HOMELAND STORES, INC.
1997 MANAGEMENT INCENTIVE PLAN
1997 MANAGEMENT INCENTIVE PLAN
MANAGEMENT INCENTIVE PLAN
Page #
I) Purpose of Plan 3
II) Definitions 3
III) Administration and Interpretation 4
IV) Eligible Employees 4
V) Amount Available for Annual Performance Bonus 4
VI) Bonus Elements 5
VII) Allocation of Annual Performance Bonus 6
VIII) Form and Settlement of Incentive Compensation Award 6
IX) Limitations 7
X) Retail Management Incentive Plan 7
XI) Amendment, Suspension or Termination of the Plan 7
XII) Exhibits:
A. 1997 EBITDA Table 8
B. 1997 Bonus Sharing Pool 9
C. Corporate Incentive Potential & Weighting Factors 10
D. Bonus Potential by Individual Corporate Management 11-14
E. Retail Management Incentive Plan 15-17
I) 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 incentive
compensation to those individuals who contribute to the successful and
profitable operation of the affairs of Homeland Stores, Inc.
II) 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 and
(vi) union contract contingency payments
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 29, 1996 and expire on January 3, 1998 (fiscal
1997);
8) "Plan" shall mean this Management Incentive Plan;
III) 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
and Benefits 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 Plan's 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.
IV) 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 D for that performance
year.
V) AMOUNT AVAILABLE FOR ANNUAL PERFORMANCE BONUS
The bonus amounts to be made available to participants at each level of
EBITDA achieved will be determined from time to time by the Board of
Directors of the Company. For this 1997 Plan, the bonus amount for each
EBITDA level is set forth in Exhibit B. These amounts will be determined
and they will be:
1) Target Bonus Potential - This is an amount expressed as
a percentage of each participant's base compensation
determined at the beginning of the performance year which
is payable if the Target EBITDA goals as set forth in
Exhibit A are met.
2) Maximum 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 Exhibit A.
3) Threshold Bonus Potential - This is the minimum acceptable
level of performance for awards to commence. The Company
has to achieve a minimum EBITDA before bonus of $24.3
million before any bonus payments can be made.
4) Newly Eligible or New Hires - Bonus paid is prorated,
based on length of time in current position.
Termination's - Not eligible to receive a bonus unless the individual was
employed at the end of the year or unless otherwise provided for in any
severance agreement. Final determination, as in all cases, will be made
by the Committee of the Board of Directors.
VI) 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 participant's performance of duties
and achievement of individual goals and objectives as
determined by the Chief Executive Officer. 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 bonus CPA and IPA elements for the various management category at
the different level of EBITDA is listed in Exhibit C.
VII) ALLOCATION OF ANNUAL PERFORMANCE BONUS
As soon as practical after the end of the Company's fiscal year and after
audit, the Committee will assess the financial performance of the Company
and specifically determine which incentive EBITDA level for the fiscal year
has been met. The Committee will request of the Chief Executive Officer
assessment of individual performance levels of Plan participants and
recommendation for Individual Performance Award levels.
Based upon achievement of corporate performance level and individual award
recommendations made by the Chief Executive Officer, 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.
VIII) FORM AND SETTLEMENT OF INCENTIVE COMPENSATION AWARDS
Bonus awards shall be paid in cash. Notwithstanding that, the Committee
shall have complete and absolute authority to determine the form and
settlement of each individual bonus.
All bonus awards (except for the retail employees) has to be approved by
the Committee prior to payout.
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.
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.
IX) 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.
X) RETAIL INCENTIVE PLAN
The Retail Plan as more fully described in Exhibit E is applicable for
retail stores management only.
XI) 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.
1997 Retail Incentive Plan
ELIGIBILITY
All Store Managers, Assistant Store Managers, Pharmacy Managers and Assistant
Pharmacy Managers are eligible to participate in the plan. Each participant in
the plan must be actively employed in the position at the time of payment. 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
("Bonus Rate"), with the exception of the Special N.O.P Incentive paid to
Store Managers who exceed their N.O.P. target. There will be no cap on the
Special N.O.P. 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 Bonus
Rate.
2) Up to 30% of their Bonus Rate for achievement of their
sales target.
3) An additional 20% of Bonus Rate 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 in cash on an semi-annual basis.
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.
92.5 to 94% of Sales Target: .25% of N.O.P.
95 to 97.4% of Sales Target: .50% of N.O.P.
97.5 to 99% of Sales Target: .75% of N.O.P.
100% of Sales Target: 1% of N.O.P.
2)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%
3)CONTROLLABLES: (Maximum 20% of Bonus Rate)
Wages 12%
Supplies 2%
Checks 2%
Cash 2%
Inventory Turns 2%
SPECIAL N.O.P. INCENTIVE
Eligible participants will receive the following additional percentages of
N.O.P. over their N.O.P. target:
a) the first $50,000 of actual N.O.P. over the N.O.P. target : 1%
b) the second $50,000 of actual N.O.P. over the N.O.P. target : 2%
c) any additional actual N.O.P. over the N.O.P. target after
a & b : 2.25%
This special incentive will have no cap on it.
PHARMACY INCENTIVE BONUS
Pharmacy managers will receive the following sales incentive bonus based on
their actual sales:
Pharmacy Manager receives 0.75% of store
pharmacy sales.
Assistant Pharmacy Manager receives 0.60% of
store pharmacy sales.
If the pharmacy department achieves or exceeds it sales budget for the year,
then an additional incentive bonus will be paid based on the following:
Pharmacy Manager receives 0.15% of store
pharmacy sales.
Assistant Pharmacy Manager receives 0.15% of
store pharmacy sales.
This incentive will be paid out on a quarterly basis except for the
additional 0.15% which will be paid in the last quarterly payment, one
quarter in arrears, and is independent of corporate EBITDA or Store NOP
performance.
Exhibit B
1997 BONUS SHARING POOL%
$ in (000)
EBITDA EBITDA
"BEFORE" BONUS "AFTER"
BONUS POOL BONUS
24,278 0 24,278
24,528 250 24,278
24,778 500 24,278
25,028 750 24,278
25,278 1,000 24,278
25,528 1,250 24,278
Threshold 25,778 1,500 24,278
26,028 1,563 24,466
26,278 1,625 24,653
26,528 1,688 24,841
26,778 1,750 25,028
27,028 1,813 25,216
27,278 1,875 25,403
27,528 1,938 25,591
27,778 2,000 25,778
28,028 2,063 25,966
Target 28,278 2,125 26,153
28,528 2,188 26,341
28,778 2,250 26,528
29,028 2,313 26,716
29,278 2,375 26,903
29,528 2,438 27,091
29,778 2,500 27,278
30,028 2,563 27,466
30,278 2,625 27,653
30,528 2,688 27,841
30,778 2,750 28,028
31,028 2,813 28,216
31,278 2,875 28,403
31,528 2,938 28,591
31,778 3,000 28,778
32,028 3,063 28,966
32,278 3,125 29,153
32,528 3,188 29,341
32,778 3,250 29,528
33,028 3,313 29,716
Maximum 33,278 3,375 29,903
Exhibit C
Award Weighting Table
Threshold Target Maximum Corporate Individual
EBITDA EBITDA EBITDA Performance Performance
$24.3 M $26.1 M $29.9M (CPA) (IPA)
Senior Officers 50% 100% 200% 75% 25%
Other Officers 25% 50% 100% 75% 25%
Directors 20% 40% 70% 50% 50%
Managers 10% 20% 30% 40% 60%
Supervisors 5% 10% 15% 30% 70%
Others 2.5% 5.0% 7.5% 20% 80%