EXHIBIT 99
INTERNATIONAL PAPER COMPANY - MANAGEMENT INCENTIVE PLAN (MIP)
AMENDED AND RESTATED AS OF JANUARY 1, 1998
I. PURPOSES OF THE PLAN
The purposes of this Amended and Restated Management Incentive Plan
are: (a) to provide greater incentive for Participants to exert their
best efforts to increase the profitability of the Company, (b) to
attract and retain in the employ of the Company persons of outstanding
competence, and (c) to further the identity of interests of Plan
Participants with the interests of the Company's shareholders. The
awards made under the Plan are not a form of deferred regular
compensation with respect to the Participants' normal performance of
their regular duties, but are instead intended to provide an incentive
to achieve higher than expected levels of performance. Defined terms
used herein shall have the meanings set forth in Article II.
II. DEFINITIONS
BUSINESS UNIT: "Business Unit" means a business unit or sector,
composed of an aggregate of Mill/Facilities and identified in a list
each Plan Year by the Committee.
COMMITTEE: "Committee" means the Management Development and
Compensation Committee of the Company's Board of Directors.
COMPANY: "Company" means International Paper Company, a New York
corporation, together with its subsidiaries.
COMPANY PEER GROUP: "Company Peer Group" means those companies engaged
in the forest products industry which the Committee determines from
time to time to be a representative group of companies with which the
Company competes.
COMPANY ROI: "Company ROI" means, with respect to any Plan Year, the
Company's Return on Investment for such Plan Year compared to its
budgeted Return on Investment for such Plan Year.
COMPETITIVE ROI: "Competitive ROI" means a comparison of the Company
ROI with the ROI of the Company's Peer Group, calculated on a weighted
basis, as determined from time to time by the Committee.
CORPORATE PARTICIPANTS: "Corporate Participants " means those
Participants not included in the list of Participants attached to a
specific Business Unit or Mill/ Facility.
EMPLOYEES: "Employees" mean those persons who are full time employees
of the Company.
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INCENTIVE COMPENSATION FUND: "Incentive Compensation Fund" means, with
respect to any Plan Year, the aggregate amount available for incentive
compensation payments under the Plan, as determined in accordance with
Article VI hereof.
KEY INITIATIVES: "Key Initiatives" means areas that have been
specifically targeted for growth and development by the unit to which
such Key Initiatives relate.
MILL/FACILITY: "Mill/Facility" means a mill, facility, forest region or
similar subdivision of a Business Unit as identified in a list compiled
each Plan Year by the Committee.
NON-FINANCIAL GOALS: "Non-financial Goals" means, with respect to any
Plan Year, a comparison of how well the Company performed in certain
non-financial areas compared to targeted performance in such areas.
PARTICIPANT: "Participant" means a person who has been designated as a
participant in the Plan pursuant to Article V hereof.
PERFORMANCE FACTOR: "Performance Factor" means the percentage amount
assigned by the Committee to a Performance Measure for a level of
achievement and representing a percentage of Target Award, pursuant to
Article VI(C) hereof.
PERFORMANCE MEASURE: "Performance Measure" means one of the three
separate measurements of corporate performance used in determining the
Incentive Compensation Fund.
PLAN: "Plan" means this Amended and Restated Management Incentive Plan,
as the same may be amended from time to time.
PLAN YEAR: "Plan Year" means the twelve month period corresponding to
the Company's fiscal year.
POOL FUNDING FACTOR: "Pool Funding Factor" means, with respect to any
given Plan Year, the sum of all Performance Measures, after giving
effect to the weighting of each Performance Measure and after
multiplication of each Performance Measure by its Performance Factor.
RETURN ON INVESTMENT/ROI: "Return on Investment" or "ROI" means
earnings before interest and after taxes divided by capital employed.
TARGET AWARD: "Target Award" means an amount equal to the percentage of
salary range midpoint applicable to the actual position level of each
Participant, as set forth in Appendix A hereto.
