HOMELAND STORES, INC.
1996 MANAGEMENT INCENTIVE PLAN
1995 MANAGEMENT INCENTIVE PLAN
MANAGEMENT INCENTIVE PLAN
1) Purpose of Plan
Definitions
Administration and Interpretation
Eligible Employees
Amount Available for Annual Performance Bonus
Bonus Elements
Allocation of Annual Performance Bonus
Form and Settlement of Incentive Compensation Award
Limitations
Retail Management Incentive Plan
Amendment, Suspension or Termination of the Plan
Exhibits
1) PURPOSE OF THE PLAN
The purpose of this Plan is to aid in obtaining and retaining qualified
and competent management personnel and to encourage significant
contributions to the success of Homeland Stores, Inc. by providing
additional compensation to those individuals who contribute to the
successful and profitable operation of the affairs of Homeland Stores, Inc.
1) DEFINITIONS
Unless as otherwise defined elsewhere in this Plan, these terms shall have
the following meanings.
1) Annual Performance Incentive Award (Bonus) shall
mean an award of cash which is made pursuant to this
Plan;
2) Board of Directors shall mean the duly elected and
serving Board of Directors of the Company;
3) Committee shall mean the persons appointed to
administer the Plan in accordance with Section III;
4) Company shall mean Homeland Stores, Inc.;
5) EBITDA shall mean the consolidated net income (loss)
as determined by GAAP for any period adjusted to
exclude (without duplication) the following items
that are included in calculating such consolidated
net income:
(i) consolidated interest expense;
(ii) provision for income taxes;
(iii) extraordinary gains or losses;
(iv) depreciation and amortization;
(v) any other non-cash charges;
(vi) reorganization items.
6) Participant shall mean an employee to whom the
Committee makes an award under the Plan;
7) Performance Period shall be any twelve consecutive
month period designated by the Board of Directors.
Unless otherwise so specified, such period shall
commence on December 31, 1995 and expire on December
28, 1996 (fiscal 1996);
8) Plan shall mean this Management Incentive Plan;
9) ADMINISTRATION AND INTERPRETATION
The Plan shall be administered by a Committee which, unless otherwise
determined by the Board of Directors, shall be members of the Compensation
Committee of the Board of Directors who are not participants hereunder.
The membership of the Committee may be reduced, changed, or increased from
time to time at the absolute discretion of the Board of Directors. The
Committee shall have full power and authority to interpret and administer
the Plan and, subject to the provisions herein set forth, to prescribe,
amend and rescind rules and regulations and make all other determinations
necessary or desirable for the Plans administration.
The decision of the Committee relating to any question concerning or
involving the interpretation or administration of the Plan shall be final
and conclusive, and nothing in the Plan shall be deemed to give any officer
or employee his legal representatives or assignees, any right to participate
in the Plan except to such extent, if any, as the Committee may have
determined or approved pursuant to the provisions of the Plan.
1) ELIGIBLE EMPLOYEES
Employees eligible to participate in the Plan shall be management or
executive-level employees and corporate officers. Also included are
other key employees recommended by senior management. Any such employee
or officer may be designated a participant by the Board of Directors and
those eligible to participate for any given performance year shall be as
determined by such Board and set forth in Exhibit c for that performance
year.
1) AMOUNT AVAILABLE FOR ANNUAL PERFORMANCE BONUS
The bonus amounts to be made available to participants will be determined
from time to time by the Board of Directors of the Company, and will be set
forth in the exhibits of the Plan for each performance year. These
amounts will be determined and they will be:
1) Target Bonus Potential - This is an amount expressed
as a percentage of each participants base
compensation determined at the beginning of the
performance year which is payable if the plan EBITDA
goals as set forth in the exhibit are met.
2) Maximum Opportunity Bonus Potential - This is the
maximum amount of bonus which will be payable to a
participant and will be attained only if the EBITDA
plan goals are exceeded, as set forth in the exhibit.
3) Threshold Bonus Potential - This is the minimum
acceptable level of performance for awards to
commence. The Company has to achieve a minimum EBITDA
of $17.1 million before any bonus payout occurs
4) Newly Eligible or New Hires - Bonus paid is prorated,
based on length of time in current position.
Terminations - Not eligible to receive a bonus unless the individual was
employed at the end of the year unless otherwise provided for in any
severance agreement that has been approved by the Board of Directors.
Final determination, as in all cases, will be made by the Committee of
the Board of Directors.
1) BONUS ELEMENTS
The bonus structure shall be built around two separate individual elements
which together will determine the ultimate bonus to be paid. They are as
follows:
1) CORPORATE PERFORMANCE AWARD
(CPA) - This bonus award will be determined based
upon the achievement of specific goals by the
Company. This amount will represent a fixed
percentage of the total award, as defined in the
exhibit and will be different by level within the
organization.
