Exhibit 10(1)
THE MEAD CORPORATION
CORPORATE ANNUAL INCENTIVE PLAN
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1997
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OBJECTIVE
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The objective of the Corporate Annual Incentive Plan is to recognize and
reward Mead's key executive officers and division leaders for achieving
and sustaining superior business results.
PARTICIPATION ELIGIBILITY
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All Corporate Executives grade 23 and above, Officers of the Corporation
and Division Presidents are participants in this plan.
PAYOUT ELIGIBILITY
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Participants must be employees of the company, an affiliate or a
subsidiary at the end of the 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 plan year. In such
cases, the incentive target will be pro-rated to reflect the months of
service.
INCENTIVE TARGET
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The Incentive Target for each grade is the difference between Mead's
policy total cash compensation target and the midpoint. This Target will
be adjusted annually, based on market total cash compensation data. In
addition, the Compensation Committee may increase the incentive targets in
any plan year, to reflect Mead's competitive base salary position. For
the 1997 plan year, incentive targets for all grades have been increased
by 3%. The current year incentive targets are shown in Attachment 1.
PAYOUT FUNDING
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Payout funding under this Plan is the sum of the incentive target
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
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 CIF
While this formula determines an available pool of incentive dollars,
allocation of incentive awards to individuals is based solely on the
criteria for "Individual Payout Determination" defined in the following
section.
INDIVIDUAL PAYOUT DETERMINATION
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Payout under this Plan for all Participants will be determined by an
assessment of:
1. Business Contract - the degree to which the Division or
Corporate functional unit has achieved its operational goals
and produced the expected financial results, and
2. Stretch Goals - the establishment and progress of management
objectives that demonstrate the executive's leadership through
innovation, and
3. Corporate Perspective - the contribution of the executive to
the synergy of the corporation, in balance to his or her
division or functional priorities, and
4. Mead Values - the climate that executive fosters within his or
her management team to encourage and reward others for high
performance: taking risks, develop innovative ideas, make hard
management decisions.
This assessment for each Participant shall be determined by the CEO.
Payout for Corporate executives and officers will be determined solely on
the basis of the plan; payout for Division Presidents will be based 50% on
this plan and 50% on the respective division incentive plan results.
PAYOUT THRESHOLD
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Senior Executives in grades 26 and above will not be eligible for payout
unless Mead's annual ROTC is 5% or higher. Other participants will not be
eligible for payout unless there are corporate earnings for the year.
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.
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 Compensation Committee may also determine if
payout will be in cash, restricted stock, replaced with stock options, or
a combination thereof.
The CEO recommends all individual payouts to the Compensation Committee of
the Board of Directors for approval. Payout for the CEO and the COO is
recommended to the Board of Directors by the Compensation Committee.
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 Annual 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
CORPORATE ANNUAL INCENTIVE PLAN
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PAYOUT TARGETS
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1997
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1997 Policy Policy 1997 Annual
Grade Midpoint Annual Target TCC Target Incentive Target*
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33 $744,864 $663,000 $1,407,900 $685,400
32 657,144 552,500 1,209,600 572,200
31 571,800 466,500 1,038,300 483,700
30 498,852 382,000 880,900 397,000
29 436,692 316,600 753,300 329,700
28 383,868 261,700 645,600 273,200
27 336,744 216,200 552,900 226,300
26 294,516 178,000 472,500 186,800
25 257,844 146,900 404,700 154,600
24 225,348 119,000 344,300 125,700
23 196,81 294,700 291,500 100,600
22 175,05 673,340 248,400 78,600
*For 1997 the above Incentive Targets include an addition of 3% of
Midpoint.