1
EXHIBIT 10.03(a)
FRANK'S NURSERY & CRAFTS, INC.
EXECUTIVE
COMPENSATION PROGRAM
FISCAL 1997
[FRANK'S NURSERY & CRAFTS LOGO]
2
FRANK'S NURSERY & CRAFTS, INC.
EXECUTIVE COMPENSATION PROGRAM
I. ELIGIBILITY AND PARTICIPATION
Individuals eligible to participate are the following: PLAN ENTRY APPROVAL
GROUP 1: Senior Executive Board of General Host
Executive Vice President Chairman/President
Vice President, Distribution
Vice President, Marketing & Strategic Planning
Vice President, Merchandising-Crafts
Vice President, Merchandising-Lawn & Garden
Vice President, Stores
GROUP 2 Line Executives Chairman/President
Asst. Vice Pres., Hardlines
Asst. Vice Pres., Information Services
Asst. Vice Pres., Operations Administration & Temporary Retail
Asst. Vice Pres., Real Estate
GROUP 3 Staff Executives Chairman/President
Assistant Controllers
Assistant Treasurer
Asst. Vice Pres., Facilities Management
Asst. Vice Pres., Inventory Management
Controller
Corporate Attorney
Director, Advertising
Director, Benefits
Director, Employee Relations
Director, I.S. Applications
Director, Loss Prevention
Director, Planning & Analysis
Director, Real Estate
Director, Taxes
Director, Transportation
Real Estate Attorney
The basis of participation (Group and effective date) for individuals who
are permitted to enter the Program during the year will be determined at
the time of entry by the Chairman.
- Page 1 -
3
IIA. PROGRAM DESIGN - GROUP 1 PARTICIPANTS
The Program is designed to pay a bonus that ranges up to 48% of base
salary. The amount of the bonus award will be based on the achievement of
Frank's Nursery & Crafts Operating Income Objectives and achievement of
Business Objectives.
1) ACHIEVEMENT OF OPERATING INCOME OBJECTIVES
Participants can earn bonuses ranging up to 25% of base salary,
based on the relationship between reported operating income and
the operating income objectives established by the Chairman. See
Appendix A. Operating income objectives will be set for the 3%,
20% and 25% payment levels; (percentage achievement for operating
income levels between the objectives established for the 3% and
20% levels, and the 20% and 25% levels, will be interpolated to
the nearest percent). Reported operating income will, in all
cases, be computed (1) before interest expense, (2) before
provisions for federal and state income taxes, and (3) after
provisions for payment of bonuses to the participants payable
under this or any other incentive program covering employees not
included in this program, and (4) will be adjusted to reflect any
variance for the year between actual and budgeted interest expense
(both inter-Company interest and outside interest expense).
In determining the extent to which an individual has met his
profit objectives, the Chairman will have the discretion to reduce
reported operating profit appropriately, for purposes of the
Program, where reported profits were achieved by actions
significantly at variance with planned profit achievement and which
actions did not receive prior review and approval of the Chairman.
In addition, at the discretion of the Chairman, reported operating
profit for the performance year will be increased or decreased by
an amount equal to 20% of the difference between the assets
employed in the business at the beginning and end of the current
performance year.
2) ACHIEVEMENT OF BUSINESS OBJECTIVES
Up to 10% of base salary will be paid for the achievement of
specific objectives. Operating profit levels will be established
for each participant below which no bonus will be paid for
specific objective achievement.
The specific objectives will be developed between the participant
and his immediate superior, and approved by the Chairman.
Objectives shall not be more than five (preferably four) specific
items; these items will have a weighed value approved by the
Chairman and recorded by the Program Administrator.
Within two weeks following the close of the year, each
participant, in conjunction with the Program Administrator, is to
submit a written summary of his degree of accomplishment of his
specific objectives. This statement together with a recommended
award shall then be submitted to the Chairman.
During the year, revisions to objectives, where warranted, are to
be submitted to the President and approved by the Chairman as
deemed appropriate.
3) ACHIEVEMENT OF CORPORATE TARGET
When the General Host Corporate Target is achieved, any bonus
otherwise earned pursuant to the above Operating Income and
Business Objectives shall be increased by 20%. The Corporate
Target will be computed after provision for bonus payments under
this program.
