EXHIBIT 10.7
GEORGIA-PACIFIC CORPORATION
ECONOMIC VALUE INCENTIVE PLAN
(As Amended and Restated by Action of the Compensation Committee
on January 21, 2000)
By action of its Board of Directors on February 1, 1995,
Georgia-Pacific Corporation adopted the Georgia-Pacific Corporation 1995
Economic Value Incentive Plan ("EVIP") for its senior management and staff
effective for calendar year 1995 and subsequent Covered Years. By action of the
Compensation Committee on January 28, 1999, the EVIP was amended and restated as
the "Georgia-Pacific Corporation Economic Value Incentive Plan", effective for
calendar year 1999 and subsequent Covered Years. By action of the Compensation
Committee on January 21, 2000, the EVIP was further amended and restated to read
as follows:
I. DEFINITIONS
For purposes of the EVIP, the following terms or phrases shall have the
indicated meanings:
1. "Affected Officer" means any officer of Georgia-Pacific Corporation
as of January 1 of a given Covered Year (other than the CEO) who participates in
the EVIP for that Covered Year and who in the judgment of the Committee may
receive total compensation for that Covered Year in excess of the limit on tax
deductible compensation specified in Section 162(m) of the Internal Revenue Code
of 1986 or any statute which is the successor or replacement of Section 162(m),
as the same may be amended from time to time (and any regulations promulgated
thereunder). The Committee shall determine which officer Participants in this
Plan will be considered Affected Officers in a given Covered Year prior to March
31 of that Covered Year.
2. "Base Salary as of January 1 of that Covered Year" means a
Participant's base annual salary in effect on January 1 of a given Covered Year,
PROVIDED THAT the determination of "Base Salary on January 1 of that Covered
Year" shall take into account base salary increases
retroactively effective to that date as approved (in accordance with normal
corporate procedures) by management or by the Committee or the Board on or
before March 31 of that Covered Year, and PROVIDED FURTHER THAT, for Employees
who become Participants for that Covered Year after the commencement of that
year, "Base Salary on January 1 of that Covered Year" shall mean such
Participant's base annual salary in effect on the date his/her participation
commences.
3. "Board" means the Board of Directors of the Corporation.
4. "Business Unit" means any operating group, business segment,
division or corporate staff department of the Corporation (including, without
limitation, the G-P Group and/or TTC) for which Relative EVA or EVA performance
standards are set for a given Covered Year.
5. "CEO" means the Chairman and Chief Executive Officer of
Georgia-Pacific Corporation or, if one person does not hold both of these
offices, the Chief Executive Officer of Georgia-Pacific Corporation.
6. "Committee" means the Compensation Committee of the Board, as
constituted from time to time, or such subcommittee of that body as the
Compensation Committee shall specify to act for the Compensation Committee with
respect to this Plan, provided however that any such subcommittee shall consist
entirely of (but not less than two) "outside directors" as that term is defined
pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended from
time to time, or any statute which is a successor or replacement for such
statute (and applicable regulations promulgated thereunder).
7. "Compensation" means midpoint of the Salary Grade of a Participant
for a given Covered Year determined as of January 1 of that Covered Year by the
Plan Administrator, provided that the determination of "Compensation" shall take
into account Salary Grade and Salary Grade midpoint increases retroactively
effective to that date as approved (in accordance with normal corporate
procedures) by management or by the Committee on or before the date of the
Board's first regular meeting during that Covered Year.
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8. "Corporation" means Georgia-Pacific Corporation and its
subsidiaries.
9. "Covered Year" means any calendar year beginning on or after January
1, 2000.
10. "Discretionary Bonus" means that portion of a Participant's award
under this Plan for a given Covered Year which is determined in accordance with
the provisions of subsection 2 of Section III.
