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EXHIBIT 10.6
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
ANNUAL INCENTIVE PLAN
AMENDED AND RESTATED
As of February 25, 1999
1. PURPOSE
The purpose of this Annual Incentive Plan (the "Plan") of
Schweitzer-Mauduit International, Inc. (the "Company") is to further unite the
interests of the stockholders of the Company and its key executives through:
(a) the annual establishment of Company objectives which are deemed by
the Company's Board to be in the best short-and long-range interests of the
Company, and
(b) the annual payment of incentive awards to each Participant in the
form of a cash award, provided his or her performance has meaningfully
contributed to the attainment of the Company's objectives.
2. EFFECTIVE DATE
The Plan, as amended and restated, is adopted effective as of January
1, 1996.
3. DEFINITIONS
"Affiliate" means any company in which the Company owns 20% or more of
the equity interest (collectively, the "Affiliates").
"Performance Percentage" means the respective percentages applicable to
achievement of the following benchmark Performance Levels for a given Objective
as follows: Threshold 50%, Target 100%, Outstanding 150%, Maximum 200%; and, if
actual performance of such Objective falls between any two of such benchmark
Performance Levels, the percentage amount applicable to the performance level
actually achieved will be prorated.
"Board" means the Board of Directors of the Company.
"CEO" means the Chief Executive Officer of the Company.
"Change of Control" shall mean the date as of which: (a) a third
person, including a "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, acquires actual or beneficial ownership of shares of the
Company having 15% or more of the total number of votes that may be cast for the
election of Directors of the Company; or (b) as the result of any cash tender or
exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions (a
"Transaction"), the persons who were directors of the Company
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before the Transaction shall cease to constitute a majority of the Board of
Directors of the Company or any successor to the Company.
"Committee" means the Compensation Committee of the Board.
"Control Measures" shall have the meaning as set forth in Section 8 of
this Plan.
"Incentive Award" means the cash award payable to a Participant as
determined in accordance with Section 10 of this Plan and is the sum of the
Objective Awards for each Objective Area.
"Measurement Period" means the fiscal year of the Company.
"Objective Areas" means the general areas for which Objectives may be
established and shall include the Company Objective Area, Unit Objective Area
and Individual/Function Objective Area.
"Objective(s)" means the objective(s) established for each Participant.
"Participant" shall have the meaning set forth in Section 5 of this
Plan.
"Percentage Weighting" shall have the meaning set forth in Section 7 of
this Plan.
"Performance Levels" shall have the meaning set forth in Section 6 of
this Plan.
"Objective Award" shall mean the amount determined by multiplying a
Participant's base salary at the beginning of the Measurement Period, by the
Percentage Weighting applicable for the Objective Area, by the Performance
Percentage for the Performance Level achieved, and by the Target Incentive Award
Percentage.
"Target Incentive Award Percentage" means the target percentage of a
Participant's base salary designated by the Committee in its sole discretion at
the beginning of the Measurement Period, which percentage need not be the same
for each Participant.
4. ADMINISTRATION
The Plan shall be administered by the Committee, which in its absolute
discretion shall have the power to interpret and construe the Plan, and to
resolve all questions arising hereunder. Any action by the Committee shall be
final and conclusive as to all individuals affected thereby.
The Committee may delegate to any officer or employee such ministerial
or administrative duties relating to the Plan as deemed appropriate by the
Committee. No member of the Committee or the CEO shall be liable for any act
done or omitted to be
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done in connection with the Plan, except for willful misconduct or as expressly
provided by statute.
5. ELIGIBILITY
The CEO, or the Committee in the case of the CEO and all officer
employees, shall, in his/its sole discretion, specify in writing for each
Measurement Period those officers and employees of the Company or any Affiliate
who shall be eligible to participate in the Plan (the "Participants") for such
Measurement Period based upon such Participants' opportunity to have a
substantial impact on the Company's operating results. Nothing contained in the
Plan shall be construed as or be evidence of any contract of employment with any
Participant for a term of any length, or as a limitation on the right of the
Company to discharge any Participant with or without cause. Notwithstanding the
foregoing and without otherwise limiting the Committee's or the CEO's discretion
to designate the officers and employees eligible to participate in the Plan, if
a Change of Control occurs in a Measurement Period prior to the date the
Objectives, Objective Areas, Performance Levels, Percentage Weightings, Control
Measures and Target Incentive Award Percentages are established for such
Measurement Period, the Objectives, Objective Areas, Performance Levels,
Percentage Weightings and Target Incentive Award Percentages shall be
established by the Committee for such Measurement Period for those officers and
employees who were Participants in the Plan in the immediately preceding
Measurement Period and such Objectives, Objective Areas, Performance Levels,
Percentage Weightings, Target Incentive Award Percentages and any Control
Measures established for such Participants shall be no less favorable than those
established for each such Participant in the immediately preceding Measurement
Period.
