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EXHIBIT 10.10.3
ROBERDS, INC.
THIRD AMENDED AND RESTATED
EXECUTIVE COMPENSATION PLAN
Effective for 1998
I. BACKGROUND
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The Roberds, Inc. Executive Compensation Plan is designed to reward executive
officers and other senior managers with annual cash bonuses and grants of stock
options, if the Company's pre-tax profit exceeds certain targets. As pre-tax
profits grow, the awards increase. The system is designed such that cash
bonuses, profit-sharing contributions, and stock awards begin to be earned at a
pre-tax earnings threshold ("Threshold"), established annually by the
Compensation Committee of the Board of Directors ("Committee"), and grow
substantially as the Company's internal target for pre-tax earnings ("Target")
is approached. If the Target is exceeded, there are significant increases in all
forms of compensation.
All awards made under the Plan are made by the Committee. In general, the Chief
Executive Officer will make recommendations to the Committee regarding awards to
be made; however, the Committee can also initiate awards on its own.
II. CASH BONUS PLAN (EXHIBIT A)
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A. PROFIT PLAN. The annual profit plan is developed by executive
management on a market-by-market basis. It is based on the expected
performance for the year, adjusted for the impact of new store openings
and other known changes in the business, and then "stretched" to
develop high, but reasonable, targets for management. The internal plan
is based on a Target established annually by the Committee, upon the
recommendation of management.
B. PRE-TAX PROFIT. All calculations under the Plan start with pre-tax
profit for the year. This is the expected audited, pre-tax earnings of
the entire Company, with all known adjustments for the year, but before
any year-end bonuses or profit-sharing contributions. The Committee can
exclude certain items from the calculation of pre-tax earnings if, in
its judgment, management cannot exert significant influence over the
outcome of those items.
C. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer will be paid a
cash bonus, expressed as a percentage of his base pay, depending the
performance of the Company against its profit plan for the year. Below
the Threshold, the Chief Executive Officer earns no cash bonus.
Beginning at the Threshold, he earns a bonus equal to a percentage of
his base pay. The bonus percentage increases with profits to a maximum
percentage of his base pay set annually by the Committee, which is the
Ceiling. The percentages are shown on Exhibit A, provided to the
Committee.
D. OTHER SENIOR EXECUTIVES. The other executive officers, and other senior
managers, share in a pool of money that also increases as pre-tax
profits increase. The pool is calculated as a percentage of the base
pay of the eligible managers. Below the Threshold, there is no money in
the pool. Beginning at the Threshold, the pool is a small percentage of
the base pay of the eligible managers, growing to maximum percentage of
their base pay at the Ceiling.
Once the size of the pool is determined, it is allocated to the
participants based on their relative "shares" in the bonus pool. The
shares are determined by reference to each manager's base pay as a
percentage of the
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base pay of the group. Certain managers have commission and override
arrangements that are a part of their compensation arrangements. For
these individuals, "base pay" is adjusted to reflect their estimated
total compensation for the year, before any year-end bonuses. Exhibit
B, provided to the Committee, illustrates the individual payouts to the
group at various levels of profitability.
Once the amount of each individual's bonus is determined under the
formula, the Chief Executive Officer can recommend that the Committee
reduce that amount by up to 50 percent, to reflect each individual
executive's performance. Any amounts that become available as the
result of such reductions can be used to increase other executives'
bonuses, by up to 50 percent, to reflect their individual performance.
However, the total amount awarded to all executives cannot exceed the
total amount derived under the formula.
The Committee may establish a percentage of the cash bonus pool to be
held in a discretionary "pot." This money can be used by the Chief
Executive Officer to cure any inequities that may arise under the
formula system or to recognize outstanding achievements by an
individual or group. This pot does not have to be awarded. The Chief
Executive Officer will make specific recommendations to the Committee
for any awards from this pool.
E. PROFIT-SHARING CONTRIBUTION. The Company has no fixed formula for
contributions to the profit-sharing plan. The contributions to the
profit-sharing plan will be adjusted annually by the Committee, based
on the recommendation of management. However, in doing so, the
Committee should be guided by the principles set forth in this Plan for
cash bonus awards: below the Threshold, no profit-sharing contribution
should be made; once the Threshold is reached, contributions can be
made at a low percentage of pre-tax earnings; that rate should grow as
pre-tax earnings approach the Target; and should increase more rapidly
as the Target is exceeded. The Committee can elect to replace or
supplement profit-sharing contributions with "matching contributions"
to the Company's section 401(k) plan.
F. BONUSES TO OTHER EMPLOYEES. Outside of the Plan, the Company may also
award cash bonuses to other lower-level employees not covered by the
Plan. These awards are made in the discretion of management; however,
none of these awards can be made to individuals participating in the
Plan.
G. DISCRETIONARY POOL. While the Plan is largely formula-driven, it is
recognized that circumstances can arise in which the Company fails to
meet its pre-tax profit plan (i.e., falls below the Threshold Amount),
but such shortfall is the result of unusual conditions or market
forces. Likewise, the Company could fail to meet its pre-tax profit
plan, but significantly outperform the comparable companies. In these
instances, management may have performed well under difficult
circumstances, but its effort simply did not yield the planned pre-tax
earnings.
In order to address such situations, the Plan permits the establishment
of a Discretionary Pool, so that cash awards can be made to key
executives even though the Company fails to achieve the Threshold
Amount. The Discretionary Pool shall be defined as a percentage of the
base pay of the executives described in sections C and D above. Such
percentage shall be established annually by the Committee. Awards from
the Discretionary Pool shall be approved by the Committee.
III. STOCK OPTION PLAN (EXHIBIT C)
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A. GENERALLY. The stock option award plan follows essentially the same
approach as the cash bonus plan. Again, all awards will be made by the
Committee.
In general, the Company will issue Incentive Stock Options ("ISOs")
under the stock option plan. However, the Committee has the ability to
issue a variety of stock-based incentives, as set forth in the Roberds,
Inc. 1993 Stock Incentive Plan. Furthermore, some grants of ISOs may be
subject to the $100,000 annual limitation imposed by the Internal
Revenue Code, and such grants may be, in whole or in part, converted to
non-qualified options if they exceed such limitation.
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Stock options will be awarded as percentage of each executive's base
pay. No awards will be made if pre-tax earnings are below the
Threshold. Beginning at the Threshold, awards are made based on a scale
shown on Exhibit C, as distributed to the Committee. The award
percentage grows as the performance against the profit plan increases.
The awards reach a maximum percentage of an individual's base pay at
the Ceiling.
Once the dollar value of the stock options is determined under the
formula, that value is converted to a number of shares based on the
then-current value of Roberds' stock at the date of grant.
Similar to the cash bonus plan, the stock option plan also reserves a
pot of shares to be awarded by the Committee upon the recommendation of
the Chief Executive Officer. These additional shares can be used to
cure inequities in the formula system or to reward unusual efforts or
results beyond those recognized by the formula system.
The stock option plan includes all participants in the cash bonus plan.
Outside of the Plan, the Committee may award stock options to other
lower-level employees, upon the recommendation of management; provided,
however, that no such awards can be made to participants in the Plan.
B. CHIEF EXECUTIVE OFFICER PLAN. The Chief Executive Officer's stock
option plan is set at a slightly higher percentage of his base pay than
that used for the other employees, as shown on Exhibit C distributed to
the Committee. This is done to reinforce his focus on long-term growth
and increases in shareholder value.
Approved by Compensation Committee, February 17, 1998
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