EX-10.(X) 6 pdm288e.txt LONG-TERM INCENTIVE BANTA CORPORATION ECONOMIC PROFIT (EP) LONG-TERM INCENTIVE COMPENSATION PLAN (As Amended and Restated Effective January 1, 2002) ARTICLE I Statement of Purpose 1.1 The purpose of the Banta Corporation (the "Company") Economic Profit ("EP") Long-Term Incentive Compensation Plan (the "Plan") is to provide an incentive compensation system which promotes and rewards the maximization of shareholder value over the long term. The Plan is designed to create a focus for all participants to achieve the key financial and strategic objectives which drive shareholder value creation. The Plan aims to provide a fair and meaningful reward for achieving or surpassing shareholder value creation goals by directly linking incentive compensation to EP and, thereby, reward management for creating value. 1.2 There are two different performance measures of value creation, EPS and EP. EPS is the fully diluted earnings per average share of common stock of the Company for the applicable year. EP is the performance measure of value creation. EP reflects the benefits and costs of capital employment. Managers create value when they employ capital in an endeavor that generates a return that exceeds the cost of the capital employed. By imputing the cost of capital upon the operating profits generated by the Company, EP measures the total value created by management. EP = (Net Operating Profit After Tax - Capital Charge) 1.3 Each Plan Participant has a prescribed Target Bonus which is composed of two components, an amount based on the Company's EP results and an amount based on the Company's EPS results. Each bonus will be paid out one-third annually over a three year period subject to the payout rules contained in Section 5.4. 1.4 The Plan will be administered on a fiscal year basis under the direction and control of the Compensation Committee of the Banta Corporation Board of Directors (the "Committee"). At a meeting of the Committee during the first quarter of each year the Committee will review and approve the list of Plan Participants for such year, along with the Company's Cost of Capital and the applicable targets and factors for EP and EPS. 1 ARTICLE II Definition of EP and the Components of EP ----------------------------------------- 2.1 "Capital" means the net investment employed in the operations of the Company. The components of Capital are as follows: Shareholders Equity Plus: Advances from (to) Corporate Plus: Collected cash overdrafts (balances) Plus: Long-term debt (including current portion) and short-term debt Plus: Deferred taxes (net of future tax benefit) Plus: Accrued (prepaid) income taxes Plus: LIFO Reserve Plus: Cumulative goodwill and non-compete amortization Plus: Acquisition earnouts paid Plus: Capitalized leases Plus: Non-cash accruals Plus: Negative EP on acquisitions and/or major R&D projects approved by the Chief Executive Officer Plus/Less: Other capital items as determined by management and approved by the Committee Less: Non-operating Cash ---- ------------------ Equals: Capital Each component of Capital will be measured by computing an average balance based on the ending period balance for each period the Company closes its books within the year. 2.2 "Cost of Capital" will be estimated at the beginning of each year based on the weighted average of the after-tax cost of debt and equity for the year in question for the entire Company. Calculations will be carried to one decimal point. 2.3 "Capital Charge" means the deemed opportunity cost of employing Capital in the Company. The Capital Charge is computed as follows: Capital Charge = Capital x Cost of Capital 2.4 "Net Operating Profit After Tax" or "NOPAT" 2 "NOPAT" means the after-tax earnings attributable to the capital employed in the Company for the year in question. The components of NOPAT are as follows: Operating Earnings Before Income Taxes Plus: Miscellaneous income (excluding interest income) Plus: Current LIFO expense Plus: Change in non-cash accruals Plus: Capitalized lease adjustment Plus: Non-compete amortization Plus: Goodwill amortization Plus: Acquisition earnouts expensed Plus: R&D expense Plus: R&D amortization Plus/Less: Other items as determined by management and approved by the Committee Less: Income Taxes ---- ------------ Equals: Net Operating Profit After Tax Gains and losses on the sale of assets, gains and losses on the disposition of businesses and/or business segments, restructuring charges and other large non-recurring gains and losses will be excluded from NOPAT unless the Committee determines that a specific item should be included. 2.5 "Economic Profit" or "EP" means the NOPAT that remains after subtracting the Capital Charge, expressed as follows: NOPAT Less: Capital Charge ---- -------------- Equals: EP EP may be positive or negative. 