- Page 2 -
4
At the beginning of each year, the Chief Executive Officer
determines the Corporate Target (expressed as an Earnings Per
Share objective), subject to the approval of the Compensation
Committee of the Board of Directors. The Corporate Target will be
recorded with the Administrator along with the Operating Income
Objectives and Business Objectives of each participant.
IIB. PROGRAM DESIGN - GROUP 2 PARTICIPANTS
The Program is designed to pay a bonus that ranges up to a maximum
of 48% of base salary. The amount of the bonus award will be based
on the achievement of Frank's Nursery & Crafts Operating Income
Objectives and achievement of Business Objectives.
1) ACHIEVEMENT OF OPERATING INCOME
Participants can earn bonuses ranging up to 15% of base salary,
based on the relationship between reported operating income and
the operating income objectives established by the Chairman. Profit
objectives will be set for the 3%, 10% and 15% payment levels;
(percentage achievement for profits between objectives
established for the 3% and 10% levels, and the 10% and 15% levels,
will be interpolated to the nearest percent). Reported profits
will, in all cases, be computed after provisions for payments of
bonuses under this Program and under any other bonus program in
effect for Home Office employees.
For purposes of this paragraph, provisions will be made for payment
of bonuses pursuant to Paragraph IIA (1) and (2), before
determining the extent to which the Corporate Target has been
achieved.
2) ACHIEVEMENT OF BUSINESS OBJECTIVES
Up to a maximum of 25% of base salary will be paid for the
achievement of specific objectives (see Paragraph IIA (2)
regarding establishment of specific objectives). Any bonus payable
under this paragraph is also subject to the following limitations:
(1) if less than 75% of the Corporate Target Result is achieved,
any bonus otherwise earned is reduced by 50%; (2) the Chairman
will establish a profit objective level below which no bonus will
be paid.
3) ACHIEVEMENT OF CORPORATE TARGET
When the General Host Corporate Target is achieved, any bonus
otherwise earned pursuant to the above Operating Income and
Business Objectives shall be increased by 20%. The Corporate
Target Result will be computed after provision for bonus payments
under this program.
At the beginning of each year, the Chief Executive Officer
determines the Corporate Target (expressed as an Earnings Per
Share objective), subject to the approval of the Compensation
Committee of the Board of Directors. The Corporate Target will be
recorded with the Administrator along with the Operating Income
Objectives and Business Objectives of each participant.
- Page 3 -
5
IIC. PROGRAM DESIGN - GROUP 3 PARTICIPANTS
The Program is designed to pay a bonus that ranges up to a maximum of 36%
of base salary. The amount of the bonus award will be based on the
achievement of Frank's Nursery & Crafts Operating Income Objectives and
achievement of Business Objectives.
1) ACHIEVEMENT OF OPERATING INCOME OBJECTIVES
Participants can earn bonuses ranging up to 15% of base salary,
based on the relationship between reported operating income and the
operating income objectives established by the Chairman. Profit
objectives will be set for the 3%, 10% and 15% payment levels;
(percentage achievement for profits between objectives
established for the 3% and 10% levels, and the 10% and 15% levels,
will be interpolated to the nearest percent). Reported profits
will, in all cases, be computed after provisions for payments of
bonuses under this Program and under any other bonus program in
effect for Home Office employees.
For purposes of this paragraph, provisions will be made for payment
of bonuses pursuant to Paragraph IIA (1) and (2), before
determining the extent to which the Corporate Target has been
attained.
2) ACHIEVEMENT OF BUSINESS OBJECTIVES
Up to a maximum of 15% of base salary will be paid for the
achievement of specific objectives (see Paragraph IIA (2)
regarding establishment of specific objectives). Any bonus payable
under this paragraph is also subject to the following limitations:
(1) if less than 75% of the Corporate Target is achieved, any
bonus otherwise earned is reduced by 50%; (2) the Chairman will
establish a profit objective level below which no bonus will be
paid.
3) ACHIEVEMENT OF CORPORATE TARGET
When the General Host Corporate Target is achieved, any bonus
otherwise earned pursuant to the above Operating Income and
Business Objectives shall be increased by 20%. The Corporate
Target Result will be computed after provision for bonus payments
under this program.
