PAETEC Holding Corp.
Annual Performance Bonus Plan
The Annual Performance Bonus Plan (the Bonus Plan) is designed to drive the achievement of corporate goals that enhance business performance
and increase shareholder value through financial incentives. By aligning every employees bonus opportunity to the corporate goals and strategy, we encourage teamwork, cooperation and positive results for PAETEC Holding Corp.
(PAETEC) and the interests of our shareholders.
Participants in the Bonus Plan are all full-time and part-time non-commissioned employees of PAETEC or any of its subsidiaries (collectively the
Company) that are not participating in any sales incentive or technical sales support incentive or commission plans. Temporary or contract employees are not eligible to participate in the Bonus Plan.
The Plan Year is each
one year period coincident with a fiscal year of PAETEC.
Corporate Performance Measures
Each Plan Year, the Compensation Committee (the Committee) of the Board of Directors (the Board) of PAETEC will set the Corporate
Performance Measures and the relative weight to be assigned to each such Corporate Performance Measure for purposes of funding the Bonus Pool. The Corporate Performance Measures will be selected from the list of Section 162(m) qualifying
performance measures as set forth in the PAETEC Holding 2007 Omnibus Incentive Plan (as amended from time to time, the Omnibus Plan).
Company Objectives are performance targets set for each of the
Corporate Performance Measures for the applicable Plan Year. They will be established by the Committee early in the Plan Year for purposes of funding the Bonus Pool. Company Objectives will be set with a target goal, a
stretch goal, and a threshold goal. Achievement of the target goal should reflect performance which is in line with expected performance. Stretch goals should assume performance well in excess of that
required to achieve the target goal, while threshold goals should define a minimum level of performance with respect to the applicable Corporate Performance Measure for the Plan Year.
If any event occurs during a Plan Year which requires changes to preserve the incentive features of the
Bonus Plan, the Committee may make appropriate upward or downward adjustments in the specified performance levels provided, however, that for the CEO, such adjustments shall be made in accordance with the provisions of the Omnibus Plan and only to
the extent permissible to maintain compliance with the requirements of Section 162(m).
The Bonus Pool will be calculated and funded based on performance against the Company Objectives as determined and approved by the Committee in its sole
discretion. The Company must meet the minimum level of any one of the measures in order for the Bonus Pool to fund. A determination of performance against Company Objectives may be modified by the Committee in its sole discretion based on the
Committees overall assessment of the manner in which such performance was achieved provided, however, that for the CEO, only in accordance with the provisions of the Omnibus Plan and only to the extent permissible to maintain compliance with
the requirements of Section 162(m).
Individual Bonus Awards
Individual bonus award targets are a percentage of Eligible Earnings (as defined below):
||Corporate Vice President
||Senior Vice President
||Executive Vice President
For employees other than the CEO, actual awards are
based on the employees relative contribution, measured through the Companys performance management process, at the managers discretion and as approved by the respective senior officer. The total of all Individual Bonus Plan awards
for any Plan Year will not exceed the total Bonus Pool approved by the Committee for such Plan Year.
Bonus awards will vary by employee
consistent with the Companys pay for performance philosophy. A below target performance review may result in no bonus payment.
Earnings are defined as W-2 base wages net of overtime, the prior years bonus award and any other additives beyond base earnings during the Plan Year. The Companys Human Resources department will have final authority to determine the
calculation of Eligible Earnings used for bonus purposes.
Timing of Payments
Individual bonus awards from the Bonus Plan shall be paid no later than March 15 following the completion of the applicable Plan Year. Awards are
401(k) eligible. All awards are verified through multiple review, audit and approval steps.
New Hires and Promotions
When an employee begins their employment with the Company or one of its subsidiaries during the Plan Year, the employee may be eligible to receive a prorated bonus, provided that employees hired
after November 1 of the Plan Year are not eligible for an Individual Bonus Award for such Plan Year. The eligible bonus amount is based on the accumulated Eligible Earnings during the Plan Year. Employees with a change in bonus tier will have
their bonus prorated based on the portion of Eligible Earnings in each tier.
Termination of Employment
An employee who terminates voluntarily from the Company prior to the bonus payout is not eligible for an Individual Bonus Award. In cases of involuntary
termination due to death, disability, or position elimination, or other similar events as described in the Companys Involuntary Severance Pay Plan before the end of the Plan Year, the employee will not be eligible for such bonus payment. In
cases of involuntary termination due to death, disability, or position elimination, or other similar events as described in the Companys Involuntary Severance Pay Plan after completion of the Plan Year, the employee will be eligible for such
bonus payment. An employee who is terminated involuntarily for any other reason will not be eligible for such bonus payment.
An employee whose status as an active employee is changed as a result of a leave of absence may be eligible for a pro rata
bonus based on actual W-2 base wages net of overtime, prior years bonus and any other additives beyond base earnings during the plan year.
Miscellaneous Administrative Provisions
Participation in the Bonus Plan or the
receipt of an Individual Bonus Award under the Bonus Plan shall not give the recipient any right to continued employment (such employment shall be at will). In addition, the receipt of a bonus with respect to any bonus period shall not
entitle the recipient to any bonus with respect to any subsequent bonus period.
The Committee shall have the right to modify or amend this
Bonus Plan from time to time, (as to the CEO, as limited by the requirements of Section 162(m)), or suspend it or terminate it entirely. The Committee has designated the Senior Vice President Human Resources to control and manage the operation
and administration of the Bonus Plan.
The Company shall have the right to deduct from all payments under this Bonus Plan any Federal or state
taxes required by law to be withheld with respect to such payments.