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Exhibit 10(a)
P. H. GLATFELTER COMPANY
MANAGEMENT INCENTIVE PLAN
(ADOPTED AS OF JANUARY 1, 1994)
(AMENDED AND RESTATED DECEMBER 18, 1997) (EFFECTIVE JANUARY 1,
1998) (AMENDED DECEMBER 17, 1998 (EFFECTIVE JANUARY 1,
1999) AND DECEMBER 14, 1999 (EFFECTIVE JANUARY 1, 2000))
1. PURPOSE OF THE PLAN
The purpose of the Management Incentive Plan (hereinafter
called the "Plan") is to provide an incentive to greater efforts on the part of
key salaried employees to increase profits of P. H. Glatfelter Company,
hereinafter, together with its subsidiaries, called the "Company". The
underlying objectives of the Plan are as follows:
(a) Maximize the annual return on shareholders' equity.
(b) Promote and reward management teamwork at both corporate and mill
levels.
(c) Enable the Company to attract and retain a talented management team.
(d) Assure that Plan awards are at risk annually.
(e) Reward key corporate, divisional and mill management personnel and
managing directors on the basis of both mill and corporate financial
results.
2. PROFIT CENTERS OF THE PLAN
In order to accomplish the objectives of the Plan, the
Company, its Glatfelter Division, its Schoeller & Hoesch operations, and each of
its U. S. mills shall be treated as a separate profit center for the purpose of
rewarding those employees, who through the exercise of their responsibilities,
are in a position to have a significant bearing on the success
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and profitability of their profit center, and therefore on the profitability of
the Company. In addition, a Glatfelter Division profit center shall represent a
combination of the Spring Grove and Neenah mill profit centers. The profit
centers are identified as follows:
Global Profit Center
Schoeller & Hoesch Profit Center
Glatfelter Division Profit Center
Spring Grove Mill Profit Center
Neenah Mill Profit Center
Ecusta Mill Profit Center
3. AMENDMENT OR TERMINATION OF THE PLAN
This Plan is an amendment and restatement of the P. H.
Glatfelter Company Management Incentive Plan and shall continue in force from
year to year until amended, modified or terminated. The Company reserves the
right by action of its Board of Directors or the Compensation Committee thereof
(hereinafter called the "Committee") at any time to amend or modify the Plan in
any respect, or to terminate the Plan in its entirety, provided that, if the
Plan is in effect at the beginning of a fiscal year, it may not be terminated or
amended for such year. The Company will seek the approval of the Company's
shareholders for an amendment if such approval is necessary to comply with the
Internal Revenue Code, Federal or state securities law or any other applicable
rules or regulations.
4. ADMINISTRATION OF THE PLAN
The management of the Plan shall be vested in the Committee,
which shall be comprised solely of two or more "outside directors" (as defined
in regulations promulgated under Section 162(m) of the Internal Revenue Code).
The majority of the members of the Committee at any time in office shall
constitute a quorum for the transaction of business at any meeting. Any
determination or action of the Committee may be made or taken by a majority of
its members present at any meeting at which a quorum is present or without a
meeting by unanimous written consent executed by all the members then in office.
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5. PARTICIPANTS IN THE PLAN
(a) The participants in the Plan and the profit center to
which they are assigned for each fiscal year shall be proposed by the Chief
Executive Officer and approved by the Committee on or before the December 31
immediately preceding such fiscal year. In this respect, the action of the
Committee shall be final. Participation is limited to selected management and
highly compensated salaried employees of the Company. Nothing herein contained
shall be construed as giving any salaried employee the right to participate in
the Plan, except after approval by the Committee, and then his/her participation
shall be subject to all the provisions of the Plan.
(b) The criteria that will be considered by the Committee in
approving a participant shall include position responsibilities, organizational
reporting relationship, current salary grade and/or rate, individual performance
expectations, and competitive practices.
(c) If participants transfer from one profit center to another
during the year, their incentive award shall be determined on the basis of the
financial results of each profit center for such fiscal year, prorated based on
service to each profit center during such fiscal year. A participant's salary
grade at the time he/she is approved by the Committee as a participant in the
Plan for such year shall be such participant's salary grade for purposes of
determining the maximum, target and minimum awards for each profit center.
(d) If a participant's employment by the Company should
terminate during the fiscal year by reason of death, retirement or permanent
disability, his/her incentive award shall be determined on the basis of the
financial results of his/her profit center for such fiscal year and his/her base
salary midpoint for such fiscal year, prorated to reflect the period of service
prior to his/her death, retirement or permanent disability, and shall be paid
either to him/her or, as appropriate, the beneficiary specifically designated by
the participant on the applicable form, or, if no such specific designation is
made, to such beneficiary as is designated under the Company's Group Life
Insurance Plan. Participants who have been removed from the payroll of the
Company during the fiscal year for any reason, other than death, retirement or
permanent disability, shall not participate in the Plan for such fiscal year,
unless the Committee, in its sole discretion, determines
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that they shall so participate. The decision of the Committee in this regard
shall be final.
