Document:

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                                                                   EXHIBIT 10.22

                          LEVI STRAUSS ASSOCIATES INC.
                           1996 SPECIAL DEFERRAL PLAN
                                 (1994 Grants)

     1.  PURPOSE.

     The purpose of this Levi Strauss Associates Inc. Special Deferral Plan
(1994 Grants) (the "Plan") is to enable a select group of highly compensated
management employees of Levi Strauss Associates Inc. and its subsidiaries
(collectively, the "Company") to convert the compensation element of certain
stock appreciation rights into deferred cash compensation.  By means of this
Plan, the Company seeks to retain and motivate this group of key management
personnel.

     2.   DEFINITIONS.

          2.1  ADMINISTRATOR.  "Administrator" means the Personnel Committee of
the Board, another committee of the Board appointed pursuant to Section 3.1, or
the Board itself, administering this Plan as provided in Section 3.1.

          2.2  BENEFICIARY.  "Beneficiary" means a beneficiary designated by a
Participant pursuant to Section 6.5.

          2.3  BOARD.  "Board" means the Board of Directors of LSAI Holding
Corp., the parent corporation of the Company.

          2.4  DEFERRAL AMOUNT.  "Deferral Amount" is the portion of an SAR
Conversion Amount that a Participant elects to defer, or to continue to defer,
under this Plan.

          2.5  ELECTED DISTRIBUTION YEAR.  "Elected Distribution Year" means the
calendar year selected by a Participant to receive payment of part, or all (at
the Participant's election), of the balance credited (at the time of payment) to
a Reserve Account of the Participant.  The Elected Distribution Year cannot be
earlier than the calendar year following the calendar year in which a Reserve
Account Vests nor later than the calendar year in which the Reserve Account's
Last Payment Date occurs; however, a Reserve Account may have more than one
Elected Distribution Year.

          2.6  FIRST PAYMENT DATE.  "First Payment Date" means the earlier of
(i) the first business day of January of the Elected Distribution Year and (ii)
the first business day of January immediately following the date a Participant's
employment by the Company terminates, whether voluntarily, involuntarily, or by
reason of the Participant's death or incapacity.

          2.7  LAST PAYMENT DATE.  "Last Payment Date" means the first business
day of January following the seventh anniversary of the grant date of an SAR.
<PAGE>

          2.8  PARTICIPANT.  A "Participant" is a Company employee who, on or
before August 31, 1996, (a) holds one or more SARs, (b) elects to participate in
this Plan pursuant to Section 4.1, and (c) in connection with that election
surrenders his or her SARs to the Company.

          2.9  PARTICIPATION YEAR.  "Participation Year" means a fiscal year of
the Company during which an individual is a Participant.

          2.10  RESERVE ACCOUNT.  "Reserve Account" means an unfunded, unsecured
book reserve account maintained on behalf of a Participant in respect of a
Vested or Vesting portion of an SAR pursuant to Section 6.

          2.11  SAR.  "SAR" means each Vested or Vesting portion of a stock
appreciation right issued by Levi Strauss Associates Inc. under its 1992
Executive Stock Appreciation Rights Plan.  For example, if a stock appreciation
right was granted for 900 shares, Vesting in equal increments in 1995, 1996, and
1997, each of those increments would be an "SAR" for purposes of this Plan.

          2.12  SAR CONVERSION AMOUNT.  "SAR Conversion Amount" means the excess
of (i) $265 (plus an increment based upon money-market fund rates measured from
April 17, 1996 to the date on which an SAR Conversion Amount is credited to a
Participant's Reserve Account) over (ii) the nominal exercise price per share of
an SAR, multiplied by the number of nominal shares as to which the SAR was
granted.

          2.13  SAR CONVERSION ELECTION.  "SAR Conversion Election" means an
election pursuant to Section 4.1.

          2.14  SAR PLAN.  "SAR Plan" means the Company's 1992 Executive Stock
Appreciation Rights Plan.

          2.15  SUBSEQUENT DEFERRAL ELECTION.  "Subsequent Deferral Election"
means an election made pursuant to Section 5.2.

          2.16  VESTED.  "Vested" has the meaning given in Section 4.2.

     3.   ADMINISTRATION.

          3.1  ADMINISTRATOR.  This Plan shall be administered by (i) the
Personnel Committee of the Board, (ii) if so determined by the Board, by a
committee consisting of not less than two directors, or (iii) in default of a
committee acting pursuant to (i) or (ii), the Board (in any case, the
"Administrator"). The Administrator may act only by a majority of its members.
The Administrator may delegate administrative duties to such employees of the
Company as it deems proper. The Board at any time may terminate the authority
delegated to any committee pursuant to this Section 3.1 and reinstate
administration of this Plan in itself.

                                       2
<PAGE>

          3.2  ADMINISTRATOR'S DETERMINATIONS BINDING.  The Administrator may
adopt, alter, or repeal administrative rules, guidelines, and practices
governing this Plan as it shall deem advisable from time to time, may interpret
the terms and provisions of this Plan, may correct any defect, omission, or
inconsistency in this Plan, and shall supervise administration of this Plan. All
decisions made by the Administrator under this Plan (including without
limitation, decisions made pursuant to Section 11) shall be binding upon all
persons, including the Company and all Participants. No member of the
Administrator shall be liable for any action that he or she, in good faith,
takes or fails to take with respect to this Plan.

     4.   ELECTIONS; VESTING.

          4.1  SAR CONVERSION ELECTIONS.  Subject to the terms and conditions of
this Plan, on or before August 31, 1996, any Participant may elect to convert
into deferred cash compensation all or part of the SAR Conversion Amount as to
any SAR he or she holds at the time of the election. The election shall be made
by filing a copy of the form attached to this Plan (or such other form as the
Administrator may specify from time to time) with the Administrator at the
principal executive offices of the Company. The election shall specify the
Deferral Amount and Elected Distribution Year and shall be effective on the date
it is delivered to the Administrator. By making the election , the Participant
waives all rights he or she may possess under the SAR Plan with respect to the
SAR(s) as to which participation in this Plan is elected.

          4.2  VESTING.  If an SAR has not "Vested" (i.e., if the SAR would
                                                     ----
forfeit upon termination of the Participant's employment with the Company) at
the date of a Participant's SAR Conversion Election, the Participant's Reserve
Account shall be subject to "Vesting" on terms and at times corresponding to the
terms and times that would have applied to the SAR but for the election.
Investment-based accretions attributable to a non-Vested Reserve Account shall
be subject to Vesting on the same terms as the Reserve Account.

     5.   PAYMENT OF PLAN BENEFITS.

          5.1  LUMP-SUM DISTRIBUTIONS FROM RESERVE ACCOUNTS.  Subject to any
Subsequent Deferral Elections of the Participant, the amount of a Participant's
Reserve Account shall be distributed to the Participant as soon as practicable
after the First Payment Date.

