Document:

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                                                                  Exhibit 10.7

[Global Bank Letterhead Logo]

                                                              November 27, 2001

PSMT PHILLIPINES, INC.
32nd Street, 5th Avenue
Fort Bonifacio Global City
Taguig, Metro Manila

                          Attention: MANUEL M. DACAYAN
                                   Comptroller

Dear Mr. Dacayan:

         We are pleased to advise that GLOBAL BANK has approved a Peso Bridge
Finance Loan in favor of PSMT PHILIPPINES, INC. under the following terms and
conditions:

Amount            :        Peso equivalent of Two Million Five Hundred Thousand
                           Dollars (US$2,500.000)

Purpose           :        To bridge finance the partial funding requirements
                           for the construction and operation of membership
                           warehouse stores

Security          :        1) Corporate Guaranty to be executed by PriceSmart,
                              Inc. (58%)
                           2) Sureties of William S. Go & spouse; and Robert C.
                              See & spouse (32%)

Interest Rate     :        4.5% over the latest auction result of the average
                           91-days Treasure Bill rate

Interest Payment  :        Payable monthly in arrears

Term              :        Up to 180 days

Principal         :        Bullet upon maturity
Repayment

Prepayment        :        Allowed without penalty

Taxes             :        All payments to be made by the Borrower are to be
                           made free and clear of any present and future taxes,
                           levies, duties or other deductions of whatever
                           nature. In particular but without limitation, all
                           interest payments by the Borrower shall be required
                           to be grossed up to include the applicable tax. The
                           Borrower shall also be required to indemnify the
                           Lender against any and all income or capital taxes,
                           documentary stamp taxes and other registration or
                           similar taxes or fees applicable to the Loan
                           Agreement or other documentation or transactions
                           contemplated therein.

         Please note that GLOBALBANK reserves the right to amend any and all of
the foregoing terms and conditions as situations warrant. This approval shall
further be subject to applicable provisions of existing bank policies,
regulations and such other terms and conditions our management may impose.
Availment herein shall be subject to availability of funds.

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         To be able to activate PSMT Philippines, Inc.'s facility, we request
for the submission of the following:

         BORROWER (PSMT PHILS. INC.):
         1.       Duly certified SEC Certificate of Registration, Articles of
                  Incorporation & By-laws;
         2.       Board Resolution/Secretary's Certificate re: establishment of
                  bridge loan in the amount of the peso equivalent of US$
                  2,500,000 and authorizing signatories;
         3.       Signature cards of authorized signatories duly authenticated
                  by corporate secretary (specimen signature cards attached)
         4.       Copies of 2001 CTC of the company and authorized signatories;
         5.       Copy of Tax Identification No.;
         6.       Latest Audited Financial Statements/Income Tax Returns (if
                  available);
         7.       Promissory Note/Disclosure Statement (form attached);
         8.       Duly signed letter advice

         GUARANTOR (PRICESMART, INC.):
         1.       Board Resolution authorizing the execution of the guaranty and
                  authorizing signatories contained in a Secretary's Certificate
                  duly acknowledged before the Philippine Consulate;
         2.       Corporate Guaranty Agreement (form attached)

         SURETIES (WILLIAM S. GO AND ROBERT C. SEE):
         1.       Surety Agreement to be executed by William S. Go and spouse
                  (form attached)
         2.       Surety Agreement to be executed by Robert C. See and spouse
                  (form attached)
         3.       Signature cards of sureties & spouses (specimen signature
                  cards attached)
         4.       Copies of 2001 CTC of the sureties & spouses;
         5.       Copies of 2000 Income Tax Returns of sureties

         Should you need clarifications on the aforecited terms and conditions
as well as the documentary requirements, please feel free to call us.

         We look forward to a mutually beneficial relationship.

                                               Very truly yours,
                                               GLOBALBANK
                                               By:

                                               /s/ Armina P. So
                                               ---------------------
                                               ARMINA P. SO
                                               Senior Manager

                                               /s/ Edgar G. Esguerra
                                               ---------------------
                                               EDGAR G. ESGUERRA
                                               Vice President

Conforme:
By:

/s/ Gilbert PartidaQuickLinks
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TARGET CORPORATION

EXECUTIVE SHORT-TERM INCENTIVE PLAN  

 
 

Article I—Background    

	1.1	 	Name. The name of the short-term incentive plan set forth herein is "Target Corporation Executive Short-Term Incentive Plan." It is sometimes hereinafter referred to as the "STIP" or the "Plan."
	