11. "Discretionary Bonus Limit" means, for a given Covered Year, (i)
for Participants other than the CEO, the least of (A) the amount of the maximum
total Quantitative Bonus and Discretionary Bonus the Participant could receive
if both Target Relative EVA for the G-P Group and Target EVA for TTC were
achieved in that Covered Year (as determined by the Committee pursuant to
paragraphs 1(a)(ii) and (iii) of Section III), (B) 100% of the Participant's
Base Salary on January 1 of that Covered Year, reduced by any Quantitative Bonus
that may be payable for that Covered Year or (C); the amount of the maximum
total Quantitative Bonus and Discretionary Bonus the Participant could receive
if both Maximum Relative EVA for the G-P Group and Maximum EVA for TTC were
achieved in that Covered Year (as determined by the Committee pursuant to
paragraphs 1(a)(ii) and (iii) of Section III), reduced by any Quantitative Bonus
that may be payable for that Covered Year and (ii) for the CEO, the lesser of
(A) an amount equal to twice the Quantitative Bonus to which he would be
entitled for that Covered Year, or (B) 200% of the CEO's Base Salary on January
1 of that Covered Year, reduced by any Quantitative Bonus that may be payable
for that Covered Year.
12. "EVA" means "economic value added" for a given Covered Year, which
is defined, in the case of a given Business Unit, as "net operating profit after
tax" for that Business Unit for that Covered Year minus a capital charge
determined by multiplying its weighted average cost of debt and equity capital
for that Covered Year by that Business Unit's "average invested capital" for
that Covered Year. For purposes of determining Relative EVA performance of the
G-P Group, EVA for a given Peer Group Company will be "Indexed EVA" determined
by subtracting that Peer Group Company's weighted average cost of debt and
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equity capital from its "return on average invested capital" and multiplying the
difference by the G-P Group's "average invested capital". For purposes of this
definition: (i) "net operating profit after tax" for a given entity for a given
Covered Year is its reported net earnings for that Covered Year adjusted by (A)
adding its net interest expense for that Covered Year, (B) adding its goodwill
amortization for that Covered Year, (C) eliminating the effect of changes in its
LIFO inventory reserve for that Covered Year, (D) eliminating the effects of
Special Items during that Covered Year (such as non-recurring gains or losses,
disposals of assets, restructuring charges and similar items), and (E) adjusting
taxes for that Covered Year to reflect actual cash taxes paid and eliminating
the tax benefit of interest expense; (ii) "average invested capital" for a given
entity for a given Covered Year is the average of the sum of its short-tem debt,
long-term debt and adjusted book value of equity at the beginning of that
Covered Year and at the end of that Covered Year; and (iii) "return on average
invested capital" for a given entity for a given Covered Year is its "net
operating profit after tax" divided by its "average invested capital" for that
Covered Year. All determinations made under this subsection 12 shall be based
(a) with respect to the Corporation, on its unaudited financial results for the
Covered Year, and (b) with respect to each Peer Group Company, on its unaudited
financial results as reported on its Forms 10Q for the first three quarters of
the Covered Year plus its unaudited financial results for the fourth quarter of
the Covered Year determined from financial data provided in its earnings
releases in January of the immediately following calendar year using the same
assumptions, policies and procedures used by the Corporation to determine fourth
quarter financial results for each such Peer Group Company in 1999 for purposes
of calculating the 1999 awards under this Plan for Participants other than the
CEO and the four next most highly compensated Participants.
13. "Employee" means any exempt full-time, salaried employee of the
Corporation.
14. "G-P Group" means the Business Unit known as the "Georgia-Pacific
Group", VIZ. that portion of the business and operations of the Corporation
which is reflected by the
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class of the Corporation's common stock known as Georgia-Pacific
Corporation-Georgia-Pacific Group Common Stock.
15. "Maximum EVA" means the EVA performance level of TTC at which the
percentage of Compensation paid as a Quantitative Bonus reaches its maximum, as
determined by the Committee pursuant to subsection 1 of Section III.
16. "Maximum Relative EVA" means the Relative EVA performance level of
the G-P Group at which the percentage of Compensation paid as a Quantitative
Bonus reaches its maximum, as determined by the Committee pursuant to subsection
1 of Section III.
17. "Participant" means an Employee of the Corporation who, for a given
Covered Year, meets the eligibility standards of Section II.
