**Exhibit10.2**

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**Phase Forward Incorporated**

**Management Incentive Plan**

**Effective January 1, 2006**

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**Phase Forward IncorporatedManagement Incentive Plan**

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**Phase ForwardIncorporatedManagement Incentive Plan (MIP)Plan DocumentEffective January 1, 2006**

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***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.**     |
| ** **        | ** ** | ** **                                                | ** ** | ** ** |
| **Plan Exhibits** | ** ** | ** **                                                |       |       |   |   |
| ** **        |       |                                                      |       |       |
| **A.**            | ** ** | **Plan Components**                                       | ** ** | **5.**     |
| ** **        | ** ** | ** **                                                | ** ** | ** ** |
| **B.**            | ** ** | **Participant Notification & Acknowledgement  Sheet** | ** ** | **6.**     |
|                   |            |                                                           |            |            |  |  |

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**ManagementIncentive Plan (MIP)Plan Document**

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**I.**                    *Purpose*

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

**II.**                *Effective Date of Plan*

The effective date for implementation of the Planshall be January 1, 2006. A Plan year is equivalent to a calendar year.The Plan may be modified or terminated at any time by the ManagementDevelopment and Compensation Committee or their designee in its or their solediscretion, without notice or consent of the Participants.

**III.**            *Eligibility*

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

**IV.**           *MIPTarget Payout*

Participants will be assigned a target payout for theMIP, expressed as a percentage of total base salary, set forth in Exhibit B.This percentage represents the potential dollar award that could be earned uponachievement of goals for all Plan components. The target payout percentage willvary according to the Participant’s position. Actual Plan payments will varybased 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 ofbase salary, to be used to calculate an amount (i.e. 10 % of $90,000 basesalary equals $9,000).   The Plancomponent and weighting is set forth in Exhibit A.

**VI.**           *TransitionIssues*

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

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

**VII.**       *Administration*

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

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

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

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

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

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**Exhibit APlan Component**

**The Plan Componentis:**

**1.**                 Operating Incomebefore Bonus and Stock Based Expenses

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

This component isearned on a quarterly basis but paid annually, by the end of the March followingthe end of the plan year. For the first and second quarters a minimumachievement or “threshold” of 105% of global performance in each quarter isrequired for payout of the component applicable to that quarter.  Payments are paid according the followingschedule:

| Achievement%   | ** ** | **Payout%**                             |
|--------------------------|------------|-----------------------------------------|
| <105%                 |       | 0%                                      |
| 3105%               |       | 20% + 4% for each additional % achieved |

 

For the third andfourth quarters, a minimum achievement or “threshold” of 80% of globalperformance in each quarter is required for payout for the component applicableto that quarter. Payments are paid according to the following schedule:

| Achievement% | ** ** | **Payout%**                                |
|--------------|------------|--------------------------------------------|
| <80%      |       | 0%                                         |
| 80% - 99.9%  |       | 50% + 2.5% for each  additional % achieved |
| 3100    |       | 100% + 2% for each additional % achieved   |

 

**For Illustration Purposes**:(Quarters are not weighted equally)

Q-1 Achievement of 110% would result in a payoutof 40% of target

Q-2 Achievement of 125% would result in a payoutof 100% of target

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

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

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**Exhibit BParticipant Notification SheetCertificate of Acknowledgement**

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**2006Management Incentive Plan**
| **Name of  Participant:**             | ** ** | **John Smith** |
|---------------------------------------|------------|----------------|
| ** **                            | ** ** | ** **     |
| **Base  Salary as of 4-1-06**         | ** ** | **$170,000**   |
| ** **                            | ** ** | ** **     |
| **Target  Participation Percentage:** | ** ** | **35%**        |
| ** **                            | ** ** | ** **     |
| **MIP  Target Payout Annualized:**    | ** ** | **$59,500**    |

 

***The information above is forillustration purposes only and actual payments will be made in accordance withthe plan and will varybased on actual achievement of targets.***

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**Plan Componentsand Weighting:**

**100% OperatingIncome Before Bonus and Stock Based Expenses (earned quarterly as follows):**

| **Q-1** | ** ** | **10%** |
|---------|------------|---------|
| **Q-2** | ** ** | **15%** |
| **Q-3** | ** ** | **30%** |
| **Q-4** | ** ** | **45%** |

 

***Theinformation above is for illustration purposes only and actual payments will bemade in accordance with the plan and will vary based on actualachievement of targets.***

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I,_______________________, hereby certify that I have read the Phase ForwardIncorporated Management Incentive Plan. I understand and agree to the terms ofthe plan.
|           |   |   |
|-----------|--------|--------|
| Signature |   | Date   |

 

 

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