American Home Shield 2008 Annual Report Download - page 140

Table of Contents
Annual Bonus Plan
The Company pays a cash bonus to executive officers if certain performance targets are met. In 2008, the Company paid bonuses pursuant to the Annual
Bonus Plan ("ABP"), which provides cash compensation based on achievement of short-term (annual) financial performance goals.
To encourage greater focus on long-term performance, in connection with Holdings' implementation of the MSIP, we reduced targets under our Annual
Bonus Plan to market median for certain executives, including our Named Executive Officers, and eliminated the Corporate Performance Plan ("CPP"), which
paid bonuses to executives based on annual pre-tax earnings of the Company. To encourage focus on Company, and, where relevant, business unit goals and
financial performance, we removed achievement of individual goals from the factors included in the Annual Bonus Plan so that bonuses are determined by the
financial performance of the Company.
Payments to executive officers under the 2008 Annual Bonus Plan were based on achievement of three financial performance measures: (i) EBITDA,
which represents actual earnings before interest, taxes, depreciation and amortization, adjusted for normalization items; (ii) revenue; and (iii) cash flow, which
represents EBITDA minus capital expenditures plus the change in net working capital. Payout under each performance measure is independent of the results
of the other performance measures. In addition, current plan year profit must exceed prior year profit for any payout under each performance measure. The
performance measures are weighted as follows: (i) EBITDA, 60%; (ii) revenue, 20%; and (iii) cash flow, 20%. For Named Executive Officers holding
positions with ServiceMaster, such as Messrs. Spainhour, Martin and McMullen, the performance criteria is based 100% on overall Company results. For
Named Executive Officers who serve or served as business unit presidents, such as Messrs. Brackett, Isakson and Sutton, the performance criteria is based
25% on overall Company results and 75% on business unit specific results. These performance measures were selected as the most appropriate measures upon
which to base annual bonuses because they are important metrics that management and our owners use to evaluate the performance of the Company.
2008 Annual Bonus Plan targets for each Named Executive Officer were based upon market survey data and the position's relative importance to the
overall financial success of the Company. The tables below describe information regarding the 2008 Annual Bonus Plan, including the performance goals and
the weight attached to each, the thresholds required for minimum payout, and the payout as a percentage of the target bonus if the threshold, target or
maximum performance is met. The performance goals and relative weighting reflect the Board's objective of ensuring that a substantial amount of each
Named Executive Officer's total compensation is tied to Company and, where applicable, business unit performance goals.
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