6. OBJECTIVE AREAS AND PERFORMANCE LEVELS
Prior to the beginning of each Measurement Period, or as soon
thereafter as reasonably practicable, Objective(s) shall be established for each
Participant in one or more Objective Areas.
The Board shall establish the Objective(s) and any Control Measures in
the Company Objective Area. The CEO, or the Committee in the case of the CEO,
shall establish the Individual/Function Objective(s) and any Control Measures
for all other Objective Areas, unless otherwise determined by the Committee.
For each Objective there shall be established performance levels
("Performance Levels") which, whenever possible, shall consist of successively
better standards or ranges, taking into consideration actual progress in the
Measurement Period, in accomplishing the objective(s). These Performance Levels
shall be defined as "Threshold", "Target", "Outstanding", and "Maximum".
Performance below the "Threshold" level shall not result in the payment of an
award.
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From time to time, it may be desirable to establish Objective(s) in
such a manner that specific Performance Levels cannot be defined. In such cases,
Performance Levels will be determined pursuant to Section 9 of this Plan.
The Objective(s) in the Individual Objective Area for a Participant may
be defined to include specific target areas on which such Participant should
focus during the year.
The original definition of any and all Objectives, Objective Areas,
Performance Levels, Percentage Weightings and Control Measures shall not be
changed during the Measurement Period, except by the approval of the person(s)
who originally approved the same. When changes in the Company's accounting or
internal reporting policies have the effect of making the financial results
between two periods not fairly comparable for the purpose of properly measuring
performance where Objectives are stated in financial terms, such results may be
adjusted in such manner as shall be deemed fair and appropriate by the person(s)
who originally approved the Objective.
If during a Measurement Period, the Company, or any of its Affiliates,
purchases substantially all of the assets or shares of a business owned by any
other person or entity ("Business"), the earnings attributable to such Business,
which are included in the Company's consolidated income statement for the
Measurement Period, shall be taken into account in calculating achievement of
any earnings Objective for the Measurement Period.
7. OBJECTIVE AREA WEIGHTINGS
Coincident with the establishment of Objective Areas, Objectives and
Performance Levels, the CEO, or the Committee in the case of the CEO and all
employees who are officers of the Company, shall establish a percentage
weighting ("Percentage Weighting") applicable to each Objective Area, or, where
applicable, to each Objective within an Objective Area. The total of all
Percentage Weightings in all Objectives and/or Objective Areas for each
Participant shall be 100 percent.
8. CONTROL MEASURES
At the time the Objectives are established, there may also be
established certain conditions known as control measures ("Control Measures")
which are either personal as to one individual, or general as to a group of
individuals. Failure to fulfill a Control Measure may partially or totally
deprive the individual to whom the Control Measure applies of the right to
receive an award, notwithstanding the level of performance attained on any or
all Objectives, or in any or all Objective Areas.
9. ASCERTAINMENT OF PERFORMANCE LEVELS
The Performance Level actually attained with respect to any Objective
or Control Measure stated in financial terms, and the payment with respect
thereto, shall be
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determined upon the completion of audited results of the Company and its
subsidiaries by the person(s) who originally approved or defined such Objective
or Control Measure, or the Committee if such person is no longer employed by or
a director of the Company.
When specific Performance Levels have not been defined in the Company
Objective Area under Section 6 of this Plan, the Committee will determine the
Performance Level attained following the end of the Measurement Period.
The Performance Level attained with respect to any other Objective Area
or Control Measure shall be determined and approved by the person(s) who
originally approved or defined such Objective or Control Measure (or the
Committee if such person is no longer employed by or a director of the Company)
following the end of the Measurement Period.
