EXHIBIT 10.54
LEVI STRAUSS & CO. ANNUAL INCENTIVE PLAN (AIP)
Originally Effective as of 1995 Fiscal Year
Restatement Effective as of 2002 Fiscal Year
TABLE OF CONTENTS
PAGE
ABOUT THIS MATERIAL...........................................................1
ANNUAL INCENTIVE PLAN.........................................................2
PURPOSE OF PLAN...............................................................2
EFFECTIVE DATE................................................................2
PLAN ADMINISTRATION...........................................................2
ELIGIBILITY...................................................................3
PERFORMANCE PERIOD............................................................3
TARGET AMOUNTS FOR PARTICIPANTS...............................................3
INCENTIVE POOL FUNDING SOURCES................................................4
FINANCIAL PERFORMANCE MEASUREMENT.............................................4
INCENTIVE POOLS PERFORMANCE FACTOR............................................5
REDISTRIBUTION OF FINAL INCENTIVE POOLS.......................................5
INCENTIVE POOL APPROVAL.......................................................5
PARTICIPANT INCENTIVE ALLOCATIONS.............................................5
INCENTIVE PAYMENTS............................................................6
TERMINATION OF EMPLOYMENT.....................................................6
EMPLOYMENT RIGHTS.............................................................6
AMENDMENT, MODIFICATION, OR TERMINATION OF PLAN...............................7
EXECUTION.....................................................................7
APPENDIX ONE: GLOSSARY OF TERMS..............................................8
ABOUT THIS MATERIAL
This document is the official document for and describes how the Levi Strauss &
Co. Annual Incentive Plan (the "Plan") works. It explains:
> Purpose of the Plan;
> Who administers the Plan;
> Who is eligible to receive incentives;
> How incentive targets are set;
> How funds for incentives are generated;
> How the amount of a Participant's incentive is determined;
> When incentives are paid; and
> What happens in the event of termination of employment.
For more specific information on how the Plan works, please refer to the Plan
Administrative Guidelines. In the event of any inconsistency between this Plan
document and the Plan Administrative Guidelines, this Plan document shall
control. This material also refers to other compensation and human resources
programs. While this Plan may be used as a stand alone reference document, a
broader understanding of all the Company compensation programs and the
Performance Management program will provide important perspective.
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ANNUAL INCENTIVE PLAN
The Levi Strauss & Co. Annual Incentive Plan (the "Plan") rewards individual
achievement of results toward Levi Strauss & Co.'s (the "Company's") objectives
for the particular year. The amount of incentive earned depends on the financial
performance of the Company and the performance of the individual Participant.
PURPOSE OF PLAN
> Serves as a single Plan covering salaried employees worldwide who
participate in the formal corporate performance management program.
> Aligns employee and shareholder interests.
> Provides a financial incentive for meeting annual corporate and
individual objectives.
> Provides managers with the ability to recognize and reward key
contributors and reinforce the Performance Management program.
> Ties the incentive opportunity to external competitive practices, and
internally to the Company's total compensation objectives.
> Encourages continuity of service.
EFFECTIVE DATE
The original Plan was effective in December, 1994, on the first day of the 1995
fiscal year, as determined for the appropriate corporate entity. The Plan was
subsequently amended on several occasions and is hereby restated and amended in
its entirety effective December 2001, as of the first day of the 2002 fiscal
year, as determined for the appropriate corporate entity.
PLAN ADMINISTRATION
The Plan is administered under the direction of the Human Resources Committee of
the Board of Directors of the Company (the "Committee"). The Committee has
exclusive authority, in its sole and absolute discretion, to take any and all
action necessary or appropriate to administer and interpret the provisions of
the Plan, including but not limited to the right to take all actions, gather all
information, and make all decisions concerning the eligibility for and amount
payable under the Plan, and to resolve and/or clarify any ambiguities,
inconsistencies and omissions that may arise under the Plan. The Committee's
determinations and interpretations shall be conclusive and binding on all
individuals. Responsibilities include (but are not limited to) the following:
> Design and interpret the Plan (including ambiguous terms);
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> Approve incentive participation rates;
> Approve financial performance measures;
> Approve incentive pool funding sources and weights;
> Approve Company financial objectives;
> Approve final incentive pool; and
> Approve other terms and conditions that may be recommended by the
Chairman of the Board or the Chief Executive Officer.
The Committee may delegate its day-to-day administrative responsibilities to
Company employees and may delegate to Company management the authority to
approve amendments to the Plan.
ELIGIBILITY
Generally, salaried employees worldwide who participate in the formal
performance management program and who meet local eligibility criteria are
Participants in the Plan. Specific participation criteria are determined on a
country-by-country basis. Individuals who are classified as Agency Workers,
consultants (regardless of whether or not such classification is binding), or
Reclassified Employees are not eligible to participate in the Plan.
PERFORMANCE PERIOD
The Plan operates on a twelve (12) month cycle which coincides with the
Company's fiscal year.
