JOHNSON WORLDWIDE ASSOCIATES, INC.
ECONOMIC VALUE ADDED
BONUS PLAN
PLAN SUMMARY
The following is a summary of the terms and conditions of Johnson
Worldwide Associates Economic Value Added Bonus Plan ("the Plan").
A. 1. Purpose of the EVA Bonus Plan
To provide incentive compensation to executives and key
managers of JWA employees in a Plan which directly relates the
financial reward to an increase in the value of the Company to
our shareholders. The key philosophy behind the Plan is that
value must continue to be created overtime in order for
bonuses to be paid.
2. Eligibility
Eligibility for the Plan is limited to designated eligible
executive and key management employees within Johnson
Worldwide Associates. Selection of such employees, if any,
for any fiscal year will be subject to nomination by the Chief
Executive Officer to the Compensation Committee of the Board
of Directors.
Eligibility of executive positions or current incumbents for
inclusion in the Plan does not guarantee their participation
in any future year.
3. Performance Versus Targets
The Plan has unlimited upside and downside performance
potential. Your incentive earnings are based on EVA
improvement. If you achieve your targeted level of EVA
improvement, you will achieve your target bonus, i.e. a
1.0 x EVA Bonus Multiple.
Given these assumptions, the EVA improvement required to
double your bonus (achieve 2.0 bonus multiple) would be
$3.5 million.
Your upside potential is limited only by your ability to drive
EVA performance upward. EVA performance and incentive
earnings are directly linked: the better your EVA performance,
the more you earn.
The leverage factor works the same on the downside. If you
underperform versus your EVA target, you will fall short of
your target incentive.
Does this mean that base pay could be taken away from you?
incentive payouts could be reduced to account for the
negative bonus earned in the current year.
4. EVA Bonus Declaration
A participants EVA Bonus Declaration for a plan year (JWA's
fiscal year) will be determined by a combination of Company,
geographic area, and/or business unit(s) performance, a
determined for each individual based upon their
responsibilities.
A participant's initial declared EVA bonus will be computed as
follows:
EVA
Bonus = Base X Target X Bonus
Declaration Salary Incentive Multiple
The Bonus Multiple will be determined based on EVA
improvement.
The Bonus Multiple is determined as follows:
Bonus Multiple = 1 + Actual EVA - Target EVA
-----------------------
EVA Leverage Amount
The leverage amount is the change in EVA over and above the
target required to double your target Bonus (i.e., a 2.0
Bonus Multiple). The leverage factor varies by business based
on the historic volatility of operating results. For example,
assume the following:
- Target EVA = $1,000,000
- Leverage Factor = $400,000
Based upon these parameters, an EVA Bonus Multiple of 2.0x
(two times target bonus) would be declared for actual EVA
performance of $1,400,000 ( Target EVA plus the Leverage
Factor). Likewise, an EVA Bonus Multiple of 0.0x ( a zero
bonus) would be declared for actual EVA performance of
$600,000.
The target EVA for subsequent plan years shall be the average
of the target EVA and actual EVA for the prior Plan year, plus
the expected improvement.
Expected improvement in EVA and leverage amounts will be
determined at the inception of the Plan and adjusted
periodically based on actual results of the businesses.
5. Payment of Bonus and Banking
The amount of any positive Bonus shall be paid in cash to the
participant subject to a banking system for two thirds of the
amount in excess of the target. The total Bonus payment for
each Plan year will be determined as follows:
Beginning Balance
+ Bonus Declared
= Available Balance
- Bank Payout (Target plus 33 1/3% of balance)
= Ending Balance (Annual payment)
The banking of bonuses serves to smooth Bonus payouts over
the business cycle. This banking system also ensures that
performance is sustained by making the payout of bank balances
contingent on sustained performance.
The payment will be made (net of tax withholding) on or before
the end of the third month following the end of the relevant
Plan year.
