EXHIBIT 10.1
FY1998 EXECUTIVE INCENTIVE PLAN
for
CADMUS COMMUNICATIONS CORPORATION
Approved by:
Executive Compensation and Organization Committee (ECOC)
of the
Board of Directors
November 11, 1997
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FY 1998 Executive Incentive Plan Description
Purpose
The Executive Incentive Plan is designed to motivate and reward senior
executives for the achievement of fiscal year financial and non-financial
objectives that directly contribute to the success of Cadmus and its various
organizational units.
Eligibility
Participation in the Plan is limited to key executives at the Corporate, Sector,
Group and Division level who have accountability for and significant impact on
business strategy, business growth and profitability. Executives in salary band
21 and above and salary band 20 level executives with a direct reporting
relationship to an executive vice president are eligible for participation in
the Plan. Executives selected for participation are confirmed at the beginning
of each Plan year. A minimum of six months service in an eligible position is
required for participation in the Plan. Awards to individuals with less than one
year's participation will be prorated based on the tenure in the eligible
position.
Target Incentive Award
The Target Incentive Award is the amount that the participant receives if the
combined, weighted performance against Plan objectives equals an overall
achievement level of 100%. This amount is established for each participant based
on the percentage of base salary that is determined to be competitive for the
participant's position in relationship to a competitive level of performance for
the organization. Depending upon the scope and impact of the executive's
position, Target Incentive Awards range from 30% to 50% of base salary. The
actual award received by the executive could be substantially higher or lower
than the target amount.
Performance Measures and Weightings
In order to reinforce the importance of supporting Cadmus-wide objectives a
portion of the award potential for all executives is based on Cadmus EPS
performance. The measures and weightings applicable to Sector, Group and
Division executives are as follows: Sector executives' awards will be weighted
50% Sector ROC and 50% Cadmus EPS; Group and Division executives will be
weighted 75% Group/Division ROC (or ROS in the case of the marketing divisions)
and 25% Cadmus EPS. Corporate executives' awards will be based 100% on Cadmus
EPS performance.
The accomplishment of individual objectives is an important part of each
participant's overall performance for the year. A factor of up to plus or minus
10% will be applied to the executive's financial-based award to reflect the
extent to which individual objectives are accomplished. These objectives
typically number from five to seven and comprise specific, measurable
performance criteria. Individual objectives cover areas such as: systems and
process improvement initiatives; customer satisfaction; development of associate
capability and satisfaction; and support for Cadmus strategy.
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Incentive Award Curves
Incentive Award Curves reflect the relationship between the organization's
financial performance and the size of the incentive pool. Group and Division
curves are based on the percentage of ROC (or ROS) achieved in excess of hurdle
operating profit. Generally, organizations that deliver a higher return on
capital will have a larger share of the operating profit accrued for incentive
awards. The incentive pool at the 100% ROC (or ROS) achievement level is
sufficient to pay a Target Incentive Award to all participants. The curves also
provide an award range above and below the target level. The organization must
achieve the threshold ROC (or ROS) level before any participant in the
organization is eligible for an award. Cadmus must achieve the threshold EPS
level in order for this portion of the total award pool to be paid.
Organizations that achieve "exceptional" ROC (or ROS) results will generate an
incentive pool that will provide participants with awards of up to a maximum of
150% of their individual target award level. On the downside of the incentive
curve, performance at the "marginal" level, or threshold, will result in an
incentive pool equal to only 50% of the target award level. An individual
incentive award curve is established for each executive in the Plan.
First Half Awards
The FY 1998 Plan contains a special First Half award feature. First Half ROC (or
ROS) performance targets will be established for each organization, as well as,
a First Half EPS target for Cadmus. At the end of the first half, actual ROC (or
ROS) and EPS performance will be compared to the targets and an award payout
percentage will be calculated and applied to the organization's "Target"
incentive accrual for the first half. Fifty percent of the total actual accrual
for the half will be made available for distribution to Plan participants. At
year end, the full fiscal year performance against target will be measured and a
total annual award will be determined. The individual participant's year-end
incentive award will be the total incentive earned for the year less the First
Half payment, if any, that was made.
General Plan Provisions
Participation in the Plan terminates on the date the associate terminates
employment with Cadmus, whether voluntary or involuntary.
With the exception of disability, retirement or death, participants must be
actively employed on the date the awards are paid in order to receive an
incentive award. Cadmus, at its sole discretion, may make an award to a former
associate, or to the former associate's estate, in such amount as it deems
appropriate.
Should a participant transfer to another organizational unit during the Plan
year, the final award will be jointly determined and prorated for the time spent
in each organization.
Incentive award recommendations for all Plan participants are to be submitted to
the Corporate Vice President , Human Resources and Quality, by the end of
January, 1998 for first half payments and by the end of July, 1998 for year-end
awards. Award payments require approval by the CEO and the Executive
Compensation and Organization Committee (ECOC) of the Board. Documentation of
individual objectives and accomplishments will be required to be submitted along
with the award recommendations at year-end.
The CEO and ECOC reserve the right to adjust the overall incentive pool, and in
turn, individual incentive awards in an amount deemed necessary to meet
minimally acceptable EPS requirements. The CEO and ECOC also reserve the right
to make discretionary awards for performance that falls below the Plan threshold
or above the Plan maximum.
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Payments will be made to participants in cash as soon as practical after the
Executive Compensation and Organization Committee meeting in February and August
1998.
Nothing in this Plan Description or in any action taken thereunder shall affect
the Company's right to terminate at any time and for any reason the employment
of any associate who is a participant in the Plan.
Definitions
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Base Salary The base annual salary rate of a participant as
of July 1 of the Plan Year or, if later, the time he or
she is approved as a participant for a given year,
exclusive of bonuses, commissions or any special
payments
Capital Employed All capital employed in the business, which is total
assets less non-interest bearing liabilities
Earnings Per
Share (EPS) Net earnings, post incentive, divided by average common
shares outstanding
Hurdle Operating
Profit Operating profit required to earn a minimally acceptable
return on capital
Operating Profit Pre-incentive, pre-tax operating earnings
Plan Year The period commencing July 1, 1997 and ending June 30,
1998 for which performance is being measured
Return on Capital (ROC) Operating profit divided by capital employed
Return on Sales (ROS) Operating profit divided by sales
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