Notwithstanding the above, the Committee may, in its sole discretion,
authorize that such determination of the Performance Levels attained be made
prior to the end of the Measurement Period, and that the payment of awards be
made pursuant to Section 12 of this Plan.
10. AMOUNT OF INCENTIVE AWARD
Except as otherwise hereinafter provided, the Incentive Award a
Participant is eligible to receive is the sum of the values attributable to
performance actually attained for each Objective or Objective Area ("Objective
Award"), as determined by the following paragraphs.
The amount of Objective Award a Participant is eligible to receive
depends upon:
(a) Participant's base salary,
(b) the Percentage Weighting applicable to that Objective or Objective
Area,
(c) the Performance Percentage which applies as a consequence of the
Performance Level attained in that area, and
(d) the Target Incentive Award Percentage established for the
Participant.
The amount of the Objective Award for each Objective or Objective Area
shall be determined by multiplying (a) times (b) times (c) times (d).
11. ADJUSTMENT OF INCENTIVE AWARD
Except as otherwise determined by the Committee, in its sole and
absolute discretion, the amount of any Incentive Award may be adjusted by the
CEO, or the Committee in the case of the CEO and employees who are officers of
the Company, in his
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or its sole discretion, to more accurately reflect an individual Participants's
performance during the Measurement Period.
In the event of transfers to, from or between eligible positions, the
amount of the Incentive Award may be reviewed, and may be adjusted or prorated,
on such basis as shall be determined fair and appropriate by the Committee.
Termination of employment for any reason other than Change of Control,
death, retirement, or total and permanent disability during the Measurement
Period shall result in a forfeiture of any Incentive Award attributable to
performance during the Measurement Period in which termination occurred.
Termination of employment because of a Participant's death, retirement or total
and permanent disability during the Measurement Period shall result in the pro
rata or other adjustment to the amount of the Incentive Award on such basis as
shall be determined to be fair and appropriate by the Committee. Termination of
employment within two years following a Change of Control shall result in the
payment of a pro rata portion of the Incentive Award at the Target Performance
Percentage, without regard to achievement or preestablished Objectives; however,
the Committee shall have the right to increase the Incentive Award payable upon
such termination as the Committee deems fair and appropriate.
Notwithstanding any provision of this Plan, no Incentive Award shall be
paid to any Participant who, in any Measurement Period other than a Measurement
Period occurring within two years following a Change of Control, has discharged
the principal responsibilities of his or her position in an unsatisfactory
manner.
12. PAYMENT OF INCENTIVE AWARDS
Incentive Awards shall be paid in one lump sum in cash in the first
calendar quarter following the Measurement Period for which the Objectives were
established. Notwithstanding the above, the Committee may make payments at such
earlier times as it may, in its sole discretion, determine, and the Committee,
or the CEO, in their sole discretion, will make such determinations as to
performance, and establish procedures (including repayment of any overpayment
which is determined after the completion of the final audit), implementing such
early payment. The Company shall have the right to deduct from the payment any
taxes required by law to be withheld thereon.
13. MISCELLANEOUS
(a) Except as provided in this Plan, no right of any Participant shall
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, attachment, garnishment, execution,
levy, bankruptcy, or any other disposition of any kind, whether voluntary or
involuntary, prior to actual payment of an Incentive Award. No Participant or
any other person shall have any interest in any fund, or in any specific asset
or assets of the Company, by reason of an Incentive Award that has been made but
has not been paid or distributed.
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(b) The Board may, at any time, amend this Plan, order the temporary
suspension of its application, or terminate it in its entirety, provided,
however, that no such action shall adversely affect the rights or interests of
Participants theretofore vested hereunder. Notwithstanding the foregoing, this
Plan may not be amended, suspended or terminated within the two-year period
following a Change of Control.
(c) The terms of the Plan shall be governed, construed, administered,
and regulated by the laws of the State of Georgia and applicable Federal law. In
the event that any provision of the Plan shall be determined to be illegal or
invalid for any reason, the other provisions shall continue in full force and
effect as if such illegal or invalid provision had never been included herein.
Annual Inc. Plan Amended & Restated
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