          5.2  SUBSEQUENT DEFERRAL ELECTION.  On or before the first business
day of November before the date that a distribution from a Participant's Reserve
Account otherwise is to be made pursuant to this Plan, the Participant may, by
filing with the Administrator a "Subsequent Deferral Election" (using such form
as the Administrator prescribes from time to time), defer payment of all or a
portion of such distribution for an additional one-year period (or a longer
period approved by the Administrator). Any such Subsequent Deferral Election
shall be effective only with the consent of the Administrator; however, as it is
in the Company's interest to defer payments of compensation, the Administrator
shall be deemed to consent to a Subsequent Deferral Election unless the
Administrator notifies the Participant in writing, within ten business days
after receipt of the Subsequent Deferral Election, that consent is not given.
Each Subsequent

                                       3
<PAGE>

Deferral Election shall be filed with the Administrator at the principal
executive offices of the Company. Under no circumstances, however, may a
Subsequent Deferral Election defer the distribution from a Participant's Reserve
beyond its Last Payment Date.

          5.3  TERMINATION OF EMPLOYMENT.  If a Participant's employment by the
Company terminates for any reason, whether voluntary, involuntary, or by reason
of death or disability, then notwithstanding any other provision of this Plan,
the First Payment Date for all the Participant's Reserve Accounts that are
Vested as of the termination date (plus deemed investment amounts accruing to
such portions between the termination and distribution dates) shall be the first
business of January immediately following termination.  All non-Vested Reserve
Accounts (plus deemed investment amounts accruing to such Reserve Accounts) of a
terminated Participant shall be forfeited as of the termination date.

          5.4  HARDSHIP.  Upon the request of a Participant and based upon a
showing of financial hardship, the Administrator may, in its sole discretion,
accelerate the time of payment of that portion (up to all) of the amounts
credited to the Participant's Vested Reserve Accounts necessary to avoid such
hardship. For purposes of this Plan, "hardship" includes any need, circumstance,
or event that is considered a "hardship" under the then-current provisions of
the Company's Employee Investment Plan (whether or not the Participant
participates in such plan) and such other needs, circumstances, or events that
the Administrator, in its sole discretion, determines are consistent with the
goals of the Company and the requirements of administration of this Plan.

     6.   RESERVE ACCOUNTS.

          6.1  ESTABLISHMENT AND MAINTENANCE.  The Administrator shall establish
and maintain a separate Reserve Account for each SAR as to which a Participant
makes an SAR Conversion Election. Each Reserve Account shall be credited with
the amount of the Deferral Amount in respect of the SAR and with earnings and
realized and unrealized gains with respect to such Deferral Amount, based on the
investment tracking options selected by the Participant, and shall be charged
with any amount distributed to or with respect to, the Participant from the
Reserve Account in accordance with this Plan, with realized and unrealized
losses incurred by the Reserve Account based on the investment tracking options
selected by the Participant, and with any expenses, fees, and withholding taxes
properly chargeable to the Reserve Account under this Plan.

          6.2  DEEMED INVESTMENT OF ACCOUNTS.  By written directions to the
Administrator, each Participant shall direct the deemed investment of each of
his or her Reserve Accounts among the investment-tracking options available
under this Plan.  In the absence of timely instructions, a Participant's Reserve
Accounts shall be treated as invested in a cash management money market fund
(or, if there is no cash management money market fund among the choices
available under this Plan, in the investment fund that most closely resembles a
cash management money market fund).  In accordance with rules established by the
Administrator, each Participant shall be allowed to modify his or her
investment-tracking directions (or the initial deemed investment made in the
absence of directions from the Participant) with respect to all or any portion
of each of his or her Reserve Accounts, effective as of the date of the
modification established by the Administrator.  By making investment-tracking
alternatives available under this Plan, the

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<PAGE>

Company makes no representation, warranty, or guarantee regarding the prudence
or desirability of, or the return to be expected from, any alternative, nor does
the Company undertake that any alternative selected by a Participant will result
in a return of principal or deemed investment return to any of a Participant's
Reserve Accounts.

          6.3  DESIGNATION OF AVAILABLE INVESTMENT OPTIONS.  The Administrator
shall select the investment-tracking options that will initially be available
with respect to Reserve Accounts. The Administrator shall have the power and
authority, in its sole and absolute discretion, to add any new investment-
tracking option considered desirable and to eliminate any investment-tracking
option previously available. If an investment-tracking option is eliminated, any
Reserve Account tracking that option shall be treated as held without investment
instructions pursuant to Section 6.2 until the Participant elects another
investment-tracking option for that Reserve Account.

          6.4  VALUATION OF ACCOUNTS; STATEMENTS.  Following the end of each
calendar quarter, the Administrator shall value each Reserve Account, based on
the fair market value of its deemed investments as of the close of the quarter.
Each Reserve Account shall be valued separately. Any earnings and realized and
unrealized gains attributable to a Reserve Account shall be credited to such
Account, and any amounts distributed from, any realized and unrealized losses
incurred by, and any expenses and fees properly chargeable to, a Reserve Account
shall be charged against such Account. As soon as practicable after the
valuation, the Administrator shall provide each Participant (or, if applicable,
Beneficiary) a written statement of the value of each of his or her Reserve
Accounts.

          6.5  BENEFICIARIES.  A Participant may designate a Beneficiary or
Beneficiaries (using the form attached to this Plan as (or such other form as
the Administrator may specify from time to time)), to receive the net amount of
the Participant's Vested Reserve Accounts upon the Participant's death.  A
Participant may at any time revoke the designation or substitute another
Beneficiary or Beneficiaries by delivery to the Administrator of a properly
executed designation form.  If there is no valid designation of a Beneficiary on
file with the Administrator, the net amount of a deceased Participant's Vested
Reserve Accounts shall be payable to the Participant's surviving spouse, or if
the Participant does not have a surviving spouse, the Participant's estate.  If
a Participant has a living spouse at the time the Participant designates a
Beneficiary other than the Participant's spouse, the Participant's spouse must
consent in writing to the designation.

          6.6  NONASSIGNABILITY OF RIGHTS.  The right of a Participant or any
other person to payment from the Company under this Plan may not be sold,
assigned, transferred, pledged, encumbered, or subject to attachment or
garnishment, except pursuant to court order that the Administrator determines in
its sole discretion to be valid and enforceable.

          6.7  NO TRUST CREATED.  Nothing contained in, and no action taken
pursuant to the provisions of, this Plan shall create or be construed to create
a trust of any kind, or a fiduciary relationship between the Company and the
Participant or any other person. Any funds that may be invested to fund the
obligations of the Company under this Plan shall continue for all purposes to be
part of the general assets of the Company, and no person other than the Company
shall have any interest in such assets by virtue of this Plan. To the extent
that any person acquires the right to receive a payment from the Company under
this Plan, such right shall be no greater than the right of

                                       5
<PAGE>

any unsecured general creditor of the Company. The Company shall at all times
retain title to, and beneficial ownership of, all assets that the Company may
set aside or designate to meet its obligations under this Plan. The Company is
under no obligation to set aside, or actually to invest, funds under this Plan.