1.2	
 	

Compensation Policy and Plan Intent. The Plan has been designed to promote the Company's pay-for-performance compensation philosophy by providing financial incentives ("incentive bonuses") to designated upper-level executive employees, who
through their efforts directly and significantly impact the achievement of Company goals and objectives. Such incentive bonuses are intended to reflect on both an executive's personal achievements, as well as a Division's or Company's achievement of
such goals and objectives.
	

1.3	
 	

Eligibility. Participation in this Plan is restricted to those upper-level executive employees who, through their position and performance, have a decided impact upon the performance of the Company and/or a Division, and therefore upon the
operating results of the Company. The Compensation Committee shall determine which individuals or groups of individuals by title or position or rank shall participate in the Plan.
	

1.4	
 	

Transfer and Termination. A participant who transfers to another Division of the Company, or who terminates employment for the purpose of early or normal retirement from the Company, or who dies or becomes disabled, shall be eligible for
incentive compensation at Plan Year end if he/she was an actual participant in the plan at the commencement of such Plan Year. The incentive bonus, when determined, pursuant to the provisions hereof shall be prorated (on a weekly basis) to reflect
that portion of the Plan Year during which the participant was enrolled and participating in the Plan as a participant. Participants in this category will be treated in accordance with the following guidelines:
	

 	
 	

a.	
 	

Transfers between Participating Divisions. Upon a participant's transfer between Participating Divisions, a pro rata share of the incentive bonus shall be contributed by each Participating Division if the participant has been designated as
such in each Participating Division from the commencement of the Plan Year, or in the case of the successor Participating Division, from his/her commencement of employment with that successor Participating Division to Plan Year end.
	

 	
 	

b.	
 	

Transfers between Participating Division and Non-Participating Division and Retirement, Death or Disability of Participating Executive. If a participant transfers from a Participating Division to a Non-Participating Division, a pro rata
incentive bonus calculated on the basis of the number of weeks (a majority of the business days of a week to be considered a whole week) during the Plan Year the executive was a Participant in the Plan, divided by 52, will be awarded in the due
course of the Plan's administration. The same formula shall be utilized for executives who transfer from a Non-Participating Division to a Participating Division. The same method of calculating an incentive bonus shall also be utilized in calculating
incentive bonuses for participants who die, become disabled or who retire from the Company during the year. Any such incentive bonuses would be paid only in the normal course of administration of the Plan.
	
 	
 	

 	
 	

 

	

 	
 	

c.	
 	

New Executive Employees. Upon recommendation of the Chief Personnel Officer or the Chief Executive Officer of a Division, whichever is applicable, and following approval thereof by the Chairman or Chief Executive Officer of the Company, a new
executive employee who will have been employed by a Participating Division prior to the end of a Plan Year may be designated as a participant in the Plan, subject to the conditions of the Plan.
	

 	
 	

d.	
 	

Termination Other Than Retirement, Death or Disability. A participant whose employment is terminated before a bonus is paid for any Plan Year for any reason other than retirement, death or disability, shall not be eligible for and shall not
receive an incentive bonus for the subject Plan Year.
	

 	
 	

e.	
 	

Promotion or Job Change. A participant who has a promotion and/or a job change during a Plan Year will have his/her incentive bonus calculated using each grade level separately. The score and grade level shall determine the bonus percentage
and that percentage shall be applied to the Midpoint of Salary Range while in the grade level. The total incentive bonus will be the sum of the bonuses for each grade level.
	

 	
 	

f.	
 	

Market Pricing Adjustment. A participant whose grade level is adjusted during the Plan Year due to a "market pricing adjustment" will have his/her bonuses calculated for the entire period using the adjusted grade. If Subsection 1.4(a), 1.4(b)
or 1.4(e) are applicable to a participant, those sections shall also apply and this Subsection (f) shall be applicable to a participant only for the period to which the "market pricing adjustment" relates.
	

