Kroger 2010 Annual Report Download - page 58

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56
Upon the exercise of performance units, a grantee will be entitled to receive the payment of such
units in accordance with the terms of the award in common shares, cash, or a combination thereof, as the
Committee may determine. The values generally will depend upon the extent to which the performance
goals for the specified period have been satisfied, as determined by the Committee. Performance goals may
be particular to a grantee or the department, branch, subsidiary or other unit in which the grantee works,
or may be based on the performance of Kroger generally and may cover such periods as may be specified
by the Committee. For purposes of the Plan, “Performance Goals” means performance goals established
by the Committee which may be based on (i) earnings or earnings per share of Kroger, a unit of Kroger,
or designated projects; (ii) total sales, identical sales, or comparable sales of Kroger, a unit of Kroger, or
designated projects; (iii) cash flow; (iv) cash flow from operations; (v) operating profit or income; (vi) net
income; (vii) operating margin; (viii) net income margin; (ix) return on net assets; (x) economic value
added; (xi) return on total assets; (xii) return on common equity; (xiii) return on total capital; (xiv) total
shareholder return; (xv) revenue; (xvi) revenue growth; (xvii) earnings before interest, taxes, depreciation
and amortization (“EBITDA”); (xviii) EBITDA growth; (xix) funds from operations per share and per share
growth; (xx) cash available for distribution; (xxi) cash available for distribution per share and per share
growth; (xxii) share price performance on an absolute basis and relative to an index of earnings per share or
improvements in Kroger’s attainment of expense levels; (xxiii) reduction in operating costs as a percentage
of sales; (xxiv) performance in key categories; (xxv) implementing or completion of strategic initiatives or
critical projects; and (xxvi) key category performance as measured by the results of surveys of customers
or associates, or any other objective goals established by the Committee, and may be absolute in their terms
or measured against or in relationship to other companies similarly or otherwise situated. Performance
units may be exercised only upon the achievement of minimum Performance Goals during the period as
determined by the Committee. The Committee will determine the period during which performance units
are exercisable and specifically set forth such period in any agreement granting performance units to a
participant in the Plan, provided, however, that a performance unit generally may not be exercised until
the expiration of at least six months from the date of grant. Performance units will expire no later than
ten years from the date of grant (or in the case of a related performance unit, the expiration of the related
option). Any performance units paid in the form of cash are deemed to be paid in common shares, with the
number of shares being deemed paid equal to the amount of cash paid to the employee divided by the fair
market value of a common share on the date of payment.
Restricted Stock. The Committee may award restricted stock to participants. The stock will be
subject to forfeiture, restrictions on transferability, and other restrictions as specified in the agreement.
The Committee has authority to impose other terms and conditions as it may determine in its discretion
including making the vesting of awards contingent on the achievement of Performance Goals. During the
period that a restricted stock award is subject to restrictions, an employee has the right to vote the shares
and receive dividends.
Incentive Shares. The Committee may grant incentive shares to participants. Incentive share
awards will consist of common shares issued or to be issued at such times, subject to achievement of
such Performance Goals or other goals and on such other terms and conditions as the Committee deems
appropriate and specifies in an agreement relating thereto.
Cash Bonuses. Two types of bonuses can be awarded under the Cash Bonus Program; an annual
bonus award for each fiscal year, and a long-term bonus award for measurement periods in excess of one
year. Bonus payments are based on Kroger’s performance measured against Performance Goals established
by the Committee. The Committee establishes a bonus “potential” for each bonus payable under the Cash
Bonus Program for each participant, based on the participant’s level within Kroger, and actual payouts
can exceed that amount when Kroger’s performance exceeds the pre-established thresholds. Initially the