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52
Performance Units.฀Performance฀units฀may฀be฀granted฀in฀connection฀with฀the฀grant฀of฀a฀nonstatutory฀
stock฀ option฀ under฀ the฀ Plan฀ (“related฀ performance฀ unit”).฀ In฀ the฀ Committee’s฀ sole฀ discretion,฀ a฀ related฀
performance฀unit฀may฀apply฀to฀all฀or฀a฀portion฀of฀the฀common฀shares฀subject฀to฀the฀related฀option.฀Performance฀
units฀may฀also฀be฀granted฀independently฀of฀any฀option฀granted฀under฀the฀Plan.฀In฀connection฀with฀the฀grant฀of฀
performance฀units,฀the฀Committee฀will฀establish฀Performance฀Goals฀(as฀defined฀below)฀for฀a฀specified฀period.
Upon฀the฀exercise฀of฀performance฀units,฀or฀automatically฀upon฀satisfaction฀of฀the฀performance฀goals฀
as฀set฀forth฀in฀an฀agreement฀for฀the฀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฀or฀invested฀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,฀or฀without฀condition,฀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฀Performance฀Goals฀
for฀annual฀bonuses฀will฀include฀the฀following฀components:฀(i)฀EBITDA;฀(ii)฀identical฀sales;฀(iii)฀achievement฀