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EXHIBIT 10.16
NASHUA
MANAGEMENT INCENTIVE PLAN
PLAN DOCUMENT
MARCH 1999
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MANAGEMENT INCENTIVE PLAN PLAN DOCUMENT
PURPOSE
The purpose of Nashua Corporation's Management Incentive Plan ("Plan") is:
1. To link senior management cash compensation to the financial performance of
the organization.
2. To motivate and reinforce the following behaviors among senior managers:
* Effective goal-setting tied to key strategic priorities,
* Accountability for goal achievement.
3. To provide a means for making awards that qualify for the performance-based
compensation exception described at Section 162(m) of the Internal Revenue
Code (the "Code").
PLAN OPERATION
The Management Incentive Plan provides cash incentive payments based upon
achievement of corporate and/or divisional financial performance goals and
achievement of personal goals by Plan Participants, as described below.
1. Salary Administration
For positions covered by the Management Incentive Plan, salary levels are
established such that, when combined with target incentive opportunities
(expressed as a percent of base salary), target total cash compensation is
both competitive with comparable companies and equitable within the
internal organization.
The following definitions apply:
BASE SALARY The annualized regular cash compensation of
a Participant, excluding incentive
payments, company contributions to employee
benefit plans, relocation, or other
compensation not designated as salary. The
base salary is the basis for regular
paychecks.
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1. Salary Administration (continued)
TARGET INCENTIVE That amount (described as a percentage of a
Participant's base salary) that will be
paid as an incentive if the target
financial performance goals and personal
goals are fully (100%) achieved.
TARGET TOTAL CASH COMPENSATION The assigned compensation level for each
Participant, based on market data and
internal equity considerations. Comprised
of base salary and target incentive amount.
Target Incentive opportunities range from 10% to 50% of base salary for
Participants depending, in part, upon the management level and unit size of
the participants.
2. Weighting of Goals
Each year specific weighting among corporate and division financial
objectives and strategic and personal objectives will be established based on
the business objectives for the year.
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3. Financial Performance Goals
Prior to the beginning of the Plan Year, financial performance goals are
developed by Senior Management and reviewed by the Compensation and
Leadership Committee of the Board of Directors. Financial performance may
be defined using any of the standard financial metrics (e.g., Sales,
Income, Cash Flow), and will be determined each year. Two levels of
financial performance are defined each year, as follows:
TARGET The budgeted financial goal which represents a realistically
attainable level of corporate or divisional financial performance
for the year.
THRESHOLD A level of achievement against the budgeted financial goal, set
below target and representing the minimum level of performance
which is required in order to pay the financial-based portion of
an employee's incentive.
4. Personal Goals
Each Plan participant is assigned a limited number (i.e., 2 - 3) of
objective pre-established Personal Goals which are typically based upon the
strategic plans for the business. These personal goals are compensable
under the Plan.
As with financial performance goals, a threshold level of personal goal
achievement is established each year, below which no payout for each
personal objective will be made. For example, if the threshold for a
manager's personal objective achievement is 80%, the manager will receive
no payout related to that goal if she achieves only 50% of that objective.
5. Plan Funding
The budgeted incentive pool equals the sum of the Target Incentives of all
eligible Participants company-wide. The pool is funded each year depending
upon the financial and personal goal performance of the Plan participants,
and upon the threshold levels set for that year.
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6. Distributions to Participants
The component of incentive payment tied to financial goals is paid out in
direct relationship to the financial performance if the business unit
achieves its threshold. Payout for above-target financial performance is
not capped.
The personal goals payout component is paid in relation to the proportion
of personal goal achievement if the Participant's actual results for the
plan year meet the personal goal threshold. The payout for the personal
goals component of the incentive is capped at 100%.
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7. Timing
Payments from the Plan will be made as soon as practicable after the end of
the Plan Year, but no later than April 1 of the following year. Incentive
payments are made in a single lump-sum payment and are subject to applicable
withholding and other taxes as prescribed by local law.