2) INDIVIDUAL PERFORMANCE AWARD
(IPA) - This bonus award will be based upon the
participants performance of duties and achievement
of individual goals and objectives as determined by
the President. This bonus may be awarded or not
awarded or awarded in any percentage as determined
by the President, based upon attainment of goals as
set forth below.
The balance or weighting between each element will be determined by the
Committee each year based upon recommendations made by the President.
(The IPA will only be payable if the CPA is payable).
The threshold for the plan to be activated would be at 90% of Target
EBITDA ($17.1 million) net of bonus. The bonus amount for the various
management category at the different level of EBITDA is described in the
exhibit. At 100% attainment of goals for both corporate (EBITDA at
$19.0 million) and individual, a participant will receive the full
incentive award. To achieve the maximum bonus, the Company must reach
an EBITDA of $22.8 million, net of bonus.
1) ALLOCATION OF ANNUAL PERFORMANCE BONUS
As soon as practical after the end of the Companys fiscal year and after
audit, the Committee will assess the financial performance of the Company
and specifically determine if the incentive Target EBITDA in force for the
fiscal year has been met. The Committee will request of the President his
assessment of individual performance levels of Plan participants and
recommendation for Individual Performance Award levels.
Based upon achievement of performance levels and individual award
recommendations made by the President, the Committee will then determine
the amount of each Annual Performance Bonus for each participant in
accordance with the provisions of the Plan and the specifics in force for
the performance period.
The Committee shall be under no compulsion to award the full amount of the
bonus pool if the corporate awards and individual awards together do not
exhaust the potential bonus pool. Any bonuses available but not awarded,
will cease to be bonuses and will revert to the Company. Amounts awarded
are not to be considered as compensation of any employee for the purpose
of calculating benefits, unless expressly provided for under the provision
of a specific plan.
1) FORM AND SETTLEMENT OF INCENTIVE COMPENSATION AWARDS
Awards shall be paid in cash. The Committee shall have complete and
absolute authority to determine the form and settlement of each individual
bonus.
The settlement of an award to any participant for any year will be handled
in the following manner except for any separate severance agreement
approved by the Board.
Cash - Cash payment will be paid as soon as possible in a lump sum at the
end of the fiscal year following the Committee's decision that is made
pursuant to Section IV.
If a participant dies before the payment of a bonus and without having
forfeited his right to the payment thereof pursuant to Section IX hereof,
such unpaid bonus shall be paid to his estate or legal representative
either as originally provided or otherwise as the Committee may determine
in each individual case.
1) LIMITATIONS
No participant or any other person shall have any interest in any fund or
in any specific asset or assets of the Company by reason of a bonus that
has been made but has not been paid or distributed to him. No
participant shall have the right to assign, pledge or otherwise dispose
of any bonus distributable to him in the future, nor shall such
participant's contingent interests in such unpaid installments be subject
to garnishment, transfer by operation of law or any legal process.
1) RETAIL MANAGEMENT INCENTIVE PLAN ("Retail Plan")
The Retail Plan as more fully described in Exhibit D is applicable for
retail stores management (including district managers) only. There are
special payment terms in the Retail Plan that may be different to Section
VIII above. The special terms are an added incentive for the retail
management personnel.
1) AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Board of Directors of the Company may at any time amend, suspend or
terminate the Plan, in whole or in part, except that no amendment,
suspension or termination shall reduce any benefits payable to a
participant or his estate or legal representative or shall reduce any
benefits awarded to a participant prior to the date of such amendment,
suspension or termination, except as provided for in Section IX.
1996 Incentive Plan
RETAIL OPERATIONS
DISTRICT MANAGERS
ELIGIBILITY
All District Managers are eligible to participate in the plan. The plan
will be paid semi-annually. Each participant in the plan must be actively
employed in the position at the time of payment. No bonus will be paid
unless the company achieves its hurdle rate of 90% of EBITDA plan. No bonus
will be paid unless the District hits a minimum of 90% of its N.O.P. target.
INCENTIVE PLAN PAYMENT
The total maximum bonus for all District Managers will be 50% of their base
pay, with the exception of the Special Incentive paid to District Managers
who exceed their N.O.P. target. There will be no cap on the Special
Incentive.
TRANSFERS AND NEW HIRES
District Managers will receive pro rata portion of bonus from the previous
District and a pro rata portion from the new District based on the length of
time in each assignment during the bonus period.
BONUS ELEMENTS
The bonus plan will be broken down into four parts, excluding the Special
Incentive. Eligible participants will be paid on the following:
1) .7 Percent of all N.O.P. up to 50% of their
eligible amount.