18. "Peer Group Companies" means, for a given Covered Year, the
companies included in the Standard & Poors Paper and Forest Products Industry
Index (but excluding the Corporation) on January 1 of that year; provided,
however that if a Peer Group Company is not in existence as an independent
entity generating the types of public information needed for EVA calculations
under this EVIP both at the beginning and the end of that Covered Year, that
company shall be disregarded for purposes of making awards under this Plan for
that Covered Year, notwithstanding its inclusion in the group of Peer Group
Companies otherwise applicable to such calculations.
19. "Plan" or "EVIP" means the Georgia-Pacific Corporation Economic
Value Incentive Plan as set forth in this document, as amended from time to
time.
20. "Plan Administrator" means the person or entity having
administrative authority under this EVIP, as specified in Section IV.
21. "Quantitative Bonus" means that portion of a Participant's award
under this Plan for a given Covered Year which is determined in accordance with
the provisions of subsection 1 of Section III.
22. "Quantitative Bonus Limit" means, for a given Covered Year, (i) for
any Participant other than the CEO, the lesser of (A) 200% of the amount which
is the product of
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(x) the maximum total Quantitative Bonus and Discretionary Bonus that the
Participant could receive if both Target Relative EVA for the G-P Group and
Target EVA for TTC were achieved in that Covered Year (as determined by the
Committee under paragraph 1(a)(ii) and (iii) of Section III) and (y) the
weighting assigned by the Committee (under paragraph 1(a)(vi) of Section III) to
the Quantitative Bonus opportunity for that Covered Year or (B) 100% of the
Participant's Base Salary on January 1 of that Covered Year; and (ii) for the
CEO, the lesser of (A) an amount equal to the amount described in (i)(A) above
calculated for the CEO or (B) 200% of the CEO's Base Salary on January 1 of that
Covered Year.
23. "Relative EVA" means, for a given Covered Year, the percentile
ranking of the G-P Group's EVA performance for that Covered Year as compared to
the "indexed EVA" performance (determined pursuant to subsection 12 of this
Section I) of the Peer Group Companies for that year.
24. "Salary Grade" means the salary grade of a Participant as
established from time to time by the Compensation Department of the Corporation
in accordance with the Corporation's generally applicable policies.
25. "Target EVA" means the EVA performance level of TTC as determined
by the Committee pursuant to subsection 1 of Section III.
26. "Target Relative EVA" means the Relative EVA performance level of
the G-P Group as determined by the Committee pursuant to subsection 1 of Section
III.
27. "Threshold EVA" means the minimum EVA of TTC for which a
Quantitative Bonus will be paid, as determined by the Committee pursuant to
subsection 1 of Section III.
28. "Threshold Relative EVA" means the minimum Relative EVA of the G-P
Group for which a Quantitative Bonus will be paid, as determined by the
Committee pursuant to subsection 1 of Section III.
29. "TTC" means the Business Unit known as "The Timber Company", VIZ.
that portion of the business and operations of the Corporation which is
reflected by the class of the
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Corporation's common stock known as Georgia-Pacific Corporation-Timber Group
Common Stock.
II. ELIGIBILITY
1. Participation Criteria. An Employee will be eligible to participate
in the EVIP for a given Covered Year if he/she is, on January 1 of that Covered
Year, an officer of Georgia-Pacific Corporation (or becomes an officer during
that Covered Year) or, if a non-officer, has been designated by the CEO or the
Committee as a Participant at the beginning of that year or has been added as a
Participant in the EVIP by act of the CEO.
2. Special Rules. Notwithstanding anything in subsection 1 of this
Section II to the contrary:
(a) A Participant who terminates employment with the Corporation
during a given Covered Year may receive a prorated award or no
award pursuant to subsection 4 of Section III.
(b) The CEO shall have authority, in his discretion, to add or
delete Employees from the Participant group, PROVIDED THAT no
person may be added as a Participant during the fourth
calendar quarter of a Covered Year, and PROVIDED FURTHER THAT
the bonus for an Employee who is added as a Participant for a
given Covered Year will be prorated based on the number of
complete calendar months he/she was a Participant for that
Covered Year. In each case in which the CEO adds a
Participant, he shall designate the effective date of his/her
participation and his/her Business Unit.
