4th Quarter. 3rd Quarter. 2nd Quarter. 1st Quarter

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1 2016 BONUS PERFORMANCE PROGRAM Welcome to Performance Bonus 2016 The Performance Bonus Program is designed to reward Dealers for exceptional performance in Parts AND Service. The spirit of the Volvo Group s investment is to reward Dealers who perform well across the Dealership in order to support the various initiatives and the Mack and Volvo brands, and grow parts purchase volume. In other words, our investment is to ensure not only that the parts business grows but also that our Dealer network improves across a multitude of disciplines. In our observation, Principals and General Managers who keep Performance Bonus and DOS at the center of their operations do best at DOS scoring, Performance Bonus payout and brand support. This program is more than a parts volume bonus program: it is a Performance Bonus program that requires a holistic approach at the Dealership. 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter PARTS PERFORMANCE PROGRAM SERVICE PERFORMANCE PROGRAM PROGRAM PAYOUT PARTICIPATION ACKNOWLEDGEMENT

2 2016 BONUS PERFORMANCE PROGRAM SUMMARY OF QUALIFICATIONS FOR PERFORMANCE BONUS Baseline Qualifications You must do these to be in the program: Administration: Submit Financial statements. Parts: Logistic Partnership Agreement (LPA), submitted Parts Business Plan. Service: Participate in ASIST and CSI at all Full Line locations. PROGRAM PAYOUT Frequency: Quarterly or annually, depending upon component. Parts Purchase Growth Parts purchase growth is the foundation of the program. Parts Growth requires growth as expressed below over the management group s 8Q average total parts purchases: Level 1 Level 2 Level 3 Level % payout: 11.5% growth over 8Q Average (approx. 5.0% year over year growth) 1.7% payout: 15.0% growth over 8Q Average (approx. 8.3% year over year growth) 2.4% payout: 18.5% growth over 8Q Average (approx. 11.5% year over year growth) 3.0% payout: 21.5% growth over 8Q Average (approx. 14.4% year over year growth) This gives the Parts Growth potential payout; then this amount is multiplied by the Aftermarket DOS score to determine actual quarterly payout. Full Year Consistency Bonus Pays out an additional 10% of monies paid at year end for consistent quarterly performance. If the Management Group has achieved at least Level 1 Parts Growth and DOS Score of 70 or better all four quarters of the year, year-end bonus of 10% of monies paid under this program are awarded. AFTERMARKET DOS A 100% point scale multiplier applied to the Parts growth potential payout to calculate the actual quarterly payout. Items explained on next page. Minimum score of 70 required for any payout. Example: Management Group achieves Level 3 parts growth, and has an Aftermarket DOS score of 90 for the quarter. Payout is: 2.4% parts purchase growth* 90% DOS score = 2.16% of total parts purchases in the quarter. 2

3 Aftermarket DOS Scoring Aftermarket DOS scores key items in the Aftermarket Parts and Service area for the management group. The parts growth potential payout is multiplied by the DOS Score to determine the actual payout. The Dealer is in complete control of most of these items as they are internal operations based. Aftermarket DOS Items and Weights: Service items, 5 available: ASIST Usage Ratio at Full Line locations Hours of Service for A, B, and C markets Service personnel Training (VISTATECH, VISTA Advisor) Customer Satisfaction index survey counts for market size TOTAL Parts items, 55 Points Available: Commitment Program Performance Emergency Order Ratio MAPP data feeds and SELECT sales growth Merchandising/Parts Branded Displays (includes RoadChoice) TOTAL Aftermarket DOS Points points 1 5 Program offers 110 total points, but caps at 100 point maximum score. This is to allow for good performance in one area to make up for mediocre performance in another and still get to the 100. ASIST: 2 Percentage of Full Line locations that have ASIST usage ratio of 60% or higher. Scoring: Numerator: The Management Group s Full Line locations with ASIST usage 60% or higher. Denominator: Total Full Line locations in the Management Group. Multiply this ratio by 25 to get DOS points. Example: Management Group has 5 service locations with the following ASIST ratios: Location 1 75% Pass Location 2 80% Pass Location 3 45% Fail Location 4 63% Pass Location 5 90% Pass Score: 4 locations pass/5 locations total = 80%, * 25 = 20 points awarded. If instead location 3 had at least 60% usage, score would be = (5/5 * 25) = 2. Hours of Service and Afterhours: All Contracted Full Line locations within a management group must meet hours of service requirement based on market size, and must utilize VAS to manage all afterhours services (Parts and Service) on behalf of the dealer. Dealer will be responsible for maintaining afterhours profile and providing afterhours support within 2 hours after requested by VAS. Hours of service are defined below: Market A Market B Market C Required to maintain standard of 16 open hours on weekdays and 8 hours on Saturday Required to maintain standard of 12 open hours on weekdays and 8 hours on Saturday Required to maintain standard of 12 open hours on weekdays Scoring: Numerator: The Management Group s Full Line locations that meet hours of service Denominator: Total Full Line locations in the Management Group. Multiply this ratio by 10 to get DOS points. 3