EVA Bonus Declaration & Payout
Bonus Bank Example
(Thousands) 1996 1997 1998 1999 2000
Annual Salary 100 100 150 150 200
x Percentage Target Bonus 15% 15% 15% 15% 15%
= EVA Target Bonus 15.0 15.0 22.5 22.5 30.0
x EVA Bonus Multiple 1.24x 1.61x (0.19x) 0.10x 1.13x
------ ----- ------ ----- -----
= EVA Bonus Declaration 18.7 24.1 (4.3) 2.3 33.9
Payout Threshold Multiple 1.00x 1.00x 1.00x 1.00x 1.00x
Payout Threshold 15.0 15.0 22.5 22.5 30.0
EVA Bonus Payout: Threshold [1] 15.0 15.0 0.0 2.3 30.0
Beginning Bank Balance 0.0 2.5 7.7 2.3 1.5
+ Addition to the Bank 3.7 9.1 (4.3) 0.0 3.9
----- ----- ----- ------ ------
= Bank Balance Available for Payout 3.7 11.5 3.5 2.3 5.4
x Payout Percentage 33% 33% 33% 33% 33%
= Bonus Bank Payout: Reserve [2] 1.2 3.8 1.1 0.8 1.8
Ending Bank Balance 2.5 7.7 2.3 1.5 3.7
Total EVA Bonus Payout [1] + [2] 16.2 18.8 1.1 3.1 31.8
B. Administration and Guidelines of the Plan
Administration of the Plan is the sole province of the
Compensation Committee of the Board of Directors. Guidelines for
its administration are:
1. Determination of Targeted Bonus Exposure Under the Bonus Plan
In each year the Compensation Committee of the Board of
Directors will establish a targeted bonus level for
participants in the Plan ranging from 10% to 100% of the
eligible executive's base salary as defined in this Plan.
Participant Tier Target Bonus %
Chief Executive Officer 1 70%
Executive Officers 2 55%
Vice Presidents &
Business Unit Managers 3 30% - 40%
Directors & Managers 4 10% - 20%
2. Individual Awards
Individual awards shall be based on the total base salary
received by an incumbent in an eligible executive position
during the fiscal year. For this purpose, the term "base
salary" shall not include allowances or any other payments or
benefits, whether legally required or not. At the time of
selection of eligible positions the target bonus for the
upcoming year shall be recommended by the Chief Executive
Officer of JWA to the Board of Directors.
The only factor to be considered in determining the individual
awards is results against all annual EVA objectives.
3. Determination of EVA Objectives
All EVA objectives used for purposes of this Plan must be
finally determined by the Chief Executive Officer of JWA and
approved prior to the beginning of the fiscal year (or as soon
thereafter as possible), and may only be changed in the event
of a significant change in the business, such as a significant
acquisition, divestiture or other major event. Guidelines for
alteration of objectives are set forth in Exhibit A.
4. Determination of Bonus Awards
After the close of the fiscal year each eligible executive's
performance against EVA objectives will be evaluated by the
Chief Executive Officer of JWA.
The Chief Executive Officer of JWA will then submit these
evaluations of performance against objectives along with his
bonus recommendations to the Compensation Committee of
the JWA Board of Directors for review and final approval. The
JWA Compensation Committee shall have the final authority to
approve individual bonuses and may, at its sole discretion,
reduce or eliminate the recommended bonuses.
5. New Hires/Promotion
An individual who is hired/promoted into a position that
participates in the Bonus Plan may be eligible for a bonus
award on a pro-rata basis in the year of entry.
6. Transfers
A participant who transfers his or her employment from one
business to another shall have his or her EVA Bonus Bank
transferred to the new unit. At the time of transfer, the
participant will have his or her bonus award based on time
spent in each particular operation/unit on a pro-rata basis
for the portion of year the individual worked in each unit.
The participant's pro-rata share will be based on the
operation's/unit's full year EVA performance.
7. Death or Disability
A participant who dies or becomes disabled while in the
employment of Johnson Worldwide Associates, Inc. shall receive
full payment of his or her Bonus Bank balance net of the
impact of a pro-rata bonus for the year in which he or she
dies or becomes disabled. Such payment shall be made at the
regular time for making bonus payments in respect to the year
of such death or disability, and shall be paid to the
designated beneficiary or estate in the case of death.
