Exhibit 10.1


 


Phase
Forward Incorporated


Management
Incentive Plan

Effective January 1, 2007


 













 


Phase Forward

Management Incentive Plan






 


Phase
Forward Incorporated

Management Incentive Plan (MIP)

Plan Document

Effective January 1, 2007






 


TABLE
OF CONTENTS




	
  Section

  	
   

  	
   

  	
   

  	
  Page

  
	
  I.

  	
   

  	
  Purpose

  	
   

  	
  3.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  II.

  	
   

  	
  Effective Date of Plan

  	
   

  	
  3.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  III.

  	
   

  	
  Eligibility

  	
   

  	
  3.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IV.

  	
   

  	
  MIP Target Payouts

  	
   

  	
  3.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  V.

  	
   

  	
  Measurement

  	
   

  	
  3.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  VI.

  	
   

  	
  Transition Issues

  	
   

  	
  3.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  VII.

  	
   

  	
  Administration

  	
   

  	
  4.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  VIII.

  	
   

  	
  Excess Distributions

  	
   

  	
  4.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Plan Exhibits

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A.

  	
   

  	
  Plan Components

  	
   

  	
  5.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  Participant Notification & Acknowledgement
  Sheet

  	
   

  	
  6.

  
								






 



 2
 









 


Phase Forward

Management Incentive Plan






Management
Incentive Plan (MIP)

Plan Document






 


I.       Purpose


The objective of the
Management Incentive Plan (MIP) is to recognize and to reward the achievement
of financial performance goals that are essential to the success of Phase
Forward. This program, in conjunction with base salary, is designed to offer
designated employees of Phase Forward Incorporated and/or its subsidiaries (the
“Company”) total cash compensation opportunities that are fully competitive
with market levels.


II.     Effective Date of Plan


The effective date for
implementation of the Plan shall be January 1, 2007.  A Plan year is equivalent to a calendar year.
The Plan may be modified or terminated at any time by the Management
Development and Compensation Committee or their designee in its or their sole
discretion, without notice or consent of the Participants.


III.   Eligibility


Certain employees,
designated by executive management in its sole discretion, whose roles and
responsibilities are deemed by executive management to be critical to
operations and who are at a management level in the organization are eligible
for participation in the MIP. Target Participation Percentage is defined by the
position.


IV.    MIP Target Payout


Participants will be
assigned a target payout for the MIP, expressed as a percentage of total base
salary, set forth in Exhibit B. This percentage represents the potential dollar
award that could be earned upon achievement of goals for all Plan
components.  The target payout percentage
will vary according to the Participant’s position.  Actual Plan payments will vary based on
performance and time in position.


V.     Measurement


The MIP consists of one
component for all Participants.  The
Participant will be assigned a target payout, expressed as a percentage of base
salary, to be used to calculate an amount (i.e. 10 % of $90,000 base salary
equals $9,000).    The Plan component and
quarterly weighting is set forth in Exhibit A.


VI.    Transition Issues


A Participant in the Plan
must be actively employed by the company through payment dates to receive any
payout under the plan. Payment dates are typically during the month of March
following the end of the Plan year. Since the annual components are calculated
on base salary as of December 31 of the plan year, payouts for annual
components will be pro-rated for those eligible Participants who join the plan
during the year, prior to October 1. Employees who transfer out of an eligible
position during the year into a non-eligible position in the company, but who
are still employed as of the payment date, will be considered for an award
based on the number of months in the eligible position and earnings accrued
during those months.



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Phase Forward

Management Incentive Plan






 


Employees hired or promoted
for the first time into bonus eligible positions after October 1 will not be
eligible to participate in any component of the Plan for that plan year.


VII.      Administration


The adoption, eligibility
and participation in this Plan in no way infers or reflects any guarantee of a
contract of employment.  Except as expressly
set forth in any Participant’s employee agreement signed by the company and
employee, all of the employees of the company are employees “at will”.
Participation in this plan does not confer any right to continue in the company’s
employ or limit the right of the company to terminate the participant at any
time, with or without cause or notice.


The financial targets
assigned and recognized as goals on any of the performance factors may be
revised or otherwise modified by the executive management of the company at any
time to account for any material change in the business of the company.  Any such revisions or modifications will be
made in writing to all Participants as soon as possible after the need for such
change is determined.


If any term or condition of
this Plan is found to be in non-conformance with a given state, federal, or
country law, that term or condition will be non-enforceable but will not negate
other terms and conditions of the Plan. 
However, the company will review and modify the overall plan to conform
to such law.


The company is an Equal
Opportunity Employer committed to a diverse workforce.  The company will not discriminate on the
basis of race, color, religion, age, sexual orientation, national origin,
physical or mental disability, or veteran status.


