As Amended Through
October 15, 1998
SCHULTZ SAV-O STORES, INC.
OFFICER ANNUAL INCENTIVE PLAN
1. Purpose
The purpose of the Schultz Sav-O Stores, Inc. Officer Annual Incentive
Plan ("Plan") is to (a) reward Participants on an individual and team basis for
the achievement of corporate financial goals and objectives which increase the
economic value of the Company for the benefit of all shareholders; (b) provide
competitive levels of compensation to its executive officers to enable the
Company to attract and retain highly qualified and talented individuals who are
able to exert a significant impact on the economic value of the Company for the
benefit of all shareholders; (c) encourage teamwork and cooperation in the
achievement of corporate financial goals and objectives; and (d) recognize
differences in the performance of individual Participants.
2. Plan Administration
The Compensation and Stock Option Committee of the Board of Directors
(the "Committee") shall have full power, authority and responsibility for the
design, construction, administration and interpretation of the Plan. The
Committee may from time to time or at any time make such decisions and adopt
such rules and regulations for the design, construction, administration and
interpretation of the Plan as it deems appropriate. Any such decision made by
the Committee shall be final, conclusive and binding upon all Participants and
any person claiming under or through them. A majority of the members of the
Committee shall constitute a quorum. All determinations of the Committee shall
be made by at least a majority of a quorum. Any decision or determination
reduced to writing and signed by all of the members of the Committee shall be
fully as effective as if it had been made by a unanimous vote at a meeting of
the Committee duly called and held.
3. Definitions
3.1 "Base Salary" means the dollar amount of a Participant's
annual base salary actually earned during the Plan Year,
without adjustment for bonuses (hereunder or otherwise),
salary deferrals, value of benefits, stock option or other
equity-based incentive award grants or exercises, imputed
income, special payments, amounts contributed to or earned
under the Company's Retirement Savings Plan or its Executive
Benefits Restoration Plan or similar existing or future
plans.
3.2 "Base Salary Percentage" means the percentage arrived at by
dividing a Participant's Base Salary for a specified Plan
Year by the aggregate Base Salaries of all Participants for
the same Plan Year.
3.3 "Bonus Amount" means a Participant's annual aggregate bonus
amount which is calculated in the manner set forth in
Section 5.1.
3.4 "Bonus Pool" means the dollar amount of the cash award pool
established for the specified Plan Year for the distribution
of Bonus Awards to Participants for such Plan Year,
calculated as follows:
Bonus Pool = 10% of the dollar amount of the Current Year
EVA + 5% of the dollar amount of the Incremental EVA +
$25,000 for each percentage point increase, if any, in net
sales of the Company for the specified Plan Year over net
sales of the Company in the preceding Plan Year, each as
reflected in the Company's audited financial statements for
such Plan Years, subject to adjustment as determined by the
Board to take into account extraordinary, unusual or
nonrecurring events or circumstances (other than the
acquisition of other supermarkets or businesses).
3.5 "Company Performance Bonus Pool" shall be equal to one-half
of the Bonus Pool for the specified Plan Year.
3.6 "Current Year EVA" means the EVA as calculated for the
specified Plan Year.
3.7 "Economic Value Added" or "EVA" means the NOPAT that remains
after subtracting the product of the Threshold Rate of
Return multiplied by the Investment Amount, expressed as
follows:
EVA = NOPAT C [Threshold Rate of Return x Investment Amount]
EVA may be positive or negative.
3.8 "Incremental EVA" means the Current Year EVA minus the EVA
for the prior Plan Year. For purposes of calculating
Incremental EVA for the 1995 Plan Year, the EVA for 1994 was
$1,128,000. Incremental EVA may not be negative.
3.9 "Individual Performance Bonus" shall have the meaning set
forth in Section 5.1.
3.10 "Individual Performance Bonus Pool" shall be equal to
one-half of the Bonus Pool for the specified Plan Year.
3.11 "Individual Performance Factor" shall have the meaning set
forth in Section 5.2.
