Exhibit 10(2)
THE CORPORATE LONG TERM INCENTIVE PLAN
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1996
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OBJECTIVE
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The objective of the Corporate Long Term Incentive Plan is to reward
executives for adding value to the Corporation by providing a return that is
above the cost of capital, while strategically managing capital growth.
TERM OF THE PLAN
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This Corporate Long Term Incentive Plan is a two year plan, with the
performance period ending December 31, 1996.
PARTICIPATION ELIGIBILITY
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All corporate executives grade 23 and above, members of the Chairman's Co-
ordinating Committee, plus Division Presidents.
PAYOUT ELIGIBILITY
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Participants must be employees of the company, an affiliate 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
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The 1996 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 the full period of the plan.
TOTAL PAYOUT DETERMINATION
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This plan measures compound capital growth over 2 years, and the ROTC achieved
in the second year of this two year plan.
A single matrix (Attachment 2) determines the Mead Performance Factor (MPF),
which is based on Return on Total Capital and Growth in Capital. The MPF
is then multiplied by the Competitive Industry Factor (CIF) to determine the
final payout. The CIF is determined as:
Competitive = Mead ROTC X Mead ROTC
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Industry Factor All Industry ROTC Forest Products ROTC
where ROTC = (EAT + ((1-Tax Rate) X Current Interest Expense) X 100
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(Average Equity + Average Long-Term Debt)
The incentive payout is determined as:
Incentive Payout = Incentive Target X MPF X CIF
The above calculation shall not be further adjusted for any Participant on the
basis of individual contribution or in any other manner unless so defined
under the proration provisions herein.
ADMINISTRATION
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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 FOR PAYOUT
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Payout will be estimated periodically and required corporate accrual of payout
will be booked against earnings during the year. Approved incentive checks will
be prepared and expensed to earnings at the time of payout.
RECOMMENDATIONS AND APPROVAL
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The Compensation Committee reviews and approves total funding and individual
payouts under the plan, and the amount, use and replenishment of any reserve
funds.
The CEO recommends all individual payouts to the Compensation Committee of the
Board of Directors for approval. Payouts for the CEO and the COO are approved
by the Board of Directors.
Form of payout will be determined by the Compensation Committee. Payout will
normally be delivered to all participants as 50% cash and 50% restricted stock
(with a 6-month vesting period). The Board of Directors may require a mandatory
deferral of all or any portion of the payout to ensure full deductibility of
compensation to any executive.
RESERVED RIGHTS
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The Mead Corporation reserves the right to alter, amend, suspend or terminate
any or all provisions of this Corporate Long Term 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.
Attachment 1
THE CORPORATE LONG TERM INCENTIVE PLAN
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PAYOUT TARGETS
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1996
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Grade Incentive Target
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33 $ 538,300
32 451,100
31 382,200
30 312,400
29 260,000
28 217,400
27 181,100
26 149,400
25 123,600
24 100,100
23 79,500
22 60,810