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UNIT NON-FINANCIAL RATING: "Unit Non-financial Rating" means, with
respect to any given Plan year, the numerical rating which can range
from .50 to 1.75 awarded the Corporate Participants as a group, and
each Business Unit and Mill/Facility as a measure of such unit's
achievement of its respective non-financial goals.
III. PLAN DESCRIPTION
The Plan establishes a maximum fund based on corporate performance
compared to Plan Year financial and non-financial objectives as
described herein. Funds are allocated proportionally to Corporate,
Business Unit and Mill/Facility Participants based on performance
levels established for the organizational units to which such
Participants are allocated. Individual Participant awards are based on
a proportionate share of their respective fund, adjusted for individual
performance. A separate Special Recognition Fund may be established to
reward special contributions by Employees during the Plan Year.
IV. ADMINISTRATION OF THE PLAN
The Plan shall be administered under the direction of the Committee.
The Committee is authorized to exercise considerable discretion and
judgment in interpreting the Plan and in adopting, from time to time,
rules and regulations governing the administration of the Plan.
Decisions of the Committee shall be final, conclusive and binding upon
all parties, including the Company, its shareholders and employees.
V. PARTICIPATION IN THE PLAN
Participants in the Plan shall be limited to officers and employees of
the Company, as determined from time to time by the Chief Executive
Officer. Recommendations with respect to the final determination of the
Participants who are to receive incentive awards for each Plan Year and
to the amount of the awards for each Plan Year, shall be made each year
to the Committee by the Chief Executive Officer under such procedures
as may from time to time be prescribed by the Committee. Employees who
are eligible for participation in any business unit or divisional
variable cash compensation plan of the Company shall not be eligible
for an incentive award under this Plan based upon the same period of
service, and amounts paid under such plans shall not be regarded as
awards under this Plan. Participation in this Plan, or receipt of an
award under this Plan, shall not give a Participant or Employee any
right to a subsequent award, nor any right to continued employment by
the Company for any period, nor shall the granting of an award give the
Company any right to continued services of the Participant or Employee
for any period. Likewise, participation in the Plan will not in any way
affect the Company's right
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to terminate the employment of the Participant or Employee at any time
with or without cause.
VI. AMOUNT AVAILABLE FOR INCENTIVE AWARDS
A. INCENTIVE COMPENSATION FUND. The amount available in any Plan
Year in the Incentive Compensation Fund shall be determined in
accordance with this Article VI.
B. PERFORMANCE MEASURES. In establishing the Incentive
Compensation Fund, three separate measurements of corporate
performance shall be used. These measurements shall include
Company ROI, Competitive ROI and Non-financial Goals. Weighting
factors of forty percent (40%), thirty-five percent (35%) and
twenty-five percent (25%), shall be given, respectively, to the
Performance Measures reflecting Company ROI, Competitive ROI and
Non-financial Goals.
C. PERFORMANCE FACTOR. Each Performance Measure shall be
multiplied by a Performance Factor ranging from fifty percent
(50%) to one hundred seventy-five percent (175%) . The Committee
shall determine the Performance Factor applicable to each
Performance Measure and shall have broad discretion in
determining such Performance Factors. In connection with Company
ROI and Competitive ROI, the Committee may take into account,
without limitation, such items as unforeseen changes in economic
conditions and the like. In connection with Non-financial Goals,
the Committee may take into account, without limitation, such
items as changes in the law, technology, natural disasters or
catastrophic occurrences.
D. CALCULATION OF INCENTIVE COMPENSATION FUND. The sum of all
Performance Measures, after giving effect to the weighting of
each Performance Measure and after multiplication of each
Performance Measure by its Performance Factor, shall equal the
"Pool Funding Factor." The sum of Target Awards for all
Participants shall be multiplied by the Pool Funding Factor and
the amount so obtained shall constitute the Incentive
Compensation Fund for the applicable Plan Year. Examples of the
methodology to be used in applying Performance Factors and
Performance Measures to the determination of Target Awards are
set forth in Appendix B hereto.
VII. ALLOCATION OF INCENTIVE COMPENSATION FUND AMONG PARTICIPANTS
A. GENERAL. Amounts available under the Incentive Compensation
Fund for payment of individual awards shall be allocated among
Corporate, Business Unit and Mill/ Facility Participants based on
organizational level performance.
