Exhibit 10(1)
THE MEAD CORPORATION
CORPORATE ANNUAL INCENTIVE PLAN
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1998
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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 Officers of the Corporation are participants in this plan. In
addition, the formula of this plan provides funding for the annual
incentives of all Corporate Center employees.
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 annual incentive target will be pro-rated to reflect the
months of service.
ANNUAL INCENTIVE TARGET
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The annual 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 annual incentive targets in any plan year, to reflect Mead's
competitive base salary position. For the 1998 plan year, annual
incentive targets for all grades have been increased by up to 3%. The
current targets are shown in Attachment 1.
PAYOUT FUNDING
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The individual annual incentive target is multiplied by the Payout
Factor under this Plan. This Payout Factor is determined as:
Payout = Mead ROTC X Mead ROTC
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Factor Mead Cost of Capital FP Peers ROTC
where ROTC = (EAT + ((1 - Tax Rate) X Current Interest Expense)) X 100
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(Average Equity + Average Long-Term Debt)
Mead's Forest Products peers (FP Peers) are comprised of those members
of the Paper Industry Compensation Association whose major business
lines are similar to the Mead business segments, and for which public
financial reporting is provided by Value Line Reports. For the 1998
plan year, these companies are identified as:
Boise Cascade
Champion International
Consolidated Paper
Georgia Pacific
International Paper
Potlatch
Stone Container
Temple-Inland
Union Camp
Westvaco
Weyerhaeuser
Willamette
The Compensation Committee may alter the membership of this FP Peer
group as corporate structures or market business lines of the indicated
companies changes.
The annual incentive payout is determined as:
Annual Incentive Payout = Annual Incentive Target x Payout Factor
While this formula determines an available pool of annual 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 each individual's contribution to the business results for
the performance period. This assessment for each Participant shall be
determined by that participant's manager, subject to review of the CEO.
PAYOUT LIMITATIONS
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Payout shall be limited on the basis of the following financial results
of the corporation:
1. There shall be no payout to any participant if any corporate
earnings are negative for the calendar year.
2. Maximum payout is 75% of target for any financial
performance under 6.0% ROTC
3. Payout is capped at 200% of target, for any level of
performance.
ACCOUNTING FOR PAYOUT
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Payout will be estimated periodically and the required corporate accrual
of payout will be booked against earnings during the year. Approved
incentive payments will be prepared and expensed to earnings at the time
of payout.
RECOMMENDATIONS AND APPROVAL
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The Compensation Committee approves this Plan, and reviews 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 recommended to the Board of Directors by the Compensation Committee.
The Compensation Committee may also determine if payout will be in cash,
restricted stock, or replaced with stock options, or a combination
thereof. 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.
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.
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.
JEROME F. TATAR MAY 11, 1998
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Approved Date
Attachment 1
CORPORATE ANNUAL INCENTIVE PLAN
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PAYOUT TARGETS
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1998
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1998 Policy Policy 1998 Annual
Grade Midpoint Annual Target TCC Target Incentive Target*
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33 $772,236 $756,700 $1,528,900 $766,400
32 684,300 626,900 1,311,200 636,000
31 597,600 521,000 1,118,600 529,300
30 525,144 419,000 944,100 426,600
29 461,064 343,000 804,100 350,000
28 383,868 282,700 687,400 289,100
27 354,648 232,900 587,500 238,700
26 310,212 191,000 501,200 196,300
25 271,524 157,200 428,700 162,000
24 237,048 128,100 365,100 132,400
23 206,616 115,700 322,300 119,600
22 183,360 102,290 285,700 105,900
21 160,728 87,890 248,600 91,160
*For 1998 the above Incentive Targets include up to an addition of 3%
of Midpoint.