As Amended Through
January 28, 1999
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 twenty-five
percent (25%) 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 seventy-five
percent (75%) 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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