     7.   COSTS; TAX WITHHOLDING; TAX AND INVESTMENT ADVICE.

     The Company shall bear all costs and expenses of administering this Plan
and maintaining Reserve Accounts.  The Company may deduct from a Participant's
Reserve Accounts, or from distributions from a Reserve Accounts, all federal,
state, local, or foreign withholding (including without limitation, employment
taxes) or other taxes that it determines in its sole discretion are required to
be withheld due to the deferral or payment of amounts pursuant to this Plan.
Each Participant is responsible for his or her own federal, state, local. or
foreign tax liabilities in connection with this Plan.  The Company is not
giving, and is not responsible for, any tax, investment, or financial advice to
any Participant in connection with this Plan.

     8.   NO EMPLOYMENT RIGHTS.

     Nothing in this Plan or in any related document confers upon any
Participant or other person any right to continue in the employ of the Company
or affects the right of the Company to terminate the employment of that person
at any time with or without cause.

     9.   INDEMNIFICATION.

     Each member of the Administrator and each officer and employee of the
Company shall, to the fullest extent permissible by law, be indemnified by the
Company against any and all liabilities arising by reason of any action taken or
omitted in connection with this Plan, including expenses reasonably incurred in
the defense of any claim.

     10.  AMENDMENT, TERMINATION OR SUSPENSION.

     The Administrator may, at any time and from time to time, amend this Plan.
Rights and obligations existing at the time of any such amendment shall not be
materially and adversely altered or impaired except with the consent of the
affected Participants.  The Administrator may suspend or terminate this Plan at
any time. Termination of this Plan shall not affect the payment of amounts then
credited to a Participant's Reserve Accounts, unless the Participant consents to
a different manner of payment or the Company elects to distribute all
Participants' Reserve Accounts immediately in lump sums (which the Company may
do regardless of tax or other consequences to Participants).

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<PAGE>

     11.  CLAIMS AND REVIEW PROCEDURE.

     The Administrator shall determine each Participant's and Beneficiary's
right to payments under this Plan.  If a Participant or Beneficiary disagrees
with the Administrator's determination, he or she may make a written claim for
payments inconsistent with that determination.  Any such claim shall be filed
with the Administrator at the principal executive offices of the Company.  The
Administrator shall review the claim and notify the claimant of its decision in
writing within 90 days after the claim is received.  If the Administrator denies
the claim, in whole or in part, the notice shall specify the reasons for denial,
references to the Plan provisions upon which denial is based, any additional
information or material necessary to perfect the claim, and procedures for
further review of the claim.  Within 60 days after receipt of the notice of
denial, the claimant may file a written appeal of the denial of the claim,
identifying the grounds, facts, and any other matter upon which the appeal is
based.  The Administrator shall give the claimant a reasonable opportunity to
review pertinent Plan documents in preparing an appeal.  The Administrator shall
furnish the claimant a final decision within 60 days after receipt of the
request for review.  If the Administrator affirms the denial of the claim in
whole or in part, it shall specify in writing the reasons for the affirmance,
with specific references to the Plan provisions upon which the affirmance is
based.

     12.  GOVERNING LAW.

     This Plan shall be construed and interpreted in all respects in accordance
with the laws of the State of California as applied to contracts entered into by
residents of that State and entirely to be performed within that State.

     13.  NO ADDITIONAL BENEFITS.

     For purposes of computing benefits to which a Participant may be entitled
at any time under any employee compensation or benefit plan maintained by the
Company, any payments under this Plan shall not be taken into account as
compensation to a Participant.

     14.  MISCELLANEOUS.

     (a)  No Participant shall under any circumstances have any interest in any
particular property or assets of the Company under this Plan.  The benefits
conferred by this Plan are not intended to be equity interests in the Company,
and Participants shall have no equity interest in the Company by virtue of
participation in this Plan.  The individuals entitled to payments under this
Plan shall have no voting or similar rights or rights to financial or other
information concerning the Company.  Rights under this Plan shall not be
transferable or assignable under any circumstances, except as specifically
provided in this Plan.

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<PAGE>

     (b)  Neither the establishment and operation of, nor the creation of any
interest under, this Plan limits the ability of the Company or any parent
corporation of the Company to reclassify, recapitalize, or otherwise change its
capital or debt structure or to merge, consolidate, convey any or all or its
assets, dissolve, wind up, or otherwise reorganize.

     (c)  This Plan represents the final, exclusive, and complete statement of
the terms of the Plan, and supersedes any and all prior or contemporaneous
understandings, representations, documents, and communications of the Company,
any parent corporation of the Company, and any employee of the foregoing,
relating to the subject matter of this Plan.

     (d)  This Plan is intended only to provide cash payments for work performed
for the Company, payment of which is not systematically deferred to the
termination of employment or beyond and does not provide retirement income to
employees within the meaning of Department of Labor Regulation Section 2510.3-
2(c).  Payments under this Plan shall be made from the general funds of the
Company, and no special or separate fund shall be established, or other
segregation of assets made, to assure payment.

     15.  ADOPTION.
          This Plan was adopted by the Company on June 3, 1996.

                                       8<PAGE>

                                                                   EXHIBIT 10.23

                 KEY EMPLOYEE RECOGNITION AND COMMITMENT PLAN

                                      OF

                              LEVI STRAUSS & CO.

                                 CONFIDENTIAL
                                 ------------
<PAGE>

ABOUT THIS MATERIAL
--------------------------------------------------------------------------------

This document describes how the Key Employee Recognition and Commitment Plan of
Levi Strauss & Co. works.  It explains:

 .    The purpose of the Plan;

 .    Who administers the Plan;

 .    Who is eligible to receive an award under the Plan;

 .    How individual awards are determined;

 .    What a Unit is and how it works;

 .    When awards are paid; and

 .    What happens in the event of termination of employment.

This is the official Plan document, which contains the exclusive and complete
description of the terms this Plan.  This Plan may be amended from time to time,
at the discretion of the Administrator.
<PAGE>

CONTENTS
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                                                                      Page
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<S>                                                                   <C>

Key Employee Recognition and Commitment Plan of Levi Strauss & Co.       1

Appendix One: Glossary of Terms                                         17

Appendix Two: Time Line of Actions Under This Plan                      20
</TABLE>
<PAGE>

KEY EMPLOYEE RECOGNITION AND COMMITMENT PLAN
OF LEVI STRAUSS & CO.
-------------------------------------------------------------------------------

The Key Employee Recognition and Commitment Plan of Levi Strauss & Co. ("Plan")
recognizes and rewards key employees for making contributions, over time, to the
Company's success.  Awards are based on achievement of long-term financial and
corporate values objectives of the Company.

PURPOSE OF THE PLAN
-------------------

 .    To recognize selected key employees who have made, continue to make,
     have the potential to make, or are expected to make substantial
     contributions to the Company.

 .    To engender a commitment to the continued success of the Company.

 .    To engender a commitment to enhance pride of association with the
     Company.

 .    To provide a financial award for meeting long-term financial objectives
     measured by cash flow and for modeling and promoting Company values and
     integrating such values into all business decisions.

 .    To encourage and reward team performance.

EFFECTIVE DATE
--------------

 .    The Plan starts on the first day of fiscal year 1997, and ends on the
     last day of fiscal year 2003.