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3.12 "Investment Amount" means the dollar amount of the Company's
average investment for the Plan Year, calculated by adding
the investment reflected on the Company's financial
statements as of the end of each fiscal quarter, and then
dividing by four, where investment is determined as follows:
Investment = indebtedness for borrowed money + shareholders'
investment + obligations under capital leases
3.13 "NOPAT" means the Company's net earnings after tax (without
reduction for any Bonus Amounts or Bonus Pool accrued, paid
or payable under the Plan), plus interest expense after tax
for the Plan Year, all as reflected in the Company's audited
financial statements for the Plan Year.
3.14 "Participant" means an eligible executive officer of the
Company under Section 4.1 who has been selected to
participate in the Plan for the Plan Year pursuant to
Section 4.2.
3.15 "Plan Year" means the one-year period coincident with the
Company's applicable fiscal year.
3.16 "Threshold Rate of Return" shall be the target percentage
rate of return on the Investment Amount for the specified
Plan Year established by the Committee at the beginning of
each Plan Year based on the Company's weighted average cost
of capital. For the 1995 Plan Year, the Threshold Rate of
Return has been established by the Committee as 9.1%.
4. Eligibility
4.1 Eligible Executive Officers. In general, all executive
officers of the Company (which generally shall include those
Company officers listed as such in the Company's annual
report to shareholders) at the beginning of a Plan Year will
be eligible for participation in the Plan. However,
nomination of an executive officer by the Chief Executive
Officer and approval by the Committee will be required for
actual participation.
4.2 Nomination and Approval. Each Plan Year, the Company's Chief
Executive Officer will nominate eligible executive officers
to participate in the Plan for the specified Plan Year. The
Committee will have the final authority to select the
Participants for such Plan Year from among the eligible
executive officers nominated by the Company's Chief
Executive Officer. Selection normally will take place, and
will be communicated to each Participant, prior to or
shortly after the beginning of the specified Plan Year.
5. Bonus Amounts; Individual Performance Factors
5.1 Calculation of Bonus Amounts. Each Participant's Bonus
Amount for a specified Plan Year will be equal to his
pro-rata portion of the Company Performance Bonus Pool plus
his Individual Performance Bonus. For any
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specified Plan Year, a Participant's pro-rata portion of the
Company Performance Bonus Pool shall be equal to the product
of the Participant's Base Salary Percentage multiplied by
the Company Performance Bonus Pool. The Participant's
Individual Performance Bonus shall be equal to the product
of the Participant's Base Salary Percentage multiplied by
the Individual Performance Bonus Pool multiplied by his
Individual Performance Factor; provided, however, that the
aggregate Individual Performance Bonuses for all
Participants for a specified Plan Year may not exceed the
Individual Performance Bonus Pool for such Plan Year. If the
aggregate Individual Performance Bonuses for all
Participants for a specified Plan Year would exceed the
Individual Performance Bonus Pool for such Plan Year, then
the Committee in its discretion shall adjust the
Participants' Individual Performance Bonuses so that such
aggregate Individual Performance Bonuses will not exceed the
Individual Performance Bonus Pool for such Plan Year.