(e) In consideration of the payments to be made in accordance
with the provisions of the Plan, the participants may not be participants in the
Company's Conference Group award program.
6. DETERMINATION OF INCENTIVE COMPENSATION AWARDS
(a) The Plan shall provide incentive awards based on
achievement of specified performance goals. Such performance goals shall be
based on certain measurements of profitability in each of the Company's profit
centers. Initially, such profitability shall be measured by earnings per share
(EPS) in the case of the Global Profit Center, and by both Operating Profit and
the Return on Capital Employed (ROCE) for the other profit centers. In the case
of the Glatfelter Division Profit Center, the financial results of the Spring
Grove and Neenah mill profit centers will be combined for purposes of
calculating Return on Capital Employed (ROCE). The determination of profit
center profitability shall be based on the audited consolidated financial
statements of the Company and on the Company's internal financial statements for
Schoeller & Hoesch and for each mill after the audit adjustments have been
applied.
(b) The amount of an individual's award shall be based on a
percentage of such individual's base salary midpoint for the salary grade
approved for him by the Committee. If such salary midpoints are revised at any
time during a fiscal year, the Committee will revise the midpoints applicable to
such year. Salary midpoints for Schoeller & Hoesch participants shall be
established in DM based on the DM/USD conversion rate at the close of business
on December 30, 1999. Such midpoints shall be maintained in DM, to be adjusted
only by structural increases for the domestic grade equivalent. The incentive
award as a percentage of base salary midpoint will vary based on the applicable
EPS, Operating Profit and ROCE levels achieved for the Plan Year. In no event
may the incentive award paid to any participant for any plan year exceed USD
1,000,000.
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(c) The EPS, Operating Profit and ROCE factors are a measure
of profitability and will be established in the operating rules for each profit
center, adopted annually by the Committee in accordance with Paragraph 9. The
incentive award shall equal the base salary midpoint multiplied by the Incentive
Award Factor which will vary in relationship to the actual EPS, Operating Profit
and ROCE levels achieved for the year.
(d) The Committee may, from time to time, establish
performance goals based on business criteria other than EPS, Operating Profit
and ROCE, such as stock price, return on assets, earnings, total shareholder
return, sales or costs.
7. PAYMENT OF INDIVIDUAL INCENTIVE AWARDS
(a) Each year after the Committee has approved the
participants in the Plan for the following year in accordance with Paragraph
5(a), participants (other than employees of Schoeller & Hoesch) shall make an
election by February 1 of such following year to receive their incentive award
in cash or to defer the receipt of 25%, 50%, 75% or 100% of the award to a
future period, specifying irrevocably the timing of the future payment(s) in
accordance with the deferred options established by the Committee. Schoeller &
Hoesch employees must receive awards in cash. The amount of deferred awards
shall be adjusted at the end of each calendar quarter by crediting the
cumulative deferred awards with interest for the quarter (i) based on the prime
rate of interest on the last business day of the quarter at Morgan Guaranty
Trust Company of New York (or such comparable rate as is determined by the
Committee if such prime rate is unavailable or, if in the opinion of the
Committee it no longer reflects the rate of interest on such bank's demand loans
to its most credit-worthy customers) for awards deferred pursuant to plan years
prior to 1999 and (ii) based on six-month LIBOR (as it appears in the Wall
Street Journal) plus 100 basis points on the last day of the quarter for awards
deferred pursuant to plan years beginning with 1999. The interest credit shall
be earned from the date when the award would have been paid if not deferred and
shall be compounded on the accumulated award and accrued interest. Should a
deferred award be paid during a quarter, interest on the amount of such payment
shall be accrued at the rate used for the immediately preceding quarter.
(b) Cash incentive awards shall be paid annually as promptly
as practicable after the Company's certified public accountants have completed
their examination of the Company's
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year-end consolidated financial statements and the Committee has certified that
the applicable performance goals have been met.
(c) Deferred incentive awards shall be paid on the first
Monday in April of each year pursuant to participants' elections to defer
receipt of their awards. In the event participants who have deferred awards
determine that they have a financial hardship which necessitates the
acceleration of the payment of the deferred award, they shall submit their
request to release the funds to the Committee which shall consider the
circumstances and, in its sole discretion, determine whether the request shall
be approved.
(d) If participants separate from the Company before age 55,
or after age 55 without being vested under the terms of the Company's Retirement
Plan for Salaried Employees, including the Supplemental Executive Retirement
Plan (collectively, the "Pension Plans"), such participants shall receive the
unpaid amount of their cumulative deferred award(s) in a lump sum within 30 days
of their separation date or, at the sole discretion and option of the Committee,
as stipulated on their election form. If participants separate after age 55 and
are vested under the terms of the Company's Pension Plans, their deferred
award(s) shall be paid as stipulated on their election form(s). If participants
should die before their deferred awards have been completely paid out, the
unpaid amount will be paid in a lump sum to the beneficiary specifically
designated by the participant on the applicable form, or, if no such specific
designation is made, to such beneficiary as is designated under the Company's
Group Life Insurance Plan.