(c) Participants in other incentive compensation programs
(excluding any stock option plan) maintained by the
Corporation are not eligible to participate in the EVIP.
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III. AWARDS
Bonuses under the EVIP are composed of two different types of awards,
VIZ., the non-discretionary annual bonus award ("Quantitative Bonus") and the
discretionary long-term bonus award ("Discretionary Bonus"):
1. Award of Quantitative Bonuses. Quantitative Bonuses for each
Participant under this EVIP for a given Covered Year will be an amount
determined pursuant to standards adopted by the Committee prior to March 31 of
that Covered Year as follows:
(a) The Committee will determine, in its discretion:
(i) The identity of any Affected Officers for the Covered
Year in question;
(ii) The Threshold Relative EVA, Target Relative EVA and
Maximum Relative EVA levels for that Covered Year for
the G-P Group;
(iii) The Threshold EVA, Target EVA and Maximum EVA levels
for that Covered Year for TTC;
(iv) For the G-P Group, the total Quantitative Bonus and
Discretionary Bonus permissible under this Plan
(expressed as a percentage of Compensation) for each
Salary Grade at each of the Relative EVA levels
described in subparagraph (ii) above (and at such
other Relative EVA levels as the Committee, in its
discretion, may decide to specify);
(v) For TTC, the total Quantitative Bonus and
Discretionary Bonus permissible under this Plan
(expressed as a percentage of Compensation) for each
Salary Grade at each of the EVA levels described in
subparagraph (iii) above (and at such other EVA
levels as the Committee, in its discretion, may
decide to specify);
(vi) The percentage of the total bonus opportunity for
that Covered Year which will comprise the
Quantitative Bonus; and
(vii) For each Participant for that Covered Year whose
Quantitative Bonus will be based on both G-P Group
Relative EVA and TTC EVA
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performance, the fractional weighting assigned to G-P Group
Relative EVA and/or TTC EVA performance for each Participant,
such weightings to total 1 for each such Participant.
(c) The amount of Quantitative Bonus (expressed as a percentage of
Compensation) for any Relative EVA level between a given level
and the next preceding or following level shall be determined
by interpolation between those two levels. If the achieved
Relative EVA level for the G-P Group for a given Covered Year
is less than the Threshold Relative EVA set for the G-P Group
for that year, no Quantitative Bonuses with respect to the
performance of the G-P Group for that year shall be paid. If
the achieved Relative EVA level for the G-P Group for a given
Covered Year exceeds the Maximum Relative EVA set for the G-P
Group for that year, the percentage of Compensation
corresponding to the Maximum Relative EVA for the G-P Group
for that year shall be used to determine the amount of the
Quantitative Bonus.
(d) The amount of Quantitative Bonus (expressed as a percentage of
Compensation) for any EVA level between a given level and the
next preceding or following level shall be determined by
interpolation between those two levels. If the achieved EVA
level for TTC for a given Covered Year is less than the
Threshold EVA set for TTC for that year, no Quantitative
Bonuses with respect to the performance of TTC shall be paid.
If the achieved EVA level for TTC for a given Covered Year
exceeds the Maximum EVA set for TTC for that year, the
percentage of Compensation corresponding to the Maximum EVA
for TTC for that year shall be used to determine the amount of
the Quantitative Bonus.
(d) The Quantitative Bonus of any Participant in a given Covered
Year shall be calculated as follows:
(i) After the close of that Covered Year and before the
payment date specified in subsection 3 of this
Section III, the Committee shall certify
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in writing the extent to which the Relative EVA
standards for the G-P Group and the EVA standards for
TTC, determined pursuant to this subsection 1 of this
Section III, have been achieved for that Covered
Year.