8. Retirement
A participant who retires from Johnson Worldwide Associates,
Inc. shall receive full payment of his or her Bonus Bank
balance and may be eligible for a pro-rata bonus for the year
in which he or she retires. Such payment shall be made in a
lump sum at the regular time for making bonus payments or over
two years as he or she so chooses. Negative Bonus Bank
balances are waived. An individual whose age and full years
of service total 70 will be considered to meet the definition
of retirement.
9. Involuntary Termination without Cause
A participant who is involuntarily terminated without cause
and who has a positive Bonus Bank balance shall become vested
with respect to such balance and shall be paid in full at the
regular time for making bonus payments net of the impact of a
pro-rata bonus for the year in which he or she is terminated.
Negative Bonus Bank balances are waived.
10. Voluntary Resignation or Termination with Cause
Except as provided for above, voluntary termination of
employment with Johnson Worldwide Associates, Inc. or
termination with cause shall result in forfeiture of the
participant's Bonus Bank balance and pro-rata bonus for the
year of voluntary termination or termination with cause.
11. No Guarantee
Participation in the Plan provides no guarantee that a bonus
under the Plan will be paid. The success of Johnson Worldwide
Associates, Inc., its business units and individual employees,
as measured by the achievement of EVA and individual
contribution, shall determine the extent to which Participants
shall be entitled to receive bonuses thereunder.
12. General Provisions
a) Withholding of Taxes
Johnson Worldwide Associates, Inc. shall have the right to
withhold the amount of taxes, which in the determination
of Johnson Worldwide Associates, Inc., are required to be
withheld under law with respect to any amount due or paid
under the Plan.
b) Expenses
All expenses and costs in connection with the adoption and
administration of the Plan shall be borne by Johnson
Worldwide Associates, Inc.
c) No Prior Right or Offer
Except and until expressly granted pursuant to the Plan,
nothing in the Plan shall be deemed to give any employee
any contractual or other right to participate in the
benefits of the Plan. No award to any such participant in
any Plan Period shall be deemed to create a right to
receive any award or to participate in the benefits of the
Plan in any subsequent Plan Period.
13. Limitations
a) No Continued Employment
Neither the establishment of the Plan or the grant of
an award thereunder shall be deemed to constitute an
express or implied contract of employment of any
participant for any period of time or in any way abridge
the rights of Johnson Worldwide Associates, Inc. to
determine the terms and conditions of employment or to
terminate the employment of any employee with or without
cause at any time.
b) Not Part of Other Benefits
The benefits provided in this Plan shall not be deemed a
part of any other benefit provided by Johnson Worldwide
Associates, Inc. to its employees. Johnson Worldwide
Associates, Inc. assumes and shall have no obligation to
participants except as expressly provided in the Plan.
c) Other Plans
Nothing contained herein shall limit Johnson Worldwide
Associates, Inc.'s power to grant bonuses to employees of
Johnson Worldwide Associates, Inc., whether or not they
are participants in this Plan.
14. a) Bonus Payments
Bonus payments shall be excluded from the computation of
other parts of the eligible executive's personal benefit
and compensation packages, such as, for example, that
executive's retirement contributions and life insurance.
b) Deferral of Bonus Payments
i) Election to Defer - An incumbent in an eligible
executive position may elect to defer all or part of any
bonus that may be awarded to that executive by action of
the Chief Executive Officer of JWA. Such election shall
be irrevocable during the full period of deferral unless
the Chief Executive Officer of JWA, in his sole
discretion, decides to modify it upon a clear showing of
financial hardship suffered or likely to be suffered by
that executive.
ii) Period of Deferral - Normally, all deferrals shall be
for the full term of employment, e.g., until termination
or death. However, each executive may elect to defer his
bonus award for a set period of years subject to the
approval of the Chief Executive Officer of JWA. If the
executive who chose deferral for a specific period
terminates employment before the end of such period, the
Deferred Bonus Account of that executive shall, upon
termination, be distributed in accordance with the
Distribution Provisions in paragraph (iv) below.
iii) Interest Rate - Deferred Bonus awards shall increase
in value during the years prior to deferral at a rate to
be established at the discretion of the Chief Executive
Officer of JWA. Such increase in value shall be credited
to such executive's Deferred Bonus Account as of the end
of each quarter and shall thereafter become part of that
executive's Deferred Bonus Account.
iv) Distribution from Deferred Bonus Accounts - Upon
termination of the executive's employment or the end of
the set period of deferral, the Deferred Bonus Account of
that executive shall be paid to that executive in full in
a single cash payment or in installments over a period of
up to ten (10) years, as detailed below.