Article II—Definitions
	

2.1	
 	

"Bonus Matrix"
	

 	
 	

"Bonus Matrix" refers to the table that sets forth figures that indicate, with varying job grade level classifications, the percentage of incentive bonus attributable to each Personal Score and/or Performance Score in relationship to the
participant's Midpoint of Salary Range. The Compensation Committee will approve a Bonus Matrix for each Performance Measure to which a participant is subject. A "Bonus Matrix" may be changed from time to time at the election of the Compensation
Committee, but any change in a Bonus Matrix shall have prospective application only.
	

2.2	
 	

"Capital Charge"
	

 	
 	

"Capital Charge" is the cost of capital invested in the business operation, adjusted for the maturity of the assets employed by such business operation.
	

2.3	
 	

"Chairman"
	

 	
 	

"Chairman" shall at all times refer to the incumbent Chairman of the Board of Directors of Target Corporation.
	

2.4	
 	

"Company"
	

 	
 	

"Company" refers to Target Corporation and its subsidiaries.
	

2.5	
 	

"Compensation Committee"
	

 	
 	

"Compensation Committee" means that committee of the Board of Directors of the Company designated as such on February 3, 2002, or as it is thereafter designated while the Plan is in effect and if no such named committee shall be designated by
the Board of Directors it shall mean the Committee of the Board most nearly performing the duties of the Compensation Committee as defined at the time of its elimination as a Board Committee.
	

2.6	
 	

"Covered Officer"
	

 	
 	

"Covered Officer" includes all participants whose compensation, in the Plan Year for which the bonus is calculated, is subject to the compensation expense deduction limitations set forth in Section 162(m) of the Internal Revenue Code of 1986, as
amended.
	
 	
 	

 	
 	

 

	

2.7	
 	

"Division"
	

 	
 	

"Division" refers to an operating company, test strategy, staff group or other subdivision of the Company.
	

2.8	
 	

"Midpoint of Salary Range"
	

 	
 	

The "Midpoint of Salary Range" of a participant during the related incentive bonus Plan Year is the midpoint for his/her job grade as set forth in the salary range by job grade that is applicable.
	

2.9	
 	

"Non-Participating Divisions"
	

 	
 	

Divisions not participating in the Plan shall be referred to as "Non-Participating Divisions."
	

2.10	
 	

"Participating Divisions"
	

 	
 	

Divisions participating in the Plan shall be referred to as "Participating Divisions."
	

2.11	
 	

"Participants"
	

 	
 	

Executives participating in the Plan are referred to as "participants."
	

2.12	
 	

"Performance Measures"
	

 	
 	

The Performance Measures shall mean one or combination of two or more of the following performance-based metrics, as approved by the Compensation Committee for the participants (which approval shall be given within 90 days of the beginning of
each Plan Year for Performance Measures applicable to Covered Officers); provided, however, that different Performance Measures may be approved for different participants during the same Plan Year.
	

 	
 	

•	
 	

EVA (economic value added) which is PTSP after taxes less a Capital Charge.
	 	 	•	 	"PTSP" (pre-tax segment profit), which is FIFO gross margin dollars less operating expenses and other expenses plus other income. It excludes LIFO provision, interest and corporate expense.
	 	 	•	 	EPS (earnings per share).
	 	 	•	 	ROA (return on assets).
	 	 	•	 	ROE (return on equity).
	 	 	•	 	EBIT (earnings before interest and taxes).
	 	 	•	 	EBITDA (earnings before interest, taxes, depreciation and amortization).
	 	 	•	 	Gross margin rate.
	 	 	•	 	Expense rate.
	

2.13	
 	

"Performance Score"
	

 	
 	

The Performance Score is determined from a schedule that is approved by the Compensation Committee that gives a score for the level of performance achieved by the Division and/or Company with respect to a particular Performance Measure. The schedule
may be modified by the Compensation Committee annually. If a participant is subject to one or more Performance Measures relating to one or more Divisions, his/her overall Performance Score shall be determined by a methodology approved by the
Compensation Committee.
	

2.14	
 	

"Plan Year"
	

 	
 	

"Plan Year" shall be the applicable financial "Fiscal Year" of the Company.
	

2.15	
 	

"Retire" or "Retirement"
	

 	
 	

"Retire" or "Retirement" means a termination of employment pursuant to an arrangement contained in any formal private retirement plan or written agreement then in effect by the Company or any participating Division relative to the subject
participant.
	

