Summary of Material Terms of The Pantry, Inc. Annual Incentive Program
Exhibit 10.29
Summary of Material Terms of
The Pantry, Inc. Annual Incentive Program
The Pantry, Inc. Annual Incentive Program (the “Program”) is a compensatory program under The Pantry, Inc. 2007 Omnibus Plan that was established on November 25, 2008 by the Compensation and Organization Committee (the “Committee”) of the Board of Directors (the “Board”) of The Pantry, Inc. (the “Company”). The Program provides for performance-based cash awards to certain of the Company’s employees, including its executive officers. Executive officers are eligible for awards under the Program based on threshold, target, and maximum performance levels set by the Committee, and the actual award amounts, if any, will therefore vary depending on the achievement of certain performance goals by the Company. The Program’s performance cycle is concurrent with the Company’s fiscal year.
The Board approved the following performance measures and their respective weights for the Company’s executive officers because the Board believed these performance measures would be key indicators of the Company’s overall financial and operating results during each fiscal year:
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| • | Adjusted EBITDA (weighted at 65%), which is defined as net income (earnings) before interest expense, income taxes, depreciation and amortization and including the lease payments made under lease finance obligations and adjusted for one-time accounting charges not forecasted as approved by the Committee. |
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| • | Merchandise gross profit divided by operating store general and administrative expenses without operating rent (weighted at 35%). |
Under the Program, each performance measure operates independently of the other measure. That is, an award may be paid when the threshold performance level is achieved for a single measure, without regard to results for the other measure. The Board approved the targets for each performance measure based upon the Company’s approved internal budget estimates.
Under the Program, the target award opportunity for the Company’s chief executive officer will be 75% of his or her annual base salary as initially approved by the Board for the applicable fiscal year and will not include any additional salary increases for such fiscal year; the target award opportunity for each of the Company’s other executive officers will be 50% of his or her annual base salary as initially approved by the Board for the applicable fiscal year and will not include any additional salary increases for such fiscal year.
Actual award payouts for the Company’s executive officers can vary from 50% of target awards for achieving or exceeding the threshold performance level to 200% of target awards for achieving the maximum performance level. For any performance greater than the threshold performance level and less than the maximum performance level but not equal to the target performance level, the appropriate payout percentage will be interpolated on a straight-line basis accordingly. For any performance below the threshold performance level, the appropriate payout percentage is 0%.
The Committee may make award payouts or otherwise increase, reduce, or eliminate payouts
that would otherwise be made under the Program in its sole discretion. Executive officers who join the Company during a fiscal year will have any award amounts for that fiscal year prorated, except that no executive officer hired after the end of the third quarter of a fiscal year will be eligible to receive an award under the Program for that fiscal year. Participants must be employed on the date awards are paid in order to receive a payout, except that participants whose employment is terminated due to death or disability or as otherwise determined by the Committee in its discretion may have their award amounts prorated and paid on the date other awards are paid in the discretion of the Committee.
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