revenue = $5,950 / 4 quarters
2. operating income = $5,950 / 4 quarters
4. CBT Performance – 15% paid quarterly for achieving its revenue objectives (half of the dollars) and for achieving its operating income target. The targets are the FY10 approved plan. (Darin is working to define how we will measure operating income for this unit, for Q1 I recommend that payment be based on revenue,).
1. revenue = $8,925 / 4 quarters
2. operating income = $8,925 / 4 quarters
F2010 – Revised Compensation Plan – Executives
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5. ARI Performance – 15% paid consistent with all ARI executives. This payment will be based on revenue, revenue growth and operating income (5% on each).
1. revenue growth = $8,925 / 4 quarters
2. operating income = $8,925 / 4 quarters
6. MBO’s
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Public Reporting – 5% - Continue as the acting CFO for public reporting for Q2, Q3 and Q4 FY10 while training Darin Janecek to take over all responsibilities in this area starting Q1 FY11.
$5,950/4
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Cash Management/Forecasting – 5% - Continue to be the point person on managing cash and the cash forecast. Transition this process to Darin Janecek so that he is accountable for this function starting Q4 FY10.
$5,950/4
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F2010 – Revised Compensation Plan – Executives
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