Exhibit 10(2)
THE MEAD CORPORATION
THE CORPORATE LONG TERM INCENTIVE PLAN
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1997
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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 Corportion 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, 1997.
PARTICIPATION ELIGIBILITY
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All corporate executives grade 23 and above, officers of the corporation
and division presidents are participants in the plan.
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. In such cases,
the incentive target will be pro-rated to reflect the months of service.
INCENTIVE TARGET
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The 1997 Incentive Target by grade is shown in Attachment 1. This Target
will be adjusted annually, based on competitive data.
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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1997
Grade Incentive Target
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33 $ 663,000
32 552,500
31 466,500
30 382,000
29 316,600
28 261,700
27 216,200
26 178,000
25 146,900
24 119,000
23 94,700
22 73,340
Mead Corporate Long Term Incentive Plan
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Mead Performance Factor
(% of Target)
10 0 0 13 26 42 59 68 76 85 93
9 0 10 22 34 46 59 67 75 83 91
8 6 16 27 38 48 59 67 74 82 90
7 11 21 31 41 50 59 66 73 81 88
6 16 25 34 43 51 59 66 73 79 86
2-Yr 5 20 28 37 45 52 59 65 72 78 84
Compound 4 24 30 38 46 52 59 65 71 77 83
Growth 3 28 34 41 47 53 59 64 70 75 81
in 2 32 36 42 48 53 59 64 69 74 79
Capital 1 35 38 44 49 54 59 64 68 73 77
(%) 0 38 41 46 50 54 59 63 67 71 75
-1 41 43 47 51 55 59 62 66 69 73
-2 44 46 49 52 55 59 62 64 67 70
-3 47 49 51 53 56 59 61 63 65 67
-4 49 52 53 54 56 59 60 62 63 64
-5 51 53 54 55 57 59 60 61 62 63
5 6 7 8 9
10 107 121 139 158 182 206 230 254 277 300 323
9 104 117 135 153 175 198 221 243 264 285 305
8 102 114 131 148 169 191 212 233 253 272 290
7 100 111 127 143 163 184 204 225 243 261 278
6 97 108 123 139 158 178 197 217 234 252 268
2-Yr 5 95 105 120 134 153 171 190 209 226 243 259
Compound 4 92 102 116 130 148 165 183 201 217 234 250
Growth 3 90 99 112 125 142 159 176 193 209 225 240
in 2 88 96 109 121 137 153 169 185 200 216 231
Capital 1 85 93 105 117 132 147 162 177 192 207 222
(%) 0 83 90 101 111 126 140 154 168 182 196 211
-1 79 86 96 106 119 132 145 158 172 185 199
-2 76 81 90 99 111 123 135 148 160 173 186
-3 72 77 85 93 104 115 126 137 148 160 172
-4 68 73 80 87 97 106 116 126 137 148 159
-5 67 70 77 83 93 102 112 121 131 141 152
10 Cost 11 12 13 14 15
of
Cap
Return on Total Capital (ROTC) - %
Notes:
1. Total Capital defined as Equity plus Long Term Debt (growth is compounded
over 2-year period).
2. Payout from this Table is subject to the application of the Competitive
Industry Factor.