<PAGE>
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
THE MEAD CORPORATION
(Exact Name of Registrant as Specified in its Charter)
OHIO 31-0535759
(State of Incorporation) (I.R.S. Employer Identification Number)
MEAD WORLD HEADQUARTERS
COURTHOUSE PLAZA NORTHEAST
DAYTON, OHIO 45463
(937) 495-6323
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
DAVID L. SANTEZ
ASSISTANT SECRETARY AND
ASSOCIATE GENERAL COUNSEL
MEAD WORLD HEADQUARTERS
COURTHOUSE PLAZA NORTHEAST
DAYTON, OHIO 45463
(937) 495-6323
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]_________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]_________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Title of each Class Amount Proposed Maximum Proposed Maximum Amount of
of Securities to be Aggregate Price Aggregate Registration
to be Registered Registered Per Share Offering Price Fee
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares, without
par value (1) 162,115 $26.6250 $ 4,316,311.88 (2)
121,350 $31.6250 3,837,693.75 (2)
11,569 $31.9375 369,484.94 (2)
73,880 $33.0000 2,438,040.00 (2)
41,550 $35.0000 1,454,250.00 (2)
206,100 $36.6250 7,548,412.50 (3)
106,200 $41.5000 4,407,300.00 (2)
240,958 $43.5000 10,481,673.00 (3)
505 $43.5625 21,999.06 (3)
30,000 $44.0000 1,320,000.00 (3)
273,275 $44.6875 12,211,976.56 (3)
550 $44.9375 24,715.63 (3)
15,000 $49.6875 745,312.50 (3)
51,654 $51.4375 2,656,952.63 (4)
320,432 $53.0625 17,002,923.00 (3)
276,990 $54.3750 15,061,331.25 (3)
4,007 $55.7500 223,390.25 (3)
29,000 $56.3125 1,633,062.50 (4)
5,887 $56.4375 332,247.56 (4)
2,462 $56.5000 139,103.00 (3)
2,094,113 $57.3750 120,149,733.38 (5)
--------- ---------------
4,067,597 $206,375,913.39 $62,538.16
</TABLE>
(1) There are also being registered hereunder an equal number of Purchase
Rights, which are currently attached to and transferrable only with the
Common Shares registered hereby, issuable pursuant to the Registrant's
Shareholder Rights Plan.
(2) Calculated in accordance with Rule 457(h)(1) based on the price at which
outstanding options may be exercised under the Registrant's 1984 Stock
Option Plan.
(3) Calculated in accordance with Rule 457(h)(1) based on the price at which
outstanding options may be exercised under the Registrant's 1991 Stock
Option Plan.
(4) Calculated in accordance with Rule 457(h)(1) based on the price at which
outstanding options may be exercised under the Registrant's 1996 Stock
Option Plan.
(5) Calculated in accordance with Rule 457(h)(1) based on the average of the
high and low sales prices of the Common Shares as reported on the New York
Stock Exchange on November 12, 1996.
____________________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
PROSPECTUS
THE MEAD CORPORATION
1984 STOCK OPTION PLAN
1991 STOCK OPTION PLAN
1996 STOCK OPTION PLAN
The Mead Corporation (the "Company") is offering Common Shares,
without par value ("Common Shares"), to permitted transferees of
nonqualified stock options under the Company's 1984 Stock Option Plan (the
"1984 Plan"), the Company's 1991 Stock Option Plan (the "1991 Plan") and the
Company's 1996 Stock Option Plan (the "1996 Plan"). The Company is offering
to permitted transferees 516,664 Common Shares, 1,370,279 Common Shares and
2,180,654 Common Shares issuable upon the exercise of stock options granted
and transferred in accordance with the terms of the 1984 Plan, the 1991 Plan
and the 1996 Plan, respectively (collectively, the "Plans"). The exercise
prices of options outstanding under the Plans on the date of this Prospectus
range from $26.625 to $56.50 per Common Share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN
OR MADE SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY COMMON SHARES IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION.
The date of this Prospectus is November 15, 1996.
<PAGE>
THE COMPANY AND THE PLANS
General
The Company was incorporated in 1930 under the laws of the State
of Ohio as the outgrowth of a paper manufacturing business founded in 1846,
and has its principal executive offices at Mead World Headquarters,
Courthouse Plaza Northeast, Dayton, Ohio 45463, telephone (937) 495-6323.
The purposes of the Plans are (i) to provide incentives to
officers and other key employees of the Company upon whose judgment,
initiative and efforts the long-term growth and success of the Company are
largely dependent; (ii) to assist the Company in attracting and retaining
key employees of proven ability; and (iii) to increase the identity of
interests of such key employees with those of the Company's shareholders by
providing such employees with options to acquire Common Shares. The purposes
of the 1996 Plan are expanded to cover non-employee directors, as well as
officers and key employees of the Company.
No new options may be granted under the 1984 Plan. The 1991 Plan
and the 1996 Plan authorize in the aggregate the grant of options to acquire
up to 8,000,000 Common Shares and the grant of up to 8,000,000 limited
rights (subject to adjustment in certain circumstances). As of the date of
this Prospectus, options to acquire an aggregate of 4,190,717 Common Shares
and an aggregate of 4,190,717 limited rights remain available for grant
under the 1991 Plan and the 1996 Plan. Common Shares subject to options that
terminate or expire or are cancelled under the 1991 Plan or the 1996 Plan
prior to being fully exercised may again become subject to option under the
respective Plan, and limited rights that terminate or expire or are
cancelled under the 1991 Plan or the 1996 Plan prior to being fully
exercised may again be granted under the respective Plan. Common Shares
issued upon the exercise of options granted under any of the Plans may be
either authorized and unissued shares or treasury shares.
In the event of a change in the Company's outstanding Common
Shares because of a share dividend, recapitalization, merger, consolidation,
split-up, combination or exchange of shares or the like, the number of
Common Shares subject to, and the option price of, each outstanding option
under any of the Plans, the number of limited rights outstanding under any
of the Plans, the fair market value of a Common Share on the date a limited
right is granted, and the like shall be appropriately adjusted by the
Committee (as defined below).
Options and limited rights granted under the Plans are subject to
the terms, conditions and restrictions set forth in the respective Plans and
in the agreements entered into between the Company and each person to whom
options are granted. Copies of the Plans are filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
Grant of Options
Each Plan is administered by the Compensation Committee of the
Board of Directors (the "Committee"), which determines the officers and
other key employees of the Company to whom, and the times at which, options
and limited rights will be granted, as well as the option price, the term of
the option (which may not exceed ten years from the date of grant), and the
number of Common Shares subject to each option. The Committee makes all
determinations necessary or advisable for the administration of the Plan,
and such determinations are conclusive. The Committee also has the authority
under each of the Plans, subject to certain restrictions, to permit the
transfer or assignment of any outstanding option and related limited
2
<PAGE>
rights, if any, by the option holder or to provide for any restrictions or
limitation on the exercise of options as it deems appropriate.
The 1996 Plan also provides for automatic nonqualified stock
option ("NSO") grants to eligible non-employee directors. Each person who
becomes an eligible director for the first time receives an automatic grant
of NSOs to purchase 300 Common Shares and, thereafter, each eligible
director receives automatic grants of NSOs to purchase a number of shares
determined by a formula set forth in the Plan on each January 3 (beginning
in 1997). Such options will become fully exercisable on the first
anniversary of the date of grant and have a term of ten years.
The 1996 Plan also permits incentive stock options to be granted
with a reload feature. When an option holder exercises an option with this
feature while employed by the Company (the "Original Option"), he or she
will be granted a NSO (the "Reload Option") on the exercise date for a
number of Common Shares equal to the number of Common Shares subject to the
Original Option being exercised less the number of Common Shares that (i)
are retained by the Company in payment of the option price or for purposes
of satisfying tax withholding obligations, or (ii) are otherwise disposed of
by the option holder for purposes of having the proceeds applied to the
option price.
The per share option price for an option granted under any of the
Plans cannot be less than Fair Market Value of a Common Share. For purposes
of the 1984 Plan, Fair Market Value is the highest sale price of a Common
Share on the date of grant, as reported on the New York Stock Exchange --
Composite Transactions Tape. For purposes of the 1991 Plan and 1996 Plan,
Fair Market Value is the average of the highest sale price and lowest sale
price of a Common Share on the date of grant, as so reported.
Transferability of Options
The Committee has permitted all options originally granted under
each of the Plans as NSOs or that have converted from incentive stock
options to NSOs after the date of grant and before the date of the
Committee's action to be transferred for no consideration (except when
required by court order) from the original grantee of the option (the
"Grantee") to (i) a Family Member (as hereinafter defined) of the Grantee,
(ii) a trust for the sole benefit of the Grantee's Family Members, or (iii)
a partnership whose only partners are Family Members of the Grantee. The
Committee action applies to NSOs granted and outstanding under the Plans
prior to the date of this Prospectus and to NSOs hereafter granted under the
Plans. "Family Member" means any of the Grantee's children, stepchildren,
grandchildren, parents, stepparents, grandparents, spouse, siblings
(including half-brothers and sisters), nieces, nephews and in-laws.
A permitted transferee of a NSO ("Transferee") has the same rights
and obligations of the Grantee of the NSO, except that the Transferee can
subsequently transfer the NSO only (i) by designating a beneficiary or
beneficiaries to receive the Transferee's benefits with respect to the NSO
upon the Transferee's death as discussed below, (ii) to a beneficiary of the
trust, if the Transferee is a trust, or (iii) to a partner, if the
Transferee is a partnership.
Upon the death of the Transferee, the options held by such person
under the Plans may be transferred to the person named in a designation of
beneficiary filed by the option holder with the Company or otherwise by will
or the laws of descent and distribution. The estate of the Transferee or the
person to whom a NSO is transferred upon the death of the Transferee (a
"Beneficiary") has the same rights and obligations of the Grantee of the
NSO, except that the NSO
3
<PAGE>
cannot subsequently be transferred again other than by designation of a
beneficiary, by will or by the laws of descent and distribution upon the
death of the Beneficiary.
Options granted under the Plans cannot be sold, pledged,
hypothecated or, except as set forth above, transferred in any manner.
Exercise of Options
Options granted under the Plans may not be exercised within one
year after the date of grant. Because NSOs transferred to Transferees and
Beneficiaries continue to be governed by the terms of the respective Plan
and the original grant, their exercisability continues to be affected by the
Grantee's employment or director status.
Generally, an option granted to an employee may be exercised after
the option becomes exercisable only if on the date of exercise the Grantee
has been continuously employed by the Company since the date of grant.
However, the Committee may provide that if the Grantee of the option ceases
to be employed for any reason, the option will continue to be exercisable
during its term for such additional period as the Committee may provide. For
all NSOs that were granted prior to the date of this Prospectus, the
Committee has acted to permit the exercise of the option following the
Grantee's termination of employment in the following instances: if the
Grantee's employment ceased due to his or her retirement after reaching age
55, or due to the Grantee's death or disability, the NSO will continue to be
exercisable for the remainder of its term. If, under any of the foregoing
circumstances, the option is not vested at the time the Grantee's employment
terminates, the option will not be exercisable until it is so vested.
A NSO that is granted to a non-employee director pursuant to the
1996 Plan that is not exercisable when the Grantee ceases to be a director
will be cancelled at the time he or she ceases to be a director. If an
option granted to a non-employee director is exercisable when the Grantee
ceases to be a director and the Grantee is at least 70-years-old or had been
a director of the Company for at least ten years at the time he or she
ceases to be a director, the option will remain exercisable for the
remainder of its term. If an option granted to a non-employee director is
exercisable when the Grantee ceases to be a director but the Grantee is not
yet 70-years-old or had not been a director of the Company for at least ten
years at the time he or she ceases to be a director, then such option will
be exercisable for an additional year (or, if shorter, through the option's
term).
In general, Reload Options granted under the 1996 Plan become
exercisable on the third anniversary of the date that the Reload Option was
granted. However, a Reload Option is immediately cancelled in whole or in
part upon any sale, disposition, assignment or transfer by the Grantee of
the Reload Option of any or all of the Common Shares issued upon the
exercise of the Original Option (the "Original Shares") prior to the third
anniversary of the date the Reload Option was granted, unless the agreement
evidencing a Reload Option states otherwise. The portion of the Reload
Option that is so cancelled shall equal the number of Original Shares that
are sold, disposed of, assigned or transferred by the Grantee prior to the
third anniversary of the date the Reload Option was granted, except that the
Reload Option will not be cancelled to the extent that the Original Shares
were used in connection with the exercise by the Grantee of another option
that has a reload feature.