If the executive's employment with JWA terminates for any
reason other than death or retirement, the entire unpaid
balance of the Bonus, plus any added value or accrued
interest, shall be paid within ninety (90) days following
the effective date of termination of employment.
If the executive's employment with JWA terminates due to
this retirement, payment of the Deferred Bonus awarded, if
any, plus any added value or accrued interest, for the
fiscal year to which this Plan applies, shall be made, or
continue to be made, as indicated by the executive in his
"Request for Payment" form and as previously approved by
the Chief Executive Officer of JWA.
If the executive dies before he receives the entire bonus,
the entire unpaid balance of the bonus, plus any added
value or accrued interest, shall be paid either within one
hundred twenty (120) days following receipt of notice of
his death by the Director-Human Resources of JWA, or in
such installments over a period of not more than ten (10)
years following his death, as determined by the Chief
Executive Officer of JWA. Bonuses paid in installments
shall bear interest on the unpaid amount during the
installment payment period at a rate to be established at
the discretion of the Chief Executive Officer of JWA.
Bonuses awarded to an executive may not be assigned,
transferred or pledged by the executive either voluntarily
or involuntarily.
The executive may, however, submit a written designation
of beneficiary of the Deferred Bonus Account to the
Director-Human Resources of JWA at any time. In the
absence of a properly designated beneficiary, payment
shall be made to the executive's estate.
15. Board of Directors' Actions
Prior to the beginning of each fiscal year the JWA Board
shall in a meeting or by written consent:
a. Select the eligible positions in the Plan, if any, for
the next fiscal year;
b. Establish the targeted bonus objective for the next
fiscal year; and
c. Establish the tentative allocation (if any) between
specific EVA objectives and JWA total EVA performance
for the next year. Within 90 days after the close of
the fiscal year, the Compensation Committee of the JWA
Board of Directors will, by resolution at a meeting,
or by consent establish the awards, if any, to be
given for performance in the preceding year.
16. Plan Terms
In all cases the terms as set forth in the Plan
document shall have control over this summary.
EXHIBIT A
GUIDELINES FOR AMENDMENT TO EVA TARGET PERFORMANCE LEVELS AND
CAPITALIZATION OF EXPENSES
AMENDMENT TO EVA TARGET PERFORMANCE LEVELS
The EVA performance targets established in the Bonus Plan are intended to
achieve long term improvements in shareholder value. These targets have
been objectively determined based on the historical performance of the
operating units and allocated appropriately to achieve overall corporate
objectives. Changes to these targets are expected to be infrequent.
Nonetheless, situations will arise in which it is appropriate to revise
such objectives. Generally, a target may be revised only in the event of
a significant acquisition or divestiture. All such revisions are at the
discretion of the Chief Executive Officer and the Compensation Committee
of the Board of Directors.
CAPITALIZATION OF EXPENSES
Similarly, certain expenses should not be considered annual expenses due
to their nature. These expenses should be "capitalized" so as to not
distort operating results calculated under EVA in any given year. These
expenses are to be added to the capital base of the business and thus
required to earn a return as long as these capitalized expenses remain a
part of the capital base. The criteria for capitalization of expenses are
as follows:
- Material to the business
- Unusual
- Nonrecurring
- Result in tangible, measurable, long-term benefit to the business.
Some examples of expenses that might be capitalized are as follows:
- Expenses related to consolidation of operating units following an
acquisition
- Expenses related to a plant closing where closing the plant is expected
to lead to operating cost reductions
Some examples of costs that should not be capitalized are as follows:
- Significant advertising campaigns
- Research and development expenses
- Recruiting expenses
All requests for capitalization of expenses will be reviewed by the Chief
Financial Officer. Any revisions to EVA calculations are at the
discretion of the Chief Executive Officer and the Compensation Committee
of the Board of Directors.