(ii) Based upon the achieved Relative EVA performance for
the G-P Group and achieved EVA performance for TTC
for that Covered Year determined in accordance with
subparagraph (i) of this paragraph (d), the
corresponding percentages of Compensation for the
Salary Grade of each Participant shall be determined
using the standards established pursuant to paragraph
(a) of this subsection 1.
(iii) The Participant's Quantitative Bonus for that Covered
Year will equal the product of (x) the sum of the
percentages calculated pursuant to subparagraph (ii)
of this paragraph (e), and (y) the Participant's
Compensation.
(f) Notwithstanding anything in this Plan to the contrary, the
Quantitative Bonus for any Participant for a given Covered
Year may not exceed the Quantitative Bonus Limit for that
year.
2. Award of Discretionary Bonuses. Any Participant shall be eligible to
receive a Discretionary Bonus for a given Covered Year, regardless of whether
he/she receives an Quantitative Bonus for that year, PROVIDED THAT the CEO will
not be eligible for a Discretionary Bonus for a given Covered Year if he is not
eligible for an Quantitative Bonus for that year. Discretionary Bonus amounts
will be determined as follows:
(a) Subject to the limits of this subsection 2, the CEO, in
his/her discretion, shall determine the amount of the
Discretionary Bonus for a given Covered Year for each
Participant (other that the CEO and each Affected Officer)
after reviewing, in his/her discretion, (i) the performance of
the Business Unit to which such Participant belongs during
that Covered Year with respect to EVA drivers
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specified no later than March 31 of that Covered Year by the
CEO, and (ii) the actions taken by the Business Unit to which
such Participant belongs during that Covered Year to increase
the long-term EVA of that Business Unit and/or the Corporation
as a whole. In conducting this review, the CEO may consider
any actions by Business Units he/she deems appropriate,
including but not limited to actions to (i) increase
efficiency (by increasing revenue or reducing costs using the
same or less capital), (ii) develop new investment
opportunities, and/or (iii) reduce or divest under-performing
assets.
(b) For each Affected Officer, the Discretionary Bonus for a given
Covered Year shall equal the Discretionary Bonus Limit for
such Affected Officer (determined in accordance with
subsection 11 of Section I), subject to reduction by the
Committee, in its discretion, based on its review and
evaluation of such performance criteria as the Committee may
deem appropriate.
(c) For the CEO, the Discretionary Bonus for a given Covered Year
shall equal 200% of the Quantitative Bonus applicable to
him/her for that year, subject to reduction by the Committee
in its discretion based on its review and evaluation of such
performance criteria as the Committee may deem appropriate.
(d) Notwithstanding anything in this Plan to the contrary:
(i) The amount of the Discretionary Bonus for each
Participant (including the CEO) will also reflect
his/her individual performance - and the performance
of any Business Unit under his/her supervision - with
respect to the Corporation's standing policies (as
applicable and in effect from time to time), in
particular (but without limitation) the Corporation's
Code of Business Conduct and its safety and
environmental policies; and
(ii) For all Participants, the Discretionary Bonus for a
given Covered Year may not exceed the Discretionary
Bonus Limit for that year.
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3. Payment of Awards. Awards shall be paid as soon as practicable after
the calculation of achieved Relative EVA and EVA levels for a given Covered
Year, but in no event later than March 15 following the end of that Covered
Year. In the event of the death of a Participant, any awards due to - or in
respect of - him/her under this Plan will be paid, first, to his/her surviving
spouse (if any) and, if there is no surviving spouse, to his/her estate.
4. Special Situations.
(a) A Participant whose employment with the Corporation terminates
during a given Covered Year (i) for any reason after he/she
has attained at least age 65 or has attained age 55 and
accumulated at least ten (10) years of service for vesting
purposes under the Georgia-Pacific Corporation Savings and
Capital Growth Plan, (ii) because of his/her death, (iii)
because of his/her total and permanent disability (as
determined by the Plan Administrator pursuant to the standards
of the Georgia-Pacific Corporation Salaried Long-Term
Disability Plan, whether or not the Participant has enrolled
in that plan) or (iv) for any other reason specifically
approved by the Plan Administrator (PROVIDED THAT, for
purposes of this clause (iv) only, the approval of the
Committee shall be required in the case of the CEO or an
Affected Officer) shall be entitled to a bonus award prorated
to reflect the number of complete calendar months actually
worked during that Covered Year payable at the same time
bonuses for other Participants are paid for that Covered Year.