PLAN ADMINISTRATION
-------------------

 .    The Plan is administered under the direction of the Administrator.  The
     Administrator's determinations and interpretations (including, without
     limitation, those relating to determination of Financial Unit Value,
     Settlement Unit Value, Corporate Values Score, and those relating to
     payment upon employment termination) shall be binding on all

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<PAGE>

     Participants. In administering the Plan, the Administrator will consult
     with the Chief Executive Officer. The Administrator may delegate any of its
     duties to others.

 .    The Administrator's responsibilities include, but are not limited to,
     approving:

     --   An employee's participation in the Plan, as nominated by the Chief
          Executive Officer;

     --   Financial and corporate values measures and objectives;

     --   Participants' individual target awards;

     --   Corporate Values Scores;

     --   Settlement Unit Values;

     --   Award Payments;

     --   Interpretation of the Plan; and

     --   Plan amendments.

ELIGIBILITY
-----------

 .    Participants are employees of the Company and Subsidiaries who are
     nominated by the Chief Executive Officer and approved by the Administrator.

WRITTEN AWARD AGREEMENT
-----------------------

 .    A written Award Agreement will be created for each Participant that
     documents the number of Units granted and other terms, conditions, and
     rights as determined by the Administrator.

TARGET AWARDS FOR PARTICIPANTS
------------------------------

                                       2
<PAGE>

 .    Participants' individual target awards are determined by the
     Administrator.

GRANTS
------

 .    A Participant will receive a one-time grant of Units as of the first day
     of fiscal year 1997.  Subsequently, the Administrator may, at its
     discretion, grant additional Units to Participants, including new
     Participants.

 .    The number of Units granted is determined by dividing the Participant's
     individual target award by $1,000.

FINANCIAL MEASURES AND OBJECTIVES
---------------------------------

 .    The Company's EBITDA is the measure used to set the Company's financial
     objectives and to assess performance against those objectives.

 .    The Company's EBITDA means the audited net income of the Company on a
     consolidated basis before (1) interest, (2) taxes, (3) depreciation, (4)
     amortization, (5) costs and expenses relating to the Company's acquisition
     of Levi Strauss Associates Inc., including compensation-related expenses
     resulting from such acquisition, such as with respect to stock options and
     stock appreciation rights, (6) all accruals and expenses directly relating
     to the operation of the Global Success Sharing Plan, and (7) all accruals
     and expenses directly relating to the operation of this Plan, all as
     determined by the Administrator.

 .    The financial objectives are shown below in Table I on page 5.

 .    The Company's achievement of financial objectives will be expressed as
     Financial Unit Value, as shown in Table II on page 5.

CORPORATE VALUES OBJECTIVES
---------------------------

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<PAGE>

 .    The use of Corporate Values Score is intended to align the financial
     rewards under the Plan with the Company's strategic aim of promoting and
     integrating Company values into business decisions and practices.

 .    The Chief Executive Officer may seek Participants' recommendations in
     establishing or revising the corporate values objectives for purposes of
     this Plan. The Chief Executive Officer will initially determine the
     corporate values objectives during the fiscal year 1997 and may
     subsequently revise them. The Administrator may review the initial or
     revised corporate values objectives at the Administrator's initiation and
     discretion.

 .    The Company's and the Participants' collective achievement of the
     corporate values objectives will be reviewed by the Chief Executive
     Officer, with the Participants' input, on a cumulative and on-going basis
     at such times as the Chief Executive Officer may decide in his or her sole
     discretion.

 .    The Company's and the Participants' collective achievement of corporate
     values objectives, as of the end of fiscal years 2001, 2002, and 2003, will
     be expressed as the Corporate Values Score. The range of the Corporate
     Values Score will be determined by the Chief Executive Officer, with input
     from the Participants', in fiscal year 1997. The Chief Executive Officer
     will determine the Corporate Values Score, subject to review and
     modification by the Administrator at the Administrator's initiative and
     discretion.

 .    If Corporate Values Score is not measured for any particular fiscal
     year, the last measured Corporate Values Score will be used in determining
     Settlement Unit Value (as defined below under "Settlement Unit Value and
     Award Payment").

SETTLEMENT UNIT VALUE AND AWARD PAYMENT
---------------------------------------

 .    Award Payment is the cash payable to a Participant upon exercise of his
     or her vested Units. The amount of Award Payment is determined by
     multiplying the number of Units exercised by the applicable Settlement Unit
     Value.

 .    Settlement Unit Value is determined by multiplying the Financial Unit
     Value by the Corporate Values Score (each as applicable during the Exercise
     Period in which the vested Units are exercised).

 .    The Financial Unit Value will be determined as of the last day of fiscal
     years 2001, 2002, and 2003, based on the Company's achievement of financial
     objectives.

                                       4
<PAGE>

 .    Table I shows the Company's financial objectives, i.e., threshold and
     target EBITDA levels for fiscal years 2001, 2002, and 2003:

Table I

<TABLE>
<CAPTION>
     ===================================================================================================================
      CUMULATIVE EBITDA IN             END OF FISCAL YEAR             END OF FISCAL YEAR            END OF FISCAL YEAR
       U.S. $ (IN BILLIONS)                  2001                            2002                        2003
     -------------------------------------------------------------------------------------------------------------------
     <S>                            <C>                             <C>                             <C>
     TARGET                                  $6.2                            $8.1                        $10.2
     -------------------------------------------------------------------------------------------------------------------
     THRESHOLD                               $4.8                            $6.0                        $ 7.2
     ===================================================================================================================
</TABLE>

 .    Table II shows the Financial Unit Value upon meeting threshold and target
     EBITDA levels for fiscal years 2001, 2002, and 2003.

Table II

<TABLE>
<CAPTION>
     ===================================================================================================================
     FINANCIAL UNIT VALUE           END OF FISCAL YEAR              END OF FISCAL YEAR              END OF FISCAL YEAR
                                          2001                            2002                             2003
     -------------------------------------------------------------------------------------------------------------------
     <S>                            <C>                             <C>                             <C>
     TARGET                               $667                           $833                             $1,000
     -------------------------------------------------------------------------------------------------------------------
     THRESHOLD                            $  0                           $  0                             $    0
     ===================================================================================================================
</TABLE>

 .    As of end of each fiscal year 2001, 2002, and 2003,

     --   The Financial Unit Value will be zero if the Company's EBITDA meets or
          is less than the threshold level.

     --   If the Company's EBITDA meets the target level, the Financial Unit
          Value will be as shown above in Table II.

     --   If the Company's EBITDA is between the threshold level and the target
          level, the Financial Unit Value will be interpolated on a straight-
          line basis.

     --   If the Company's EBITDA exceeds the target level, the Financial Unit
          Value will be extrapolated on a straight-line basis.

     --   There is no maximum on the Financial Unit Value.

PERFORMANCE PERIOD
------------------

                                       5
<PAGE>

 .    The Performance Period for the Units will be up to 7 years. The
     Performance Period of the Units for an individual Participant also depends
     on employment termination, as discussed further on pages 8-12 regarding
     termination of employment.

