An EBITDA bonus clause outlines additional compensation for employees based on the company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) performance. It serves to incentivize employees to enhance the company's profitability and operational efficiency, directly tying their bonus to financial success.
(b) Employee shall, effective as of January 1, 2020, be granted cash performance bonus opportunities pursuant to Employer’s Amended and Restated 2001 Long-Term Incentive Plan (the “Amended and Restated LTIP”), based on the attainment of performance targets related to specified levels of EBITDA (the “EBITDA Bonus”), with respect to each year of Employee’s employment under this Agreement, commencing with 2020 through the final year of the Employment Term. The terms and conditions of the EBITDA Bonuses are set forth in the Cash Performance Bonus Award Agreement attached hereto as Exhibit A (the “EBITDA Bonus Agreement”). Employer hereby represents and warrants that the Compensation Committee of the Board has approved the Cash Performance Bonus Award Agreement, including the terms and conditions of the EBITDA Bonuses set forth therein.
(b)Performance Bonus (50% at Target). Beginning with the fiscal year ending January 3, 2020, Executive will be eligible to receive a bonus (the “Performance Bonus”) based on three levels: minimum, target and maximum. The bonus for Executive at each level will be comprised of an objective component based on the achievement of (i) Company EBITDA targets (the “Company EBITDA Bonus”) and (ii) the EBITDA targets of the Group (the “Group EBITDA Bonus”), and (iii) a discretionary component based on the achievement of individual performance objectives (the “Individual Performance Rating Criteria”) established by the Chief Executive Officer (the “Rating Bonus”). The term “Executive’s Base Salary” means Executive’s actual Base Salary, exclusive of any other compensation received by Executive regardless of form, in effect as of the date the Performance Bonus is calculated. The term “EBITDA” means the earnings before interest, taxes, depreciation and amortization of the Company on a consolidated basis, calculated in accordance with generally accepted accounting principles utilized in determining the Target EBITDA (as defined below) and applied on a consistent basis (or in the case of determining the Group’s EBITDA, the portion of EBITDA attributable to the Group and calculated in accordance with the generally accepted accounting principles used in determining Group Target EBITDA (as defined below) and applied on a consistent basis). Furthermore, non-operating income, currency translation impact, gains and losses attributable to the disposal of Company and/or its Subsidiaries’ assets, and stock compensation expenses shall be excluded from the calculation of EBITDA in accordance with generally accepted accounting principles. Additionally, from time to time the Compensation Committee, in its sole discretion, may elect to exclude other non-recurring expenses from the calculation of EBITDA. All determinations of EBITDA shall be derived from the Company’s annual audited financial statements and determined by the Compensation Committee, whose determination shall be conclusive and final. Each Performance Bonus under this Section 3(b) shall be paid in cash, in a lump sum, within the same calendar year in which the Company receives its audited financials for such fiscal year.
EBITDA Bonus Accelerator: If total EBITDA achieved exceeds the Target EBITDA for the year after 100% funding of the STIP Pool discussed above, the Company will fund an additional 25% into the bonus pool (up to a maximum of 125% of the participants’ target STIP) to be allocated
(c)The Executive will be eligible for an annual cash bonus of up to $400,000, earned as of the end of each fiscal year, commencing with the fiscal year ending December 31, 2024, contingent on achievement of pre-established performance goals, as determined by the Board or the Compensation Committee of the Board, and Executive’s continued employment with the Company through the last day of the fiscal year (“EBITDA Bonus”). For the fiscal year 2024, the Executive is guaranteed a minimum EBITDA Bonus of $200,000. For all subsequent fiscal years, the Executive does not have a guaranteed minimum EBITDA Bonus. The EBITDA Bonus for any fiscal year will be paid no later than March 15 of the following fiscal year.
Under the Bonus Plan, the Company will pay cash bonuses to manager-level and above employees as well as the Company’s named executive officers if the Company (i) achieves at least 90% of a specified earnings before depreciation and amortization target (the “EBITDA Target”) for the applicable fiscal year (the “EBITDA Bonus”), or (ii) entered into binding agreement for, or consummated, acquisitions of dispensaries, cultivation facilities or other cannabis-related assets, directly or indirectly, during 2021 (the “M&A Bonus”). The EBITDA Bonus payments will range from 10% to 200% of the applicable officer’s salary depending on the percentage of the EBITDA Target the Company achieves, as follows:
(ii) Subject to Section 3(b)(ii)(6) below, beginning with the fiscal year ending December 31, 2019 (or if the Company’s fiscal year is changed, with the first full fiscal year of the Company beginning after the date hereof), Executive will be eligible to receive a bonus (the “Performance Bonus”) based on three levels: Entry, Target and Distinguished. The bonus for Executive will be comprised of an objective component, equal to 90% of the Performance Bonus (as calculated at target), based on the achievement of EBITDA targets (the “EBITDA Bonus”) and a discretionary component, equal to 10% of the Performance Bonus (as calculated at target), based on the achievement of individual performance objectives (the “Individual MBO Criteria”) established by the Compensation Committee (the “MBO Bonus”). The term “EBITDA” means the earnings before interest, taxes, depreciation and amortization of the Company, calculated in accordance with generally accepted accounting principles applied on a consistent basis. All determinations of EBITDA shall be derived from the Company’s annual audited financial statements and determined by the Compensation Committee, whose determination shall be conclusive and final. Any Performance Bonus earned for a fiscal year shall be paid in the calendar year following such fiscal year as soon as reasonably practicable following the issuance of the Company’s annual audited financial statements, but in all events by no later than December 31 of the calendar year following such fiscal year.
