Exhibit (10.2)
THE "DIRECTION 2000" EXECUTIVE INCENTIVE PLAN
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1994
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OBJECTIVE The objective of the "Direction 2000" Executive
- - --------- Incentive Plan is to reward executives
for adding value to the Corporation by providing a
return that is above the cost of capital, with
increasing revenues and improving
performance over time.
TERM OF THE PLAN Beginning January 1, 1993, the "Direction 2000"
- - ---------------- Plan is an eight year plan (to the year
2000) with annual payments. Business year 1994 is
the second performance period of the eight
year plan term.
PARTICIPATION All corporate executives grade 23 and above, plus
ELIGIBILITY Division Presidents.
- - -----------
PAYOUT Participants must be employees of the company,
ELIGIBILITY an affliate or a subsidiary at the end of each
- - ----------- plan year to receive payout from this plan.
An appropriate proration of earned awards may
be made in case of death, disability, retirement,
hire or transfer during the year.
INCENTIVE TARGET The 1994 Incentive Target by grade is shown
- - ---------------- in Attachment 1. This Target will be
adjusted annually, based on competitive data.
The Incentive Target will be prorated for
participants gaining or losing eligibility,
or for changes in grade during each year of
the plan term.
TOTAL PAYOUT Payout under the "Direction 2000" Executive
DETERMINATION Incentive Plan consists of two components, each
- - ------------- of which is 50% weighting in 1994:
ROTC Improvement Component - rewards for the
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degree to which ROTC has improved relative
to expectations for the business, as indicated by
the following Business Track:
YEAR 1993 1994 1995 1996 1997 1998 1999 2000
--------------------------------------------------
% ROTC 9.5 11.1 11.8 12.0 12.0 12.0 12.0 12.0
The payout for this component is determined from
the table in Attachment 2.
High Performance Component - rewards for achieving
--------------------------
higher levels of ROTC while increasing revenues
over the previous year. The payout is determined
from the matrix in Attachment 3.
In the first calendar year following the year when
12% ROTC has been attained, the weighting will
change to 30% Improvement and 70% High
Performance.
The sum of these two components produces a Mead
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Performance Factor (MPF) which is a measure of the
-----------------------
degree to which the performance relative to the
Business Track has been achieved. The MPF is
multiplied by a Competitive Industry Factor
(CIF) to determine the final payout.
The CIF is determined as:
Competitive = Mead ROTC X Mead ROTC
---------------- -------------
Industry Factor All Industry Forest Products
ROTC ROTC
The incentive payout is determined as:
Incentive = Incentive X MPF X CIF
Payout Target
ADMINISTRATION The Plan is administered by the Compensation
- - -------------- Committee of the Board. The Compensation
Committee has delegated administration to the
Corporate Vice President, Human Resources.
ACCOUNTING Payout will be estimated periodically and
FOR PAYOUT Corporate Aaccounting will provide a cumulative
- - ---------- accrual over the term of the plan.
Approved incentive checks will be prepared by
Corporate payroll at time of payout. Payout
will be charged against the Corporate Accrual
Account.
RECOMMENDATIONS The Compensation Committee reviews and approves
AND APPROVAL total funding and individual payouts under the
- - ------------ plan, and the amount, use and replenishment of any
reserve funds.
The CEO and COO recommend all individual payouts
to the Compensation Committee of the Board of
Directors for approval. Payout for the CEO and
COO is recommended to the Board of Directors by
the Compensation Committee.
Form of payout will be determined by the
Compensation Committee. Payout to those executive
officers named in the proxy will be delivered as
100% restricted stock. Payout to the other
participants will be 30% cash and 70%
restricted stock (with a 3-year vesting period).
RESERVED RIGHTS The Mead Corporation reserves the right to alter,
- - --------------- amend, suspend or terminate any or all provisions
of this "Direction 2000" Executive Incentive
Plan, except such actions shall neither inhibit
nor hinder the rights of any individual with
respect to earned and credited awards which have
been deferred. Designation of a position as
eligible for participation neither guarantees
the individual a right to an incentive payment nor
a right to continued employment.
S. C. Mason
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Approved
July 15, 1994
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Date
Attachment 1
THE "DIRECTION 2000" EXECUTIVE INCENTIVE PLAN
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PAYOUT TARGETS
--------------
1994
Grade Incentive Target
----- ----------------
33 $510,400
32 422,400
31 348,700
30 289,600
29 243,800
28 201,700
27 166,500
26 136,600
25 113,700
24 91,300
23 71,400
22 52,900
Attachment 2
This graph illustrates the payout for the ROTC Improvement Component that is
tabularized on the right. The line plots the relationship between 1994 ROTC
performance (on the X-axis) versus the incentive payout as a percent of the
target (on the Y-axis) for this component. The resulting payout line is
non-linear, with zero payout at or below 8.1% ROTC, rising to 50% of target
incentive at 11.1% ROTC, and rising at increasing increments for performance
above 11.1% ROTC.
Attachment 3
Mead "Direction 2000" Executive Incentive Plan
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High Performance Matrix
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(%'s Indicate Payout Under High Performance Component of Plan)
4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0%
18% 17% 22% 27% 35% 44% 55% 69% 86% 107% 133% 166% 205% 18%
17% 16% 20% 26% 32% 41% 51% 64% 80% 100% 124% 154% 191% 17%
16% 15% 19% 24% 30% 38% 47% 59% 74% 93% 115% 143% 177% 16%
15% 14% 17% 22% 28% 35% 44% 55% 69% 86% 107% 133% 165% 15%
14% 13% 16% 20% 26% 32% 41% 51% 64% 80% 99% 123% 153% 14%
13% 12% 15% 19% 24% 30% 38% 47% 59% 74% 92% 114% 142% 13%
12% 11% 14% 18% 22% 28% 35% 44% 55% 68% 85% 106% 131% 12%
11% 10% 13% 16% 20% 26% 32% 41% 51% 63% 79% 98% 121% 11%
10% 9% 12% 15% 19% 24% 30% 38% 47% 59% 73% 91% 112% 10%
Change 9% 9% 11% 14% 18% 22% 28% 35% 43% 54% 67% 84% 104% 9%
In 8% 8% 10% 13% 16% 20% 26% 32% 40% 50% 62% 77% 96% 8%
Revenue 7% 7% 9% 12% 15% 19% 24% 30% 37% 46% 57% 71% 88% 7%
6% 7% 9% 11% 14% 17% 22% 27% 34% 43% 53% 66% 82% 6%
5% 6% 8% 10% 13% 16% 20% 25% 31% 39% 49% 61% 75% 5%
4% 6% 7% 9% 12% 15% 18% 23% 29% 36% 45% 56% 69% 4%
3% 5% 7% 9% 11% 14% 17% 21% 27% 33% 41% 51% 64% 3%
2% 5% 6% 8% 10% 12% 16% 20% 24% 30% 38% 47% 58% 2%
1% 4% 6% 7% 9% 11% 14% 18% 22% 28% 35% 43% 54% 1%
0% 4% 5% 7% 8% 10% 13% 16% 21% 26% 32% 40% 49% 0%
-1% 4% 5% 6% 8% 10% 12% 15% 19% 24% 29% 36% 45% -1%
-2% 3% 4% 6% 7% 9% 11% 14% 17% 22% 27% 33% 41% -2%
4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0%
Return on Total Capital