Due to some of the foregoing factors, the Transferee's or
Beneficiary's ability to exercise a NSO is not entirely within his or her
control. For information regarding the terms of a particular stock option
grant or to receive a Stock Option Exercise Form, the Transferee or
4
<PAGE>
Beneficiary may contact the office of the Secretary, The Mead Corporation,
Courthouse Plaza Northeast, Dayton, Ohio 45463, (937) 495-4076.
An option holder may exercise all or part of an option that is
exercisable by giving written notice of exercise to the Committee or its
designee on a Stock Option Exercise Form obtained from the Company that is
completed in all respects and is signed by the Transferee or the
Beneficiary, as the case may be. The option price must be paid in full at
the time such notice is given. The option price may be paid in cash or with
Common Shares having a Fair Market Value (as defined in the relevant Plan)
equal to the option price, or a combination of Common Shares and cash
together having a Fair Market Value on the date of exercise equal to the
option price. The Common Shares may be either already-owned by the option
holder or withheld from the Common Shares otherwise issuable to the option
holder upon the exercise of the option. In the event that the Grantee
receives a deemed hardship distribution from The Mead Salaried Savings Plan,
the Transferee or Beneficiary, as the case may be, may be restricted from
using cash to pay the option price for NSOs that are exercised within 12
months after the date of the Grantee's deemed hardship distribution.
Upon the exercise of a NSO by a Transferee or Beneficiary, the
Grantee of such NSO is required to satisfy the applicable withholding tax
obligation by paying cash or other property to the Company. If the Grantee
does not satisfy the applicable withholding tax obligation on the exercise
date, the Company will retain from the Common Shares to be issued a number
of Common Shares having a Fair Market Value on the exercise date equal to
the mandatory withholding tax payable by the Grantee. The Company will issue
the certificate for Common Shares to the Transferee or the Beneficiary, as
the case may be, only after the option price has been paid and the
applicable withholding tax has been satisfied.
Limited Rights
The Committee may grant limited rights with respect to any option
(other than the NSOs granted to non-employee directors under the automatic
grant provisions of the 1996 Plan) either at the time the option is granted
or at any time thereafter prior to the exercise, cancellation, termination
or expiration of such option. The number of limited rights covered by any
such grant may equal but not exceed the number of Common Shares covered by
the related option. The term of each limited right is the same as the term
of the option to which it relates. A holder may not exercise a limited right
if and to the extent that the related option is exercised, and the holder
may not exercise an option if and to the extent that a related limited right
is exercised. When a NSO with limited rights is transferred as permitted by
a Plan, then such limited rights automatically will be transferred as well.
A limited right is exercisable only if and to the extent that the
related option is exercisable. However, even if the related option is
exercisable, a limited right is not exercisable during the first six months
after grant. A limited right granted under the 1984 Plan is exercisable only
if the Fair Market Value of a Common Share on the date of exercise exceeds
the option price of a Common Share subject to the related option. Finally, a
limited right that otherwise is exercisable may be exercised only during the
following periods:
(i) during a period of 30 days following the date of expiration of a
tender offer or an exchange offer (other than an offer by the
Company) subject to regulation under Section 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
for Common Shares (a "Tender Offer"), if the offeror acquires
Common Shares pursuant to such Tender Offer;
5
<PAGE>
(ii) during a period of 30 days following the date of approval by the
shareholders of the Company of a definitive agreement: (x) for
the merger or consolidation of the Company into or with another
corporation, if the Company will not be the surviving Company or
will become a subsidiary of another corporation, unless for
purposes of limited rights granted under the 1991 Plan and the
1996 Plan the voting securities of the Company outstanding
immediately prior to the merger or consolidation continue to
represent at least 80% of the combined voting power of the voting
securities of the Company or the surviving entity immediately
thereafter, or (y) for the sale of all or substantially all of
the assets of the Company (an "Acquisition Transaction");
(iii) during a period of 30 days following: (x) the date upon which
the Company is provided a copy of a Schedule 13D (filed pursuant
to Section 13(d) of the Exchange Act) indicating that any person
or group has become the holder of 20% or more of the outstanding
voting shares of the Company or (y) the date of approval by the
shareholders of the Company of a control share acquisition, as
defined in the Ohio General Corporation Law (a "Change of
Control"); and
(iv) during a period of 30 days following a change in the composition
of the Board such that individuals who were members of the Board
on the date two years prior to such change (or who were elected,
or were nominated for election, by the Company's shareholders
with the affirmative vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such
two-year period) no longer constitute a majority of the Board (a
"Change in Composition of the Board").
Upon the exercise of a limited right and subject to the payment
by the Grantee of the applicable withholding taxes as described below, the
holder of the limited right will receive a cash payment equal to the excess
of: (x) the aggregate "exercise value" on the date of exercise (determined
as provided below) of that number of Common Shares that is equal to the
number of limited rights being exercised over (y) the aggregate exercise
price under the related option of that number of Common Shares that is equal
to the number of limited rights being exercised. A holder may exercise a
limited right by giving written notice of such exercise to the Committee or
its designee.
The "exercise value" of a limited right on the date of exercise
is:
(a) in the case of an exercise during a period described in (i)
above, the highest price per Common Share paid pursuant to any
Tender Offer that is in effect at any time during the 60-day
period prior to the date on which the limited right is exercised;
(b) in the case of an exercise during a period described in (ii)
above, the greater of: (x) the highest sale price of a Common
Share during the 30-day period prior to the date of shareholder
approval of the Acquisition Transaction, as reported on the New
York Stock Exchange -- Composite Transactions Tape, or (y) the
highest fixed or formula per Common Share price payable pursuant
to the Acquisition Transaction (if determinable on the date of
exercise);
(c) in the case of an exercise during a period described in (iii)
above, the greater of: (x) the highest sale price of a Common
Share during the 30-day period prior to the date the Company is
provided with a copy of the Schedule 13D, or the date of
-6-
<PAGE>
approval of the control share acquisition, as reported on the New
York Stock Exchange -- Composite Transactions Tape, or (y) the
highest acquisition price of a Common Share shown on such
Schedule 13D or to be paid in such control share acquisition; and
(d) in the case of an exercise during a period described in (iv)
above, the highest sale price of a Common Share during the 30-day
period prior to the date of the Change in Composition of the
Board, as reported on the New York Stock Exchange -- Composite
Transactions Tape.
Any securities or property that form part or all of the
consideration paid for Common Shares pursuant to a Tender Offer or
Acquisition Transaction will be valued at the higher of (1) the valuation
placed on such securities or property by the person making such Tender Offer
or the other party to such Acquisition Transaction, or (2) the value placed
on such securities or property by the Committee.
Upon the exercise of limited rights by a Transferee or
Beneficiary, the Grantee of such limited rights is required to satisfy the
applicable withholding tax obligation by paying cash or other property to
the Company. If the Grantee does not satisfy the applicable withholding tax
obligation on the exercise date, the Company will retain from the cash
payment to be made to the Transferee or Beneficiary, as the case may be, an
amount equal to the mandatory withholding tax payable by the Grantee.
Effects of Certain Changes in Control
The Plans provide that in the event of a Tender Offer, an
Acquisition Transaction, a Change in Control or Change in the Composition of
the Board, all outstanding options will become fully exercisable provided
such date is a least six months after the date the option was granted.
Payment of Cash for Cancellation of Options
The Committee has the authority in it sole discretion to authorize
the payment to the holder of an option (with the consent of such holder), in
exchange for the cancellation of all or a part of such holder's option, of
cash in an amount not to exceed the difference between the aggregate Fair
Market Value on the date of such cancellation of the Common Shares with
respect to which the option is being cancelled and the aggregate option
price of such Common Shares; provided, however, that if the exercisability
of the options granted under the respective Plan has been accelerated, "Fair
Market Value" on the date of such cancellation will be calculated in the
same manner as the "exercise value" of a limited right would be calculated
(whether or not any limited rights are actually outstanding).
Amendment and Termination of the Plans
The Board of Directors from time to time may amend the Plans, or
any provision thereof, in such respects as the Board of Directors may deem
advisable; provided, however, that any such amendment to the 1984 Plan must
be approved by the holders of shares entitling them to exercise a majority
of the voting power of the Company if such amendment would materially
increase the benefits accruing to participants under the 1984 Plan,
materially increase the aggregate number of Common Shares that may be issued
and/or delivered under the 1984 Plan, or materially modify the requirements
as to eligibility for participation in the 1984 Plan, and any such
-7-
<PAGE>
amendment to the 1991 Plan or the 1996 Plan must be approved by the
shareholders of the Company if so required by federal or state law or by any
stock exchange upon which Common Shares then may be listed.
The 1984 Plan expired on January 26, 1994, and no new options or
limited rights can be granted thereunder. The Board of Directors may
terminate the 1991 Plan and the 1996 Plan at any time. If not earlier
terminated by the Board of Directors, the 1991 Plan will expire on January
24, 2001 and the 1996 Plan will expire on September 30, 2005.
No amendment to or termination of a Plan may affect adversely any
option or limited right previously granted under such Plan without the
consent of the holder thereof.
Restrictions on Resale
There are no restrictions on the resale of Common Shares received
by a Transferee or Beneficiary upon the exercise of an option granted under
a Plan, unless such person is deemed to be an "affiliate" of the Company. An
affiliate may not dispose of Common Shares received upon the exercise of an
option unless there is an effective registration statement under the
Securities Act of 1933 (the "Securities Act") covering such disposition or
an applicable exemption from such registration is available pursuant to Rule
144 promulgated under the Securities Act or otherwise. For this purpose, a
Transferee or Beneficiary may be considered an affiliate if he or she has
such a relationship with certain officers and directors of the Company, who
themselves are considered to be affiliates of the Company, that the
Transferee or Beneficiary could be deemed to be in control of, or part of a
group that is in control of, or is controlled by, or is under common control
with, the Company.
Shareholder Rights Plan
In November 1996, the Company adopted a Shareholder Rights Plan
pursuant to which one right was granted for each outstanding Common Share.
Such rights also automatically accrue to all Common Shares issued following
the adoption of the Shareholder Rights Plan and prior to November 2006,
including Common Shares issued upon the exercise of options granted under
the Plans. The rights expire in November 2006, and none of the rights
currently are exercisable.
The rights, which become exercisable if a third party acquires 20%
or more of the Common Shares, or if a tender offer that would result in a
third party owning 20% or more of the Common Shares is commenced, entitle
the holder to purchase one Common Share by paying the "exercise price" of
$200. After the rights become exercisable, if a third party acquires 20% or
more of the Common Shares (other than pursuant to certain offers for all
Common Shares), or if a holder of 20% or more of the Common Shares engages
in certain specified "self-dealing" transactions, or if the Board of
Directors determines that any person who owns at least 10% of the Company's
Common Shares is taking certain actions adverse to the best interest of the
Company or is otherwise materially adversely affecting the Company's
business, then the holder of each right (other than a holder of 20% or more
of the Common Shares) may purchase Common Shares worth twice the exercise
price by paying the exercise price. Similarly, if the Company is acquired in
a merger or sells 50% or more of its assets or earning power, the holder of
each right may purchase stock of the acquiring company worth twice the
exercise price. Generally, the Company may redeem each right for $.01 at any
time prior to 10 days after the rights become exercisable.
-8-
<PAGE>
Federal Income Tax Consequences
The following discussion is a summary of certain relevant federal
income tax effects applicable to NSOs and limited rights assigned to
Transferees. The discussion related to Transferees is likewise applicable to
Beneficiaries. It is recommended that Transferees and Beneficiaries of NSOs
consult their tax advisers before they exercise any such options and before
they dispose of any Common Shares acquired upon the exercise of any such
options.
At the time a Transferee exercises a NSO, the Grantee of the NSO
will recognize ordinary income for federal income tax purposes in an amount
equal to the excess of the Fair Market Value of the Common Shares purchased
over the option price. Also, under current law, if the Transferee exercises
a NSO after the Grantee's death, any such ordinary income will be recognized
by the Grantee's estate. The Company generally will be entitled to a tax
deduction at such time in the same amount that the Grantee recognizes
ordinary income.
Upon the exercise of a NSO by a Transferee, the Grantee of such
NSO is required to satisfy the applicable withholding tax obligation by
paying cash or other property to the Company. If the Transferee exercises a
NSO after the Grantee's death, no income tax is withheld but the Grantee's
estate is subject to FICA withholding unless the NSO is exercised in the
calendar year after the Grantee's death. As discussed elsewhere in this
Prospectus, if the Grantee fails to satisfy his or her withholding tax
obligations, the Company will retain from the Common Shares otherwise
issuable to the Transferee upon the exercise of the NSO a number of Common
Shares having an aggregate Fair Market Value equal to such withholding tax
obligation.
