Exhibit 10.B 15 P. H. GLATFELTER COMPANY MANAGEMENT INCENTIVE PLAN OPERATING RULES FOR 1994 General - ------- The following management incentive plan operating rules are in effect for the year 1994. 16 Maximum, Target, Minimum Awards by Grade - ---------------------------------------- The table below shows maximum, target and minimum awards as percentages of base salary midpoints for each salary grade. This table applies to all participants, in all profit centers. Award as % of Base Salary Midpoint ---------------------------------- Salary Grade Target Maximum Minimum - ------------ ------ ------- ------- 25 70 100 32.5 24 65 100 27.5 23 60 100 22.5 22 55 100 17.5 21 50 100 12.5 20 45 90 11.25 19 40 80 10.0 18 40 80 10.0 17 35 70 8.75 16 35 70 8.75 15 30 60 7.5 14 30 60 7.5 13 25 50 6.25 12 25 50 6.25 11 20 40 5.0 10 20 40 5.0 9 20 40 5.0 17 Return on Shareholders' Equity (ROSE) and Return on Capital Employed (ROCE) - --------------------------------------------------------------------------- Factors - ------- The weighted average of the ROSE and ROCE factors set forth below define the returns necessary to achieve the target awards for each profit center. Corporate Profit Center - ----------------------- Year ROSE Weighting Factor ---- ----- ---------------- 1992 Actual 20.3% 10% 1993 Actual 12.1% 30% 1994 Budget 10.3% 60% ---- Weighted Avg. - Target 11.8% Glatfelter Paper Group Profit Center - ------------------------------------ Year ROCE Weighting Factor ---- ---- ---------------- 1992 Actual 15.8% 10% 1993 Actual 10.7% 30% 1994 Budget 9.3% 60% ---- Weighted Avg. - Target 10.4% Spring Grove Mill Profit Center - ------------------------------------ Year ROCE Weighting Factor ---- ---- ---------------- 1992 Actual 13.4% 10% 1993 Actual 9.8% 30% 1994 Budget 6.8% 60% ---- Weighted Avg. - Target 8.4% 18 Neenah Mill Profit Center - --------------------------- Year ROCE Weighting Factor ----- ---- ---------------- 1992 Actual 26.1% 10% 1993 Actual 15.2% 30% 1994 Budget 22.4% 60% ---- Weighted Avg. - Target 20.6% Ecusta Mill Profit Center - --------------------------- Year ROCE Weighting Factor ---- ---- ---------------- 1992 Actual 11.9% 10% 1993 Actual 2.7% 30% 1994 Budget 1.3% 60% ---- Weighted Avg. - Target 2.8% The ROSE and ROCE factors set forth below define the returns necessary to achieve the maximum and minimum awards for each profit center. Corporate Profit Center - ----------------------- ROSE ---- Maximum 17.65% Target 11.80% Minimum 7.86% Glatfelter Paper Group Profit Center - ------------------------------------ ROCE ---- Maximum 14.65% Target 10.40% Minimum 6.85% 19 Spring Grove Mill Profit Center - ------------------------------- ROCE ---- Maximum 10.92% Target 8.40% Minimum 5.46% Neenah Mill Profit Center - ------------------------- ROCE ---- Maximum 35.02% Target 20.60% Minimum 14.42% Ecusta Mill Profit Center - ------------------------- ROCE ---- Maximum 4.20% Target 2.80% Minimum 1.29% For the purposes of determining the Incentive Award Factor, all rates of return will be computed to one decimal. Should the actual rate of return fall between the maximum, target or minimum values in the table, the Incentive Award Factor will vary proportionately to the interval between the actual rate of return and the maximum, target or minimum values into which it falls. 20 The Incentive Award Factor for the mill profit centers will be based on the aggregate of 80% of the ROCE factor for the mill and 20% of the ROSE factor for the Company. The award factor for the Glatfelter Paper Group reflects the combination of the financial results for the Spring Grove and Neenah mills and will be based on the aggregate of 80% of the ROCE for combined mills and 20% of the ROSE for the Company.