All matters of MIP
interpretation should be directed to the VP, Human Resources, and will be
resolved at his/her discretion subject to the approval of the CEO and where
necessary the Management Development and Compensation Committee.


VIII   Return
of Excess Distributions (Applies to Executive Officers only)


Notwithstanding any
provision hereof to the contrary, if the company restates its financial results
for any period covered by this Plan, the company will re-measure the
achievement of performance targets using the restated financial results.
Following such recalculation, if the aggregate amount of a previously paid
bonus to a Participant identified on Schedule B (a “Senior Participant”)
exceeds the aggregate amount of his or her bonus actually earned, such excess
shall be deemed to constitute a “bonus overpayment”. The company shall notify
each Senior Participant of the amount of his or her bonus overpayment as soon
as reasonably practical. The amount of such bonus overpayment shall be, at the
company’s election, either (i) repaid to the company by the Senior Participant
within 30 days of receipt of the notice of bonus overpayment or (ii) deducted
from the Senior Participant’s future compensation. The provisions of this
section shall survive the termination or expiration of this Plan.


 



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Phase Forward

Management Incentive Plan






 


Exhibit A


Plan Component


The Plan Component is:


1.              Operating
Income before Bonus and Stock Based Expenses


This relates to the
global performance by the Company against the Company’s planned earnings for
the fiscal year corresponding to the Plan year, as established by the Board at
the beginning of the Plan year. The specific criteria upon which any bonuses
may be earned during the Plan year is based on operating income before bonus
and stock based expenses.  The
achievement of performance targets will be measured when or shortly after the
Company publicly reports its financial results for the applicable period.   All Participants are measured on this
component. The targets may change as approved by the Board of Directors in its
sole discretion, for items such as an acquisition or other extraordinary
corporate event.


This component is earned
on a quarterly basis but paid annually, by the end of the March following the
end of the plan year. A minimum achievement or “threshold” of 80% of global
performance in each quarter is required for payout of the component applicable
to that quarter.  Total payments for the
year may not exceed 200% of the Target Payout. Payments are paid according the
following schedule:


 


	
  First and Second Quarter Payment Schedule

  	
   

  
	
   

  	
   

  
	
  Achievement%

  	
   

  	
  Payout%

  	
   

  
	
  <80%

  	
   

  	
  0%

  	
   

  
	
  80%–99.9%

  	
   

  	
  50% + 2.5% for each additional % achieved

  	
   

  
	
  >100

  	
   

  	
  100% + 3% for each additional % achieved

  	
   

  



 


	
  Third and Fourth Quarter Payment Schedule

  	
   

  
	
   

  	
   

  
	
  Achievement%

  	
   

  	
  Payout%

  	
   

  
	
  <80%

  	
   

  	
  0%

  	
   

  
	
  80%–99.9%

  	
   

  	
  50% + 2.5% for each
  additional % achieved

  	
   

  
	
  >100

  	
   

  	
  100% + 2% for each
  additional % achieved

  	
   

  



 


For Illustration Purposes:
(Quarters are not weighted equally)


Q-1 Achievement of 110% would result in a payout of
130% of target


Q-2 Achievement of 100% would result in a payout of
100% of target


Q-3 Achievement of 85% would result in a payout of
62.5% of target


Q-4 Achievement of 105% would result in a payout of
110% of target


 



 5
 









 


Phase Forward

Management Incentive Plan






 


Exhibit B

Participant Notification Sheet

Certificate of Acknowledgement






2007
Management Incentive Plan


	
  Name of Participant:

  	
   

  	
  John
  Smith

  
	
   

  	
   

  	
   

  
	
  Base
  Salary as of 3-1-07

  	
   

  	
  $170,000

  
	
   

  	
   

  	
   

  
	
  Target
  Participation Percentage:

  	
   

  	
  35%

  
	
   

  	
   

  	
   

  
	
  MIP
  Target Payout Annualized:

  	
   

  	
  $59,500

  



 


The information above is for illustration purposes only and
assumes annualized participation. Actual payments will be made in accordance
with the plan and will vary based on actual achievement of targets.






Plan
Components and Weighting:


100%
Operating Income Before Bonus and Stock Based Expenses (earned quarterly as
follows):




	
  Q-1

  	
   

  	
  10%

  
	
  Q-2

  	
   

  	
  15%

  
	
  Q-3

  	
   

  	
  30%

  
	
  Q-4

  	
   

  	
  45%

  






 


The information above is for illustration purposes only and
actual payments will be made in accordance with the plan and will vary based on
actual achievement of targets.






I,                                    ,
hereby certify that I have read the Phase Forward Incorporated Management
Incentive Plan.  I understand and agree
to the terms of the plan.


	
  

  	
   

  	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  Date

  



 



 6