If the Company retains Common Shares to satisfy the withholding
tax obligation of the Grantee upon the exercise of a NSO, the Internal
Revenue Service might consider such act as a gift by the Transferee to the
Grantee in an amount equal to the Fair Market Value of the shares retained
on the exercise date. The gift by the Transferee, if any, should be eligible
for the annual gift tax exclusion or the application of the unified tax
credit before calculating whether a gift tax is payable by the Transferee.
The tax basis of the Common Shares received by a Transferee upon
the exercise of a NSO equals the option price plus the ordinary income
recognized by the Grantee (i.e., the fair market value of the shares
received on the exercise date). The tax basis of the Common Shares received
is slightly different if the Transferee delivers Common Shares in payment of
all or a portion of the option price. If Common Shares acquired upon
exercise of a NSO later are sold or exchanged by the Transferee, the
difference between the sale price and the tax basis of such Common Shares
generally will be taxable as long-term or short-term capital gain or loss
(if the shares are a capital asset of the Transferee) depending upon whether
the shares have been held for more than one year after such date.
Upon the exercise of limited rights by a Transferee, the amount of
any cash received will be taxable to the Grantee as ordinary income, and the
Company will be entitled to a corresponding deduction.
USE OF PROCEEDS
The Company intends to use the proceeds received from the exercise
of stock options granted under the Plans for general corporate purposes.
-9-
<PAGE>
PLAN OF DISTRIBUTION
The Common Shares offered hereby will be issued by the Company in
accordance with the terms of the Plans.
LEGAL MATTERS
The validity of the issuance of the Common Shares being offered
hereby will be passed upon for the Company by David L. Santez, Assistant
Secretary and Associate General Counsel of the Company. Mr. Santez holds
options to purchase 6,000 Common Shares and has a beneficial interest in
approximately 700 Common Shares acquired by The Mead Salaried Savings Plan
through October 31, 1996.
EXPERTS
The balance sheets of the Company and its consolidated
subsidiaries as of December 31, 1995 and 1994, and the related statements of
earnings, shareowners' equity and cash flows for each of the three years in
the period ended December 31, 1995, which are incorporated herein by
reference, have been audited by Deloitte & Touche llp, independent auditors,
whose report thereon is incorporated herein, and are included in reliance
upon the report of such firm and upon the authority of such firm as experts
in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement under the Securities Act with
respect to the Common Shares offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Shares offered hereby, reference is hereby made to
such Registration Statement, including the exhibits filed as a part thereof.
The Company is subject to the information requirements of the
Exchange Act and in accordance therewith files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and
other information can be inspected and copied at the offices of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the Commission's Regional Offices at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Commission maintains a web site (http://www.sec.gov.) that contains
publicly available reports, proxy and information statements and other
information regarding the Company and other registrants that file
electronically with the Commission through the Electronic Data Gathering,
Analysis and Retrieval system. Such reports and other information concerning
the Company also can be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York; the Midwest Stock
Exchange, 440 South LaSalle Street, Chicago, Illinois; and the Pacific Stock
Exchange, Inc., 301 Pine Street, San Francisco, California.
-10-
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
The following documents filed with the Commission are incorporated
herein by reference as of their respective dates of filing:
(a) The Annual Report of The Mead Corporation on Form 10-K for
the year ended December 31, 1995, filed pursuant to Section 13 of the
Exchange Act;
(b) All other reports filed by the Company pursuant to Section
13(a) or 15(d) of the Exchange Act since December 31, 1995; and
(c) The description of the Company's Common Shares and the
related Rights contained in the Registration Statements filed pursuant
to Section 12 of the Exchange Act, including any amendment or report
filed for the purpose of updating such description.
All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the filing
of a post-effective amendment that indicates that all Common Shares offered
hereunder have been sold or that deregisters all shares then remaining
unsold hereunder shall be deemed to be incorporated by reference herein and
to be a part hereof from the date of filing of such documents.
The Company will provide without charge to each person to whom
this Prospectus is delivered, on the request of such person, a copy of any
or all of the foregoing documents incorporated herein by reference, other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into the documents that this Prospectus
incorporates). Written or telephone requests should be directed to David L.
Santez, Assistant Secretary and Associate General Counsel, The Mead
Corporation, Courthouse Plaza Northeast, Dayton, Ohio 45463, (937) 495-4076.
-11-
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemized statement of the amount of all
expenses incurred by the Registrant in connection with the issuance and
distribution of the Common Shares registered hereunder.
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee.......... $62,538.16
Legal Fees and Expenses....... 5,000.00
Accounting Fees and Expenses.. 5,000.00
Miscellaneous................. 2,000.00
Total.................... $74,538.16
</TABLE>
All fees listed above other than the SEC Registration Fee are estimates.
Item 15. Indemnification of Directors and Officers.
Section 2 of Article V of the Regulations of the Registrant
provides for the indemnification by the Registrant of its officers,
directors, employees and others against certain liabilities and expenses.
Such provision provides different treatment for (i) cases other than those
involving actions or suits by or in the right of the Registrant and (ii)
cases involving actions or suits by or in the right of the Registrant. In
the first category, the Registrant indemnifies each director, officer,
employee and agent of the Registrant and each person who services another
organization at the request of the Registrant, against expenses, including
attorneys' fees, judgments, decrees, fines, penalties and amounts paid in
settlement actually and reasonably incurred by such person in connection
with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the
fact that such person is or was in such position or so serving, if such
person acted in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of the Registrant, and with respect to any
matter the subject of a criminal action, suit or proceeding, if such person
had no reasonable cause to believe that such person's conduct was unlawful.
In the second category, the Registrant indemnifies each director, officer,
employee and agent of the Registrant and each person who serves another
organization at the request of the Registrant, against expenses, including
attorneys' fees, actually and reasonably incurred by such person in
connection with the defense or settlement of any threatened, pending or
completed action or suit by or in the right of the Registrant to procure a
judgment in its favor, by reason of the fact that such person is or was in
such position or so serving, if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Registrant, except that no indemnification shall be made in
respect of any matter as to which such person has been adjudged to be liable
for negligence or misconduct in the performance of such person's duty to the
Registrant unless and only to the extent that a court of common pleas, or
the court in which such action or suit was brought, determines that, despite
the adjudication of liability, but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses. Any such indemnification, unless ordered by a court, may be made
by the Registrant only as authorized in the specific case upon a
determination that indemnification of such person is proper in the
circumstances because such person has met the applicable standard of
conduct. Such determination must be made (a) by a majority vote of a quorum
consisting of directors of the Registrant who were not and are not parties
to or threatened with any such action, suit or proceeding, or (b) if such a
quorum is not obtainable or if a majority vote of a quorum of disinterested
directors so directs, in a written opinion by independent legal counsel
other than an attorney, or a firm having
II-1
<PAGE>
associated with it an attorney, who has been retained by or who has
performed services for the Registrant or the person to be indemnified in the
last five years, or (c) by the shareholders, or (d) by the Court of Common
Pleas or the court in which such action, suit or proceeding was brought.
Any determination made by the disinterested directors or by independent
legal counsel must be promptly communicated to the person who threatened or
brought an action or suit by or in the right of the Registrant and such
person may, within ten days, petition an appropriate court to review the
reasonableness of such determination.
To the extent that a person covered by the indemnification
provisions of the Regulations has been successful on the merits or otherwise
in defense of any action referred to above, indemnification of such person
against expenses is mandatory.
The Regulations also provide that expenses, including attorneys'
fees, amounts paid in settlement, and (except in the case of any action by
or in the right of the Registrant) judgments, decrees, fines and penalties
incurred in connection with any potential, threatened, pending or completed
action or suit by any person by reason of the fact that he is or was a
director, officer, employee or agent of the Registrant or is or was serving
another organization at the request of the Registrant may be paid or
reimbursed by the Registrant, as authorized by the Board of Directors upon a
determination that such payment or reimbursement is in the best interests of
the Registrant.
The Regulations also provide that, with certain limited
exceptions, a director will be liable in damages for any action he takes or
fails to take as a director only if it is proved by clear and convincing
evidence that such action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the Registrant or
undertaken with reckless disregard for the best interests of the Registrant.
The Regulations also provide that, with certain limited exceptions, expenses
incurred by a director in defending an action must be paid by the Registrant
as they are incurred in advance of the final disposition, if the director
agrees (i) to repay such advances if it is proved by clear and convincing
evidence that his action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the Registrant or
undertaken with reckless disregard for the Registrant's best interests and
(ii) to reasonably cooperate with the Registrant concerning the action.
The Registrant has entered into indemnification agreements with
its directors. The agreements provide that the Registrant will promptly
indemnify each director to the fullest extent permitted by applicable law
and that the Registrant will advance expenses under the circumstances
permitted by Ohio law. The agreements also provide that the Registrant is
to take certain actions upon the occurrence of certain events that represent
a change in control of the Registrant, including establishment of a $10
million escrow account as security for certain of the Registrant's
indemnification obligations. While not requiring the maintenance of
directors' and officers' liability insurance, the indemnification agreements
do require that the directors be provided with the maximum coverage if such
insurance is maintained and that, in the event of any reduction in, or
cancellation of, present directors' and officers' liability insurance
coverage, the Registrant will stand as self-insurer with respect to the
coverage not retained and will indemnify the directors against any loss
resulting from any reduction in, or cancellation of, such insurance
coverage. The agreements also provide that the Registrant may not bring any
action against a director more than two years (or such shorter period as may
be applicable under the law) after the date a cause of action accrues.
The Registrant purchased, effective for a period from August 1,
1996 through August 1, 1997, an insurance policy under which, subject to the
limitations described below, the insurer performs for the Registrant its
obligation of indemnifying officers and directors. The
II-2
<PAGE>
insurer is obligated, subject to such limitations, to pay on behalf of the
Registrant amounts in excess of $500,000 to which any director or officer of
the Registrant shall be entitled by reason of his right to indemnification
by the Registrant, provided that such right to indemnification arises in
connection with the defense of any action, suit or proceeding to which such
director or officer may be a party or with which such director or officer
may be threatened during the one-year period covered by this policy. The
policy does not, of course, cover any matter that is uninsurable under law.
Such $500,000 deduction applies in respect of each properly established
claim to indemnification. If more than one claim to indemnification arises
out of the same act or interrelated acts, such claims to indemnification
will be treated as one and only one retention of $500,000 shall be applied.
The maximum liability of the insurer is $25,000,000. Effective August 1,
1996, the Registrant purchased excess policies providing additional annual
limits of $75,000,000 through August 1, 1997.
In conjunction with the above described insurance, the Registrant
maintains insurance designed to protect the individual director or officer
against specified expenses and liabilities, including those arising out of
negligence in the performance of duty, with respect to which the Registrant
does not provide indemnification. The individual policies contain the same
maximum liability provisions as described hereinbefore with no deductibles.
Item 16. Exhibits.
See Exhibit Index following the signature pages to this
Registration Statement.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement,
provided, however, that paragraph (1)(i) and (1)(ii) above do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the Registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
II-3
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dayton, State of Ohio, on November
9, 1996.
THE MEAD CORPORATION
By /s/ Steven C. Mason
----------------------------
Steven C. Mason
Chairman of the Board and
Chief Executive Officer
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William R. Graber, Thomas E. Palmer
and Jerome F. Tatar, and each of them, his or her true and lawful attorneys-
in-fact and agents, with full power of substitution and resubstitution, for
him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any
of them or their or his or her substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: November 9 , 1996 By /s/ Steven C. Mason
---------------------- ---------------------------------
Steven C. Mason
Director, Chairman of the Board
and Chief Executive Officer
(principal executive officer)
Date: November 9 , 1996 By /s/ William R. Graber
---------------------- ---------------------------------
William R. Graber
Vice President and Chief Financial
Officer (principal financial
officer)
Date: November 9 , 1996 By /s/ Gregory T. Geswein
---------------------- ---------------------------------
Gregory T. Geswein
Controller (principal accounting
officer)
Date: November 9 , 1996 By /s/ John C. Bogle
---------------------- ---------------------------------
John C. Bogle
Director
Date: November 9 , 1996 By /s/ John G. Breen
---------------------- ---------------------------------
John G. Breen
Director
II-5
<PAGE>
Date: November 9 , 1996 By /s/ William E. Hoglund
---------------------- ---------------------------------
William E. Hoglund
Director
Date: November 9 , 1996 By /s/ James G. Kaiser
---------------------- ---------------------------------
James G. Kaiser
Director
Date: November 9 , 1996 By /s/ John A. Krol
---------------------- ---------------------------------
John A. Krol
Director
Date: , 1996 By
---------------------- ---------------------------------
Susan J. Kropf
Director
Date: November 9 , 1996 By /s/ Charles S. Mechem, Jr.