2.6 Operations acquired will be excluded from the EP computations for the first 12 months after acquisition, unless the Committee approves earlier, or later, inclusion based on the facts related to a specific acquisition. ARTICLE III Definition and Computation of Target Bonus ------------------------------------------ 3.1 "Actual EP" means the EP as calculated for the Company for the year in question. 3.2 "Target EP" means the level of EP that is expected in order for a Participant of the Company to receive one hundred percent (100%) of the Target Bonus attributable to the EP component as determined for the year by the Committee. 3 3.3 "Target Bonus" means the "Target Bonus Percentage" times a Participant's Base Pay actually paid for the year (see article VII for calculations related to a change in a Participant's employment status). 3.4 "Target Bonus Percentage" is 25% for each Participant. 3.5 "Base Pay" means the Participant's base rate of salary excluding bonuses and other benefits or forms of compensation. 3.6 "Actual EPS Bonus" means the bonus earned by a Participant based on EPS results for the applicable year and the schedule of positive and negative percentages of the Target Bonus attributable to the EPS results as determined by the Committee. ARTICLE IV Definition and Computation of Actual Bonus ------------------------------------------ 4.1 Each Participant shall have his/her Target Bonus subdivided into two component targets, a target based on total Company EP results and a target based on EPS. Unless otherwise specifically provided by the Committee, the Target Bonus will be split fifty-fifty between the two components. 4.2 "Actual EP Bonus" means the bonus earned by a Participant based on total Company EP results and is calculated by multiplying the Target Bonus by a percentage which is determined as follows: [Actual EP - Target EP] + 1 ----------------------- [Bonus Table Generator] 4.3 "Bonus Table Generator" is the negative (positive) deviation from Target EP necessary before a zero (two times Target) bonus is earned, annually determined by the Committee. 4.4 "Combined Bonus" is the sum of the Actual EP Bonus and Actual EPS Bonus. The Combined Bonus will be capped at three hundred percent (300%) of Target Bonus for each Participant such that any amounts above three hundred percent (300%) of a Participant's Target Bonus will be ignored for any calculation and other purpose of this Plan. The minimum Combined Bonus for each Participant will be zero such that any negative amount will be ignored for any calculation and other purpose of this Plan. ARTICLE V Description of Bonus Banks -------------------------- 5.1 Establishment of a Bonus Bank. To encourage a long-term commitment by Participants to the Company, all Combined Bonus amounts shall be credited to "at risk" accounts 4 (Bonus Banks), with the level of future payout contingent on continued employment as provided herein. 5.2 "Bonus Bank" means, with respect to each Participant, a bookkeeping record of an account to which amounts are credited from time to time under the Plan and from which bonus payments to such Participants are debited. 5.3 "Bank Balance" means, with respect to each Participant, a bookkeeping record of the net balance of the amounts credited to such Participant's Bonus Bank. A Participant's Bank Balance shall initially be equal to zero. 5.4 Payout Rules: (A) If there is no balance in the Bonus Bank carried over from the prior year: (1) Pay out 1/3 of the Combined Bonus, if any. (2) Add the remaining Combined Bonus to the Bonus Bank. The banked amount will be paid out in two equal installments beginning with a payment at the time that bonuses would be paid for the subsequent year. (3) Carry forward any Bonus Bank amounts. (B) If there is a Bonus Bank balance carried over from the prior year: (1) Pay out 1/3 of the Combined Bonus earned for the current year, if any. (2) Add the remaining Combined Bonus to the Bonus Bank. The banked amount will be paid out in two equal installments beginning with a payment at the time that bonuses would be paid for the subsequent year (3) Pay out any scheduled installments from prior years applicable to the current year. (4) Carry forward any Bonus Bank balances. 5.5 Payment of Awards. All amounts payable to Participants shall be paid in cash within 30 days following approval of the calculations by the Committee. ARTICLE VI Deferred Payment 6.1 Deferrals. A Participant may elect in advance to defer payment of all or any portion of the payments he/she would otherwise receive pursuant to Sections 5.4 and 5.5. No bonus amount otherwise payable in a year shall be deferred for any year unless the Company shall have received a written notice from the Participant not later than December 31 of the second preceding year specifying the portion of the award which is to be deferred. By way of example, an election to defer any 1998 awards (which would otherwise be paid in early 1999) must be received by December 31,1997. Any such deferral election shall be irrevocable. 