2) Up to 20% of their eligible amount for achievement
of their sales target.
3) An additional 15% of eligible amount for attaining
controllable expense targets:
Wages 6%
Supplies 2%
Checks 3%
Cash 2%
Inventory Turns 2%
1) Up to 15% of their eligible amount based on
achievement of the personal objectives set by the
District Manager and the Vice President of Retail
Operations.
AWARD PAYMENT
The incentive bonus will be paid out semi-annually. Payment
will be made as soon as practical after the close of each
bonus period. Ten Percent of the bonus payment will be held
back from the first semi-annual payment. The entire bonus
will be paid after the close of the fiscal year.
BONUS CALCULATION (After Eligibility of 90% of N.O.P. Target)
1) NOP: After eligibility participants earn .7% of N.O.P. up to 50% of
bonus rate.
90 to 94% of Sales Target .175% of N.O.P.
95 to 99% of Sales Target .35% of N.O.P.
100% of Sales Target .7% of N.O.P.
1) SALES: (Maximum 20% of Bonus Rate) to be paid in the following
manner:
90 to 94% of Sales Target 10%
95 to 99% of Sales Target 15%
100% of Sales Target 20%
1) CONTROLLABLES: (Maximum 15% of Bonus Rate)
Wages 6%
Supplies 2%
Checks 3%
Cash 2%
Inventory Turns 2%
1) Up to 15% of their eligible amount based on achievement of the
personal objectives set by the District Manager and the Vice President of
Retail Operations.
*SPECIAL INCENTIVE N.O.P.
Eligible participants will receive an additional .7% of all N.O.P. over
their N.O.P. target. This special incentive will have no cap on it.
1996 Incentive Plan
RETAIL OPERATIONS
ELIGIBILITY
All Store Managers, Assistant Store Managers, Pharmacy Managers and
Assistant Pharmacy Managers are eligible to participate in the plan. The
plan will be paid semi-annually. Each participant in the plan must be
actively employed in the position at the time of payment. No bonus will be
paid unless the company achieves its hurdle rate of 90% of EBITDA plan. No
store bonus will be paid unless store hits a minimum of 90% of its N.O.P.
target.
INCENTIVE PLAN PAYMENT
The total maximum bonus for all Store Managers will be 30% of their base
pay, with the exception of the Special Incentive paid to Store Managers who
exceed their N.O.P. target. There will be no cap on the Special Incentive.
First Assistant Managers will be paid 10% of the Store Managers bonus and 5%
will be paid to Second Assistants.
TRANSFERS AND NEW HIRES
Store Managers will receive pro rata portion of bonus from the previous store
and a pro rata portion from the new store based on the length of time in each
assignment during the bonus period. Assistant Store Managers bonus will be
based on the store assigned to at the end of the bonus period. New hires or
newly eligible participants will have their bonus based on length in current
position.
BONUS ELEMENTS
The bonus plan will be broken down into three parts, excluding the Special
Incentive. Eligible participants will be paid on the following:
1) One Percent of all N.O.P.
up to 50% of their eligible amount.
2) Up to 30% of their eligible amount for
achievement of their sales target.
3) An additional 20% of eligible amount for
attaining controllable expense target:
Wages 12%
Supplies 2%
Checks 2%
Cash 2%
Inventory Turns 2%
AWARD PAYMENT
The incentive bonus will be paid out semi-annually. Payment will be made as
soon as practical after the close of each bonus period. Ten Percent of the
bonus payment will be held back from the first semi-annual payment. The
entire bonus will be paid after the close of the fiscal year.
BONUS CALCULATION (After Eligibility of 90% of N.O.P.
Target)
1) NOP: After eligibility participants earn 1% of N.O.P.
up to 50% of bonus rate.
90 to 94% of Sales Target .25% of N.O.P.
95 to 99% of Sales Target .5% of N.O.P.
100% of Sales Target 1% of N.O.P.
1) SALES: (Maximum 30% of Bonus Rate) to be paid in the
following manner:
90 to 94% of Sales Target 10%
95 to 99% of Sales Target 20%
100% of Sales Target 30%
1) CONTROLLABLES: (Maximum 20% of Bonus Rate)
Wages 12%
Supplies 2%
Checks 2%
Cash 2%
Inventory Turns 2%
*SPECIAL INCENTIVE N.O.P.
Eligible participants will receive an additional 1% of all N.O.P. over
their N.O.P. target. This special incentive will have no cap on it.
PHARMACY INCENTIVE BONUS
Pharmacy Manager receives .6% of store
pharmacy sales.
Assistant Pharmacy Manager receives .45% of
store pharmacy sales.
This incentive will be paid out on a quarterly basis, one quarter in arrears,
and is independent of corporate EBITDA performance.