---------------------- --------------------------------
Charles S. Mechem, Jr.
Director
Date: November 9 , 1996 By /s/ Paul F. Miller, Jr.
---------------------- ---------------------------------
Paul F. Miller, Jr.
Director
Date: November 9 , 1996 By /s/ Thomas B. Stanley, Jr.
---------------------- ---------------------------------
Thomas B. Stanley, Jr.
Director
Date: November 9 , 1996 By /s/ Lee J. Styslinger, Jr.
---------------------- ---------------------------------
Lee J. Styslinger, Jr.
Director
Date: November 9 , 1996 By /s/ Jerome F. Tatar
---------------------- ---------------------------------
Jerome F. Tatar
Director
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<C> <S> <C>
4.1 Amended Articles of Incorporation of the Registrant adopted May 28,
1987..................................................................... 1
4.2 Regulations of the Registrant, as amended April 25, 1996, were filed
as Exhibit 3(ii) to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996......................................... 2
4.3 Rights Agreement dated as of November 9, 1996 between the
Registrant and The First National Bank of Boston, as Rights Agent,
was filed as Exhibit 1 to the Registrant's Current Report on Form
8-K dated November 9, 1996............................................... 2
5 Opinion of Associate General Counsel of the Registrant................... 1
23.1 Consent of Associate General Counsel of the Registrant (contained in
Opinion filed as Exhibit 5).............................................. 1
23.2 Consent of Deloitte & Touche llp......................................... 1
24 Powers of Attorney (contained in the signature pages following Part II
of this Registration Statement).......................................... 1
99.1 The Mead Corporation 1984 Stock Option Plan, as amended through
November 9, 1996......................................................... 1
99.2 The Mead Corporation 1991 Stock Option Plan, as amended through
November 9, 1996......................................................... 1
99.3 The Mead Corporation 1996 Stock Option Plan, as amended through
November 9, 1996......................................................... 1
</TABLE>
- -----------------------
1 - Filed herewith
2 - Incorporated by Reference
<PAGE>
Exhibit 4.1
Adopted May 28, 1987
AMENDED ARTICLES OF INCORPORATION
of
THE MEAD CORPORATION
<PAGE>
CERTIFICATE
OF
AMENDED ARTICLES OF INCORPORATION
OF
THE MEAD CORPORATION
--------------------
STEVEN C. MASON, President and GEORGE J. MALY, JR., Secretary, of THE MEAD
CORPORATION, a corporation for profit under the Ohio General Corporation Law,
with its principal office located at Dayton, Montgomery County, Ohio, do hereby
certify that a meeting of the Board of Directors of said Corporation was duly
called and held on the 28th day of May, 1987, at which meeting a quorum of such
Directors was present, and at such meeting there were duly adopted the
resolutions set forth below adopting Amended Articles of Incorporation as
permitted by Section 1701.72(B) of the Ohio Revised Code:
"Resolved, That the Articles of Incorporation be, and they hereby are,
amended to read as set forth in the following Amended Articles of Incorporation:
AMENDED ARTICLES OF INCORPORATION
FIRST: The name of said corporation is "THE MEAD CORPORATION."
SECOND: The place in Ohio where the principal office of said corporation
is located is Dayton, Montgomery County.
THIRD: The purpose or purposes for which it is formed are:
(a) To produce, mine, quarry, manufacture or otherwise acquire or exploit
and to hold, own, sell or otherwise dispose of, trade in and deal in natural
resources of every kind or character and the by-products or derivatives of such
natural resources.
(b) To manufacture, purchase or otherwise acquire and to hold, own, sell or
otherwise dispose of, trade in and deal in paper, pulp, paper materials,
paperboard and paper products of every kind and description, plastic and other
paper substitute materials and products of every kind and description, lumber,
plywood, shingles and newsprint.
(c) To manufacture, purchase, or otherwise acquire and to hold, own, sell
or otherwise dispose of, trade in and deal in looseleaf binders, fillers,
posters and construction paper, social stationery, office products, gift items,
specialty tableware and party items, art materials, institutional aids and
teaching guides, and other educational and consumer products of every kind and
description.
(d) To manufacture, purchase, or otherwise acquire and to hold, own, sell
or otherwise dispose of, trade in and deal in cement, cement-asbestos, rubber,
plastics, lime, coal, coke, iron, steel and metals and metal products of every
kind or description.
(e) To manufacture, purchase, or otherwise acquire and to hold, own, sell
or otherwise dispose of, trade in and deal in drapery and upholstery fabrics,
hardwood veneer and upholstered household and institutional furniture, and other
interior furnishings of every kind and description.
<PAGE>
(f) To engage in applied research, development, product improvement,
evaluation of reconnaissance and intelligence systems, and in general to engage
in and deal with all types of data handling systems, precision optics,
photographic process control and specialized photography of every kind and
description.
(g) To manufacture, buy, sell and deal in goods, wares and merchandise and
personal property of every kind and description.
(h) To purchase or otherwise acquire and to hold or maintain, work,
develop, sell, lease, exchange, convey, mortgage, transfer, or in any manner to
dispose of and deal in, within and without the State of Ohio, wherever situated,
lands, leaseholds, and any interest, estate and right in real property, and any
personal or mixed property, including the shares of stock and other securities
of other corporations, and any franchises, rights, licenses, or privileges,
necessary, convenient or appropriate for any of the purposes herein expressed.
(i) To enter into, make and perform contracts of every kind for any lawful
purpose, with any person, firm, association or corporation, municipality, state
or government, or any political subdivision of any of the same.
(j) To apply for, purchase, register, or in any manner to acquire and to
hold, own, use, operate and introduce, and to sell, lease, assign, pledge, or in
any manner to dispose of, and in any manner deal with patents, patent rights,
licenses, copyrights, trademarks, trade names, and to acquire, own, use, or in
any manner dispose of, any and all inventions, improvements and processes,
labels, designs, brands, or other rights, and to work, operate or develop the
same, and to carry on any business, manufacturing or otherwise which may
directly or indirectly effectuate these objects or any of them.
(k) To purchase or otherwise acquire the whole or any part of the property,
assets, business, goodwill and rights, and to undertake and assume the whole or
any part of the liabilities and obligations, of any person, firm, association or
corporation, and to pay for the same in cash or in shares of any class or
series, or in bonds, debentures, notes or other obligations of the Corporation,
or otherwise; to hold or in any manner to dispose of the whole or any part of
the property or assets so acquired, and to conduct the whole or any part of the
business so acquired, and to exercise all the powers necessary or convenient in
and about the conduct, management and carrying on of any such business.
(l) To do any and all things necessary, convenient or expedient for the
accomplishment of any of the purposes, or the furtherance of any of the powers
hereinbefore set forth, either alone or in association with other corporations,
firms or individuals; and, in general, to carry on any other business not
forbidden by the General Corporation Law of the State of Ohio.
FOURTH: The maximum number of shares which the Corporation is authorized to
have outstanding is 340,357,040 shares which shall be classified as follows:
61,500 Cumulative Preferred Shares of the par value of $100 per share
(hereinafter called "Preferred Shares");
20,000,000 Voting Cumulative Preferred Shares without par value
(hereinafter called "Voting Preferred Shares");
20,000,000 Cumulative Preferred Shares without par value (hereinafter
called "No Par Preferred Shares");
295,540 Cumulative Second Preferred Shares of the par value of $50 per
share (hereinafter called "Second Preferred Shares"):
300,000,000 Common Shares without par value (hereinafter called
"Common Shares").
SECTION 1. For the purposes of this section and the express terms and
provisions hereinafter set forth:
I. "Affiliate" shall, as of any date, mean any corporation of which more
than 50%, but less than 90%, of the outstanding shares entitling the holders
thereof to elect a majority of the directors
2
<PAGE>
(either at all times or so long as there shall be no default in the payment of
dividends or otherwise in respect of any other class of shares of such
corporation) shall on such date be owned by the Corporation; and "Subsidiary"
shall, as of any date, mean any corporation of which 9O% or more of such
outstanding voting shares shall on such date be owned by the Corporation.
II. "Funded Indebtedness" shall mean any indebtedness which by its terms
or at the option of the debtor will mature more than 12 months from the date as
of which the computation is made.
III. "Consolidated Funded Indebtedness" shall mean the aggregate of all
Funded Indebtedness (other than any owned by the Corporation or any Subsidiary)
created, issued, re-issued, assumed or guaranteed by the Corporation or by any
Subsidiary, or secured by lien or charge on, or pledge of any property of, the
Corporation or a Subsidiary; subject, however, to subsection VII of this Section
1.
IV. "Consolidated Net Earnings" shall mean the aggregate net earnings of
the Corporation and its Subsidiaries, determined as provided in subsection VIII
of this Section 1, before deductions for interest charges on Consolidated Funded
Indebtedness, for outstanding stock interests in Subsidiaries not owned by the
Corporation or other Subsidiaries, and for taxes on income, with due allowance
for any losses sustained.
V. "Consolidated Net Income" shall mean Consolidated Net Earnings, after
deductions for all taxes on income, for interest charges on Consolidated Funded
Indebtedness, and for such portion of Consolidated Net Income as shall be
applicable to stock interests in Subsidiaries not owned by the Corporation or
other Subsidiaries; all determined as provided in subsection VIII of this
Section 1. Except as otherwise hereinafter specified, deductions for the
aforesaid interest charges and portion of Consolidated Net Income applicable to
stock interests in Subsidiaries not owned by the Corporation or other
Subsidiaries shall be based, respectively, upon interest actually paid or
accrued during the period in question and upon stock outstanding during such
period.
VI. "Consolidated Net Assets" shall mean the excess of all assets of the
Corporation and its Subsidiaries (excluding organization expenses, unamortized
bond discount and expense, patents, trademarks, copyrights, trade names, good
will, and other like intangibles) over the sum of current liabilities and
reserves of the Corporation and its Subsidiaries (other than reserves deducted
from assets or included in current liabilities, reserves for contingencies the
expenditures chargeable to which are within the control of the Corporation or a
Subsidiary, and the amount of self-insurance reserves in excess of current
claims), all as shown by a consolidated balance sheet of the Corporation and its
Subsidiaries, as of a date within 9O days of the consummation of the transaction
with respect to which the computation of Consolidated Net Assets is made,
prepared in accordance with generally accepted accounting principles, with
appropriate adjustments for (a) the estimated anticipated results of normal
operations between such date and the date of consummation of such transaction,
and (b) all transactions occurring during such period out of the course of
normal operations.
VII. In any computation of Consolidated Funded Indebtedness or
Consolidated Net Assets, there shall be excluded (a) all obligations with
respect to which an amount sufficient to discharge the same in full shall have
been deposited, in trust for the payment thereof, and (b) all moneys so
deposited for the payment of such obligations or deposited, in trust, for the
retirement of shares of stock.
VIII. In any computation of Consolidated Net Income or Consolidated Net
Earnings (a) all inter-company items shall be eliminated, (b) no deduction shall
be made from earnings for any costs or changes incident to the redemption after
June 1, 1946, of shares of Cumulative Preferred Stock of the Corporation
outstanding on said date, and (c) such computation shall be made in accordance
with generally accepted accounting principles and, when required to be made up
to the date of consummation of a proposed transaction, may be made as of a
period ending not earlier than 90 days prior to
3
<PAGE>
the consummation of such transaction, but in any such case such computation
shall be adjusted by taking into consideration the estimated anticipated
results from operations from the close of the period as of which such
computation shall have been made up to the date of consummation of such proposed
transaction.
SECTION 2. The express terms and provisions of the Preferred Shares are as
follows:
I. Preferred Shares may be issued in series from time to time. Within the
limitations and restrictions set forth in this Article FOURTH, the Board of
Directors is expressly authorized, at one time or from time to time, to adopt
amendments to the Articles of Incorporation in respect of any authorized and
unissued Preferred Shares to fix or alter the division of such shares into
series, the designation and number of shares of each series, the dividend rates,
redemption rights, redemption prices, liquidation prices, sinking fund
requirements, conversion rights, and restrictions on issuance of shares of the
same series or of any other class or series. The express terms and provisions of
Preferred Shares of different series shall be identical except that there may be
variations in respect of any or all of the particulars hereinbefore set forth in
this subsection I. In case the stated dividends or the amounts payable on
dissolution, liquidation, or sale of assets of the Corporation are not paid in
full, all Preferred Shares of all series shall participate ratably in the
payment of dividends, including accumulations, if any, in proportion to the sums
which would be payable thereon if all dividends thereon were paid in full, and,
in any distribution of assets other than by way of dividends, in proportion to
the sums which would be payable on such distribution if all sums payable thereon
to holders of Preferred Shares were discharged in full.