5.2 Individual Performance Factor Calculation. Each
Participant's Individual Performance Factor for a Plan Year
will be based on the Participant's accomplishment of
individual and/or group financial and/or other goals or
objectives established by the Company's Chief Executive
Officer, with the approval and ratification of the Committee
(or as determined solely by the Committee in the case of the
Company's Chief Executive Officer), as of the beginning of
the specified Plan Year. Whenever possible, individual
performance will be evaluated according to quantifiable or
objective benchmarks of success and the level of the
Participant's relative achievement of such quantifiable
benchmarks. An achievement percentage continuum that ranges
from achieving 0% to 150% of the quantifiable benchmark
opportunity will be established and the Participant's
relative level of achievement of such quantifiable
benchmarks will be enumerated accordingly from 0 to 1.5
based on such continuum. After the end of a Plan Year, the
Company's Chief Executive Officer, with the approval and
ratification of the Committee (or solely by the Committee in
the case of the Company's Chief Executive Officer), will
evaluate and rate the Participant's performance over the
Plan Year and the relative contribution of the Participant
to the achievement of the previously established individual
or group financial or other performance goals and
objectives, and this evaluation will result in the
Participant's Individual Performance Factor being determined
according to the following schedule:
Performance Individual
Individual Rating Performance Factor
Very Good 1.5 1.5
Good 1.0
Satisfactory 0.5
Marginal 0.0
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6. Change in Status During the Plan Year
6.1 New Hire or Promotion
An executive officer who is newly hired or promoted during a
specified Plan Year to an executive officer position which,
if held by the Participant at the beginning of the Plan
Year, would have otherwise allowed the Participant to be
eligible for participation in the Plan will generally not be
eligible to receive a Bonus Amount for such Plan Year;
provided, however, that the Company's Chief Executive
Officer, with the approval and ratification of the Committee
(or solely by the Committee in the case of the Company's
Chief Executive Officer) may waive this policy and allow
such executive officer to receive a pro rata Bonus Amount
for such Plan Year based on the percentage of the Plan Year
the executive officer was employed in such eligible
executive officer position (determined based on the actual
number of full months of employment in such executive
officer position during the Plan Year divided by 12). Any
such waiver of this policy will take into account such
factors as the executive officer's contributions to the
Company's achievement of corporate financial goals and
objectives in such executive officer position and the
portion of the Plan Year the individual actually spent in
such executive officer position.
6.2 Death, Disability or Retirement
If a Participant's employment as an effective officer is
terminated during a Plan Year by reason of death, disability
or normal or early retirement, the Participant (or his or
her heirs or personal representatives in the case of death)
will receive a pro rata Bonus Amount for such Plan Year
based on the percentage of the Plan Year the Participant was
employed in such position (determined based on the actual
number of full months of employment of such Participant
during the Plan Year divided by 12).
6.3 Termination for any Other Reason
If a Participant's employment is terminated during a Plan
Year for any reason other than death, disability or
retirement, such Participant will generally not be eligible
to receive a Bonus Amount for such Plan Year; provided,
however, that the Company's Chief Executive Officer, with
the approval and ratification of the Committee (or solely
the Committee in the case of the Company's Chief Executive
Officer) may waive this policy and allow such Participant to
receive a pro-rata Bonus Amount for such Plan Year based on
the percentage of the Plan Year the executive officer was
employed in such eligible executive officer position
(determined based on the actual number of full months of
employment in such executive officer position during the
Plan Year divided by 12).
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7. Administrative Provisions
7.1 Amendments and Terminations. The Company's Board of
Directors shall have the right to modify or amend this Plan
in whole or in part from time to time or at any time, or
suspend it or terminate it entirely; provided, however, that
no such modification, amendment, suspension or termination
may, without the consent of any affected Participants (or
beneficiaries of such Participants in the event of death),
reduce the rights of any such Participants (or
beneficiaries, as applicable) to a payment or distribution
of a Bonus Amount already determined and earned under Plan
terms in effect prior to such change. A Participant shall
not be deemed to have earned or have any right to any Bonus
Amount for a Plan Year until completion of that Plan Year
and the determination of Bonus Amounts for such Plan Year by
the Company's Chief Executive Officer and/or the Committee.
7.2 Effect of Award on Other Employee Benefits. By acceptance of
a Bonus Amount, each Participant agrees that such Bonus
Amount is special additional compensation and that it will
not affect adversely any other employee benefit (e.g.,
Retirement Savings Plan, Executive Benefits Restoration
Plan, life insurance, etc.), in which the Participant
participates or to which he is entitled, except as provided
in Section 7.4 below. The existence of the Plan or the grant
of any Bonus Amounts hereunder shall not restrict the
ability of the Committee or the Board to grant any other
discretionary bonuses to any executive officers, employees
or others outside of the Plan.
7.3 Retirement Programs; Severance Agreements. Bonus Amounts
paid under this Plan shall be included in the Participant's
compensation for purposes of the Company's Retirement
Savings Plan, Executive Benefits Restoration Plan, any other
qualified employee benefit plan and any applicable key
executive employment and severance agreement with the
Company.
