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EXHIBIT 10.13
HASTINGS ENTERTAINMENT, INC.
SALARY INCENTIVE PLAN
BACKGROUND AND OBJECTIVES
The overall compensation strategy of Hastings Entertainment, Inc. (Hastings) is
to provide key salaried associates with competitive total direct pay
opportunity. The two cash components of the Hastings compensation program are
base salary and salary incentive opportunity. Periodic base salary adjustments
will be used to reward an associate's sustained job performance over time,
while also recognizing external salary market movement and increases in job
responsibility.
The Salary Incentive Plan (the SIP) for Hastings will provide incentive cash
pay at risk, with potential SIP rewards tied to performance achievement. When
SIP performance goals are met, SIP awards plus base salary will approximate
competitive total cash pay opportunity for all plan participants. The
following document defines SIP eligibility, the size of potential award
opportunities, performance measurement, form and timing of award payments,
administrative guidelines and definitions for ongoing SIP management.
ELIGIBILITY
Award eligibility will be determined by the CEO at the beginning of each
performance/award period. Generally, SIP participants will be the key salaried
associates (other than Officers and Directors), who primarily are responsible
for the annual growth and administration or profitability of the Company. The
number of eligible SIP participants is expected to vary from year to year, as
Hastings expands and as the Company's compensation strategy and programs are
refined. The CEO will determine whether a person
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employed by Hastings less than six months prior to the end of the applicable
performance measurement period will be eligible for an award for that period.
INCENTIVE TARGETS
At the beginning of each performance period, each participant in the SIP will
be assigned an INCENTIVE TARGET EXPRESSED AS A PERCENT OF BASE SALARY. This
incentive target for the initial performance period can increase to 125% of the
targeted amount (or decrease to 50% of the targeted amount) based on
performance achievement. SIP incentive targets and minimum/maximum limits may
be re-defined from time to time, as modifications are made in Hastings'
management compensation strategy. Within 90 days after the end of each
performance period, each participant's base salary rate will be multiplied by
the actual SIP award percentage earned to determine the dollar value of the
award for the prior performance period. For SIP calculations "base salary
rate" shall mean the base salary rate in effect at the end of the performance
period in which the award is earned.
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SIP AWARD POOL
The SIP award pool shall be established at the beginning of each performance
measurement period. The size of the SIP pool will equal 100% of all targeted
SIP awards for all SIP participants.
PERFORMANCE MEASURES
At the beginning of each performance period, the Compensation Team or CEO shall
establish in writing the performance goals that shall determine the size of the
SIP award. For the initial performance period, the primary performance
measures for all SIP participants will be sales and return on equity (ROE), as
defined in the Hastings annual business plan. ROE is defined as the after-tax
rate of return on beginning shareholders' equity. Performance goals for SIP
awards may be equal to or exceed the goals in the Hastings business plan, as
determined by the Company's Compensation Team or CEO. At the end of the
performance period, the Compensation Team or CEO shall certify in writing the
extent to which the performance goals were satisfied.
In addition to the SIP targets, senior management, the Hastings Compensation
Team and CEO jointly will establish minimum acceptable and outstanding SIP
goals as follows:
o MINIMUM ACCEPTABLE - Hastings performance at 50% of the target level,
below which only the minimum incentive will be paid;
o TARGET - Hastings performance at 100% of target, where the SIP
adjustment factor is 1X, with "X" equal to the target incentive pool;
and
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o OUTSTANDING - Hastings performance at or above 150% of target, where
the SIP adjustment factor is 1.25X, with "X" equal to the target
incentive pool.
Semi-annually, the Company will review actual results measured against overall
Hastings goals to establish the size of the SIP pool earned. Simultaneously,
senior management will recommend to the Compensation Team and CEO appropriate
SIP goals for the next performance period.
Exhibit 1 presents a sample performance matrix that would be used to modify the
initial SIP award pool for performance goal achievement.
If, during a performance period, Hastings' Compensation Team or CEO determines
that an accounting reserve needs to be set aside to fund a future financial
contingency for Hastings, the Board shall establish such a reserve and
determine if adjustment(s) in the SIP target(s) for the affected performance
period(s) are warranted. Similarly, the Compensation Team or CEO has the
authority to modify the SIP targets at the end of a performance period to
adjust for extraordinary circumstances, including mergers, acquisitions,
re-capitalization, or any other substantial changes in the Hastings business
plan(s).