VESTING AND EXERCISE SCHEDULE; DEFERRAL OF RECEIPT
--------------------------------------------------

 .    The Units granted effective as of the beginning of fiscal year 1997 will
     vest in 25% increments on the last day of fiscal years 1997, 1998, 1999,
     and 2000, respectively. All other grants will be subject to vesting terms
     established by the Administrator.

 .    The vested Units will become exercisable in 33-1/3% increments on the
     last day of fiscal years 2001, 2002, and 2003, respectively. Once vested
     Units become exercisable, a Participant can exercise all or any portion of
     his or her vested Units, by delivering to the Company, during any Exercise
     Period, an exercise notice in a form to be prescribed by the Administrator.

 .    Vested Units that have not been exercised by the end of fiscal year 2003
     will be automatically deemed exercised during the second quarter of fiscal
     year 2004, and Award Payment will be paid as soon as practicable
     thereafter.

 .    A Participant who is eligible to participate in the Company's Deferred
     Compensation Plan For Executives may defer receipt of Award Payment payable
     upon future exercise of his or her vested Units, to the extent permitted
     under and in accordance with the terms of the Deferred Compensation Plan
     for Executives. A Participant who elects to defer must elect irrevocably,
     on a form to be prescribed by the Administrator, during the applicable
     Deferral Election Period.

 .    For any Participant who is not eligible to participate in the Company's
     Deferred Compensation Plan For Executives and whose Company-related income
     is subject to taxation outside of the United States, deferral of receipt of
     Award Payment will be subject to local law and at the discretion of the
     Administrator, as of the beginning of the applicable Deferral Election
     Period.

 .    Applicable Deferral Election Periods are as follows:

     --   With respect to vested Units that become exercisable at the end of
          fiscal year 2001, the Deferral Election Period is the second quarter
          of fiscal year 2001.

                                       6
<PAGE>

       --   With respect to vested Units that become exercisable at the end of
            fiscal year 2002, the Deferral Election Period is the second quarter
            of fiscal year 2002.

       --   With respect to vested Units that become exercisable at the end of
            fiscal year 2003, the Deferral Election Period is the second quarter
            of fiscal year 2003.

  .    Table III shows the vesting and exercise schedule, Exercise Periods, and
       the Deferral Election Periods.

  Table III

<TABLE>
<CAPTION>
==================================================================================================================================
FISCAL YEAR    PERCENTAGE OF UNITS    RIGHT TO EXERCISE VESTED   PERCENTAGE OF VESTED    EXERCISE PERIOD      DEFERRAL ELECTION
               VESTED (ON THE LAST     UNITS (ON THE LAST DAY      UNITS EXERCISABLE                        PERIODS (FOR ELIGIBLE
                DAY OF THE FISCAL        OF THE FISCAL YEAR)      (ON THE LAST DAY OF                           PARTICIPANTS)
                      YEAR)                                         THE FISCAL YEAR)
------------------------------------------------------------------------------------------------------------------------------
<S>            <C>                    <C>                        <C>                     <C>                <C>
   1997                25%                      No                        0                    N/A                 N/A
------------------------------------------------------------------------------------------------------------------------------
   1998                25%                      No                        0                    N/A                 N/A
------------------------------------------------------------------------------------------------------------------------------
   1999                25%                      No                        0                    N/A                 N/A
------------------------------------------------------------------------------------------------------------------------------
   2000                25%                      No                        0                    N/A                 N/A
------------------------------------------------------------------------------------------------------------------------------
   2001                --                       Yes                  first 33-1/3         2nd quarter of     2nd quarter of FY
                                                                                             FY 2002               2001
------------------------------------------------------------------------------------------------------------------------------
   2002                --                       Yes                 second 33-1/3         2nd quarter of     2nd quarter of FY
                                                                                             FY 2003               2002
------------------------------------------------------------------------------------------------------------------------------
   2003                --                 Yes/Automatic              third 33-1/3         2nd quarter of     2nd quarter of FY
                                                                                             FY 2004               2003
===============================================================================================================================
</TABLE>

TIME LINE ILLUSTRATION
----------------------

 .    Appendix Two on pages 20-22 shows a time line illustrating when the
     corporate values objectives are established, when Corporate Values Scores
     are measured, when Financial Unit Values are measured, when Units become
     vested and exercisable, the Exercise Periods during which vested Units can
     be exercised, and the Deferral Election Periods in which to elect to defer
     receipt of Award Payments.

ACCELERATION OF VESTING AND PAYMENTS
------------------------------------

                                       7
<PAGE>

 .    Notwithstanding any other provision of this Plan, the Administrator may,
     in its discretion, accelerate the vesting schedule or require any
     Participant to cash out or exercise all vested Units at the applicable
     Settlement Unit Value, regardless of the tax, financial, or other
     consequence to the Participant of such acceleration, exercise, or cashout.

TERMINATION OF EMPLOYMENT DUE TO RETIREMENT
-------------------------------------------

 .    A Participant who Retires during the second half of a fiscal year will
     be treated for vesting purposes as if he or she had continued in employment
     through the end of such fiscal year.  A Participant who Retires during the
     first half of a fiscal year will not be given any credit for vesting
     purposes for employment during such fiscal year.

 .    A Participant who Retires can exercise his or her vested Units only in
     accordance with the vesting and exercise schedule shown in Table III on
     page 7.

TERMINATION OF EMPLOYMENT DUE TO DEATH
--------------------------------------

 .    A Participant who dies during a fiscal year will be treated for vesting
     purposes as if he or she had survived and remained employed through the end
     of such fiscal year.

 .    The Beneficiary of a Participant who terminates employment due to death
     will receive a lump-sum cashout of the Participant's unexercised vested
     Units as soon as practicable.

 .    The amount of the lump-sum cashout will be determined by multiplying the
     number of unexercised vested Units by the applicable Settlement Unit Value.

 .    The applicable Settlement Unit Values will be determined as shown in
     Table IV:

Table IV

  -----------------------------------------------------------------------------
  TERMINATION OF EMPLOYMENT DUE TO            SETTLEMENT UNIT VALUE
  DEATH DURING
  -----------------------------------------------------------------------------
             FY 1997                                  $125
  -----------------------------------------------------------------------------
             FY 1998                                  $250
  -----------------------------------------------------------------------------
             FY 1999                                  $375
  -----------------------------------------------------------------------------
             FY 2000                                  $500
  -----------------------------------------------------------------------------
      1st half of FY 2001                             $500
  -----------------------------------------------------------------------------
      2nd half of FY 2001             Settlement Unit Value based on Financial
                                      Unit Value and Corporate Values Score as
                                      the end of FY 2001

                                       8
<PAGE>

  -----------------------------------------------------------------------------
      1st half of FY 2002             Settlement Unit Value based on Financial
                                      Unit Value and Corporate Values Score as
                                      the end of FY 2001
  -----------------------------------------------------------------------------
      2nd half of FY 2002             Settlement Unit Value based on Financial
                                      Unit Value and Corporate Values Score as
                                      the end of FY 2002
  -----------------------------------------------------------------------------
      1st half of FY 2003             Settlement Unit Value based on Financial
                                      Unit Value and Corporate Values Score as
                                      the end of FY 2002
  -----------------------------------------------------------------------------
      2nd half of FY 2003             Settlement Unit Value based on Financial
                                      Unit Value and Corporate Values Score as
                                      the end of FY 2003
===============================================================================

TERMINATION OF EMPLOYMENT DUE TO PERMANENT DISABILITY
-----------------------------------------------------

 .    A Participant who terminates employment due to Permanent Disability during
     a fiscal year will be treated for vesting purposes as if his or her
     employment had continued through the end of such fiscal year.