7.4 No Right to Continued Employment or Additional Bonus
Amounts. A Participant's eligibility for or actual receipt
of a Bonus Amount in any specified Plan Year shall not give
the Participant any right to continued employment with the
Company, and the right and power to dismiss or terminate the
employment of the Participant for any reason whatsoever
(other than as otherwise specified in any applicable
contract of employment between the Participant and the
Company) is specifically reserved to the Company. In
addition, the selection of an eligible executive officer as
a Participant in the Plan for any Plan Year shall not
require or infer the inclusion or selection of such person
as a Participant for any subsequent Plan Year or, if such
person is subsequently so included or selected, shall not
require that the same Bonus Amount provided to the
Participant under the Plan for an earlier Plan Year be
provided to such Participant for the subsequent Plan Year.
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7.5 Adjustments to Performance Goals. When a performance goal or
objective is based on Economic Value Added or other
quantifiable financial or accounting measures, it may be
appropriate to exclude certain items in order to properly
measure performance. The Committee in its discretion will
decide those items that shall be considered in adjusting
actual results. For example, some types of items that may be
considered for exclusion are:
a. Extraordinary Items. Any gains or losses which
will be treated as extraordinary in the Company's
financial statements under generally accepted
accounting principles.
b. Unanticipated Nonrecurring Non-Ordinary Course
Items. Unanticipated, nonrecurring, nonordinary
course items such as:
(i) Gains or losses from the sale or
disposal of real estate or property.
(ii) Gains resulting from insurance
recoveries when such gains relate to
claims filed in prior years.
(iii) Losses resulting from natural
catastrophes, when the cause of the
catastrophe is beyond the control of the
Company and did not result from any
failure or negligence on the Company's
part.
(iv) Changes in accounting policies or
practices.
7.6 Payment of Bonus Amounts. The Bonus Amounts payable for a Plan Year as
determined by the Chief Executive Officer and/or Committee shall be
distributed by the Company as soon as practicable after the date of
the first public release of the Company's complete audited financial
statements for such Plan Year.
8. Miscellaneous
8.1 Indemnification. Each person who is or who shall have been a member of
the Committee or of the Company's Board of Directors, shall not be
liable for, and shall be indemnified and held harmless by the Company
against and from, any and all loss, cost, liability or expense
(including attorneys' fees and disbursements) that may be imposed upon
or incurred by him or her in connection with any claim, action, suit
or proceeding to which he or she may be a party by reason of any
action taken or failure to act under or pursuant to the Plan. The
foregoing right of indemnification shall not be exclusive of any other
rights of indemnification, advancement of expenses or reimbursement to
which such persons may be entitled under the Company's Articles of
Incorporation, By-Laws, Indemnity Agreements, as a matter of law under
the Wisconsin
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Business Corporation Law, under applicable insurance policies or
otherwise, or any other power or authority that the Company may have
to indemnify or reimburse them or hold them harmless.
8.2 Expenses of the Plan. The expenses of administering this Plan
shall be borne by the Company.
8.3 Withholding Taxes. The Company shall deduct from all Bonus
Amounts paid or payable under the Plan any federal or state taxes
required by law to be withheld with respect to such payments.
8.4 Non-Transferrable Benefits. Bonus Amounts (or any interests
therein) paid or payable under the Plan are personal to
Participants and are non-transferrable and non-assignable during
the life of a Participant.
8.5 Unsecured Rights. The right of any Participant to receive a Bonus
Amount under the Plan when determined and earned shall be an
unsecured claim against the general assets of the Company and the
Participant shall have no rights in or against any specific
assets of the Company as a result of participation hereunder.
8.6 Powers of Company Not Affected. The existence of the Plan shall
not affect in any way the right or power of the Company, the
Board of Directors or its shareholders to make or authorize any
or all adjustments, recapitalization, reorganizations or other
changes in the Company's capital structure or its business, or
any merger or consolidation of the Company, or dissolution or
liquidation of the Company, or any sale or transfer of all or any
part of its assets or business or any other corporate act or
proceeding, whether of a similar character or otherwise.
8.7 Governing Law. This Plan shall be construed in accordance with
and governed by the laws of the State of Wisconsin.
8.8 Effective Date. The effective date of the Plan is January 1,
1995.
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