Article III—Division or Company Performance-Based Bonus
	

3.1	
 	

Compensation Policy and Intent of Company Performance-Based Bonuses
	
 	
 	

 	
 	

 

	

 	
 	

Incentive bonuses under this Article III are based on one or more Division and/or Company Performance Measures for the Fiscal Year.
	

3.2	
 	

Selection of Pooled or Non-Pooled
	

 	
 	

The Compensation Committee will determine whether Division and/or Company bonuses are to be pooled or non-pooled.
	

3.2.1	
 	

Non-Pooled
	

 	
 	

If the Compensation Committee approves non-pooled bonuses, incentive bonuses for each participant will be calculated by taking the participant's bonus percentage or percentages from each applicable Bonus Matrix, using his/her salary grade, and
multiplying it or them by his/her Midpoint of Salary Range.
	

3.2.2	
 	

Pooled
	

 	
 	

If the Compensation Committee approves pooled bonuses, a bonus pool is calculated by multiplying the percentage from the Bonus Matrix using the Performance Score for each participant by the participant's Midpoint of Salary Range.
	

 	
 	

The incentive bonus for each participant will be based on a ratio of his/her bonus to all Performance-Based bonuses paid under this Plan. The percentage determined by that ratio will be multiplied by the bonus pool.
	

3.3	
 	

Minimum Score
	

 	
 	

No bonus will be payable to a participant under this Plan unless his/her personal score under the Personal Score provisions of this Plan is equal to or higher than the minimum set by the Division or the Compensation Committee.
	

3.4	
 	

Selection of Pooled or Non-Pooled
	

 	
 	

The Compensation Committee will determine whether a Division and/or Company is to be pooled or non-pooled.
	

Article IV—Personal Score Bonus
	

4.1	
 	

Compensation Policy and Intent of Plan
	

 	
 	

Incentive bonuses under this Article IV are based on a participant's individual accomplishments in his/her assigned job during the Plan Year.
	

4.2	
 	

Selection of Pooled or Non-Pooled
	

 	
 	

The Compensation Committee will determine whether Division and/or Company bonuses are to be pooled or non-pooled.
	

4.2.1	
 	

Non-Pooled
	

 	
 	

If the Compensation Committee approves non-pooled bonuses, incentive bonuses for each participant will be calculated by taking the participant's bonus percentage from the Personal Score Bonus Matrix, using his/her personal score above the specified
minimum and job grade and multiplying it by his/her Midpoint of Salary Range.
	

4.2.2	
 	

Pooled
	

 	
 	

If the Compensation Committee approves pooled bonuses, a bonus pool is calculated by multiplying the percentage from the Personal Score Bonus Matrix using the personal score for each participant above the specified minimum by the participant's
Midpoint of Salary Range.
	

 	
 	

The bonus for each participant will be based on a ratio of his/her bonus to do all bonuses paid under this Plan. The percentage determined by that ratio will be multiplied by the bonus pool.
	

Article V—Maximum Bonus
	
 	
 	

 	
 	

 

	

5.1	
 	

The maximum bonus payable under the Plan to any participant for any Plan Year is equal to 400% of that person's salary for the Plan Year during which the bonus was earned. If the participant held a different office or was not employed in his/her
position for the full year covered by that Proxy Statement, the maximum bonus is 400% of the highest annualized salary rate paid to that person in such Plan Year. In addition, for purposes of calculating the maximum bonus payable to the CEO or any
other Covered Officer, the salary of the participant may not exceed 200% of the salary earned by the Company's CEO for Fiscal 2001 as reported in its Proxy Statement covering that year. If it is necessary to reduce a bonus in order to comply with the
limitation on the maximum aggregate bonus payable to a participant, then the reduction shall be applied first to the bonus payable under Article IV Personal Score Bonus and then, if necessary, to the bonus payable under Article III Division
or Company Performance-Based Bonus.
	

Article VI—Payment
	

6.1	
 	

Payment of Bonus. Normally, the total incentive bonus for a Fiscal Year will be paid in cash as soon as administratively feasible after the amount of the incentive bonus has been computed. However, any participant who is a participant in a
deferred compensation plan or arrangement of the Company, may have his/her incentive bonus deferred pursuant to that plan or arrangement.
	