(b) Subject to paragraph (a) of this subsection 4, Participants
who during a given Covered Year (i) voluntarily terminate
their employment with the Corporation or (ii) are
involuntarily terminated by the Corporation for any reason,
will not be eligible to receive a bonus under this Plan for
that Covered Year.
5. Maximum Total Bonus Award. Notwithstanding anything in this Plan to
the contrary, no Participant may receive a Quantitative Bonus and Discretionary
Bonus award under this Plan in any Covered Year which in total exceeds
$2,000,000.
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IV. ADMINISTRATION
The Plan will be administered by the Committee. Decisions and
determinations by the Committee shall be final and binding upon all parties,
including the Corporation, shareholders, Participants and other employees. The
Committee shall have the authority to administer the Plan, make all
determinations with respect to the construction and application of the Plan and
the Board resolutions establishing the Plan, adopt and revise rules and
regulations relating to the Plan and make any other determinations which it
believes necessary or advisable for the administration of the Plan. No member of
the Committee shall be liable to any person for any action taken or omitted in
connection with the interpretation and administration of this Plan unless
attributable to the member's own willful misconduct or lack of good faith. The
Committee is expressly authorized to appoint one or more individuals, who need
not be members of the Committee, or entities to administer the Plan and to make
all determinations with respect to the construction and application of the Plan,
and otherwise exercise all powers vested in the Committee under the Plan. Such
agents shall serve at the pleasure of the Committee. The decisions of any such
agents taken within the scope of his/her authority will have the same effect as
decisions by the Committee. Notwithstanding anything in this Section IV to the
contrary, the Committee may not delegate authority which under this Plan is
expressly reserved to the Committee alone.
V. AMENDMENT OR TERMINATION
The Board, by action of the Committee, expressly reserves the
right to amend or terminate the EVIP at any time, PROVIDED THAT no Quantitative
Bonus for a given Covered Year may thereby be reduced on or after December 31 of
that Covered Year.
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VI. MISCELLANEOUS
1. Awards Unfunded. Awards payable pursuant to the EVIP (if any) shall
be paid solely from the general assets of the Corporation. No trust or other
funding device providing for the identification or segregation of assets to fund
EVIP awards has been established, nor is it the Corporation's intention to do
so.
2. Taxation of Awards. Awards under the EVIP will be compensation
subject to Federal and State tax withholding (including, without limitation,
FICA withholding) in the calendar year in which they are paid.
3. Retirement Plans and Welfare Benefit Plans. Except as otherwise
specified in the plan in question, awards under the EVIP will not be included as
"compensation" for purposes of the Corporation's retirement plans (both
qualified and non-qualified) or welfare benefit plans.
4. Spendthrift Clause. A Participant may not assign, anticipate,
alienate, commute, pledge or encumber any benefits to which he or she may become
entitled under the EVIP, nor are the awards subject to attachment or garnishment
by any creditor.
5. No Contract of Employment. The Corporation intends that the awards
provided under the EVIP be a term of employment and a part of each Participant's
compensation and benefit package. Participation in this Plan shall not
constitute an agreement (1) of the Participant to remain in the employ of and to
render his/her services to the Corporation or (2) of the Corporation to continue
to employ such Participant, and the Corporation may terminate the employment of
a Participant at any time with or without cause.
6. Previous EVIP Interpretations. The amendment and restatement of this
Plan is not intended to and shall not - affect the continuing validity of EVIP
interpretations issued by the Plan Administrator prior to January 1, 2000.
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VII. EFFECTIVE DATE/SHAREHOLDER APPROVAL
1. Effective Date. This amendment and restatement of the EVIP shall
become effective as of January 1, 2000.
2. Shareholder Approval. The Compensation Committee has determined that
the approval of the shareholders of the Corporation is not required for this
amendment and restatement.
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