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B. CORPORATE LEVEL PERFORMANCE. To the extent feasible under the
applicable portion of the Incentive Compensation Fund, the
attainment of Participant Target awards by Corporate
Participants, subject to adjustment under Section VII E below,
shall be
(1) eighty percent (80%) of the sum of a figure based (a)
seventy percent (70%) on overall Company performance and (b)
thirty percent (30%) on Key Initiatives in the Participant's
specific area plus (2) twenty percent (20%) of the Unit
Non-financial Rating.
C. BUSINESS UNIT PERFORMANCE. To the extent feasible under the
applicable portion of the Incentive Compensation Fund, the
attainment of Participant Target awards by Business Unit
Participants, subject to adjustment under Section VII E below,
shall be (1) eighty percent (80%) of the sum of a figure based
(a) fifty percent (50%) on Company performance and (b) fifty
percent (50%) on Business Unit performance plus (2) twenty
percent (20%) of the Unit Non-financial Rating. The Company
portion of such performance shall be based entirely on overall
Company performance. The remaining fifty percent (50%) shall be
based on the particular Business Unit's Performance, with seventy
percent (70%) of such amount based on actual ROI, or, if such an
ROI measurement is determined, in the sole discretion of the
Committee to be inappropriate, based on such other financial
measurements as the Committee shall deem appropriate, compared to
budgeted ROI, and thirty percent (30%) of such amount based on
Key Initiatives in the Participant's Unit.
D. MILL/FACILITY PERFORMANCE. To the extent feasible under the
applicable portion of the Incentive Compensation Fund, the
attainment of Participant Target Awards by Mill/Facility
Participants, subject to adjustment under Section VII E below,
shall be (1) eighty percent (80%) of the sum of a figure based
(a) twenty-five percent (25%) on overall Company performance, (b)
twenty-five percent (25%) on Business Unit ROI and Key
Initiatives measurements for that Business Unit in which the
Mill/Facility is included and (c) the remaining fifty percent
(50%) on such Mill/Facility's performance plus (2) twenty percent
(20%) of the Unit Non-financial Rating. In determining
Mill/Facility performance, seventy percent (70%) of such amount
based on actual ROI against budgeted ROI or, if such an ROI
measurement is determined, in the sole discretion of the
Committee to be inappropriate, based on such other financial
measurements as the Committee shall deem appropriate, and thirty
percent (30%) of such amount based on Key Initiatives.
E. INDIVIDUAL AWARDS. Individual awards for Participants shall be
based on each Participant's share of the relevant fund
established in connection with Corporate performance, Business
Unit performance and Mill/Facility performance, as the case may
be, factored by the individual performance of the Participant,
within a range of 0 percent (0%) to one hundred twenty percent
(120%).
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VIII. SPECIAL RECOGNITION FUND.
The Committee may approve the establishment of a discretionary fund to
be used to reward Employees whose contribution during the Plan Year
merits special recognition.
Such awards shall be recommended by the Chief Executive Officer of the
Company and, in the aggregate, may not exceed two percent (2%) of the
total Incentive Compensation Fund approved by the Committee for the
Plan Year.
IX. AWARD RECOMMENDATIONS.
A. RECOMMENDATIONS. The Chief Executive Officer shall submit to
the Committee at the end of each Plan Year recommendations with
respect to the Participants who should receive incentive awards
for that Plan Year, together with the proposed amount of such
individual awards.
B. GRANTING OF AWARDS. The Committee, in its sole discretion, may
approve, revise or disapprove any recommended award to a
Participant as it deems appropriate. Any award to an
Officer-Director shall be subject to approval by the full Board
of Directors of the Company.
C. DEATH, DISABILITY OR RETIREMENT OF A PARTICIPANT. A
Participant whose employment terminates during a Plan Year
because of death, retirement or disability (or who is granted a
leave of absence) may, at the discretion of the Committee and
under such rules as the Committee may from time to time
prescribe, be eligible for consideration for a pro-rata award
based on the period of active employment during the Plan Year. If
a Participant's employment with the Company is terminated for any
reason other than death, disability, retirement, or the grant of
a leave of absence, prior to actual payment of an award
hereunder, such award shall be canceled and the Participant shall
have no right to receive payment on account of such award.