PARTICIPATION
Plan Participants are senior managers and other key employees whose
responsibilities and accomplishments can be directly tied to significant
short-term business goals.
In order to be eligible for an incentive payment, a participant must have been
employed in a Plan-eligible position(s) for at least six consecutive months of
the Plan Year. For a participant who serves in a Plan-eligible position(s) for
less than a full year, the incentive payment may be pro-rated based on the
number of months, including partial months, the individual was a participant
during the Plan Year.
In all cases, the Incentive Compensation Committee (the CEO, the Chief Financial
Officer, and the Vice President of Human Resources) reserves the authority to
exercise its discretion in determining incentive payments. However, the
following guidelines have been provided as a starting point for making decisions
regarding incentive eligibility in cases of new hires, employment terminations,
periods of disability or leave, and transfers into, out of, and between
Plan-eligible positions during the Plan Year.
1. New Hires and Transfers into Eligible Positions when Employee Serves at Least
Six Consecutive Months in the Position
A non-participant hired, transferred, promoted, or re-assigned into an
eligible position during the Plan Year will be considered for an Incentive
Payment on a pro-rated basis, provided that the employee is employed for at
least six consecutive months of the Plan Year.
2. New Hires into Eligible Positions when Employee Serves Less Than Six
Consecutive Months in the Position
When offers are made to candidates for Plan-eligible positions, and the
employee will serve in the position for less than six consecutive months in
the current Plan Year, the offer may include a guaranteed cash compensation
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amount in addition to the base salary, to compensate for the missed
opportunity in the first (partial) year. This amount should be no more than
the target incentive for which the employee would have been eligible in that
year, pro-rated by the number of months employed; and is to be paid at the
same time incentives are paid in the following year. The employee will be
integrated into the Plan in the full Plan Year following his/her hire date.
3. Transfers into Ineligible Positions
An employee transferred from an eligible position into a non-eligible
position may be considered for a pro-rated incentive payment, provided that
the employee has served at least six months in an eligible position(s) during
the Plan Year. Any incentive payment will be based on the base salary while
the employee was a Plan participant.
In these cases, an adjustment to base salary may be required in order to
achieve the appropriate salary level for the new (non-Plan) position. (For
example, the base salary may be increased to reach a reasonable
market-based pay rate if there is no longer the possibility of an incentive
payment.) When the adjustment required is a positive one, it may be made
retroactively in cases where the transfer occurs before the employee
reaches the six-month minimum service required for an incentive payment.
4. Transfers from One Plan-Eligible Position to Another
In the event that a participant transfers from one incentive eligible
position to another before the completion of the Plan Year, an assessment
will be made to determine the relative impact of goal achievement in each
position on the final incentive payment. Typically, the participant will be
paid a pro-rated share of the incentive payment amount for each position.
However, the Incentive Compensation Committee has discretion to determine
otherwise if the duration of service in either of the Plan-eligible positions
is considered too short a period in which to achieve results against the
stated goals. In either event, the participant's incentive payment will
reflect the full twelve months of participation.
In the case of a current Participant moving from one Target Incentive level
to another, an adjustment to base salary may be required in order to achieve
the appropriate Target Total Cash Compensation level.
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5. Terminations
All Incentive Payments under the Plan will be forfeited for participants
whose employment is terminated for any reason other than normal or early
retirement under the provisions of the Company's retirement plan, death or
disability during the Plan Year, unless determined otherwise by the Incentive
Compensation Committee.
If a Plan participant is employed on the last day of the Plan Year, but
terminates employment prior to the date of the incentive payment, the
Incentive Compensation Committee shall retain discretion over whether a
payment is made to that participant.
6. Disability, Leaves of Absence, and Sabbaticals
Even if an employee meets the requirement of six or more consecutive months
in a Plan-eligible position, the employee must have rendered services for a
minimum of three consecutive months in any Plan Year when attendance is
interrupted by a period of disability, a leave of absence, or a sabbatical in
order for any incentive to be paid (including that amount based on corporate
and division/geography results).
