Staples 2003 Annual Report Download - page 14

Administration
The Incentive Plan will be administered by the Compensation Committee of the Board of Directors. The Compensation
Committee will have broad authority for determining target bonuses and selecting performance criteria, as described below; for
adopting rules and regulations relating to the Incentive Plan; and for making decisions and interpretations regarding the provisions
of the Incentive Plan, the satisfaction of performance criteria and the payment of bonuses under the Incentive Plan.
Eligibility
Each of our executive officers, within the meaning of the rules and regulations promulgated by the SEC, will be eligible
to participate in the Incentive Plan. We currently have eight executive officers. Unless specifically determined otherwise
by the Compensation Committee, an executive officer whose employment terminates prior to the end of a Plan Year, other
than as a result of permanent disability, death or retirement, will not be eligible to receive a bonus award under the Incentive
Plan for that Plan Year.
Determination of Bonus Awards
Each executive officer will have a target bonus award (a “Target Award”) for each Plan Year. Target Awards will be
expressed as a percentage of the actual base salary paid to the executive officer during that Plan Year. The percentages will
be determined by the Compensation Committee based upon the executive officer’s job level and responsibilities and may
vary for different officers and/or business units.
Within 120 days after the beginning of each Plan Year, the Compensation Committee will establish specific performance
criteria for the payment of bonus awards for that Plan Year. The performance criteria for each Plan Year will be based on
one or more of the following measures: sales, earnings per share, return on net assets, return on equity, and customer service
levels. The Committee may determine that special one-time or extraordinary gains and/or losses should or should not be
included in the calculation of such measures. In addition, customer service target levels will be based on pre-determined
tests of customer service levels such as scores on blind test (“mystery”) shopping, customer comment card statistics, customer
relations statistics (e.g., number of customer complaints), and delivery response levels. The Compensation Committee
believes that disclosure of further details concerning the performance criteria for each Plan Year may be confidential
commercial or business information, the disclosure of which would have an adverse effect on us.
For each Plan Year, a specified percentage of each bonus award will be based upon each of the performance criteria
selected by the Compensation Committee for that Plan Year for each executive. For fiscal year 2003, the performance criteria
are based on earnings per share, return on net assets and customer service goals. For each of the performance criteria, a
specified percentage of the portion of the bonus award that is based on that particular performance criteria will be paid,
dependent upon actual performance as measured against such performance criteria. Each performance criteria has an
associated threshold level that must be achieved for any of the bonus award associated with that criteria to be paid. No bonus
will be paid under the Incentive Plan if a minimum earnings per share goal is not achieved. Bonuses are paid on a lump
sum basis after the Company publicly reports its financial performance for a particular Plan Year.
The maximum bonus award payable to any executive officer for any Plan Year will be $3 million. In addition, the
Compensation Committee presently intends to limit bonus awards to 200% of an executive’s Target Award. Although the total
amounts to be paid under the Incentive Plan are not determinable at this time, the table below shows the fiscal year 2003 Target
Awards for, and minimum and maximum awards payable under, the Incentive Plan based on current compensation levels.
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