X. METHOD AND TIME OF PAYMENT OF AWARDS
A. TYPE OF PAYMENT. As soon as practicable after an individual
incentive award under this Plan has been approved by the
Committee (or approved by the Board of Directors with respect to
an award to an Officer-Director), the award shall be paid to the
Participant in cash unless the Participant has elected to defer
payment as described in Article X(C).
B. PAYMENT TO BENEFICIARIES. If a Participant dies prior to
receipt of an approved award under the Plan, the award shall be
paid to such beneficiary or beneficiaries as the Participant
shall designate in writing. The beneficiary designation shall
state
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whether payment shall be made in a lump-sum or in quarterly
installments over a specified period of time (not to exceed forty
calendar quarters). If a Participant dies without having filed a
beneficiary designation as set forth above, the award shall be
paid in a lump-sum to the Participant's estate.
C. DEFERRAL OF PAYMENT (1998 AWARD YEARS AND AFTER). Subject to
the approval of the Committee and for any Award Year beginning in
1998, any Participant may elect to defer payment of all or any
portion of an award under this Plan by filing a written
irrevocable Election to Defer Payment with the Company by a date
determined by the Company. Awards or portions thereof so elected
to be deferred shall be invested in the Participant's accounts
under the Company's Unfunded Savings Plan as directed by the
Participant.
XI. MODIFICATION, SUSPENSION OR TERMINATION OF PLAN.
The Board of Directors may at any time suspend, terminate, modify or
amend any or all of the provisions of this Plan.
XII. GOVERNING LAW.
The Plan shall be governed by the laws of the State of New York.
XIII. TAX WITHHOLDING.
The Company shall have the right to deduct from any award made under
the Plan, a sufficient amount to cover withholding of any federal,
state, local or foreign jurisdiction taxes required by law, or to take
such other action as may be necessary to satisfy any such withholding
obligations.
XIV. NON-TRANSFERABILITY OF AWARDS.
No award, under this Plan, and no rights or interests therein, shall
be assignable or transferable by a Participant (or legal
representative).
XV. EFFECTIVE DATE
This Plan shall become effective as of January 1, 1998.
APPENDIX A
MANAGEMENT INCENTIVE PLAN (MIP)
TARGET AWARDS
POSITION MIP
LEVEL TARGET
43 75%
36 55%
35 55%
34 55%
33 50%
32 50%
31 50%
30 45%
29 45%
28 45%
27 40%
26 40%
25 40%
24 36%
23 30%
22 30%
21 25%
20 20%
19 20%
18 15%
APPENDIX B
MANAGEMENT INCENTIVE PLAN (MIP)
CALCULATION OF INCENTIVE COMPENSATION FUND
FINANCIAL AND NON-FINANCIAL PERFORMANCE RATING
GOAL ACHIEVEMENT PERFORMANCE RATING
125% and above 1.75
100% 1.00
70% 0.50
69% and below 0.00
FINANCIAL PERFORMANCE FACTOR
Goal Performance Performance
GOALS ACHIEVEMENT RATING WEIGHTING FACTOR
ROI vs. Budget 78.9% .648 .40 .324
ROI vs. Peers 100.0 .700 .35 .175
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Total .75 .499
NON-FINANCIAL PERFORMANCE FACTOR
Goal Performance Performance
GOALS ACHIEVEMENT RATING WEIGHTING FACTOR
Quality 115.0% 1.45 .0833 .121
Safety & Environment 113.0 1.39 .0833 .116
People Development 103.0 1.09 .0833 .091
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Total .2500 .328
COMPANY PERFORMANCE FACTOR
Financial Performance Factor (.499) +
Non-Financial Performance Factor(.328) = .827
PRELIMINARY MANAGEMENT INCENTIVE PLAN FUND PROJECTION
Company Performance Factor x Aggregate Target Awards
.827 x $23.312MM = $19.279MM