2006 Executive Incentive Plan
Exhibit 10.19
FY2006 Executive Incentive Plan
2006
Executive Incentive Plan
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Table of Contents |
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INTRODUCTION AND PRINCIPLES |
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PLAN PARTICIPATION |
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EFFECTIVE DATE |
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PLAN DESIGN / MEASURES, & OBJECTIVES |
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PLAN MIX |
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TARGET INCENTIVE BONUS |
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PAY-OUT CALCULATION FOR CASH INCENTIVES |
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BASIS OF MEASURES AND PAYOUT SCHEDULE |
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OPERATIONS OFFICERS |
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STAFF OFFICERS |
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CALCULATION OF BONUS PAYMENTS |
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GENERAL RULES |
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CASH ADVANCES |
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INCOME TAX |
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TRANSFERS/NEW HIRES/TERMINATIONS/PART TIME PARTNERS |
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TRANSFERS |
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NEW HIRES |
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CALCULATION OF PRORATED AWARDS |
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EXCEPTIONS TO THE PLAN |
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OTHER TERMS |
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ACQUISITIONS AND OTHER UNUSUAL BUSINESS SITUATIONS |
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BUSINESS UNIT REVENUE/PROFIT/EXPENSE |
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COMPANY RIGHTS |
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June 22, 2005
Section A |
| Introduction and Principles |
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| The FY2006 Executive Incentive Plan (EIP) provides an opportunity for executives of Cintas to share in the companys success. Year-end bonus awards are paid if performance measures are met or exceeded. Awards are tied directly to the annual performance of Cintas and its divisions. |
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| Please note that the EIP is not just an individual incentive plan but rather, the recognition of both individual and organizational success. |
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| Every executive will have at least 50% of their targeted incentive bonus based on the relevant Corporate measure (profit as a % of sales, % of revenue growth or EPS growth. As such, we all succeed or fail as One Team. |
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| Plan Participation |
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| This plan applies to all Cintas Officers. |
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| Effective Date |
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| This Plan year is effective from June 1, 2005 until the end of our fiscal year, May 31, 2006 and it supersedes all prior EIP or officer compensation plans. Cintas reserves the right to amend and/or adjust this plan based on the strategic needs of our business. Communication to our participating partners will be made in a timely fashion. |
Section B |
| Plan Design / Measures, & Objectives |
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| Plan Mix |
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| The FY2006 EIP introduces the concept of plan mix. Each participating officer will share in the success of Cintas based on three (3) different compensation vehicles; base salary, incentive bonuses, and long term incentives (i.e. stock and stock options). |
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| Operations Officers will be eligible for cash incentive bonuses tied to the following; a business unit percent of Profit as a % of Sales objective and a business unit percent of Revenue Growth objective. These objectives will be linked to the Operations Officers individual level of responsibility. Additionally, Operations Officers will be eligible for long term incentives (LTI) based on the achievement of the combination of % of Sales Growth and Profit as a % of Sales in their areas of responsibility (Cintas Rule 35 calculation) and Cintas Earnings per Share (EPS) Growth. |
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| Staff Officers will be eligible for cash incentive bonuses tied to both a Cintas EPS Growth, and the Individual Goals linked to the Staff Officers individual area of responsibility. Additionally, Staff Officers will be eligible for long term incentives (LTI) based the same formula as their annual cash incentive bonus. |
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| For All Officers covered by the FY2006 EIP, an officer could earn 0% up to a maximum of 200% of the cash bonus award depending on their overall performance in their two cash incentive bonus objectives. Additionally, depending on the results of the two LTI objectives, an officer could earn 0% LTI up to a maximum of 200% of the LTI award if that performance target is achieved. |
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| Target Incentive Bonus |
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| The target incentive bonus is the total cash incentive amount earned at the target objectives. Total Targeted Cash (TTC) represents an individuals base salary plus targeted cash incentives. Target bonus percentages may vary by position/level. |
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| Pay-Out Calculation for Cash Incentives |
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| For each measure, after the planned threshold is achieved, pay-out for that measure begins. If the target level is achieved, 100% of the bonus amount for that measure is earned, and if you achieve the level of maximum payout, 200% of the targeted award is earned. |
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| Basis of Measures & Payout Schedule |
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| The following charts describe the Basis of Measures, Objectives, and Payout Schedules for Corporate Staff and Division Officers Annual Bonus and LTI Awards. |
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| Operations Officers | ||||
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| Cash Incentive Bonus | ||||
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| Business Unit Profit as a % of Sales | ||||
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| Weighting |
| Level of Achievement |
| Bonus Payout % |
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| 50% |
| Below Threshold |
| 0% |
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| Threshold to Target |
| 50% of target and then straight line bonus payout based on % of profit growth achieved |
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| Target |
| 100.00% |
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| Target to Maximum |
| Accelerated straight line bonus payout based on % of profit growth achieved |
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| Maximum |
| 200.00% |
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| Business Unit Percent of Revenue Growth | ||||
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| Weighting |
| Level of Achievement |
| Bonus Payout % |
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| 50% |
| Below Threshold |
| 0% |
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| Threshold to Target |
| 50% of target and then straight line bonus payout based on % of revenue growth achieved |
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| Target |
| 100.00% |
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| Target to Maximum |
| Accelerated straight line bonus payout based on% of revenue growth achieved |
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| Maximum |
| 200.00% |
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| LTI Award | ||||
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| Operational Goals (Combination of Revenue Growth % Plus Profit %) | ||||
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| Weighting |
| Level of Achievement |
| LTI Award% |
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| 50% |
| Below Threshold |
| 0% |
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| Threshold to Target |
| 50% of target and then predetermined levels based on hitting performance targets |
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| Target |
| 100.00% |
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| Target to Maximum |
| Predetermined levels based on hitting performance targets |
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| Maximum |
| 200.00% |
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| Cintas EPS | ||||