4 Service Personnel Training: A minimum of 30% of technicians enrolled in Dealer Manager must maintain Master level for each Full Line location. In addition, at least one advisor enrolled in Dealer Manager from each location must achieve the following certification level based on dealer type: Full-Line Expert Advisor for Q1-Q3 and completion of Master Advisor by end of Q4* Sub-Dealer Full Line Completion of Skilled Advisor by end of Q4* Grace period for new hires: Newly hired technicians as of January 1st, 2016, will have a 12 month grace period. Upon completion of grace period, technician must have achieved Skilled level for location to qualify for Service Training (in addition to above requirements). * Requirement will be scored in Q4 Scoring: Pass/Fail rating for entire management group. Customer Satisfaction Index Surveys: Rolling 12 month count of customer returned surveys for Full Line locations that provide service. Needed 12 month rolling counts by location size: Market A Market B Market C 30 surveys 25 surveys 20 surveys Calculation: Full Line locations that pass survey count requirement divided by full line locations, then multiply by 10 for score. Commitment Program Performance: 20 points The products in the Commitment program are typically high volume, competitive reputation parts that are shipped directly from Supplier to Dealer location. The purpose of the commitment program is to set a price for the management group based on full year volume expectations and then focus the Dealer s parts personnel efforts on retailing those parts. The commitment program quarterly target is set as a % of the Level 1 parts purchases target discussed under Parts Growth: US Based Management Groups = Canada Based Management Groups = 17% of Level 1 Target 23% of Level 1 Target These percentages were based on the Dealer network average purchase history (Mack and Volvo) of these products from 14Q4-15Q3, by country, as a % of total parts purchases in that time frame. Scoring: Measures Quarterly actual purchases of commitment product lines against the Commitment Program quarterly target for the management group: Actual purchases are at 90 to 99% of Commitment Target Actual purchases are at 100% to 109% of Commitment Target Actual purchases are at 110% or more of Commitment Target 10 Points 15 Points 20 Points Emergency Order Ratio: 1 Emergency Ratio measures the percentage of PDC Emergency and VOR order lines against total PDC order lines placed by dealer group. Sometimes Emergency orders are required for service purposes and the target ratios below allow for that. Dealer should be able to manage to 30% or under through reliance on LPA program and using the emergency and VOR order types as intended, for truck down situations. Calculation of the Management Group s Emergency Order Ratio: PDC Emergency Lines / (PDC Emergency Lines + PDC Stock lines) for management group. Emergency Ratio * Score 30% or under % to 35% % to 40% % and over 0 * Management Groups that have a majority of PDC directed shipments from Reno facing locations, the scale adds 10% due to logistics footprint: 40% or under = 1, 40.1% to 45% =, 45.1% to 50% =, over 50% = zero. 4

5 Parts Merchandizing: Branded parts (Mack, Volvo) are displayed on appropriate branded shelf Road Choice display in retail parts area with appropriate stock Pictures must be provided at request. Scoring: Pass/Fail rating for entire management group. MAPP and SELECT: Management Group has turned on MAPP Data feeds for all locations SELECT is the e-commerce platform for online parts ordering by fleets and customers Scoring: Pass/Fail score of positive growth year-over-year at quarter-end in retail sales through SELECT. PARTICIPATION ACKNOWLEDGEMENT Dealers must complete the online acknowledgement form to confirm participation no later than January 31, Visit to find the online Program Participation Acknowledgement form. 5

6 2016 BONUS PERFORMANCE PROGRAM Terms and Conditions To Qualify for program participation: : the Dealership must 1) have an approved Parts Business plan, signed by the Dealer Principal; 2) submit Dealer financial information monthly per the guidelines defined and published by corporate Dealer Development on the Trucks Dealer Portal under Dealer>News & Info ; 3) meet full LPA installation requirements. The LPA installation must include automatic order replenishment for a minimum of 95% of PDC parts, utilize standard tables, and provide LPA managed Buy Back for the location to be eligible for program consideration. Payout calculations will begin in the quarter following the completion of the LPA installation. Cancellation of the LPA program by a Dealer location(s) during a quarter will result in forfeiting all Program compensation beginning in that quarter; 4) must complete the online program acknowledgement form to confirm participation no later than January 31, 2016; 5) ASIST participation at least one created ASIST case in the quarter for each Full Line location in the management group; 6) CSI enrollment at all Full Line locations that provide service enrolled in Burke CSI process at the start of the quarter. Payout Frequency and Timing: payout is quarterly, two months after the quarter, as a credit to the dealer s parts statement. Management Group must have an active parts account on payment date to receive parts statement credit. Corporate may modify or cancel the program at any time. The terms and conditions of the Program may not be modified unless such modification is described in a writing issued by corporate. Corporate may not waive any term or condition of this Program unless such waiver is explicitly set forth in writing signed by an officer or the party(ies) against whom the waiver is charged. Parts Growth definitions/terms: Qualified parts purchases definition: Net Parts Purchases of all PDCs and Vendor Direct Ship Programs for proprietary, reman, all-makes, and Road Choice parts. Net Parts Purchases means invoiced parts, at the part number invoice line item level, excluding core charges, freight and taxes, net of returns and buybacks, and other credits relating to those parts. The 8 Quarter average for the management group was also set with the same net parts purchases definition. If there are data discrepancies, the technical definition used to establish the 8Q average will be used to score the purchases in the current quarter ( like for like comparison ). All quarterly purchases are scored as stand alone for the quarter. Purchases from prior month and/or quarter are not transferable to the next period. All compensation will be paid at the Dealer management consolidated level. Each Dealer code s eight-quarter average is calculated by totaling the parts purchased from 2013 Q4 to 2015 Q3, and dividing by the number of quarters in that time frame that the Dealer code had at least $5,000 of purchases. The Dealer code eight-quarter averages are totaled to calculate the Management Group s eight quarter average. For transfer of ownership (location buys and sells) during the year, the 8Q average baseline of parts purchases will be pro-rated based on transaction execution date and allocated between the selling and buying dealer management group, and the Targets for the program will be re-calculated given the new 8Q average. Commitment Program target dollars will also be adjusted in the same fashion by recalculating them with the new Level 1 target parts growth target. ** Please contact your District Parts Manager (DPM) if you have questions or need additional information. 6