4.3Provided that the Executive remains continuously employed in active service by the Company through the EBITDA Bonus Date (as defined below) Executive shall be entitled a cash bonus of three million dollars ($3,000,000). The EBITDA Bonus Date shall be the date prior to December 31, 2024 that the Board and/or Compensation Committee determine that the Company's EBITDA for the immediately preceding consecutive twelve (12) month period exceeds four hundred million dollars ($400,000,000) (the "EBITDA Bonus"). If payable, the EBITDA Bonus shall be payable as soon as reasonably practicable following, and in no event later than two and one-half (2-1/2) months following the end of the fiscal quarter in which the EBITDA Bonus is achieved. The EBITDA Bonus target set forth herein may be equitably adjusted by the Board and/or Compensation Committee in their sole discretion in the event of any material acquisition or divestiture by the Company prior to December 31, 2024.
The Employment Agreement also provides that if the Company terminates the employment of Mr. Zabkowicz without cause, or if Mr. Zabkowicz resigns for good reason, then Mr. Zabkowicz will be entitled to receive, in addition to compensation accrued and not yet paid: (i) a pro-rated EBITDA Bonus and Net Revenue Bonus, to the extent earned as of such termination date (with no proration if such termination or resignation occurs in fiscal year 2024); (ii) full vesting of outstanding RSUs and deemed grant and vesting of RSUs issuable pursuant to the Employment Agreement; (iii) eighteen months of severance, payable in equal monthly installments, in an aggregate amount equal to 1.5x Base Salary; and (iv) reimbursement for COBRA premiums through the eighteen month anniversary of termination. Each of the foregoing payments would be conditioned upon Mr. Zabkowicz’s execution, non-revocation and delivery of a general release of the Company and its affiliates.
In addition, in the context of long-term incentive compensation, Mr. Field is eligible to receive a one time “EBITDA Bonus” of $3,000,000. The EBITDA Bonus is only payable if, prior to December 31, 2024, the Company’s EBITDA for the immediately preceding consecutive twelve month period exceeds $400,000,000 (as determined by the Board and/or Compensation Committee).
Up to $666,667 of the Target Bonus (the “EBITDA Bonus”) shall become earned and payable in the event that the Company achieves 70% or more of the Company’s EBITDA target for 2021 as set forth in the budget approved by the Board on December 4, 2020 with respect to calendar year 2021 (the “EBITDA Target”), as described below.
EBITDA Bonus. Each executive had a bonus target amount (expressed as a percentage of base salary) based on the Company’s achievement of “Adjusted EBITDA” targets for continuing operations in 2019. Adjusted EBITDA is a non-GAAP measure under which EBITDA is adjusted to exclude stock-based compensation and certain nonrecurring charges not directly related to the ongoing operations of the Company. The Compensation Committee determines Adjusted EBITDA for purposes of the EBITDA Bonus, taking into account recommendations from the Company’s Chief Financial Officer. Executives receive 50% of their EBITDA bonus target for achievement of a minimum Adjusted EBITDA, 100% of the EBIDTA bonus target amount for achievement of the target Adjusted EBITDA amount, and 150% of the EBITDA bonus for achievement of a maximum Adjusted EBIDTA amount. If Adjusted EBITDA is between these levels, the resulting EBITDA Bonus percentage is calculated based on linear interpolation. EBITDA Bonus calculations were performed quarterly in 2019.
Adjusted EBITDA Bonus (50% of Total Bonus Target) Generally consistent with 2014 through 2018, the predominant performance metric for short-term cash incentive awards for 2019 was Adjusted EBITDA, which was used as a metric for both earning and funding short-term cash incentive awards. “Adjusted EBITDA” was defined as earnings before interest, taxes, depreciation, and amortization excluding certain pre-defined costs, losses, and expenses, including but not limited to impairment and restructuring charges as approved by the Board, LTI compensation, and transaction and integration costs. The Committee believes that Adjusted EBITDA provides a specific measure of operating and financial performance and aligns our executives with our short-term business goals for EBITDA growth. The Adjusted EBITDA Bonus comprised 50% of each NEO’s total bonus target for 2019. Each NEO’s Adjusted EBITDA Bonus was based on the achievement of Adjusted EBITDA by such NEO’s legacy segment (i.e., the Healthcare segment for legacy Tivity Health employees and the Nutrition segment for legacy Nutrisystem employees). This transitional approach was adopted based on the timing of the Nutrisystem acquisition and to allow the Company time to develop appropriate consolidated adjusted EBITDA goals in future years. As such, the Adjusted EBITDA Bonus for Messrs. Tramuto, Holland, and Janicak and Ms. Flipse was based on Adjusted EBITDA performance for the Healthcare segment, while the Adjusted EBITDA Bonus for Mss. Krausz and Zier was based on Adjusted EBITDA performance for the Nutrition segment.