5 6.2 Deferral Accounts. All amounts so deferred will be credited, as of the dates otherwise payable, to an account created on the Company's books for the Participant. Amounts standing to a Participant's credit in the account shall be paid to the Participant or his designated beneficiary or estate: (1) over a period of not more than fifteen years following termination of the Participant's employment by reason of death, disability or normal or early retirement as permitted by the Company's Retirement Plan; and (2) over a period of not more than three years following termination of a Participant's employment for any other reason, in either case at such times and in such installments as shall be determined in the sole discretion of the Committee. 6.3 Interest. Until such time as all amounts in the account are paid in full, a credit in lieu of interest shall be made to the account on December 31 of each year (or on the date of the final installment payment from the account, as the case may be) in an amount equal to interest on the balance from time to time outstanding in the account during the year at a rate equal to the average prime rate of interest less one percentage point. For purposes of this section the "average prime rate of interest" in effect during the applicable period shall be computed by multiplying each prime rate of interest in effect at the Firstar Bank of Milwaukee during such period by the number of days each such rate was so m effect, and by dividing the total number so obtained by the total number of days in such period. ARTICLE VII Plan Participation, Transfers and Terminations 7.1 Participant. "Participant" shall mean an employee employed on a regular full-time or part-time basis by the Company and who has been recommended by the Chief Executive Officer to be eligible to participate in the Plan and approved by the Committee. In order to be eligible for an Actual EP Bonus for a year, the Participant must be designated as such pursuant to Section 1.4. A person shall remain a Participant for other purposes of the Plan as long as he/she has a Bonus Bank balance or a deferred balance. 7.2 New Participants. The percentage (%) of award to which a Participant is entitled in the first year of his/her participation in the Plan is prorated at a rate of 1/12 for each complete month from date of participation. 7.3 Retirement. Disability. Involuntary Termination Without Cause or Death. A Participant who retires under the terms of the Company's Retirement Plan, or suffers a "disability", as such term is defined in the Company's long-term disability benefits program and is not reasonably expected by management to return to work, or is involuntarily terminated without cause or who dies shall be eligible to receive the balance of his/her Bonus Bank as of the end of the year pursuant to Section 5.5 after taking into account the actual bonus value for the said year. The actual bonus value for the said year shall be equal to zero dollars ($0) if the Participant has not completed six full months of employment with the Company during the year. Otherwise, the percentage of award for the said year to which 6 a Participant is entitled shall be prorated at a rate of 1/12 for each complete month of employment during the year. 7.4 Voluntary Termination. In the event that a Participant voluntarily terminates employment with the Company on or before the end of the applicable fiscal year, the right of the Participant to his/her Bank Balance and/or any potential current year payout shall be forfeited. 7.5 Termination for Cause. "Cause" shall mean: (1) misappropriation by the Participant of funds of the Company or any of its subsidiaries; (2) the Participant personally and secretly obtaining profits from dealings with the Company or any of its subsidiaries; (3) the Participant's unreasonable neglect of, or refusal to perform, his/her duties or responsibilities; and (4) conviction of a serious crime involving moral turpitude. 7.6 Payment and Breach of Agreement. Notwithstanding any other provision of the Plan or any other agreement, in the event that a Participant shall breach any noncompetition agreement with the Company or breach any agreement with respect to the postemployment conduct of such Participant, any remaining payment otherwise due to the Participant hereunder shall be forfeited. 