 .    A Participant who terminates employment due to Permanent Disability can
     exercise his or her vested Units only in accordance with the vesting and
     exercise schedule shown in Table III on page 7.

 .    Notwithstanding the preceding provision of this Plan, a Participant who
     terminates employment due to Permanent Disability may apply, because of
     hardship or other reasons, to the Administrator for a cashout of his or her
     unexercised vested Units at any time. The Administrator may grant or deny
     the application in the Administrator's sole discretion.

 .    If the Administrator approves a cashout of unexercised vested Units
     before the Participant would otherwise be able to exercise them, the
     cashout will be paid as soon as practicable.  The amount of such cashout
     will be determined by multiplying the number of Units cashed out by the
     applicable Settlement Unit Value.

 .    The applicable Settlement Unit Value depends on when a Participant's
     termination of employment occurs.  The applicable Settlement Unit Value
     will be determined in the same manner as for termination of employment due
     to death, as set forth in Table IV on page 9.

TERMINATION OF EMPLOYMENT BY RESIGNATION
----------------------------------------

 .    A Participant who terminates employment by resignation during the second
     half of a fiscal year will be treated for vesting purposes as if he or she
     had continued in employment through the end of such fiscal year.  A
     Participant who resigns during the first half of a fiscal year will not be
     given any credit for vesting purposes for employment during such fiscal
     year.

                                       9
<PAGE>

 .    A Participant who terminates employment by resignation will receive a
     lump- sum cashout of unexercised vested Units as soon as practicable.

 .    The amount of the lump-sum payment will be determined by multiplying the
     number of unexercised vested Units by the applicable Settlement Unit Value.

 .    The applicable Settlement Unit Value depends on when a Participant's
     termination of employment occurs.  The applicable Settlement Unit Value
     will be determined in the same manner as for termination of employment due
     to death, as set forth in Table IV on page 9.

INVOLUNTARY TERMINATION OF EMPLOYMENT DUE TO LAYOFF
---------------------------------------------------

 .    A Participant who terminates employment due to layoff during a fiscal
     year will be treated for vesting purposes as if his or her employment had
     continued through the end of such fiscal year.

 .    A Participant who terminates employment due to layoff can exercise his
     or her vested Units only in accordance with the vesting and exercise
     schedule shown on Table III on page 7.

 .    Notwithstanding the preceding provision of the Plan, a Participant who
     terminates employment due to layoff may apply, because of hardship or other
     reason, to the Administrator for a cashout of his or her unexercised vested
     Units at any time. The Administrator may grant or deny the application in
     the Administrator's sole discretion.

 .    If the Administrator approves a cashout of unexercised vested Units
     before the Participant would otherwise be able to exercise them, the
     cashout will be paid as soon as practicable.  The amount of such cashout
     will be determined by multiplying the number of Units cashed out by the
     applicable Settlement Unit Value.

 .    The applicable Settlement Unit Value depends on when a Participant's
     termination of employment occurs.  The applicable Settlement Unit Value
     will be determined in the same manner as for termination of employment due
     to death, as set forth in Table IV on page 9.

                                      10
<PAGE>

INVOLUNTARY TERMINATION OF EMPLOYMENT FOR UNSATISFACTORY PERFORMANCE
--------------------------------------------------------------------
OR MISCONDUCT
-------------

 .    If a Participant's employment is terminated for unsatisfactory
     performance or misconduct, the Participant will forfeit all Units, vested
     or otherwise, and any other rights under the Plan, and will not be entitled
     to any payment under the Plan.

 .    The Administrator will determine in its sole discretion whether a
     termination for unsatisfactory performance or misconduct exists in
     individual cases.

DISCIPLINARY FORFEITURE
-----------------------

 .    A Participant will forfeit all Units, vested or otherwise, and any other
     rights under the Plan, and will not be entitled to any payment under the
     Plan, if:

     --   The Participant commits an act of misconduct while an employee of the
          Company or a Subsidiary, regardless of whether his or her employment
          is terminated by the Company or Subsidiary; or

     --   The Participant commits a breach of his or her Award Agreement at any
          time, including after termination of employment.

 .    The Administrator will determine in its sole discretion whether a
     Participant's act constitutes an act of misconduct or breach.

BENEFICIARY DESIGNATION
-----------------------

 .    As part of the Award Agreement, each Participant shall name a person or
     persons as the Beneficiary who is to receive any distribution payable under
     the Plan in the event of the Participant's death.  The most recently
     designated Beneficiary will apply to all distributions, unless otherwise
     specified by the Participant.  In the event that no Beneficiary has been
     properly designated, or if no properly designated Beneficiary survives the
     Participant, the Participant's estate shall be the Participant's
     Beneficiary.

                                      11
<PAGE>

TAX WITHHOLDING
---------------

 .    The Company may deduct from the cash payment to be paid upon exercise or
     cashout of vested Units any applicable taxes (e.g., U.S. federal, state,
     local or other taxes)  required to be withheld by virtue of the exercise of
     the Units.

NO TAX, FINANCIAL, LEGAL OR OTHER ADVICE
----------------------------------------

 .    The Company or any Subsidiary has not and will not provide any tax,
     financial, legal, or other advice related to participation in the Plan,
     including, but not limited to, tax or financial consequences of
     participating in the Plan. No provision of the Plan will be interpreted as
     giving such advice.

OTHER BENEFITS
--------------

 .    Units granted and payments made with respect to those Units will not be
     considered compensation when determining any other Company-sponsored
     benefits (e.g., pension benefits, CAP benefits), except as provided under
     the Deferred Compensation Plan For Executives in the event a Participant
     elects to defer receipt of Award Payment under this Plan, as described on
     page 6.

NONASSIGNABILITY
----------------

 .    No Units or other rights granted under or provided by this Plan are
     assignable or transferable by Participants, or otherwise subject to levy,
     attachment, or execution of a judgment of any kind, except as provided for
     by a Participant's will or by the laws of descent and distribution.

 .    Qualified Domestic Relations Order

     --   Notwithstanding the preceding provision of the Plan, cash payable
          to a Participant under this Plan may be paid to an "alternate payee,"
          as such person is defined in section 414(p)(8) of the Code.

                                      12
<PAGE>

     --   The amount payable to an alternate payee is as provided by a
          domestic relations order with respect to the Plan that would
          constitute a qualified domestic relations order within the meaning of
          section 404(p)(1)(A) of the Code, as if the Plan were subject to Code
          section 414(p).