II. The holders of Preferred Shares shall be entitled to receive when and
as declared out of the surplus of the Corporation, subject to any limitations
prescribed by statute, cash dividends at the respective rates fixed as aforesaid
by the Board of Directors for the shares of the several series of Preferred
Shares, and no more. Dividends on the Preferred Shares shall be payable
quarterly on the first days of March, June, September and December in each year.
Dividends on each Preferred Share shall be cumulative from the first day of the
dividend period in which such share is issued, except that if any share is
issued after the record date fixed for determining the holders of Preferred
Shares of such series entitled to the dividend for such period, dividends on
such share shall be cumulative from the first day of the dividend period next
following the date of issuance of such share, and except that dividends on any
share of a particular series issued prior to the first dividend payment date for
shares of such series shall be cumulative from such date as shall be fixed by
the Board of Directors prior to the issuance thereof, but not earlier than the
beginning of the current dividend period.
The Preferred Shares shall rank pari passu with the Voting Preferred Shares
and the No Par Preferred Shares with respect to the payment of dividends.
Subject to the provisions of this Article FOURTH, the holders of all shares
ranking junior to the Preferred Shares with respect to the payment of dividends
shall be entitled to receive such dividends as may from time to time be declared
thereon by the Board of Directors.
III. Except as may be otherwise expressly provided in this Article FOURTH,
the Corporation shall have the right to redeem the Preferred Shares of any one
or more series at any time, either in whole or in such portions, as, from time
to time, the Board of Directors may determine, upon the payment to the
respective holders thereof of the "General Redemption Price" thereof. The
General Redemption Price for shares of each series shall be an amount equal to
the sum of (a) the redemption price fixed by the Board of Directors for the
shares of such series prior to the initial issuance of the first shares of such
series; and (b) an amount equivalent to all accumulated and unpaid dividends on
the shares to be redeemed to the date fixed for redemption (hereinafter referred
to as the "Redemption Date"), whether or not such dividends shall have been
earned or declared. In lieu of such payment the Corporation may deposit the
General Redemption Price of the shares to be redeemed on or prior to the
Redemption Date, with such responsible bank or trust company or bank and trust
company in the Borough of
4
<PAGE>
Manhattan, in the City of New York, State of New York, having a capital and
surplus of not less than $5,000,000, as may be designated by the Board of
Directors, in trust, for payment on or after the date of such deposit (without
awaiting the Redemption Date) to the holders of the Preferred Shares then to be
redeemed. If less than the whole amount of outstanding Preferred Shares of any
particular series shall be redeemed at any time, the shares thereof to be
redeemed shall be selected by lot.
Notice of any such redemption, in whole or in part, and of any such deposit
made or to be made of such General Redemption Price, shall be mailed to each
holder of Preferred Shares so to be redeemed, at his address registered with the
Corporation, not less than thirty days prior to the Redemption Date, and, if
less than all of the said shares owned by such shareholder are to be redeemed,
the notice shall specify the number of shares thereof which are to be redeemed.
Such notice having been so given, or irrevocable written authority to the
depositary having been given at the time of making the deposit provided for
herein forthwith to give such notice, all rights of the respective holders of
the said shares as shareholders of the Corporation by reason of the ownership of
such shares, except the right to receive the General Redemption Price of such
shares upon presentation and surrender of their respective certificates
representing the said shares, shall cease from and after the Redemption Date
(unless default shall be made by the Corporation in providing moneys for the
payment of the General Redemption Price), or, if the General Redemption Price
shall have been deposited on or prior to the Redemption Date as above permitted,
from and after the date of such deposit; provided, however, that in lieu of the
right to receive the General Redemption Price, any rights of conversion or
exchange may be exercised up to the close of business on the Redemption Date. If
after such deposit any Preferred Shares so called shall be converted or
exchanged, the amount theretofore deposited with the depositary for the
redemption thereof shall forthwith be paid over by it to the Corporation. Any
other moneys so deposited which shall remain unclaimed by the holders of
Preferred Shares so called for redemption at the end of two years after the
Redemption Date shall be paid by such depositary to the Corporation, after which
the holders of such Preferred Shares shall look only to the Corporation for
payment of the General Redemption Price thereof, without interest.
IV. Upon the dissolution, liquidation or sale of all or substantially all
the assets of the Corporation, the holders of Preferred Shares shall be entitled
to receive the following sums, before any payment shall be made to any other
class of shares ranking junior to the Preferred Shares with respect to payment
upon dissolution, liquidation or sale of assets:
(a) in case of any involuntary dissolution or liquidation or forced
sale of all or substantial1y all the assets of the Corporation, each
Preferred Share of each series shall be entitled to receive the sum of
$100, together with a sum, whether or not earned or declared, equivalent to
all accumulated and unpaid dividends thereon to the date of such payment;
or
(b) in case of any voluntary dissolution or 1iquidation or voluntary
sale of all or substantially all the assets of the Corporation, each
Preferred Share of each series shall be entitled to receive the amount
fixed for such contingency by the Board of Directors for the shares of such
series prior to the initial issuance of the first shares of such series,
together with a sum, whether or not earned or declared, equivalent to all
accumulated and unpaid dividends thereon to the date of such payment.
The Preferred Shares shall rank pari passu with the Voting Preferred Shares and
the No Par Preferred Shares with respect to payment upon dissolution,
liquidation, or sale of assets. After all sums payable on the Preferred Shares
as herein provided upon a particular contingency shall have been paid in full,
but not prior thereto, the other classes of shares ranking junior to the
Preferred Shares with respect to payment upon dissolution, liquidation, or sale
of assets shall be entitled to payment of all other sums then distributable,
subject to the respective terms and provisions (if any) applying to such class
or classes of shares, respectively. For the purposes of this subsection IV, a
consolidation or merger of the Corporation with or into any other corporation,
or a consolidation or merger of any other corporation with or into the
Corporation shall not be deemed a dissolution, liquidation, or sale of assets.
5
<PAGE>
V. Except as herein or by law expressly provided to the contrary, the
holders of Preferred Shares shall have no right as such holders to vote at or
participate in any meeting of shareholders of the Corporation or to receive any
notice of any such meeting. If, however, dividends on any of the Preferred
Shares shall be in arrears in an amount equal to the annual dividends thereon,
the holders of all of the Preferred Shares shall be entitled to vote at all
meetings of shareholders of the Corporation and to receive notice of all such
meetings. Such voting rights of the holders of Preferred Shares shall continue
until all accumulated and unpaid dividends on all Preferred Shares shall have
been paid, whereupon all such voting rights shall cease, subject to being
revived from time to time upon the reoccurrence of the conditions above
described as giving rise thereto.
At any meeting at which the holders of the Preferred Shares shall be
entitled to vote, each vote cast pursuant to the provisions of this subsection V
on behalf of the holder of a Preferred Share shall be counted as such number of
votes as shall equal the quotient derived from dividing the number of Preferred
Shares of all series then outstanding into the total number of votes to which at
such time all outstanding shares ranking junior to the Preferred Shares with
respect to the payment of dividends or distributions in liquidation may be
collectively entitled, except that so long as any Second Preferred Shares shall
be outstanding, the number of votes to which each Preferred Share shall be
entitled shall be one-half the number of votes to which each Preferred Share
would be entitled under the above provisions. For the purposes of the above
computation, shares held by the Corporation or by any Subsidiary or Affiliate
shall not be deemed to be outstanding, and such shares shall have no right
whatsoever to vote at or to receive notice of any meeting other than such rights
as may be expressly granted by law.
VI. So long as any of the Preferred Shares shall remain outstanding, no
dividend (other than dividends payable in shares ranking junior to the Preferred
Shares with respect to the payment of dividends and distributions in
liquidation) shall be paid, nor shall any distribution (by purchase, redemption,
payment to any sinking fund, or otherwise) be made, on any shares ranking junior
to the Preferred Shares with respect to the payment of dividends or
distributions in liquidation, unless:
(a) all dividends on all outstanding Preferred Shares, Voting
Preferred Shares and No Par Preferred Shares shall have been paid, and full
dividends thereon for the then current quarterly dividend period shall have
been declared and a sum sufficient for the payment thereof set apart
therefor;
(b) the Corporation shall not be in arrears in respect of any sinking
fund obligation in respect of any series of Preferred Shares, Voting
Preferred Shares, or No Par Preferred Shares;
(c) after giving effect to the payment of the proposed dividend or
distribution, the aggregate of all such dividends and distributions paid,
subsequent to December 29, 1945, shall not exceed the sum of (i)
Consolidated Net Income earned after said date less the aggregate of all
dividends paid on the Preferred Shares, Voting Preferred Shares and No Par
Preferred Shares, all sinking fund payments with respect thereto, and all
amounts credited against such payments for the voluntary purchase or
redemption of Preferred Shares, Voting Preferred Shares or No Par Preferred
Shares, (ii) the net proceeds of the sale subsequent to September 1, 1946,
of shares ranking junior to the Preferred Shares with respect to the
payment of dividends and distributions in liquidation, (iii) the principal
amount of indebtedness converted, subsequent to April 1, 1967, and the
stated capital of shares ranking equal with or prior to the Preferred
Shares with respect to the payment of dividends and distributions in
liquidation converted, subsequent to April 1, 1967, into shares ranking
junior to the Preferred Shares with respect to the payment of dividends and
distributions in liquidation, and (iv) $1,000,000; and
(d) if such dividend or distribution be on the Common Shares, after
giving effect to the payment of the proposed dividend or distribution,
Consolidated Net Assets shall be at least 175% of the sum of (i)
Consolidated Funded Indebtedness, (ii) the aggregate par value of (and/or,
in the case of shares without par value, stated capital applicable to) the
outstanding Preferred Shares
6
<PAGE>
of all series and all other outstanding shares of the Corporation ranking
equally with or prior to the Preferred Shares with respect to the payment
of dividends or distributions in liquidation, including shares owned by the
Corporation, and (iii) capital and surplus of Subsidiaries applicable to or
represented by shares owned by others than the Corporation or its
Subsidiaries.
The purchase or other acquisition by a Subsidiary or Affiliate of shares of the
Corporation shall be deemed a purchase or acquisition of such shares by the
Corporation within the meaning of this subsection VI.
VII. Without the affirmative vote at a meeting, or the written consent with
or without a meeting, of the holders of at least two-thirds of the Preferred
Shares at the time outstanding, as a class, the Corporation shall not:
(a) increase the number of authorized Preferred Shares to an amount
in excess of l00,000;
(b) increase the number of authorized Voting Preferred Shares to an
amount in excess of 20,000,000;
(c) increase the number of authorized No Par Preferred Shares to an
amount in excess of 20,000,000;
(d) authorize or issue any shares other than Preferred Shares, Voting
Preferred Shares, No Par Preferred Shares or shares ranking junior to the
Preferred Shares with respect to the payment of dividends and distributions
in liquidation;
(e) adopt or effect any amendment to its Articles of Incorporation
which would be substantially prejudicial to the holders of Preferred
Shares; provided, however, that if such amendment would be substantially
prejudicial to the holders of Preferred Shares of one or more series, but
less than all of the several series of Preferred Shares, or would unequally
affect two or more series in a substantially prejudicial manner, the
affirmative vote at a meeting, or the written consent with or without a
meeting, of the holders of at least two-thirds of the shares of each series
so affected at the time outstanding, voting as a sub-class, shall be
required in addition to the said vote or written consent of the holders of
at least two-thirds of the Preferred Shares of all series at the time
outstanding, voting as a class; and provided, further, that any such
amendment, when effected upon such vote or consent, shall not confer upon
dissenting holders of Preferred Shares any right to payment for their
shares;
(f) sell, convey, lease or otherwise part with all or substantially
all of its assets, property or business, or consolidate or merge with or
into any other corporation, or merge any other corporation into itself;
provided, however, that this restriction shall not apply to a consolidation
or merger to which the Corporation is a party if none of the rights or
preferences of the Preferred Shares shall be adversely affected thereby; or
(g) give any guarantee or similar obligation for the payment of any
share or dividend by any other corporation or person; provided, however,
that this restriction shall not apply to any guarantee or similar
obligation for the payment of any share or dividend by any corporation
which at the time the guarantee or similar obligation is given is a
Subsidiary.
For the purpose of determining whether such affirmative vote or written consent
required by this subsection VII has been obtained, Preferred Shares held by the
Corporation or by any Subsidiary or Affiliate shall not be deemed to be
outstanding or entitled to participate in any such vote or consent.