7.7 No Guarantee. Selection as a Participant is no guarantee that benefits under the Plan will be earned or that selection as a Participant will be made in any subsequent year. ARTICLE VIII General Provisions 8.1 Withholding of Taxes. The Company shall have the right to withhold the amount of taxes, which in the determination of the Company, are required to be withheld under law with respect to any amount due or paid under the Plan. 8.2 Expenses. All expenses and costs in connection with the adoption and administration of the Plan shall be borne by the Company. 8.3 No Prior Right or Offer. Except and until expressly granted pursuant to the Plan, nothing in the Plan shall be deemed to give any employee any contractual or other right to participate in the benefits of the Plan. 8.4 Rights Personal to Employee. Any rights provided to a Participant under the Plan shall be personal to such Participant, shall not be transferable (except by will or pursuant to the 7 laws of descent or distribution), and shall be exercisable, during his/her lifetime, only by such Participant. 8.5 Distribution of Bank Balances Upon Termination of the Plan. Upon termination of the Plan, the Bank Balance of each Participant shall be distributed as soon as practicable but in no event later than 90 days from such event. ARTICLE IX Limitation 9.1 No Continued Employment. Nothing contained herein shall provide any Participant with any right to continued employment or in any way abridge the rights of the Company to determine the terms and conditions of employment and whether to terminate employment of any Participant. 9.2 No Vested Rights. Except as otherwise provided herein, no employee or other person shall have any claim of right (legal, equitable, or otherwise) to any award, allocation, or distribution or any right, title, or vested interest in any amounts in his/her Bonus Bank and no officer or employee of the Company or any other person shall have any authority to make representations or agreements to the contrary. No interest conferred herein to a Participant shall be assignable or subject to claim by a Participant's creditors. The right of the Participant to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company and the Participant shall have no rights in or against any specific assets of the Company as the result of participation hereunder. ARTICLE X Authority 10.1 Committee Authority. Except as otherwise expressly provided herein, full power and authority to interpret and administer this Plan shall be vested in the Committee. The Committee may from time to time make such decisions and adopt such rules and regulations for implementing the Plan as it deems appropriate for any Participant under the Plan. Any decision taken by the Committee arising out of or in connection with the construction, administration, interpretation and effect of the Plan shall be final, conclusive and binding upon all participants and any person claiming under or through them. 10.2 Board of Directors Authority. The Board shall be ultimately responsible for administration of the Plan. The Board or the Committee, as appropriate, shall work with the Chief Executive Officer of the Company in all aspects of the administration of the Plan. 8 ARTICLE XI Notice 11.1 Any notice to be given pursuant to the provisions of the Plan shall be in writing and directed to the appropriate recipient thereof at his/her business address or office location. ARTICLE XII Effective Date 12.1 This Plan was originally effective as of January 1, 1998. The effective date of this restatement is January 1, 2002. 12.2 The Plan is intended to remain in force indefinitely beginning on the first day of each fiscal year after the effective date hereof, unless the Board of Directors, in its discretion, terminates it by resolution and notifies the Participants. ARTICLE XIII Amendments 13.1 Amendment. This Plan may be amended or terminated at any time at the sole discretion of the Board upon the recommendation of the Committee. The annual activities of the Committee pursuant to the Plan are not Plan amendments, including but not limited to the determinations pursuant to Section 1.4. 13.2 Protected Benefits. Notwithstanding the foregoing, after the last day of an applicable fiscal year, the Plan may not be amended or the Participants revised such that the Participant receives less than the amount payable by the Plan nor may an amendment reduce or eliminate any previously banked amount under Article V prior to such amendment or revision. 13.3 Notice. Notice of any amendment or termination shall be given promptly to each Participant. ARTICLE XIV Applicable Law 14.1 This Plan shall be construed in accordance with the provisions of the laws of the State of Wisconsin to the extent not preempted by Federal law. 9