The Board of Directors and the Compensation Committee also retain the right and
authority to adjust, amend, or suspend any current payments in the SIP for any
given performance period, if, in the good faith determination of the Board of
Directors or Compensation Committee, the payments of such SIP amounts would
result in a material adverse change to, or a material decline in, the financial
condition or prospects of Hastings.
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CEO DISCRETIONARY ADJUSTMENTS
After the size of each SIP award has been determined based on SIP performance
achievement, the CEO shall have the authority to make limited adjustments in
SIP awards based on individual performance contributions. Such CEO
discretionary adjustments, if any, shall be limited to -30%, and shall be
restricted to downward adjustments only. Exhibit 2 presents a sample SIP award
calculation.
FORM AND TIMING OF AWARDS
SIP award calculations will be finalized within 90 days after the end of each
performance period. SIP awards will be paid in cash in two distributions
annually (initially in April for August through January performance and in
October for February through July performance), unless a participant makes an
election to voluntary defer a portion of his/her award.
o Voluntary deferrals must be submitted to the CEO in writing at the
beginning of the fiscal year to avoid constructive receipt, i.e., tax
liability before the award is actually paid to the associate.
o Cash deferral elections shall be limited to one half or all of the
award and should be limited to a maximum of three payments to avoid
administrative complexity.
ADMINISTRATIVE GUIDELINES AND DEFINITIONS
The SIP shall be administered by the CEO, COO, CFO and the Compensation Team
("the Team"), with final approval for all performance goals and award targets
resting with the Team or CEO. All decisions made by the Team or CEO shall be
final and binding.
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o Employee Termination - A participant must be an employee of the
Company on the day the SIP award is finalized and approved for payment
by the Hastings Compensation Team.
o New Hires - Approved, newly hired participants shall earn SIP awards
on a pro-rata basis, based on their date of employment. The CEO will
determine whether a person employed by Hastings less than six months
prior to the end of the applicable performance measurement period will
be eligible for an award for any relevant period.
o Base Salary - Base salary for SIP award calculations shall be the
ending rate of pay for the performance period in which the award is
earned.
o Support Documentation - The Team shall be responsible for maintaining
all necessary support documentation regarding performance and bonus
calculations under the SIP.
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EXHIBIT 1
HASTINGS ENTERTAINMENT, INC.
SALARY INCENTIVE PLAN
INCENTIVE TARGET ADJUSTMENT VS. PERFORMANCE:
1997 ROE VERSUS PLAN
1997
SALES VS. <60% 60% 70% 80% 90% 100% 110% 120% 1305 140% >150%
PLAN
>150% 100% 105% 110% 115% 120% 125% 125% 125% 125% 125% 125%
140% 95% 100% 105% 110% 115% 120% 120% 120% 120% 120% 125%
130% 90% 95% 100% 105% 110% 115% 115% 115% 115% 120% 125%
120% 85% 90% 95% 100% 105% 110% 110% 110% 115% 120% 125%
110% 80% 85% 90% 95% 100% 105% 105% 110% 115% 120% 125%
100% 75% 80% 85% 90% 95% 100% 105% 110% 115% 120% 125%
90% 70% 75% 80% 85% 90% 95% 100% 105% 110% 115% 120%
80% 65% 70% 75% 80% 85% 90% 95% 100% 105% 110% 115%
70% 60% 65% 70% 75% 80% 85% 90% 95% 100% 105% 110%
60% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% 105%
<60% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%
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EXHIBIT 2
HASTINGS ENTERTAINMENT, INC.
SALARY INCENTIVE PLAN
SAMPLE AWARD CALCULATION
ASSUMPTIONS:
Management current salary is $25,000.
Annual SIP award target is 10% of salary or $2,500. Semi-annual SIP award
target is 5% of salary or $1,250.
Actual sales are 90% of Plan and ROE is 100% of Plan (95% of Targeted SIP
component earned based on matrix).
CEO Discretion: Assume individual performance is satisfactory and CEO deducts
nothing from earned award.
CALCULATIONS FOR: SEMI-ANNUAL ANNUAL AWARD
Current Salary: $25,000 $25,000
Semi-annual Target: x.5 x.10
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$1,250 $2,500
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Performance Adjustment re: Matrix: x.95 x.95
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Semi-annual SIP award earned: $1,188 $2,375
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