VIII. So long as any dividend on any Preferred Shares shall be in arrears
and unpaid, the Corporation shall not redeem any Preferred Shares (unless all
outstanding Preferred Shares shall be redeemed) or purchase any Preferred
Shares, or permit any Subsidiary or Affiliate to make any such purchase, unless
such redemption or purchase shall be accomplished not earlier than 30 days and
not later than 90
7
<PAGE>
days after the mailing of a written purchase offer to each holder of record of
Preferred Shares at the address of such shareholder registered with the
Corporation. Any such purchase offer shall be made upon terms that will result
in holders of Preferred Shares of the several series being offered prices in
proportion to the several dividend rates applicable thereto.
IX. Preferred Shares acquired by the Corporation through the exercise by
the holders thereof of any conversion privilege shall not be re-issued except as
hereinafter provided. Such shares and any other Preferred Shares acquired by the
Corporation otherwise than through the operation of any sinking fund and not
used to reduce the amount of any sinking fund instalment shall, upon compliance
with such provisions of law relating to the retirement of shares as may be
applicable, have the status of authorized and unissued Preferred Shares which
are unclassified into any series. Preferred Shares acquired by the Corporation
through the operation of any sinking fund or which have been used to reduce the
amount of any sinking fund instalment shall be cancelled and not re-issued, and
the Corporation shall from time to time take appropriate corporate action to
reduce the authorized number of Preferred Shares accordingly.
X. No holder of Preferred Shares of any series shall, as such holder, have
any preemptive rights in, or preemptive rights to purchase or subscribe to, any
shares of the Corporation, or any bonds, debentures, or other securities
convertible into any shares of the Corporation, other than such rights of
conversion or exchange as shall be expressly granted by the Board of Directors
prior to the initial issuance of the first shares of the series of which such
Preferred Shares shall constitute a part; and, except as aforesaid, each and
every holder of Preferred Shares, by accepting the same, thereby waives and
releases any and all preemptive rights which he might otherwise have to purchase
any shares which may at any time be issued by the Corporation.
SECTION 3. The express terms and provisions of the Voting Preferred Shares
are as follows:
I. Voting Preferred Shares may be issued in series from time to time.
Within the limitations and restrictions set forth in this Article Fourth, the
Board of Directors is expressly authorized, at one time or from time to time, to
adopt amendments to the Articles of Incorporation in respect of any authorized
and unissued Voting Preferred Shares to fix or alter the division of such shares
into series, the designation and number of shares of each series, the dividend
rates, redemption rights, redemption prices, liquidation prices, sinking fund
requirements, conversion rights, and restrictions on issuance of shares of the
same series or of any other class or series. Voting Preferred Shares may, if
authorized by such amendments to the Articles of Incorporation, be convertible
at the option of the holder thereof into full paid and nonassessable Common
Shares of the Corporation during such period or periods at such rate or rates
(which rate or rates of some or all series may be determinable in whole or in
part by the payment of money to the Corporation by the holder exercising the
option to convert), as may be determined by such amendments. The express terms
and provisions of Voting Preferred Shares of different series shall be identical
except that there may be variations in respect of any or al1 of the particulars
hereinbefore set forth in this subsection I. In case the stated dividends or the
amounts payable on dissolution, liquidation, or sale of assets of the
Corporation are not paid in full, all Voting Preferred Shares of all series
shall participate ratably in the payment of dividends, including accumulations,
if any, in proportion to the sums which would be payable thereon if all
dividends thereon were paid in full, and, in any distribution of assets other
than by way of dividends, in proportion to the sums which would be payable on
such distribution if all sums payable thereon to holders of Voting Preferred
Shares were discharged in full.
II. The holders of Voting Preferred Shares shall be entitled to receive
when and as declared out of the surplus of the Corporation, subject to any
limitations prescribed by statute, cash dividends at the respective rates fixed
as aforesaid by the Board of Directors for the shares of the several series of
Voting Preferred Shares, and no more. Dividends on the Voting Preferred Shares
shall be payable quarterly on the first days of March, June, September and
December in each year. Dividends on each
8
<PAGE>
Voting Preferred Share shall be cumulative from the first day of the dividend
period in which such share is issued, except that if any share is issued after
the record date fixed for determining the holders of Voting Preferred Shares of
such series entitled to the dividend for such period, dividends on such share
shall be cumulative from the first day of the dividend period next following the
date of issuance of such share, and except that dividends on any share of a
particular series issued prior to the first dividend payment date for shares of
such series shall be cumulative from such date as shall be fixed by the Board of
Directors prior to the issuance thereof, but not earlier than the beginning of
the current dividend period.
The Voting Preferred Shares shall rank pari passu with the Preferred Shares
and the No Par Preferred Shares with respect to the payment of dividends.
Subject to the provisions of this Article FOURTH, the holders of all shares
ranking junior to the Voting Preferred Shares with respect to the payment of
dividends shall be entitled to receive such dividends as may from time to time
be declared thereon by the Board of Directors.
III. Except as may be otherwise expressly provided in this Article FOURTH,
the Corporation shall have the right to redeem the Voting Preferred Shares of
any one or more series at any time, either in whole or in such portions, as,
from time to time, the Board of Directors may determine, upon the payment to the
respective holders thereof of the "General Redemption Price" thereof. The
General Redemption Price for shares of each series shall be an amount equal to
the sum of (a) the redemption price fixed by the Board of Directors for the
shares of such series prior to the initial issuance of the first shares of such
series; and (b) an amount equivalent to all accumulated and unpaid dividends on
the shares to be redeemed to the date fixed for redemption (hereinafter referred
to as the "Redemption Date"), whether or not such dividends shall have been
earned or declared. In lieu of such payment the Corporation may deposit the
General Redemption Price of the shares to be redeemed on or prior to the
Redemption Date, with such responsible bank or trust company or bank and trust
company in the Borough of Manhattan, in the City of New York, State of New York,
having a capital and surplus of not less than $5,000,000, as may be designated
by the Board of Directors, in trust, for payment on or after the date of such
deposit (without awaiting the Redemption Date) to the holders of the Voting
Preferred Shares then to be redeemed. If less than the whole amount of
outstanding Voting Preferred Shares of any particular series shall be redeemed
at any time, the shares thereof to be redeemed shall be selected by lot.
Notice of any such redemption, in whole or in part, and of any such deposit
made or to be made of such General Redemption Price, shall be mailed to each
holder of Voting Preferred Shares so to be redeemed, at his address registered
with the Corporation, not less than thirty days prior to the Redemption Date,
and, if less than all of the said shares owned by such shareholder are to be
redeemed, the notice shall specify the number of shares thereof which are to be
redeemed. Such notice having been so given, or irrevocable written authority to
the depositary having been given at the time of making the deposit provided for
herein forthwith to give such notice, all rights of the respective holders of
the said shares as shareholders of the Corporation by reason of the ownership of
such shares, except the right to receive the General Redemption Price of such
shares upon presentation and surrender of their respective certificates
representing the said shares, shall cease from and after the Redemption Date
(unless default shall be made by the Corporation in providing moneys for the
payment of the General Redemption Price), or, if the General Redemption Price
shall have been deposited on or prior to the Redemption Date as above permitted,
from and after the date of such deposit; provided, however, that in lieu of the
right to receive the General Redemption Price, any rights of conversion or
exchange may be exercised up to the close of business on the Redemption Date. If
after such deposit any Voting Preferred Shares so called shall be so converted
or exchanged, the amount theretofore deposited with the depositary for the
redemption thereof shall forthwith be paid over by it to the Corporation. Any
other moneys so deposited which shall remain unclaimed by the holders of Voting
Preferred Shares so called for redemption at the end of two years after the
Redemption Date shall be paid by such depositary to the Corporation, after which
the holders of such Voting Preferred Shares shall look only to the Corporation
for payment of the General Redemption Price thereof, without interest.
9
<PAGE>
IV. Upon the dissolution, liquidation or sale of all or substantially
all of the assets of the Corporation, the holders of Voting Preferred Shares
shall be entitled to receive the following sums, before any payment shall be
made to any other class of shares ranking junior to the Voting Preferred Shares
with respect to payment upon dissolution, liquidation or sale of assets:
(a) in case of any involuntary dissolution or liquidation or forced
sale of all or substantially all the assets of the Corporation, each Voting
Preferred Shares of each series shall be entitled to receive the amount
fixed for such contingency by the Board of Directors for the shares of such
series prior to the initial issuance of the first shares of such series,
together with a sum, whether or not earned or declared, equivalent to all
accumulated and unpaid dividends thereon to the date of such payment; or
(b) in case of any voluntary dissolution or liquidation or voluntary
sale of all or substantially all the assets of the Corporation, each Voting
Preferred Share of each series shall be entitled to receive the amount
fixed for such contingency by the Board of Directors for the shares of such
series prior to the initial issuance of the first shares of such series,
together with a sum, whether or not earned or declared, equivalent to all
accumulated and unpaid dividends thereon to the date of such payment.
The Voting Preferred Shares shall rank pari passu with the Preferred Shares and
the No Par Preferred Shares with respect to payment upon dissolution,
liquidation, or sale of assets. After all sums payable on the Voting Preferred
Shares as herein provided upon a particular contingency shall have been paid in
full, but not prior thereto, the other classes of shares ranking junior to the
Voting Preferred Shares with respect to payment upon dissolution, liquidation,
or sale of assets shall be entitled to payment of all other sums then
distributable, subject to the respective terms and provisions (if any) applying
to such class or classes of shares, respectively. For the purposes of this
subsection IV, a consolidation or merger of the Corporation with or into any
other corporation, or a consolidation or merger of any other corporation with or
into the Corporation shall not be deemed a dissolution, liquidation, or sale of
assets.
V. The holders of Voting Preferred Shares shall be entitled to one vote for
each Voting Preferred Share held by them respectively. In addition to such
general voting rights, the holders of Voting Preferred Shares shall have the
following voting rights. If dividends on any of the Voting Preferred Shares
shall be in arrears in an amount equal to 150% of the annual dividends thereon,
the holders of the Voting Preferred Shares shall have the special right, voting
as a class, to elect the number of directors hereinafter provided. The
remaining directors shall be elected by the other class or classes (Preferred
Shares, no Par Preferred Shares, Second Preferred Shares and/or Common Shares)
entitled to vote therefor. The holders of Voting Preferred Shares shall have the
right to elect that number of directors which bears the same proportion to the
number of directors constituting the entire board of directors as the
outstanding Voting Preferred Shares bears to the total of the outstanding Common
Shares and Voting Preferred Shares, or in any event a minimum number of two
directors. From and after the election of directors by the holders of Voting
Preferred Shares, as aforesaid, and so long as one or more directors so elected
continue to hold office, the holders of such Voting Preferred Shares shall not
be entitled to exercise their general voting rights with respect to the election
of the other directors. If, however, the holders of such Voting Preferred Shares
do not exercise their rights to elect directors, voting as a class, they shall
continue to be entitled to exercise their general voting rights with respect to
the election of directors.
Whenever the special voting right of the holders of Voting Preferred Shares
shall have vested, such special right may be exercised initially either at a
special meeting of such holders, called as hereinafter provided, or at any
annual meeting of shareholders held for the purpose of electing directors, and
thereafter at such annual meetings. The special right of the holders of the
Voting Preferred Shares, voting as a class, to elect directors as provided
herein, shall continue until such time as all dividends accumulated on the
Voting Preferred Shares shall have been paid in full, at which time the right of
the holders of
10
<PAGE>
Voting Preferred Shares to exercise such special voting right shall terminate,
subject to revesting in the event of each and every subsequent default of the
character above-mentioned.
At any time when the special voting right shall have vested in the holders
of the Voting Preferred Shares as herein provided, and if such right shall not
already have been initially exercised, the Secretary of the Corporation shall,
upon the written request of the holders of record of at least 10% in amount of
the Voting Preferred Shares then outstanding, call a special meeting of the
holders of the Voting Preferred Shares for the purpose of exercising their
special voting right. Such meeting shall be held at the earliest practicable
date upon the notice required for annual meetings of shareholders.
Notwithstanding the provisions of this paragraph, no such special meeting shall
be called during a period within 60 days immediately preceding the date fixed
for the next annual meeting of shareholders.
At any meeting held for that purpose of electing directors at which the
holders of the Voting Preferred Shares shall have the special voting right, as a
class, to elect directors as provided herein, the presence in person or by proxy
of the holders of 33-1/3% of the then outstanding Voting Preferred Shares shall
be required and be sufficient to constitute a quorum for the exercise of such
special voting right. At such meeting or adjournment thereof, (a) the absence of
a quorum of the Voting Preferred Shares shall not prevent the election of the
directors to be elected by the holders of the other class or classes entitled to
vote therefor, and the absence of a quorum of such other class or classes shall
not prevent the election of the directors to be elected by the special voting
right of the holders of the Voting Preferred Shares, and (b) in the absence of a
quorum of any class entitled to vote for the election of directors, a majority
of the holders present in person or by proxy of such class shall have the power
to adjourn the meeting for the exercise of the voting rights of such class, from
time to time, without notice other than adjournment at the meeting, until a
quorum shall be present.