At the beginning of each year, the Chief Executive Officer
determines the Corporate Target (expressed as an Earnings Per
Share objective), subject to the approval of the Compensation
Committee of the Board of Directors. The Corporate Target will be
recorded with the Administrator along with the Operating Income
Objectives and Business Objectives of each participant.
- Page 4 -
6
III. GENERAL PROGRAM CONTROLS
1. No awards will be paid with respect to achievement of specific
objectives in a year when dividends (cash or common stock in lieu
of cash) on General Host's Common Stock are not paid. If a
dividend is paid for a portion of the year, any specific objective
achievement bonus otherwise earned will be pro-rated.
2. Any bonus otherwise payable under this Program will be
reduced proportionately to the extent necessary, if any, to prevent
the Corporation from reporting a loss for the fiscal year in
question.
3. Anything herein to the contrary notwithstanding, no bonus
will be paid to any individual whose overall performance during the
year, in the judgement and discretion of his supervisor, and the
Chairman of the Board, was unsatisfactory.
4. In the event that profit targets are not attained, the
President will have the discretion to recommend the payment of a
reasonable and appropriate bonus for performance that was
otherwise outstanding.
IV. ADMINISTRATION
1. Individual awards will be computed on base salary as of
February 1 of the current fiscal year.
2. The Program must be approved by the Compensation Committee
and the Board of Directors. The Chairman's objectives and the
Corporate Target result must also be approved by the Compensation
Committee of the Board of Directors.
3. The President and Vice President, Human Resources will be the
Administrators of the Program. In concert with the Chairman, they
will prepare a report for the Compensation Committee by the end of
February of each year, documenting last year's results and listing
the current year's:
a) Program Participants
b) Operating Income Objectives
c) Specific Business Objectives for Each Participant
d) Corporate Target
e) Bonus Possibilities for Each Participant
4. The Chairman will have full and final discretion to determine
the amount of bonus, if any, to be paid to any participant who
dies, retires or is disabled during the year, or whose
responsibilities are changed during the year, subject to the
approval of the Board of Directors. Participants whose employment
is terminated for any other reason up to and including the date the
awards are distributed (check date) will be ineligible for any
award.
5. In the event there is any dispute as to the amount of any
bonus payable under this Program, the Compensation Committee will
have full and final discretion to resolve the matter as it deems
equitable and appropriate.
6. All bonuses payable under this Program will be payable within
a reasonable time after audited financial statements for the
current fiscal year are available. All bonuses are subject to
applicable payroll taxes.
7. Any bonus payable under this Program may, at the Company's
discretion, be paid in General Host's common stock in lieu of cash,
which stock may be subject to certain restrictions in accordance
with Federal Securities laws. In such event, the Company will
consider the tax effects and either provide low cost tax loans or a
cash payment to cover Participants' additional tax liability.
- Page 5 -
7
FRANK'S NURSERY & CRAFTS, INC.
EXECUTIVE COMPENSATION PROGRAM
Bonus Potential Matrix
Operating Income Objective (Fiscal Year 1997)
- ------------ ---------------- ---------------- ------------------- ---------------- ------------- -------------
MAXIMUM BONUS MAXIMUM BONUS
PARTICIPANTS OPERATING INCOME ACHIEVEMENT OF ACHIEVEMENT OF ACHIEVEMENT OF CORP TARGET CORP TARGET
OBJECTIVE OPERATING INCOME BUSINESS OBJECTIVES CORPORATE TARGET NOT ACHIEVED ACHIEVED
- ------------ ---------------- ---------------- ------------------- ---------------- ------------- -------------
Group 1 $28 mm (Minimum) 3% 10% --- 13% 13%
$30 mm (Target) 20% 10% 6% 30% 36%
$36 mm (Maximum) 25% 15% 8% 40% 48%
Group 2 $28 mm (Minimum) 3% 10% --- 13% 13%
$30 mm (Target) 10% 20% 6% 30% 36%
$36 mm (Maximum) 15% 25% 8% 40% 48%
Group 3 $28 mm (Minimum) 3% 7% --- 10% 10%
$30 mm (Target) 10% 10% 4% 20% 24%
$36 mm (Maximum) 15% 15% 6% 30% 36%
Notes: Bonus awards will not be granted if FNC operating income is less than
$28 mm.
Corporate Target established at $0.23 Earnings Per Share.