     --   Determination of whether an order would constitute a qualified
          domestic relation order will be made by the Administrator, or its
          designee, in its sole discretion.

     --   The rights of any alternative payee hereunder are subject to the
          provisions of the Plan as administered with respect to alternate
          payees, and the Administrator may require an alternate payee to
          acknowledge that his or her rights are subject to such provisions.

 .    A Participant's right to exercise Units under the Plan are exercisable
     during the Participant's lifetime only by the Participant or his or her
     legal representative.

UNFUNDED STATUS
---------------

 .    The Plan is unfunded.  A Participant's right to receive payments under
     the Plan is an unsecured claim against the general assets of the Company.
     Although the Company may establish a bookkeeping reserve to meet its
     obligations, any rights acquired by any Participant are no greater than the
     right of any unsecured general creditor of the Company.

 .    No provision of the Plan gives anyone any interest in any particular
     property or asset of the Company or any stockholder rights, such as voting
     or dividend rights. The Company shall not be required to segregate any
     assets that may at any time be represented by cash or Units, nor shall the
     Company, Board of Directors, or the Administrator be deemed to be a trustee
     of any cash or Units to be paid or granted under this Plan. Any liability
     of the Company to any holder with respect to a grant of Units under this
     Plan shall be based solely upon any contractual obligations that may be
     created by this Plan. No such obligation of the Company shall be deemed to
     be secured by any pledge of, or other encumbrance or security interest in,
     any property of the Company or any Subsidiary. Neither the Company, the
     Board of Directors, nor the Administrator shall be required to give any
     security or bond for the performance of any obligation that may be created
     by this Plan. No Subsidiary shall have any obligation or liability to any
     person under this Plan.

NO LIMIT ON CAPITAL STRUCTURE CHANGES
-------------------------------------

                                      13
<PAGE>

 .    The establishment and operation of this Plan, including the grant of
     Units under this Plan, will not limit the ability of the Company or of any
     Subsidiary to reclassify, recapitalize, or otherwise change its capital or
     debt structure; to merge, consolidate, convey any or all of its assets,
     dissolve, liquidate, windup, or otherwise reorganize; or to take any action
     in respect of its manufacturing, marketing, distribution, merchandising,
     management, or any other aspect of its business, regardless of the impact
     on EBITDA or otherwise.

NO EMPLOYMENT RIGHTS
--------------------

 .    No provision of the Plan gives any Participant or anyone else the right
     to remain employed with the Company or its Subsidiary.  The Company, and
     each Subsidiary, reserves the right to terminate any Participant's
     employment at any time, with or without cause and with or without notice.

AMENDMENT, MODIFICATION, OR TERMINATION OF PLAN
-----------------------------------------------

 .    The Administrator may modify, amend, or terminate any and all provisions of
     the Plan, and establish rules and procedures for its administration, at its
     discretion and without notice. Plan termination shall have the effect of
     terminating all unvested Units.

SEVERABILITY
------------

 .    If any provision of this Plan is held illegal or invalid for any reason,
     the illegality or invalidity shall not affect the remaining parts of the
     Plan, and the Plan will be construed and enforced as if the illegal or
     invalid provision were not part of the Plan.

NO WAIVER
---------

 .    Failure of the Company to enforce at any time any provision of this Plan
     shall in no way be construed to be a waiver of such provision or any other
     provision of the Plan.

GOVERNING LAW
-------------

 .    The Plan and all individual Award Agreements hereunder will be governed
     by the laws of the State of California. In applying the laws of the State
     of California, its rules on choice of law will be disregarded.

ALL PROVISIONS
--------------

 .    This official Plan document represents the exclusive and complete statement
     of the terms of the Plan, and supersedes any and all prior or
     contemporaneous understandings, representations, documents, and
     communications between the Company or any Subsidiary and any Participant,
     whether oral or written, relating to its subject matters. The formal name
     of this Plan is the "Key Employee Recognition And Commitment Plan of Levi
     Strauss & Co." In the event of any conflict between the provisions of this
     official

                                      14
<PAGE>

     Plan document, as amended from time to time, and any other document
     describing or otherwise relating to the Plan, this official Plan document
     shall control.

Adoption
--------

To record the adoption of the Key Employee Recognition and Commitment Plan of
Levi Strauss & Co., the Company has caused its duly authorized officer to
execute this document.

                           Levi Strauss & Co.

                           By:  _________________________

                           Title:  Chief Executive Officer

                           Date:  _______________________

                                      15
<PAGE>

APPENDIX ONE: GLOSSARY OF TERMS
--------------------------------------------------------------------------------

Administrator means the Personnel Committee of the Board of Directors of the
-------------
Company.

Award Agreement means the written agreement between the Company and a
---------------
Participant that sets forth the number of Units granted to the Participant and
other terms and conditions of the grant.

Award Payment means the cash payable to a Participant when the Participant
-------------
exercises his or her vested Units.  The amount is based on the applicable
Settlement Unit Value.

Beneficiary means the person or persons designated by a Participant to receive
-----------
any distribution payable under the Plan in the event of the Participant's death.
The most recently designated Beneficiary will apply to all distributions, unless
otherwise specified by the Participant.  If no Beneficiary has been properly
designated, or if no properly designated Beneficiary survives the Participant,
the Participant's estate will be the Participant's Beneficiary.

Code means the Internal Revenue Code of 1986, as amended.
----

Company means Levi Strauss & Co.
-------

Corporate Values Score means a measure of the Company's and the Participants'
----------------------
collective achievement against the corporate values objectives.  The Chief
Executive Officer may seek the Participants' recommendations in establishing or
revising the corporate values objectives.  Corporate values objectives may
include, but are not limited to, corporate reputation, customer satisfaction,
and employee satisfaction.  Although the Chief Executive Officer may seek
Participants' recommendations, the Chief Executive Officer has sole discretion
in establishing  or revising the corporate values objectives, subject to review
and modification by the Administrator at the Administrator's initiative and
discretion.  The Chief Executive Officer will determine the Corporate Values
Score, subject to review and modification by the Administrator at the
Administrator's initiative and discretion. The Corporate Values Score range
(e.g., 0.8 - 1.2) will be determined by the Chief Executive Officer with
Participants' input in fiscal year 1997.

EBITDA means the audited net income of the Company on a consolidated basis
------
before (1) interest, (2) taxes, (3) depreciation, (4) amortization, (5) costs
and expenses relating to the Company's acquisition of Levi Strauss Associates
Inc., including compensation-related expenses resulting from such acquisition,
such as with respect to stock options and stock appreciation rights, (6) all
accruals and expenses directly relating to the operation of the Global Success

                                      16
<PAGE>

Sharing Plan, and (7) all accruals and expenses directly relating to the
operation of this Plan, all as determined by the Administrator.

Exercise Period means the period in which a Participant may exercise vested
---------------
Units. The Exercise Periods are the second quarter of fiscal years 2002, 2003,
and 2004.