8. MANAGEMENT INCENTIVE PLAN ADJUSTMENT SUPPLEMENT
The Company will supplement the basic monthly pension payable
under the Company's Pension Plans, with respect to an employee who is a
participant in the Plan and elected to defer incentive awards in accordance with
Paragraph 7 of the Plan, as provided in the Plan of Supplemental Retirement
Benefits for the Management Committee.
9. MANAGEMENT INCENTIVE PLAN OPERATING RULES
On or prior to December 31 immediately preceding each fiscal
year, the Committee shall adopt operating rules for each of the profit centers
for such fiscal year to be based on the operating budget for such fiscal year
and estimated financial results for the then current fiscal year, both as
presented at
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the December Board of Directors' meeting. These operating rules will establish
maximum, target and minimum Incentive Award Factors for each salary grade and
the corresponding maximum, target and levels of EPS, Operating Profit and rates
of ROCE for each of the individual profit centers based on historical and
anticipated EPS and Operating Profit levels and rates of return for the profit
centers (or maximum, target and minimum goals based on such other business
criteria as the Committee may establish pursuant to Paragraph 6(d)), and such
other administrative and procedural rules which the Committee considers
appropriate.
10. DEFINITIONS
For the purpose of determining the incentive awards under the
Plan, the following definitions shall apply:
(a) Earnings per share (EPS) shall mean basic earnings per share as
reported for the applicable period in the Company's consolidated financial
statements.
(b) The "Incentive Award Factor" shall be the percentage of base salary
midpoint for each salary grade corresponding to the maximum, target and minimum
performance goals established for each profit center in the operating rules.
(c) Return on Capital Employed (ROCE) shall mean Operating Profit
divided by Average Capital Employed. ROCE shall be based on the Company's
internal financial reports for each of the Spring Grove, Neenah, and Ecusta
mills, and the Schoeller & Hoesch profit center after the year-end audit
adjustments by the Company's independent certified public accountants have been
applied to the accounting records and related reports. In the case of the Spring
Grove mill profit center, the Return on Capital Employed (ROCE) shall be based
on the consolidated financial reports for the Spring Grove mill and The
Glatfelter Pulp Wood Company. In the case of the Glatfelter Division profit
center, the Return on Capital Employed (ROCE) shall be based on the consolidated
financial reports for the Spring Grove mill, The Glatfelter Pulp Wood Company,
and the Neenah mill.
(d) Operating Profit shall mean operating profit as reported for the
fiscal year in the Company's internal financial statements by mill and for The
Glatfelter Pulp Wood Company. . .
(i) before provision is made for the amounts paid or
payable under the Plan, the Employees' Profit Sharing
Plans, and the
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Spring Grove Conference Group award program, and
(ii) after such adjustment, if any, as shall be made to
exclude, to the extent that the Committee in its sole
discretion may determine, the whole or any part of
any item which is both unusual in nature and
infrequent in occurrence.
(e) Average Capital Employed shall mean the sum of the average of
inventories and net property, plant, and equipment as shown in the Company's
monthly internal financial statements by mill and for The Glatfelter Pulp Wood
Company during the fiscal year.
(f) Retirement shall mean voluntary separation from service by
participants who have achieved an age whereby they are eligible for and have
elected to receive early retirement under the Company's Pension Plans.
(g) Disability shall mean a disability due to any medically
determinable physical or mental impairment that prevents a participant from
fulfilling the duties that such participant was performing at the time of the
occurrence of such disability and which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of more than
twelve months, as determined by the Committee in its sole discretion.
11. RIGHTS NOT TRANSFERABLE
Rights to incentive cash awards and deferred incentive awards
are not transferable by a participant except upon the death of the participant
by operation of will or the laws of intestacy.
12. FUNDING
The Plan is not funded. All awards that are not received in
cash shall remain as part of the general assets of the Company and shall not be
deemed held in trust for the benefit of the participant.
13. WITHHOLDING OF APPLICABLE TAXES
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The Company shall have the right to withhold amounts from
incentive cash awards and deferred incentive awards as shall be required to be
withheld by the Company pursuant to any statute or other governmental regulation
or ruling.
14. CONCLUSION
The interpretation of the Plan or any provision thereof or the
operating rules made by the Committee shall be binding upon both the Company and
every participant in the Plan. While it is the intention of the Company to
provide a fair and reasonable basis for the determination of incentive
compensation awards and the selection of the participants, the Plan is not an
employment contract between the Company and the salaried employees or any
participants and shall not constitute an agreement by the Company to continue
any participant in its employ for any period of time notwithstanding that the
termination of the employment of a participant during a fiscal year will
preclude an incentive award to such participant for such year.
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