LA QUINTA CORPORATION 2004 ANNUAL BONUS PROGRAM
Exhibit 10.2
LA QUINTA CORPORATION
2004 ANNUAL BONUS PROGRAM
INTRODUCTION
The Annual Bonus Program provides a clear connection between financial rewards and specific business objectives that are the personal responsibility of each individual who is eligible for the bonus plan. The achievement of these business objectives is a direct measure of the efforts and results of the individual. The attainment of these objectives supports the overall success of La Quinta.
This bonus program provides incentives equally to all selected Corporate Executive Management. The plan includes a component of total compensation that is linked to both the achievement of our business objectives and individual performance.
OBJECTIVES
1. Link actual performance with financial incentives.
2. Provide enhanced rewards for above average financial returns.
3. Provide a financial incentive to achieve the business objectives.
PURPOSE
The purpose of this plan is to provide incentives for the achievement of company results. This document provides information that enables the individual, at the beginning of the year, to have a clear understanding of the financial rewards that can be earned for achieving specific performance objectives and standards.
The principal cornerstones of this program are:
| 1. | Bonus amounts are earned each year. These rewards must be earned through actual performance. |
2. Maximize EBITDA.
3. Increase Revenues.
4. Improve Guest Satisfaction.
5. Increase RevPAR.
6. Control costs.
7. Achieve individual objectives.
PARTICIPATION
Participation in the plan is limited to Corporate Executive Management. Determination of membership in the plan is the sole responsibility of the Board of Directors Compensation Committee.
After the Compensation Committee has approved participation in the plan, each senior executive will receive the necessary materials in order to enable him/her to communicate the plan to participants in their area of responsibility.
ELIGIBILITY
• Executive Committee Members – Job titles such as:
President and CEO, Executive Vice President, Senior Vice President, etc.
• Corporate Vice Presidents – Job titles such as:
Controller, Development Services, Reservation Systems, Revenue Management, Risk Management, Sales, Tax, RVP’s, etc.
• Corporate Directors – Job titles such as:
Cash Management, Construction Services, Assistant Treasurer, Assistant Controller, Relationship Marketing, Training, etc.
• Corporate Managers – Job titles such as:
System Development, Field Marketing, Corporate Tax, General Accounting, Payroll, Hotel General Managers, etc.
Other selected position titles in Salary Grade 18 and above unless participating in another La Quinta Bonus Program.
• Corporate Staff – Job titles such as:
Benefits Specialist, Staff Accountant, Contracts Administrator, Administrative Assistant, Accounting Clerk, etc.
Individuals are eligible for participation in the Annual Bonus Program:
| A. | If the individual has not voluntarily or involuntarily terminated employment prior to the date incentive payments are issued. |
| B. | In cases where an eligible individual has been transferred or promoted by Sept. 30th of the year, the bonus payout will be pro-rated according to the number of rounded whole months in each position. In cases where an eligible individual has been transferred or promoted on or after October 1st of the year, the bonus payout will be based on the location, bonus percentage entitlement, etc. of the old position/location for the entire year (as if the promotion/transfer had not occurred). |
| C. | In cases where an employee manipulates expenses or revenues, the entire bonus for the employee will be at risk of forfeiture as determined by the Compensation Committee. |
ADMINISTRATION
The Board of Directors Compensation Committee is the sole interpreter and arbitrator of these provisions and has the right to amend, withdraw, or revoke them at any time. Recommended bonus payments (including any “stretch” bonus) are not final until approved by the Compensation Committee.
DEFINITIONS
Pay is defined as the regular base pay earned during the year, as accounted for by the Payroll system. It does not include any other bonus, auto allowance, relocation reimbursements, or other similar types of payments received by the individual.
Gate is defined as the minimum level of achievement eligible for a bonus payment.
Target is defined as the planned level of achievement in the annual budget.
Stretch Bonus is defined as bonus payments greater than target. Stretch bonus can be applied to any or all bonus components and can double the overall bonus potential.
Quantitative goals are goals based on numbers set forth in the annual budget or operations plan. Financial goals such as IOC, EBITDA, Revenue or a Guest Satisfaction target are examples of quantitative goals.
Qualitative goals are individual goals determined between the individual and his/her supervisor.
Department budget is the budget for the department for which the bonus eligible person is responsible.
GATE
The Company must achieve a minimum threshold of 95% of Budgeted EBITDA, IOC or Revenue (depending on the individual). This gate must be achieved in order for eligible participants to qualify for the financial portion of their individual bonus potential.
BONUS OPPORTUNITIES
Bonus opportunities are established through a Goal Setting Exercise for each individual’s immediate area of responsibility. The bonus opportunities are divided into Quantitative and Qualitative categories.
The qualitative component of each individual’s bonus is determined by the achievement of Individual Business Objectives. The weighting for achievement of business objectives varies by individual.
The individual and his/her immediate supervisor at the beginning of the year set individual business objectives. These objectives may be revised, eliminated, or amended during the course of the plan year depending on changes in business needs and conditions. Each business objective is given target points that represent the importance of the objective. The total number of target points must be 100. At the end of the year, the supervisor rates performance toward the achievement of the business objectives by assigning achieved points for each objective. If the objective is achieved, the assigned points equal the target points. If the objective is not achieved, the assigned points are a percentage of the target point. This percentage represents the degree to which the objective was completed. The achieved points determine the bonus amount paid.
A portion of a stretch bonus can also be earned by exceeding expectations for planned objectives. An individual who exceeded their objectives or, who achieved unexpected results by overcoming unforeseen or difficult business conditions, can earn an additional bonus payment based on the discretion of the Executive Committee member and with the approval of the President and CEO. The amount of this stretch portion of the bonus is completely discretionary within the range of payment established for that position.
Reasons for granting this additional bonus are demonstrating leadership and management ability by:
| • | Overcoming adverse business conditions and obstacles, or foreseeing issues to avoid problems that would have had an adverse impact on Company results. |
| • | Enhancing La Quinta’s image with customers, employees, shareholders, the local communities where we operate, the general business community, or vendors. |
| • | Managing others to achieve outstanding results and increasing morale. |
| • | Acting individually or as a member of a team to complete special assignments that are critical to the success of the Company. |
Where possible, the above accomplishments are to be supported by measurable results. Recommendations for a stretch bonus are submitted to Executive Committee members. The Executive Committee will review all recommendations with approval by the President and CEO prior to submission to the Compensation Committee for final approval.