If the employee meets the requirement of three consecutive months of
rendering services, the incentive payment would typically be pro-rated based
on the number of months in the Plan Year that the employee was present and
fully performing the job. Assessment of performance against personal goals
will be based on the amount of time the employee was actually rendering
services.
7. Pro-rating
For a participant who serves in a Plan-eligible position(s) for less than a
full year, the pro rata share of the incentive payment shall equal the
number of months, including partial months, the individual was rendering
services in a Plan-eligible position during the Plan Year divided by twelve,
times the Incentive Payment amount (based on results achieved).
EFFECT ON TAXES
Payments made under this Plan will be included in total wages in the year paid,
and are thus considered taxable income in that year.
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EFFECT ON BENEFITS
Regular Management Incentive Plan payments are included in covered wages for
purposes of the 401(k) and pension plans.
TERMS AND CONDITIONS
1. The Plan shall be approved by the Board of Directors and administered by
the Incentive Compensation Committee (the "Committee"). The Committee shall
have authority, consistent with the Plan, to establish Plan periods during
which awards may be established and earned under the Plan, to determine the
size and terms of the awards to be made to each Plan Participant, to
determine the time when awards will be made, to prescribe the form of
payment for awards under the Plan, to adopt, amend and rescind rules and
regulations for the administration of the Plan and for its own acts and
proceedings, and to decide all questions and settle all controversies and
disputes which may arise in connection with the Plan. All decisions,
determinations and interpretations of the Committee shall be binding upon
all parties concerned.
The terms of an award, once fixed, shall preclude future Committee
discretion with respect to the amount or timing of payments of the award,
except that (i) no payment of an award shall be made unless and until the
Committee certifies in writing that the performance goals specified in the
award have been satisfied; (ii) the Committee may retain the discretion to
reduce payments; (iii) the Committee may permit the deferral of payments that
have been earned under an award provided such deferral is consistent with
Section 162 of the Code and (iv) the Committee may retain such other
discretion as is consistent with the qualification of the award under Section
162(m).
2. Corporate Performance results are determined at the end of the fiscal year
when audited data is available. Adjustments may be made in order to minimize
the potential distortion of performance measurements resulting from major
unplanned/uncontrollable events, such as a major unbudgeted acquisition,
non-operating gains or losses or extraordinary operating items, or other
events or conditions during the year affecting financial performance, so long
as such adjustments are made without the involvement of the CEO, and are in
conformity with Section 162(m) of the Internal Revenue Code. Such adjustments
may be made when it is judged that the Corporation would have been unable to
anticipate said event(s) during the corporate goal setting process.
3. The Management Incentive Plan does not, directly or indirectly, create in
any employee or class of employees any right with respect to continuation
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of employment by the Company, and it shall not be deemed to interfere in any
way with the Company's right to terminate, or otherwise modify, an employee's
employment at any time. No employee shall have a right to be selected as a
Participant for any year nor, having been selected a Participant in the Plan
for one year, to be a Participant in any other year. Neither the Plan nor any
award thereunder shall be an element of damages in any claim based upon
discharge in violation of a contract unless the contract in question shall be
in writing and shall make specific reference to this section and this
sentence, overriding the same; nor shall this Plan or any rights thereto be
regarded as an element of damages for wrongful discharge in any other context
except to the extent that rights shall have accrued hereunder as of the date
of discharge.
4. The provisions of the Plan and the grant of any incentive payment shall
inure to the benefit of all successors of each Participant, including without
limitation such Participant's estate and the executors, administrators or
trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy
or representative of creditors of such Participant.
5. The Plan may be amended or terminated at any time, and shall continue in
effect until so terminated; provided however that no amendment or termination
of the Plan shall adversely affect any right of any Plan Participant with
respect to any incentive payment theretofore made without such Plan
Participant's written consent.
6. The Plan shall be effective with respect to the Plan Year beginning January
1, 1998.
7. This Plan and all determinations made and actions taken hereunder shall be
construed in accordance with the laws of the State of New Hampshire.
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