Article VII—General
	

7.1	
 	

Beneficiary. Any incentive bonus payments which become distributable after the death of a participant shall be distributed as they become due to such person or persons, or other legal entity as the participant may have designated in writing
delivered to the Company's or his/her Participating Division's personnel office on an approved form. The participant may, from time to time, revoke or change any such designation by writing delivered to such personnel office on an approved form. If
there is no unrevoked designation on file with such personnel office at the participant's death, or if the person or persons designated therein shall have all predeceased the participant, such distributions shall be made to the participant's spouse,
or in the absence of a spouse, to the participant's children, and if the participant has no spouse or children, to the participant's estate. If a participant has deferred his/her incentive bonus pursuant to a plan or arrangement with the Company, the
plan or arrangement shall govern the beneficiary designation.
	

7.2	
 	

Administration and Interpretation of Plan (the "Plan Committee"). This Plan shall be interpreted by the Compensation Committee of the Company and its interpretations shall be final and binding on participants, Participating Divisions, and all
other parties in interest.
	

 	
 	

The Plan shall be administered by the Compensation Committee. The Compensation Committee reserves the right, from time to time, to prescribe rules and regulations which are not inconsistent with the provisions of the Plan, and to modify or revoke
such rules and regulations at such time and in such manner as it may deem proper. A copy of this Plan and all such rules and regulations will be supplied to each person participating in the Plan and a copy of the then current Plan shall be maintained
in the Company's personnel office and at the personnel office of each Participating Division and shall be available, upon request, for review by any participant or his duly authorized agent. All persons in the Plan shall be bound by the terms of the
Plan and of all rules and regulations pursuant thereto, all as now in effect or hereafter amended, promulgated or passed which shall likewise be maintained at the Company and each Participating Division personnel office.
	

7.3	
 	

Rights of Participants and Beneficiaries. The Plan is not an employment agreement and does not ensure or evidence to any degree the continued employment or the claim to continued employment of any participant for any time or period or
job.
	

 	
 	

No participant or beneficiary shall, by virtue of this Plan, have any interest in any specific asset or assets of the Company or any Participating Division. A participant or beneficiary has only an unsecured contract right to receive cash payments in
accordance with and at the times specified by the Plan.
	
 	
 	

 	
 	

 

	

 	
 	

No participant shall have the right or ability to assign, pledge, or otherwise dispose of any part of an incentive bonus hereunder (except as provided in Section 7.1 hereof).
	

7.4	
 	

Overview. It is specifically understood that the Chairman of the Board and Chief Executive Officer of the Company shall at all times retain the authority to veto or rescind any appointment or designation of an individual as a participant
(except an Executive Officer) under this Plan but it is the intent of the Plan that such authority shall be exercised with restraint and only for circumstances deemed by said officer to be of importance for preserving the integrity of the Plan's
policy and/or its performance.
	

7.5	
 	

Termination of Plan. This Plan may be amended or terminated at any time by the Board of Directors of the Company. Such amendment or termination, will not, without the participant's written consent, affect his/her incentive bonus or bonuses
previously earned.
	

7.6	
 	

Miscellaneous Provisions
	

 	
 	

a.	
 	

Headings. Headings at the beginning of sections hereof are for convenience of reference, shall not be considered a part of the text of the Plan, and shall not influence its construction.
	

 	
 	

b.	
 	

Capitalized Definitions. Capitalized terms used in the Plan shall have their meaning as defined in the Plan unless the context clearly indicates to the contrary.
	

 	
 	

c.	
 	

Gender. Any references to gender also include the opposite gender.
	

 	
 	

d.	
 	

Use of Compounds of Word "Here." Use of the words "hereof," "herein," "hereunder," or similar compounds of the word "here" shall mean and refer to the entire Plan unless the context clearly indicates to the contrary.
	

 	
 	

e.	
 	

Construed as a Whole. The provisions of the Plan shall be construed as a whole in such manner as to carry out the provisions thereof and shall not be construed separately without relation to the context.
	

 	
 	

f.	
 	

Shareholder Approval. No bonuses, awards or other compensation will be granted or paid pursuant to Article III of the Plan unless and until the Plan is approved by the affirmative vote of a majority of the voting power of the shares
present and entitled to vote at a meeting of the Company's shareholders.

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Article I—Background

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