The term of office of all directors in office at any time when special
voting power shall, as aforesaid, be vested in the holders of the Voting
Preferred Shares, shall terminate upon the election of any directors at any
meeting of shareholders held for the purpose of electing directors. Upon any
termination of the special voting right of the holders of Voting Preferred
Shares provided herein, the term of office of all directors then in office shall
terminate upon the election of directors at a meeting of the holders of the
other class or classes then entitled to vote, which meeting may be held at any
time after such termination of the special voting right of the holders of the
Voting Preferred Shares, upon notice as above provided, and shall be called by
the Secretary of the Corporation upon written request of the holders of record
of 10% of the aggregate number of outstanding shares of such other class or
classes then entitled to vote for directors.
VI. So long as any of the Voting Preferred Shares shall remain outstanding,
no dividend (other than dividends payable in shares ranking junior to the Voting
Preferred Shares with respect to the payment of dividends and distributions in
liquidation) shall be paid, nor shall any distribution (by purchase, redemption,
payment to any sinking fund, or otherwise) be made, on any shares ranking junior
to the Voting Preferred Shares with respect to the payment of dividends or
distributions in liquidation unless:
(a) all dividends on all outstanding Preferred Shares, Voting
Preferred Shares and No Par Preferred Shares shall have been paid, and full
dividends thereon for the then current quarterly dividend period shall have been
declared and a sum sufficient for the payment thereof set apart therefor;
(b) the Corporation shall not be in arrears in respect of any sinking
fund obligation in respect of any series of Preferred Shares, Voting Preferred
Shares or No Par Preferred Shares;
(c) after giving effect to the payment of the proposed dividend or
distribution, the aggregate of all such dividends and distributions paid,
subsequent to December 31, 1965, shall not exceed the sum of (i) Consolidated
Net Income earned after said date less the aggregate of all dividends paid on
the Preferred Shares, Voting Preferred Shares and No Par Preferred Shares, all
sinking fund payments with respect thereto, and all amounts credited against
such payments
11
<PAGE>
for the voluntary purchase or redemption of Preferred Shares, Voting
Preferred Shares or No Par Preferred Shares, (ii) the net proceeds of the
sale subsequent to September 1, 1966, of shares ranking junior to the Voting
Preferred Shares with respect to the payment of dividends and distributions
in liquidation, (iii) the principal amount of indebtedness converted,
subsequent to April 1, 1967, and the stated capital of shares ranking equal
with or prior to the Voting Preferred Shares with respect to the payment of
dividends and distributions in liquidation converted, subsequent to April 1,
1967, into shares ranking junior to the Voting Preferred Shares with respect
to the payment of dividends and distributions in liquidation, and (iv)
$32,000,000; and
(d) if such dividend or distribution be on the Common Shares, after
giving effect to the payment of the proposed dividend or distribution,
Consolidated Net Assets shall be at least 175% of the sum of (i) Consolidated
Funded Indebtedness, (ii) the aggregate par value of (and/or, in the case of
shares without par value, stated capital applicable to) the outstanding
Voting Preferred Shares of all series and all other outstanding shares of the
Corporation ranking equally with or prior to the Voting Preferred Shares with
respect to the payment of dividends or distributions in liquidation,
including shares owned by the Corporation, and (iii) capital and surplus of
Subsidiaries applicable to or represented by shares owned by others than the
Corporation or its Subsidiaries.
The purchase or other acquisition by a Subsidiary or Affiliate of shares of the
Corporation shall be deemed a purchase or acquisition of such shares by the
Corporation within the meaning of this subsection VI.
VII. Without the affirmative vote at a meeting, or the written consent
with or without a meeting, of the holders of at least two-thirds of the Voting
Preferred Shares at the time outstanding, as a class, the Corporation shall not:
(a) increase the number of authorized Preferred Shares to an amount in
excess of 100,000;
(b) increase the number of authorized Voting Preferred Shares to an
amount in excess of 20,000,000;
(c) increase the number of authorized No Par Preferred Shares to an
amount in excess of 20,000,000;
(d) authorize or issue any shares other than Preferred Shares,
Voting Preferred Shares, No Par Preferred Shares or shares ranking junior
to the Voting Preferred Shares with respect to the payment of dividends and
distributions in liquidation;
(e) adopt or effect any amendment to its Articles of Incorporation
which would be substantially prejudicial to the holders of Voting Preferred
Shares; provided, however, that if such amendment would be substantially
prejudicial to the holders of Voting Preferred Shares of one or more
series, but less than all of the several series of Voting Preferred Shares,
or would unequally affect two or more series in a substantially prejudicial
manner, the affirmative vote at a meeting, or the written consent with or
without a meeting, of the holders of at least two-thirds of the shares of
each series so affected at the time outstanding, voting as a sub-class,
shall be required in addition to the said vote or written consent of the
holders of at least two-thirds of the Voting Preferred Shares of all series
at the time outstanding, voting as a class; and provided, further, that any
such amendment, when effected upon such vote or consent, shall not confer
upon dissenting holders of Voting Preferred Shares any right to payment for
their shares;
(f) sell, convey, lease or otherwise part with all or substantially
all of its assets, property or business, or consolidate or merge with or
into any other corporation, or merge any other corporation into itself;
provided, however, that this restriction shall not apply to a consolidation
or merger to which the Corporation is a party if none of the rights or
preferences of the Voting Preferred Shares shall be adversely affected
thereby; or
12
<PAGE>
(g) give any guarantee or similar obligation for the payment of any
share or dividend by any other corporation or person; provided, however,
that this restriction shall not apply to any guarantee or similar
obligation for the payment of any share or dividend by any corporation
which at the time the guarantee or similar obligation is given is a
Subsidiary.
For the purpose of determining whether such affirmative vote or written consent
required by this subsection VII has been obtained, Voting Preferred Shares held
by the Corporation or by any Subsidiary or Affiliate shall not be deemed to be
outstanding or entitled to participate in any such vote or consent.
VIII. So long as any dividend on any Voting Preferred Shares shall be in
arrears and unpaid, the Corporation shall not redeem any Voting Preferred Shares
(unless all outstanding Voting Preferred Shares shall be redeemed) or purchase
any Voting Preferred Shares, or permit any Subsidiary or Affiliate to make any
such purchase, unless such redemption or purchase shall be accomplished not
earlier than 30 days and not later than 90 days after the mailing of a written
purchase offer to each holder of record of Voting Preferred Shares at the
address of such shareholder registered with the Corporation. Any such purchase
offer shall be made upon terms that will result in holders of Voting Preferred
Shares of the several series being offered prices in proportion to the several
dividend rates applicable thereto.
IX. Voting Preferred Shares acquired by the Corporation through the
exercise by the holders thereof of any conversion privilege shall not be re-
issued except as hereinafter provided. Such shares and any other Voting
Preferred Shares acquired by the Corporation otherwise than through the
operation of any sinking fund and not used to reduce the amount of any sinking
fund instalment shall, upon compliance with such provisions of law relating to
the retirement of shares as may be applicable, have the status of authorized and
unissued Voting Preferred Shares which are unclassified into any series. Voting
Preferred Shares acquired by the Corporation through the operation of any
sinking fund or which have been used to reduce the amount of any sinking fund
instalment shall be cancelled and not re-issued, and the Corporation shall from
time to time take appropriate corporate action to reduce the authorized number
of Voting Preferred Shares accordingly.
X. No holder of Voting Preferred Shares of any series shall, as such
holder, have any preemptive rights in, or preemptive rights to purchase or
subscribe to, any shares of the Corporation, or any bonds, debentures, or other
securities convertible into any shares of the Corporation, other than such
rights of conversion or exchange as shall be expressly granted by the Board of
Directors prior to the initial issuance of the first shares of the series of
which such Voting Preferred Shares shall constitute a part; and, except as
aforesaid, each and every holder of Voting Preferred Shares, by accepting the
same, thereby waives and releases any and all preemptive rights which he might
otherwise have to purchase any shares which may at any time be issued by the
Corporation.
SECTION 4. The express terms and provisions of the No Par Preferred Shares
are as follows:
I. No Par Preferred Shares may be issued in series from time to time.
Within the limitations and restrictions set forth in this Article FOURTH, the
Board of Directors is expressly authorized, at one time or from time to time,
to adopt amendments to the Articles of Incorporation in respect of any
authorized and unissued No Par Preferred Shares to fix or alter the division of
such shares into series, the designation and number of shares of each series,
the dividend rates, redemption rights, redemption prices, liquidation prices,
sinking fund requirements, conversion rights, and restrictions on issuance of
shares of the same series or of any other class or series. No Par Preferred
Shares may, if authorized by such amendments to the Articles of Incorporation,
be convertible at the option of the holder thereof into full paid and
nonassessable Common Shares of the Corporation during such period or periods at
such rate or rates (which rate or rates of some or all series may be
determinable in whole or in part by the payment of money to the Corporation by
the holder exercising the option to convert), as may
13
<PAGE>
be determined by such amendments. The express terms and provisions of No Par
Preferred Shares of different series shall be identical except that there may be
variations in respect of any or all of the particulars hereinbefore set forth in
this subsection 1. In case the stated dividends or the amounts payable on
dissolution, liquidation, or sale of assets of the Corporation are not paid in
full, all No Par Preferred Shares of all series shall participate ratably in
the payment of dividends, including accumulations, if any, in proportion to the
sums which would be payable thereon if all dividends thereon were paid in full,
and, in any distribution of assets other than by way of dividends, in proportion
to the sums which would be payable on such distribution if all sums payable
thereon to holders of No Par Preferred Shares were discharged in full.
II. The holders of No Par Preferred Shares shall be entitled to receive
when and as declared out of the surplus of the Corporation, subject to any
limitations prescribed by statute, cash dividends at the respective rates fixed
as aforesaid by the Board of Directors for the shares of the several series of
No Par Preferred Shares, and no more. Dividends on the No Par Preferred Shares
shall be payable quarterly on the first days of March, June, September and
December in each year. Dividends on each No Par Preferred Share shall be
cumulative from the first day of the dividend period in which such share is
issued, except that if any share is issued after the record date fixed for
determining the holders of No Par Preferred Shares of such series entitled to
the dividend for such period, dividends on such share shall be cumulative from
the first day of the dividend period next following the date of issuance of such
share, and except that dividends on any share of a particular series issued
prior to the first dividend payment date for shares of such series shall be
cumulative from such date as shall be fixed by the Board of Directors prior to
the issuance thereof, but not earlier than the beginning of the current dividend
period.
The No Par Preferred Shares shall rank pari passu with the Preferred Shares
and the Voting Preferred Shares with respect to the payment of dividends.
Subject to the provisions of this Article FOURTH, the holders of all shares
ranking junior to the No Par Preferred Shares with respect to the payment of
dividends shall be entitled to receive such dividends as may from time to time
be declared thereon by the Board of Directors.
III. Except as may be otherwise expressly provided in this Article FOURTH,
the Corporation shall have the right to redeem the No Par Preferred Shares of
any one or more series at any time, either in whole or in such portions, as,
from time to time, the Board of Directors may determine, upon the payment to the
respective holders thereof of the "General Redemption Price" thereof. The
General Redemption Price for shares of each series shall be an amount equal to
the sum of (a) the redemption price fixed by the Board of Directors for the
shares of such series prior to the initial issuance of the first shares of such
series; and (b) an amount equivalent to all accumulated and unpaid dividends on
the shares to be redeemed to the date fixed for redemption (hereinafter referred
to as the "Redemption Date"), whether or not such dividends shall have been
earned or declared. In lieu of such payment the Corporation may deposit the
General Redemption Price of the shares to be redeemed on or prior to the
Redemption Date, with such responsible bank or trust company or bank and trust
company in the Borough of Manhattan, in the City of New York, State of New York,
having a capital and surplus of not less than $5,000,000, as may be designated
by the Board of Directors, in trust, for payment on or after the date of such
deposit (without awaiting the Redemption Date) to the holders of the No Par
Preferred Shares then to be redeemed. If less than the whole amount of
outstanding No Par Preferred Shares of any particular series shall be redeemed
at any time, the shares thereof to be redeemed shall be selected by lot.