TARGET AMOUNTS FOR PARTICIPANTS
Incentive Target Amounts are generally set near the beginning of each fiscal
year for each Participant. The annual Target Amount for each Participant is
determined by multiplying the Participant's annual base salary in effect for the
Plan's fiscal year by the Participation Rate. The Participation Rate is based on
the Participant's job level and is expressed as a percent of annual base salary.
The Participation Rates are generally reviewed and may be modified on an annual
basis.
Target Amounts are calculated in local currency.
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INCENTIVE POOL FUNDING SOURCES
The source of funds for Business Unit Incentive Pools is based on the actual
financial performance of one or more of the following levels, including:
-- Total Company (LS&CO.)
-- Triad (LSA, LSEMA, APD)
-- Business Unit (e.g. Affiliate)
Senior management generally reviews the funding sources and their relative
weights before the start of each fiscal year.
Following is a framework intended solely as a guideline for possible weights for
each funding source:
EXAMPLES OF INCENTIVE POOL FUNDING WEIGHTS
________________________________________________________________________________
BONUS FUNDING MIX BY PERCENT
________________________________________________________________________________
BUSINESS TRIAD LS&CO.
________________________________________________________________________________
WORLD-WIDE
LEADERSHIP TEAM
________________________________________________________________________________
o Function Head 100
________________________________________________________________________________
o Triad President 70 30
________________________________________________________________________________
GLOBAL 100
________________________________________________________________________________
TRIAD STAFF 70 30
________________________________________________________________________________
BUSINESS UNIT
________________________________________________________________________________
o LSA/LSEMA 70 30
________________________________________________________________________________
o APD 80 20
________________________________________________________________________________
o ACFR 70(LSA) 20 (APD) 10(LSEMA)
________________________________________________________________________________
FINANCIAL PERFORMANCE MEASUREMENT
The Committee approves the financial measures that are used to determine the
objectives and assess the performance of each funding source.
> Performance is measured based on earnings and revenue.
> The Earnings and Revenue financial performance objectives are approved by
the Committee before the fiscal year begins.
> For purposes of determining the final incentive pool, the actual
performance of each funding source is expressed as a percent of financial
target achieved. This percentage is known as the Performance Factor.
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INCENTIVE POOLS PERFORMANCE FACTOR
After the end of the fiscal year a Performance Factor is determined for each
funding source. The Performance Factor is a percentage based on the financial
performance of each funding source against its financial target. The performance
factor ranges from zero to two hundred percent (0-200%).
Financial performance that exceeds the minimum objectives at each funding source
generates a Performance Factor starting at one percent (1%). The Performance
Factor increases as the financial performance objective is achieved and
exceeded.
If performance at all funding sources is below minimum objectives, the
Performance Factor is zero percent (0%) and, therefore, a final incentive pool
is not generated.
For Business Units with more than one funding source, a weighted average of the
Performance Factors at each funding source is calculated. The weighted average
is based on the funding weights established at the beginning of the year.
After the end of the fiscal year, a Funded Amount is determined for each
Participant. The Funded Amount is determined by multiplying the Performance
Factor by the Participant's Target Amount.
A final incentive pool for each Business Unit is determined after the end of the
fiscal year. A Business Unit's final incentive pool is the sum of the Funded
Amounts for each Participant within the Business Unit.
REDISTRIBUTION OF FINAL INCENTIVE POOLS
After the final incentive pools have been determined, members of the Worldwide
Leadership Team ("WLT"), may redistribute funds from one pool to another.
INCENTIVE POOL APPROVAL
The Chief Executive Officer recommends the final incentive pool after the end of
the fiscal year for Committee approval.
PARTICIPANT INCENTIVE ALLOCATIONS
Incentive allocations to Participants in the Plan are determined by the head of
the Participant's work group, based on individual performance. If a Participant
meets performance expectations (as determined in the Performance Management
program), then he or she will be eligible to receive an individual incentive
allocation.
If a Participant does not meet performance expectations (as determined in the
Performance Management program), no incentive is paid. Any money budgeted for
those incentives is
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added back to the Business Unit's Final Incentive Pool making it available for
other Participants in the Business Unit. Individual incentive allocations are
allocated to a Participant based on annual results as measured against the
employee's annual objectives, established at the beginning of the performance
year and contributions relative to others.
Individual incentive allocations are reviewed and approved by the Participant's
manager and a WLT member.
The limit to incentive awards is limited to the Business Unit's Final Incentive
Pool.
The total of funds allocated to a Participant is the Final Incentive Amount.
INCENTIVE PAYMENTS
Incentive payments are made as soon as administratively practicable after the
close of the fiscal year. The Committee approves the fiscal year-end results
which fund the Plan and the final incentive pool.