Under the Executive Bonus Plan, EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, impairment charges and stock compensation expense. The Executive Bonus Plan also provides that EBITDA will be adjusted to exclude extraordinary, unusual or non-recurring gains and losses not deemed to be in the ordinary course of business, at the Compensation Committee's reasonable discretion. The Executive Bonus Plan requires that a minimum of 80% of budgeted EBITDA must be attained before the payment of any goals and objectives bonus and 85% of budgeted EBITDA must be attained before any payment of EBITDA bonus. The Executive Bonus Plan also specifies that the portion of the bonus tied to EBITDA will be capped at 200% of the target level after the attainment of 120% of budgeted EBITDA (the "EBITDA bonus"). The EBITDA bonus is earned on a pro-rata basis at an established rate for each participant for each 1% increase in attainment of budgeted EBITDA above 85% to a maximum of 120%. For the portion of the bonus tied to goals and objectives (the "goals and objectives bonus"), a minimum of 70% achievement of such goals and objectives is also required for the participant to be eligible for this portion of the bonus. Payments of the goals and objectives bonus are determined based on the discretion of the Compensation Committee, with input from the CEO, based on evaluating achievement of each participant's goals and objectives. The determination of whether goals and objectives were met by each Named Executive Officer other than Mr. LaLonde is not a formulaic, objective or quantifiable standard; rather, the individual performance considerations were just factors (among others) that were generally taken into account in the course of making subjective judgments in connection with the compensation decision. The total EBITDA bonus amount is paid 50% in cash and 50% in restricted stock units vesting annually over three years with accelerated vesting for any event of termination other than for cause.
Under the Executive Bonus Plan, EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, impairment charges and stock compensation expense. The Executive Bonus Plan also provides that EBITDA will be adjusted to exclude extraordinary, unusual or non-recurring gains and losses not deemed to be in the ordinary course of business, at the Compensation Committee's reasonable discretion. The Executive Bonus Plan requires that a minimum of 80% of budgeted EBITDA must be attained before the payment of any goals and objectives bonus and 85% of budgeted EBITDA must be attained before any payment of EBITDA bonus. The Executive Bonus Plan also specifies that the portion of the bonus tied to EBITDA will be capped at 200% of the target level after the attainment of 120% of budgeted EBITDA (the "EBITDA bonus"). The EBITDA bonus is earned on a pro-rata basis at an established rate for each participant for each 1% increase in attainment of budgeted EBITDA above 85% to a maximum of 120%. For the portion of the bonus tied to goals and objectives (the "goals and objectives bonus"), a minimum of 70% achievement of such goals and objectives is also required for the participant to be eligible for this portion of the bonus. Payments of the goals and objectives bonus are determined based on the discretion of the Compensation Committee, with input from the CEO, based on evaluating achievement of each participant's goals and objectives. The determination of whether goals and objectives were met by each Named Executive Officer is not a formulaic, objective or quantifiable standard; rather, the individual performance considerations were just factors (among others) that were generally taken into account in the course of making subjective judgments in connection with the compensation decision. The total EBITDA bonus amount is paid 50% in cash and 50% in restricted stock units vesting annually over three years with accelerated vesting for any event of termination other than for cause.
3. Discretionary + Budget EBITDA Bonus Pool Starting in fiscal year 2022, your position qualifies you for the year-end bonus EBITDA Pool to be defined annually by the CEO and the Board of Directors. The board can award this in the form of cash or equity. For example the EBITDA budget for 2021 was $8.1mm. There will be a board discretionary distribution to those who participate in this pool of 20% of EBITDA over $8.1mm. The Board must present and approve a new plan annually.
An Ebitda Bonus is a performance-based incentive tied to a company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). It is designed to reward employees, typically senior management or executives, for reaching predefined financial performance targets. The bonus often aims to align the interests of the employees with those of the company stakeholders by focusing on operational profitability.
You should consider using an Ebitda Bonus under the following circumstances:
To write an Ebitda Bonus, follow these key steps:
Eligibility: All senior management and executive-level employees.
EBITDA Target: $10 million by the end of the fiscal year.
Measurement Period: January 1st to December 31st.
Bonus Calculation: 1% of EBITDA for the first $10 million, and 2% for EBITDA above $10 million.
Payment Terms: Payable within 30 days after the audited financial results are released.
Conditions: Clawback provision applicable in case of restatements or fraud.
Ebitda Bonuses are typically found in the following types of contracts:
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