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Exhibit 10(a)
P. H. GLATFELTER COMPANY
MANAGEMENT INCENTIVE PLAN
ADOPTED AS OF JANUARY 1, 1994
AMENDED AND RESTATED EFFECTIVE MARCH 16, 1995
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P. H. GLATFELTER COMPANY
MANAGEMENT INCENTIVE PLAN
ADOPTED AS OF JANUARY 1, 1994
AMENDED AND RESTATED EFFECTIVE MARCH 16, 1995
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 mill management personnel on the basis of both mill
and corporate financial results.
(f) Provide above-average incentive award potential to key
salaried employees of the Company whose base salaries are
generally below average market rates.
2. Profit Centers of the Plan
In order to accomplish the objectives of the Plan, the Company and
each of its 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
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position to have a significant bearing on the success and profitability
of their profit center, and therefore on the profitability of the
Company. In addition, a Glatfelter Paper Group profit center shall
represent a combination of the Spring Grove and Neenah mill profit
centers. The profit centers are identified as follows:
Corporate Profit Center
Glatfelter Paper Group 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.
4. Administration of the Plan
The management of the Plan shall be vested in the Committee. 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
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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.
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 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 a participant shall transfer from one profit center to
another during the year, his incentive award shall be determined on
the basis of the financial results of each profit center for each
fiscal year, prorated based on service to each profit center during
such fiscal year. The participant's salary grade at the time he is
approved by the
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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 his death, retirement or permanent
disability, his incentive award shall be determined on the basis of
the financial results of his profit center for such fiscal year and
his base salary midpoint for such fiscal year, prorated to reflect his
services prior to his death, retirement or permanent disability, and
shall be paid either to him or as appropriate, his beneficiary as
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. A
participant who has been removed from the payroll of the Company
during the fiscal year for any reason, other than his death,
retirement, or permanent disability, shall not participate in the Plan
for such fiscal year, unless the Committee, in its sole discretion,
determines that he 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 certain
measurements of profitability in each of the Company's profit
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centers. Such profitability shall be measured by the return on
average shareholders' equity (ROSE) in the case of the Corporate
Profit Center and by both the return on average shareholders' equity
(ROSE) of the Company and the return on average capital employed
(ROCE) for the applicable mill profit center. In the case of the
Glatfelter Paper Group, the financial results of the Spring Grove and
Neenah mill profit centers will be combined for purpose of calculating
return on average capital employed. 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 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 in a fiscal year, the Committee will revise the
midpoints applicable to such year. The incentive award as a
percentage of base salary midpoint will vary based on the applicable
ROSE and ROCE levels achieved for the Plan year.
(c) The ROSE 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 8. The
incentive award shall equal the base salary midpoint multiplied by the
Incentive Award Factor which will
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vary in relationship to the actual ROSE and ROCE levels achieved for
the year.
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), the
participants 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 set forth on Schedule A, hereto. 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 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). 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.
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(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 year-end consolidated
financial statements.
(c) Deferred incentive awards shall be paid on the first Monday in
April of each year pursuant to a participant's election to defer
receipt of his award. In the event a participant who has deferred an
award determines that he has a financial hardship which necessitates
the acceleration of the payment of the deferred award, he shall submit
his 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 a participant separates from the Company before age 55, or
after age 55 without being vested by the terms of the Company's
Pension Plans for Salaried Employees, including the Supplemental
Executive Retirement Plan (collectively, the "Pension Plans"), such
participant will receive the unpaid amount of his cumulative deferred
award(s) in a lump sum within 30 days of his separation date or at the
sole discretion and option of the Committee, as stipulated on his
election form. If such participant separates after age 55 and is
vested under the terms of the Company's Pension Plans, his deferred
award(s) will be paid as stipulated on his election form(s). If a
participant should die before his deferred award(s) has been
completely paid out, the unpaid amount will be paid in a lump sum to
his designated beneficiary, as
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designated under the Company's Group Life Insurance Plan, on a timely
basis after his death.
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 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 minimum rates of return on average
shareholders' equity and rates of return on average capital employed
for each of the individual profit centers, based on historical and
anticipated rates of return for the profit centers, (or alternative
awards where there are unusual operating circumstances) and such other
administrative and procedural rules which the Committee considers
appropriate.
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10. Definitions
For the purpose of determining the incentive awards under the Plan,
the following definitions shall apply:
(a) Return on Average Shareholders' Equity (ROSE) shall mean
Incentive Income divided by Average Shareholders' Equity.
(b) Incentive income shall mean income before income taxes as
reported for the fiscal year in the Company's audited consolidated
financial statements...
(i) before provision is made for the amounts paid or
payable under the Plan, the Employees' Profit Sharing
Plans, and the 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.
(c) Average Shareholders' Equity shall mean the average of the
shareholders' equity as reported in each of the Company's monthly
internal financial statements during the fiscal year.
(d) The "Incentive Award Factor" shall be the percentage of base
salary midpoint for each salary grade corresponding to the maximum,
target and minimum rates of return established for the corporate,
mill, and the paper group profit centers in the operating rules.
(e) Return on Capital Employed (ROCE) shall mean Operating Profit
divided by Average Capital Employed. ROCE shall be
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based on the Company's internal financial reports for each of the
Spring Grove, Neenah, and Ecusta mills 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 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 Paper Group profit center, the Return on Capital
Employed shall be based on the consolidated financial reports for the
Spring Grove mill, The Glatfelter Pulp Wood Company, and the Neenah
mill.
(f) 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 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.
(g) Average Capital Employed shall mean the sum of the average of
inventories and net property, plant, and equipment
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as shown in the Company's monthly internal financial statements by
mill and for the Glatfelter Pulp Wood Company during the fiscal year.
(h) Retirement shall mean voluntary separation from service by a
participant who has achieved an age whereby he is eligible for and has
elected to receive early retirement under the Company's Pension Plans.
(i) 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
The Company shall have the right to withhold amounts from incentive
cash awards and deferred incentive awards as shall
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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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