Financial Unit Value means a measure of the Company's achievement against
--------------------
financial objectives set in the Plan.  The Financial Unit Value is zero if the
Company's EBITDA does not exceed the threshold EBITDA level, and increases as
the Company's EBITDA exceeds the threshold level.  The rate of increase in
Financial Unit Value is tied to the target EBITDA level.  There is no cap on the
Financial Unit Value.  Table I on page 5 shows the threshold and target EBITDA
levels for fiscal years 2001, 2002, and 2003, and Table II on page 5 shows the
corresponding Financial Unit Values.

Participant means an employee of the Company or a Subsidiary, nominated by the
-----------
Chief Executive Officer and approved by the Administrator, who has been granted
Units under this Plan.

Performance Period means, with respect to a Unit, the time period during which
------------------
the Company's achievement of financial and corporate values objectives is
measured. If an individual Participant terminates his or her employment during
the term of this Plan, the Performance Period of his or her Units would depend
on the type of termination and when such termination occurs, as described
further on pages 8-12.

Permanent Disability means the Participant is disabled within the meaning of,
--------------------
and eligible for benefits under, a long-term disability program or equivalent
program maintained by the Company or a Subsidiary employing the Participant; or,
in the opinion of the Administrator or its designee, is unable to engage in any
substantially gainful employment by reason of any physical or mental impairment
which can be expected to result in death or which can be expected to last for
not less than 12 months.

Retirement or Retire means termination of employment by a Participant who meets
----------    ------
the age and service requirement as defined and determined under the pension plan
applicable to the Participant and who elects to retire thereunder.

Settlement Unit Value means the monetary value of a Unit upon exercise.
---------------------
Settlement Unit Value is determined by multiplying the Financial Unit Value and
the Corporate Values Score applicable during the Exercise Period in which the
Unit is exercised.

                                      17
<PAGE>

Subsidiary means any corporation of which more than 50% of the outstanding
----------
shares having ordinary voting power are owned or controlled by the Company, and
any other entity that the Board of Directors of the Company, in its sole
discretion, deems to be a Subsidiary.

Unit means a future right to receive cash under the Plan. Its initial value is
----
zero, but the value may increase or decrease over time based on the Company's
achievement of financial and corporate values objectives during the Performance
Period.

Vesting means owning the right to the value of Units granted to a Participant
-------
under the Plan.  For Units granted effective as of the beginning of fiscal year
1997, vesting occurs in 25% increments on the last day of fiscal years 1997,
1998, 1999, and 2000, as shown in Table III on page 7. All other Units will vest
according to the terms established by the Administrator.

                                      18
<PAGE>

<TABLE>
<CAPTION>
APPENDIX TWO: TIME LINE OF ACTIONS UNDER THIS PLAN
----------------------------------------------------------------------------------------------------------------------------------
<S>                   <C>                      <C>                        <C>                       <C>
                      -------------------------------------------------------------------------------------------------------
*    FY 1997          1st Quarter              2nd Quarter                3rd Quarter               4th Quarter

                      ?      .  Corporate values objectives are established during FY 1997 and may be             ?
                                revised thereafter.

                             .  The range of the Corporate Values Score will be determined during FY 1997.

                                                                                                                            ?
                                                                                                                  . 25% Units
                                                                                                                     Vested

                      -------------------------------------------------------------------------------------------------------
*    FY 1998          1st Quarter                 2nd Quarter                3rd Quarter                4th Quarter

                                                                                                                            ?
                                                                                                              . Additional 25%
                                                                                                                 Units Vested

                      -------------------------------------------------------------------------------------------------------
*    FY 1999          1st Quarter                 2nd Quarter                3rd Quarter                4th Quarter

                                                                                                                            ?
                                                                                                              . Additional 25%
                                                                                                                 Units Vested

                      -------------------------------------------------------------------------------------------------------
*    FY 1999          1st Quarter                 2nd Quarter                3rd Quarter                4th Quarter

                                                                                                                            ?
                                                                                                              . Additional 25%
                                                                                                                 Units Vested
</TABLE>

*  The Company's and the Participants' collective achievement of the corporate
   values objectives will be reviewed by the Chief Executive Officer, with the
   Participants' input, on a cumulative and on-going basis as such times as the
   Chief Executive Officer may decide in his or her sole discretion.

                                      19
<PAGE>

<TABLE>
<CAPTION>
                      -------------------------------------------------------------------------------------------------------
<S>                   <C>                      <C>                        <C>                       <C>
*    FY 2001          1st Quarter              2nd Quarter                3rd Quarter               4th Quarter

                                                . If eligible, may                                                          ?
                                                  irrevocably elect                                            . First 33-1/3%
                                                  to defer receipt of                                             exercisable
                                                  payment upon
                                                  exercise of first
                                                  33-1/3%, which
                                                  becomes
                                                  exercisable at the
                                                  end of FY 2001,
                                                  regardless of
                                                  when actually
                                                  exercised

                      -------------------------------------------------------------------------------------------------------
*    FY 2002          1st Quarter               2nd Quarter               3rd Quarter               4th Quarter

                      . Financial Unit          . May exercise                                                              ?
                        Value determined          the first 33-1/3%                                           . Second 33-1/3%
                      . Corporate Values        . If eligible, may                                                exercisable
                        Score determined          irrevocably elect
                                                  to defer receipt of
                                                  payment upon
                                                  exercise of
                                                  second
                                                  33-1/3%, which
                                                  becomes
                                                  exercisable at the
                                                  end of FY 2002,
                                                  regardless of
                                                  when actually
                                                  exercised
</TABLE>

*    The Company's and the Participants' collective achievement of the corporate
     values objectives will be reviewed by the Chief Executive Officer, with the
     Participants' input, on a cumulative and on-going basis as such times as
     the Chief Executive Officer may decide in his or her sole discretion.

                                      20
<PAGE>

<TABLE>
<CAPTION>
                      -------------------------------------------------------------------------------------------------------
<S>                   <C>                      <C>                        <C>                       <C>
*    FY 2003          1st Quarter              2nd Quarter                3rd Quarter               4th Quarter

                      . Financial Unit         . May exercise                                                               ?
                        Value determined         second 33-1/3%                                                . Third 33-1/3%
                      . Corporate Values         plus any other                                                   exercisable
                        Score determined         unexercised
                                                 vested Units
                                               . If eligible, may
                                                 irrevocably elect
                                                 to defer receipt of
                                                 payment upon
                                                 exercise of
                                                 third
                                                 33-1/3%, which
                                                 becomes
                                                 exercisable at the
                                                 end of FY 2003,
                                                 regardless of
                                                 when actually
                                                 exercised

                      -------------------------------------------------------------------------------------------------------
     FY 2004          1st Quarter              2nd Quarter                3rd Quarter               4th Quarter
                      . Financial Unit         . Automatic
                        Value determined         exercise of
                      . Corporate Values         unexercised,
                        Score determined         vested Units
</TABLE>

* The Company's and the Participants' collective achievement of the corporate
 values objectives will be reviewed by the Chief Executive Officer, with the
 Participants' input, on a cumulative and on-going basis as such times as the
 Chief Executive Officer may decide in his or her sole discretion.

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