ex10_5.htm


Exhibit 10.5 – Summary of Executive Bonus


 


Management Incentive Bonus Plan


Revised F2010


 



	
Management Incentive Bonus Plan (“MIBP”)







 


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.


 



	
Specifics







 


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:




 



	 
Example:

	 	
 
 
Annual1


Bonus Amount equals $30,000



	 	 	 
% of Total Bonus

	 	 	
Q1


 


25%

	 	 	
Q2


 


25%

	 	 	
Q3


 


25%

	 	 	
Q4


 


25%

	 
	
 MBOs

	 	 	$10,000	 	 	 	33.0	%  	 	 	$2,500	 	 	 	$2,500	 	 	 	$2,500	 	 	 	$2,500	 
	
 Operating Income Bonus

	 	 	$10,000	 	 	 	33.0	%	 	 	$2,500	 	 	 	$2,500	 	 	 	$2,500	 	 	 	$2,500	 
	
 Revenue vs Plan

	 	 	$10,000	 	 	 	33.0	%	 	 	$2,500	 	 	 	$2,500	 	 	 	$2,500	 	 	 	$2,500	 









 



	
MBOs







 


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.


 



	
Operating Income and Revenue versus Plan







 









1 Example:  amount of bonus differs for each executive.




 




F2010 – Revised  Compensation Plan – Executives





1











  






 


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%.


 



	  	 	 	
 
% of Bonus up to 1st Break



	 	 	
 
1st Break Point



	 	 	
 
% of Bonus up to 2nd Break



	 	 	
 
2nd Break Point



	 	 	% of Bonus up to 100% of Plan	 	
 

	
 
% of Bonus at and after 100%




	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	  
	
 Operating Income

	 	 	
0%

	 	 	
90% of Plan

	 	 	
15% + 5.0% for each



1% over 90%



	 	 	
95% of Plan

	 	 	
60% + 5.0% for


each 1% over 95%

	 	  	
100% + 1.0% for each 

1% over 100%; if 

revenue under 100%


this bonus is capped 

at 100%








	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 





 


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.


 




	 	 	 	 
 
% of Bonus up to 1st Break



	 	 	1st Break Point	 	 	 
% of Bonus up to 2nd Break

	 	 	2nd Break  Point	 	 	 
% of Bonus up to 100% of Plan

	 	 	 
% of Bonus @ 100%-104%

	 	 	 
% of Bonus @ 105%-109%

	 	 	 
% of Bonus if revenue over 110%


	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	  	 	  	  	 	 	 	 	 	 
	

 Revenue



	 	 	
0%

	 	 	
80% of Plan

	 	 	

15% + 2.5% for each





1% over 80%



	 	 	
90% of Plan

	 	 	
60% + 2.5% for


each 1% over


90%

	 	  	




100% + 2.5%


each 1% over


100%









	 	 	100% + 5% each 1% over 100%	 	 	200% of all 


bonuses for



that quarter






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 







 



	
Examples







 


Assuming $40,000 annual bonus paid at $10,000 per quarter in equal portions for MBOs, Operating Income and Revenue.




 


	 
Bonus Allocation Example

	 	  Annual Bonus Amount equals $30,000	 	 	 
% of Total Bonus

	 	 	
Q1


 


25%

	 	 	
Q2


 


25%

	 	 	
Q3


 


25%

	 	 	
Q4


 


25%

	 
	
 MBOs

	 	 	$10,000	 	 	 	33.00	%	 	 	$2,500	 	 	 	$2,500	 	 	 	$2,500	 	 	 	$2,500	 
	
 Operating Income Bonus

	 	 	$10,000	 	 	 	33.00	%	 	 	$2,500	 	 	 	$2,500	 	 	 	$2,500	 	 	 	$2,500	 
	
 Revenue vs Plan

	 	 	$10,000	 	 	 	33.00	
%

	 	 	$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





2











  






 



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.


 






	
 Example 1

	 	 
Qtrly Bonus Amount

	 	 	
 
 
Performance % Actual vs Plan





	 	 	
Payment

	 	 	  	 
	
 MBOs

	 	$	2,500	 	 	 	100	%	 	 	$2,500	 	 	
 

	 
	
 Operating Income Bonus

	 	$	2,500	 	 	 	186	%	 	 	$2,500	 	 	

bonus is capped at 100% if revenue less that 100%



	 
	
 Revenue vs Plan 

	 	$	2,500	 	 	 	96	%	 	 	$1,875	 	 	

60% + 2.5% for each 1% over 90%



	 
	
 Total

	 	$	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.


 



	
 Example 2

	 	 
Qtrly Bonus Amount

	 	 	
 
 
Performance % Actual vs Plan





	 	 	
Payment

	 	 	  	 
	
 MBOs

	 	$	2,500	 	 	 	100	%	 	 	
$2,500

	 	 	
 

	 
	
 Operating Income Bonus

	 	$	2,500	 	 	 	105	%	 	 	
$2,625

	 	 	

100% + 1% for each over 1% over 100%; if revenue at 100%



	 
	
 Revenue vs Plan 

	 	$	2,500	 	 	 	100	%	 	 	
$2,500

	 	 	



100% + 5% for each over 1% over 100%







	 
	
 Total

	 	$	7,500	 	 	 	102	%	 	 	
$7,625

	 	 	  	 





 


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.


 



	
 Example 3

	 	 
Qtrly Bonus Amount

	 	 	
 
 
Performance % Actual vs Plan





	 	 	
Payment

	 	 	  	 
	
 MBOs

	 	$	2,500	 	 	 	100	%	 	 	
$2,500

	 	 	

bonus doubles 110% revenue



	 
	
 Operating Income Bonus

	 	$	2,500	 	 	 	130	%	 	 	

$3,250



	 	 	



bonus doubles 110%


revenue





	 
	
 Revenue vs Plan 

	 	$	2,500	 	 	 	110	%	 	 	
$2,500

	 	 	





bonus doubles 110%


revenue









	 
	
 Total

	 	 	$7,500	 	 	 	110	%	 	 	

$8,250



	 	 	  	 
	 	 	 	 	 	 	 	
Pays 200%

	 	 	 	
$16,500

	 	 	 	 





 




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





3











  






 


Budget Targets for FY10



	  	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 Operating income:

	 	 	Q1	 	 	Q2	 	 	 Q3	 	 	Q4	 
	
 Per Quarter

	 	 	 	$123,257	 	 	 	$234,192	 	 	 	$308,324	 	 	 	$565,930	  
	
 YTD

	 	 	 	$123,257	 	 	 	$357,449	 	 	 	$665,773	 	 	 	$1,231,703	 
	
Total Operating Income $1,231,703

	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 Revenue:

	 	 	Q1	 	 	Q2	 	 	Q3	 	 	 	Q4	 
	
 Per Quarter

	 	 	 	$5,533,944	 	 	 	$5,727,492	 	 	 	$5,823,609	 	 	 	$5,950,970	 
	
 YTD

	 	 	 	$5,533,944	 	 	 	$11,261,436	 	 	 	$17,085,045	 	 	 	$23,036,015	 
	
Total Revenue $23,036,015

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 





 


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





4











  






 


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


 



	
  

	●	
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







 



	
  

	●	
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







 


F2010 – Revised  Compensation Plan – Executives


 


 


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