TERMINATION OF EMPLOYMENT
In the case of termination due to death, Retirement, Reduction in Force,
severance under a LS&CO. severance plan, or Long-Term Disability, the
Participant's incentive Target Amount shall be prorated for the length of time
worked during the fiscal year. Any earned incentive shall be paid in cash as
soon as administratively practicable after the close of the fiscal year, or in
compliance with applicable law.
As one of the objectives of the Plan is to encourage continuity of service, in
all other cases of termination before the payment date (including voluntary
resignation or Involuntary Discharge), a Participant shall have no right to any
incentive payment under AIP.
EMPLOYMENT RIGHTS
Neither this document nor the existence of the Plan is intended to or does imply
any promise of continued employment by the Company. Employment may be terminated
with or without cause, and with or without notice, at any time, for any reason,
at the option of the Company or the employee. No one other than the Board of
Directors of the Company, Chief Executive Officer, President or a Senior Vice
President of LS&CO. may approve an agreement with an employee that guarantees
his or her employment. Such an agreement must be in writing and signed by such
an authorized individual.
A Participant who has been Involuntarily Discharged may lose all of his or her
interest, including any right, under the Plan and may not be entitled to receive
any payment under the Plan.
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AMENDMENT, MODIFICATION, OR TERMINATION OF PLAN
The Committee or its authorized designee(s) may modify, amend, or terminate the
Plan at any time for any reason, at its discretion and without notice.
EXECUTION
To record the restatement of the Plan, effective as of December 1, 2001, the
Company has caused its duly authorized officer to execute this document as of
this 14th day of January 2002.
Levi Strauss & Co.
By:
_________________________________
Fred Paulenich
Date: JANUARY 14, 2002
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APPENDIX ONE: GLOSSARY OF TERMS
> Agency Workers: individuals who are employed pursuant to a written
agreement with an agency or other third party for a specific job
assignment or project.
> Allocation: the process of distributing funds from the final AIP pool
to Participants.
> Business Unit: Sub-group of a Triad, e.g. Affiliate or regional office,
such as a customer fulfillment region (CFR).
> Committee: Human Resources Committee of the Board of Directors of Levi
Strauss & Co.
> Company: Levi Strauss & Co. and its participating subsidiaries.
> Consultants: individuals (who may also be referred to as independent
contractors) who have specialized knowledge or special skills and are
retained to provide advice or assistance to the Company and who are not
employees of the Company.
> Final Incentive Amount: the approved payout, to a Participant.
> Financial Performance Measures: the business objectives set for each
Funding Source for the purpose of determining the final Incentive Pool.
The Committee identifies which measures are to be used and establishes
the specific objectives to be used each year.
> Funded Amount: an amount generated to pay incentives based on the
Participant's Target Amount and a forecast of business performance. The
Funded Amount is calculated by multiplying a Participant's Target
Amount by the Performance Factor.
> Funding Source: the organizational unit(s) used to set and measure
financial objectives for purposes of determining the size of the final
AIP allocation pools (e.g. Total Company, Triad, Business Unit).
> Incentive Pool: the sum of the Funded Amounts for each Participant
within the Work Group, determined after the close of the fiscal year.
> Involuntary Discharge: an involuntary termination of employment due
to violation of policy, misconduct, unsatisfactory job performance or
any other reason deemed by the Company to warrant a discharge.
> Long-Term Disability: an authorized leave of absence for an extended
period of time due to a disability and pursuant to the Company's
long-term disability policy as then in effect.
> Participant: a salaried employee who meets the participation criteria
of the Plan.
> Participation Criteria: determined on a country-by-country basis.
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> Participation Rate: the percentage used to determine a Participant's
incentive Target Amount. A Participation Rate is based on the
Participant's job level and is expressed as a percent of annual base
salary.
> Performance Factor: the percentage used to describe the degree to
which actual financial performance has met, exceeded, or fallen short
of objectives. The Performance Factor is used to determine the final
AIP pool.
> Performance Management Program: the program in which performance
objectives are set and measured for individual employees.
> Plan: Levi Strauss & Co. Annual Incentive Plan, as set forth herein
and as amended from time to time.
> Reclassified Employees: common law employees who were not initially
classified by the Company as employees but who were subsequently
reclassified as employees by a federal, state or local group,
organization or agency, or a court.
> Reduction in Force: an involuntary termination of employment which
in the opinion of the Committee, results from the lack of appropriate
work for the Participant and is not an Involuntary Discharge for the
reasons of unacceptable performance or misconduct.
> Retirement: a voluntary termination of employment by an employee
who meets the age and/or service requirement as defined and determined
under the pension plan applicable to the Participant.
> Revenue: Net Sales, after customer returns.
> Target Amount: set near the beginning of the fiscal year. It is
calculated by multiplying the annual base salary in effect for the
Plan's fiscal year by the Participation Rate. Target Amounts are
calculated in local currency.
> Triad: One of LS&CO.'s three regional divisions - Asia Pacific
Division (APD), Levi Strauss, Americas (LSA), Levi Strauss, Europe,
Middle East & Africa (LSEMA).
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