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| Weighting |
| Level of Achievement |
| LTI Award% |
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| 50% |
| Below Threshold |
| 0% |
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| Threshold to Target |
| 50% of target and then predetermined levels based on hitting performance targets |
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| Target |
| 100.00% |
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| Target to Maximum |
| Predetermined levels based on hitting performance targets |
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| Maximum |
| 200.00% |
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| Staff Officers | ||||
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| Cash Incentive Bonus | ||||
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| Individual Goals | ||||
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| Weighting |
| Level of Achievement |
| Bonus Payout % |
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| 50% |
| Does Not Meet Goals |
| 0% |
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| Meets Most Goals |
| 50% |
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| Meets Goals |
| 100.00% |
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| Exceeds Goals |
| 150.00% |
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| Outstanding Achievement |
| 200.00% |
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| Cintas EPS | ||||
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| Weighting |
| Level of Achievement |
| Bonus Payout % |
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| 50% |
| Below Threshold |
| 0% |
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| Threshold to Target |
| 50% at threshold and then predetermined levels for hitting EPS Performance Targets |
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| Target |
| 100.00% |
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| Target to Maximum |
| Predetermined levels for hitting EPS Performance Targets |
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| Maximum |
| 200.00% |
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| LTI Award | ||||
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| Individual Goals | ||||
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| Weighting |
| Level of Achievement |
| LTI Award % |
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| 50% |
| Does Not Meet |
| 0% |
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| Meets Most Goals |
| 50% and then predetermined levels based on hitting performance targets |
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| Meets Goals |
| 100.00% |
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| Exceeds Goals |
| Predetermined levels based on hitting performance targets |
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| Outstanding Achievment |
| 200.00% |
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| Cintas EPS | ||||
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| Weighting |
| Level of Achievement |
| LTI Award % |
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| 50% |
| Below Threshold |
| 0% |
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| Threshold to Target |
| 50% and then predetermined levels based on hitting performance targets |
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| Target |
| 100.00% |
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| Target to Maximum |
| Predetermined levels based on hitting performance targets |
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| Maximum |
| 200.00% |
Section C |
| Calculation of Bonus Payments |
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| General Rules |
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| Bonus calculations will be made using year-end actual results, subject to adjustment at the discretion of the CEO to exclude items that are not operational and therefore do not reflect the years performance against objectives, such as accounting principle changes or revenue from an acquisition that was not in the business plan. (See Section E for more detail). |
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| In addition, any automatic payroll deductions elected by the partners (e.g. 401K, or company loan repayments as the CEO deems necessary, etc) will be deducted from their bonus. |
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| Partners who receive an overpayment of their award are responsible for reimbursing Cintas the amount of the overpayment, except where prohibited by law |
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| Cash Advances |
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| No cash advances will be paid against EIP awards. |
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| Income Tax |
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| Cash payments are treated as ordinary income, or according to local legislation, and are subject to withholding for all applicable taxes. |
Section D |
| Transfers/New Hires/Terminations/Part Time Partners |
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| Transfers |
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| The partners Comp Plan will be changed to properly incentivise the partner for their new responsibility, at the discretion of the CEO. Any final award calculation will be calculated by taking into account the time spent under each plan. If a partner is transferred from another incentive program or non-EIP-eligible position to an EIP-eligible role, or vice versa, the partner will be aligned to the appropriate Basis of Measures for the months spent in the eligible position.Any bonus will be paid on the normal payment cycle on the designated pay date. |
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| New Hires |
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| EIP eligible Officers hired during the year may receive a pro-rated award or may be given a special plan for the remainder of the fiscal year as determined by the CEO. |
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| Calculation of Prorated Awards |
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| The Company will pay the partner a pro rata share of the bonus earned from the beginning of the fiscal year until the point of the employees termination in the event that the employee retires, or their position is eliminated. If the employee is terminated because of poor performance, any bonus to be paid will be determined at the sole discretion of the Company, using its best judgment, taking all factors into consideration so as to be fair to both the partner and the Company. In the event that the partner leaves the Company during the year for any reason, or in the event the partner is terminated because of dishonesty, insubordination, or gross neglect, etc., the partner shall not be entitled to any of the bonus earned up to the point of his termination. |
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| Exceptions to the plan |
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| In general, no exceptions are made to the Basis of Measures alignment for eligible partners. If special circumstances cause the Basis of Measures alignment to be unfair to a particular individual or the Company, an exception request must be approved by the CEO who may approve the request at his discretion. |
Section E |
| Other Terms |
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| Acquisitions and Other Unusual Business Situations |
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| The purpose of the formula and the Incentive Plan is to reward individuals for normal operating profits earned within his area of responsibility. Any incidences that abnormally inflate the profits of an operation such as the purchase or the sale of rental volume, the unusual sale of operating assets, or any other abnormal operational situation that causes the profits of the individual operation to abnormally increase, the Plan shall be adjusted so as to avoid any inequitable results to the partner or the Company. |
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| Business Unit Revenue/Profit/Expenses |
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| All financial numbers related to business unit/Cintas performance will be determined by the Cintas Accounting Department with the approval of our CFO and CEO. In cases of dispute, the Cintas Accounting Department figures will govern performance as it relates to calculating all bonus plan payouts. |
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| Company Rights |
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| Even though it is the intention of the Company to continue this Plan on an ongoing basis, from year to year, so that the employee can rely upon it in making long-term operational decisions, the Company does reserve the right to alter the program as it sees fit, from year to year. |
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FY2006 Executive Incentive Plan
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