Notice of any such redemption, in whole or in part, and of any such deposit
made or to be made of such General Redemption Price, shall be mailed to each
holder of No Par Preferred Shares so to be redeemed, at his address registered
with the Corporation, not less than thirty days prior to the Redemption Date,
and, if less than all of the said shares owned by such shareholder are to be
redeemed, the notice shall specify the number of shares thereof which are to be
redeemed. Such notice having been so given, or irrevocable written authority to
the depositary having been given at the time of making the deposit provided for
herein forthwith to give such notice, all rights of the respective holders of
the said shares as shareholders of the Corporation by reason of the ownership of
such shares, except the right
14
<PAGE>
to receive the General Redemption Price of such shares upon presentation and
surrender of their respective certificates representing the said shares, shall
cease from and after the Redemption Date (unless default shall be made by the
Corporation in providing moneys for the payment of the General Redemption
Price), or, if the General Redemption Price shall have been deposited on or
prior to the Redemption Date as above permitted, from and after the date of such
deposit; provided, however, that in lieu of the right to receive the General
Redemption Price, any rights of conversion or exchange may be exercised up to
the close of business on the Redemption Date. If after such deposit any No Par
Preferred Shares so called shall be so converted or exchanged, the amount
theretofore deposited with the depositary for the redemption thereof shall
forthwith be paid over by it to the Corporation. Any other moneys so deposited
which shall remain unclaimed by the holders of No Par Preferred Shares so called
for redemption at the end of two years after the Redemption Date shall be paid
by such depositary to the Corporation, after which the holders of such No Par
Preferred Shares shall look only to the Corporation for payment of the General
Redemption Price thereof, without interest.
IV. Upon the dissolution, liquidation or sale of all or substantially all
the assets of the Corporation, the holders of No Par Preferred Shares shall be
entitled to receive the following sums, before any payment shall be made to any
other class of shares ranking junior to the No Par Preferred Shares with respect
to payment upon dissolution, liquidation or sale of assets:
(a) in case of any involuntary dissolution or liquidation or forced
sale of all or substantially all the assets of the Corporation, each No Par
Preferred Share of each series shall be entitled to receive the amount fixed for
such contingency by the Board of Directors for the shares of such series prior
to the initial issuance of the first shares of such series, together with a sum,
whether or not earned or declared, equivalent to all accumulated and unpaid
dividends thereon to the date of such payment; or
(b) in case of any voluntary dissolution or liquidation or voluntary
sale of all or substantially all the assets of the Corporation, each No Par
Preferred Share of each series shall be entitled to receive the amount fixed for
such contingency by the Board of Directors for the shares of such series prior
to the initial issuance of the first shares of such series, together with a sum,
whether or not earned or declared, equivalent to all accumulated and unpaid
dividends thereon to the date of such payment.
The No Par Preferred Shares shall rank pari passu with the Preferred Shares and
the Voting Preferred Shares with respect to payment upon dissolution,
liquidation, or sale of assets. After all sums payable on the No Par Preferred
Shares as herein provided upon a particular contingency shall have been paid in
full, but not prior thereto, the other classes of shares ranking junior to the
No Par Preferred Shares with respect to payment upon dissolution, liquidation,
or sale of assets shall be entitled to payment of all other sums then
distributable, subject to the respective terms and provisions (if any) applying
to such class or classes of shares, respectively. For the purposes of this
subsection IV, a consolidation or merger of the Corporation with or into any
other Corporation, or a consolidation or merger of any other corporation with or
into the Corporation shall not be deemed a dissolution, liquidation, or sale of
assets.
V. Except as herein or by law expressly provided to the contrary, the
holders of No Par Preferred Shares shall have no right as such holders to vote
at or participate in any meetings of shareholders of the Corporation or to
receive any notice of any such meeting. If, however, dividends on any of the No
Par Preferred Shares shall be in arrears in an amount equal to 150% of the
annual dividends thereon, the holders of the No Par Preferred Shares shall be
entitled to vote at all meetings of shareholders of the Corporation and to
receive notice of all such meetings and shall have the right, voting as a class,
to elect the number of directors hereinafter provided. The remaining directors
shall be elected by the other class or classes (Preferred Shares, Voting
Preferred Shares, Second Preferred Shares and/or Common Shares) entitled to vote
therefor. The holders of No Par Preferred Shares shall have the right to elect
that number of directors which bears the same proportion to the number
15
<PAGE>
of directors constituting the entire board of directors as the outstanding No
Par Preferred Shares bears to the total of the outstanding Common Shares and
Voting Preferred Shares, or in any event, the holders of No Par Preferred Shares
shall have the right to elect a minimum number of two directors. Such voting
rights of the holders of No Par Preferred Shares shall continue until all
accumulated and unpaid dividends on all No Par Preferred Shares shall have been
paid, whereupon all such voting rights shall cease, subject to being revived
from time to time upon the reoccurrence of the conditions above described as
giving rise thereto.
Whenever the voting right of the holders of No Par Preferred Shares shall
have vested, such right may be exercised initially either at a meeting of such
holders, called as hereinafter provided, or at any annual meeting of
shareholders held for the purpose of electing directors, and thereafter, at such
annual meetings. The right of the holders of the No Par Preferred Shares, voting
as a class, to elect directors as provided herein, shall continue until such
time as all dividends accumulated on the No Par Preferred Shares shall have been
paid in full, at which time the right of the holders of No Par Preferred Shares
to exercise such voting right shall terminate, subject to revesting in the event
of each and every subsequent default of the character above-mentioned.
At any time when the voting right shall have vested in the holders of the
No Par Preferred Shares as herein provided, and if such right shall not already
have been initially exercised, the Secretary of the Corporation shall, upon the
written request of the holders of record of at least 10% in amount of the No Par
Preferred Shares then outstanding, call a special meeting of the holders of the
No Par Preferred Shares for the purpose of exercising their voting right. Such
meeting shall be held at the earliest practicable date upon the notice required
for annual meetings of shareholders. Notwithstanding the provisions of this
paragraph, no such special meeting shall be called during a period within 60
days immediately preceding the date fixed for the next annual meeting of
shareholders.
At any meeting held for the purpose of electing directors at which the
holders of the No Par Preferred Shares shall have the voting right, as a class,
to elect directors as provided herein, the presence in person or by proxy of the
holders of 33 1/3% of the then outstanding No Par Preferred Shares shall be
required and be sufficient to constitute a quorum for the exercise of such
voting right. At such meeting or adjournment thereof, (a) the absence of a
quorum of the No Par Preferred Shares shall not prevent the election of the
directors to be elected by the holders of the other class or classes entitled to
vote therefor, and the absence of a quorum of such other class or classes shall
not prevent the election of the directors to be elected by the voting right of
the holders of the No Par Preferred Shares, and (b) in the absence of a quorum
of any class entitled to vote for the election of directors, a majority of the
holders present in person or by proxy of such class shall have the power to
adjourn the meeting for the exercise of the voting rights of such class, from
time to time, without notice other than adjournment at the meeting, until a
quorum shall be present.
The term of office of all directors in office at any time when voting power
shall, as aforesaid, be vested in the holders of the No Par Preferred Shares,
shall terminate upon the election of any directors at any meeting of
shareholders held for the purpose of electing directors. Upon any termination of
the voting right of the holders of No Par Preferred Shares provided herein, the
term of office of all directors then in office shall terminate upon the election
of directors at a meeting of the holders of the other class or classes then
entitled to vote, which meeting may be held at any time after such termination
of the voting right of the holders of the No Par Preferred Shares, upon notice
as above provided, and shall be called by the Secretary of the Corporation upon
written request of the holders of record of 10% of the aggregate number of
outstanding shares of such other class or classes then entitled to vote for
directors.
VI. So long as any of the No Par Preferred Shares shall remain outstanding,
no dividend (other than dividends payable in shares ranking junior to the No Par
Preferred Shares with respect to the payment of dividends and distributions in
liquidation) shall be paid, nor shall any distribution (by purchase, redemption,
payment to any sinking fund, or otherwise) be made, on any shares ranking junior
to the No Par Preferred Shares with respect to the payment of dividends or
distributions in liquidation unless:
16
<PAGE>
(a) all dividends on all outstanding Preferred Shares, Voting
Preferred Shares and No Par Preferred Shares shall have been paid, and full
dividends thereon for the then current quarterly dividend period shall have
been declared and a sum sufficient for the payment thereof set apart
therefor;
(b) the Corporation shall not be in arrears in respect of any sinking
fund obligation in respect of any series of Preferred Shares, Voting
Preferred Shares or No Par Preferred Shares;
(c) after giving effect to the payment of the proposed dividend or
distribution, the aggregate of all such dividends and distributions paid,
subsequent to December 31, 1966, shall not exceed the sum of (i)
Consolidated Net Income earned after said date less the aggregate of all
dividends paid on the Preferred Shares, Voting Preferred Shares and No Par
Preferred Shares, all sinking fund payments with respect thereto, and all
amounts credited against such payments for the voluntary purchase or
redemption of Preferred Shares, Voting Preferred Shares or No Par Preferred
Shares, (ii) the net proceeds of the sale subsequent to April 1, 1967, of
shares ranking junior to the No Par Preferred Shares with respect to the
payment of dividends and distributions in liquidation, (iii) the principal
amount of indebtedness converted, subsequent to April 1, 1967, and the
stated capital of shares ranking equal with or prior to the No Par
Preferred Shares with respect to the payment of dividends and distributions
in liquidation converted, subsequent to April 1, 1967, into shares ranking
junior to the No Par Preferred Shares with respect to the payment of
dividends and distributions in liquidation, and (iv) $33,000,000; and
(d) if such dividend or distribution be on the Common Shares, after
giving effect to the payment of the proposed dividend or distribution,
Consolidated Net Assets shall be at least 175% of the sum of (i)
Consolidated Funded Indebtedness, (ii) the aggregate par value of (and/or,
in the case of shares without par value, stated capital applicable to) the
outstanding No Par Preferred Shares of all series and all other outstanding
shares of the Corporation ranking equally with or prior to the No Par
Preferred Shares with respect to the payment of dividends or distributions
in liquidation, including shares owned by the Corporation, and (iii)
capital and surplus of Subsidiaries applicable to or represented by shares
owned by others than the Corporation or its Subsidiaries.
The purchase or other acquisition by a Subsidiary or Affiliate of shares of the
Corporation shall be deemed a purchase or acquisition of such shares by the
Corporation within the meaning of this subsection VI.
VII. Without the affirmative vote at a meeting, or the written consent with
or without a meeting, of the holders of at least two-thirds of the No Par
Preferred Shares at the time outstanding, as a class, the Corporation shall not:
(a) increase the number of authorized Preferred Shares to an amount in
excess of 100,000;
(b) increase the number of authorized Voting Preferred Shares to an
amount in excess of 20,000,000;
(c) increase the number of authorized No Par Preferred Shares to an
amount in excess of 20,000,000;
(d) authorize or issue any shares other than Preferred Shares, Voting
Preferred Shares, No Par Preferred Shares or shares ranking junior to the
No Par Preferred Shares with respect to the payment of dividends and
distributions in liquidation;
(e) adopt or effect any amendment to its Articles of Incorporation
which would be substantially prejudicial to the holders of No Par Preferred
Shares; provided, however, that if such amendment would be substantially
prejudicial to the holders of No Par Preferred Shares of one or more
series, but less than all of the several series of No Par Preferred Shares,
or would unequally
17
<PAGE>
affect two or more series in a substantially prejudicial manner, the
affirmative vote at a meeting, or the written consent with or without a
meeting, of the holders of at least two-thirds of the shares of each series
so affected at the time outstanding, voting as a sub-class, shall be
required in addition to the said vote or written consent of the holders of
at least two-thirds of the No Par Preferred Shares of all series at the
time outstanding, voting as a class; and provided, further, that any such
amendment, when effected upon such vote or consent, shall not confer upon
dissenting holders of No Par Preferred Shares any right to payment for
their shares;
(f) sell, convey, lease or otherwise part with all or substantially
all of its assets, property or business, or consolidate or merge with or
into any other corporation, or merge any other corporation into itself;
provided, however, that this restriction shall not apply to a consolidation
or merger to which the Corporation is a party if none of the rights or
preferences of the No Par Preferred Shares shall be adversely affected
thereby; or
(g) give any guarantee or similar obligation for the payment of any
share or dividend by any other corporation or person; provided, however,
that this restriction shall not apply to any guarantee or similar
obligation for the payment of any share or dividend by any corporation
which at the time the guarantee or similar obligation is given is a
Subsidiary.
For the purpose of determining whether such affirmative vote or written consent
required by this subsection VII has been obtained, No Par Preferred Shares held
by the Corporation or by any Subsidiary or Affiliate shall not be deemed to be
outstanding or entitled to participate in any such vote or consent.
VIII. So long as any dividend on any No Par Preferred Shares shall be
in arrears and unpaid, the Corporation shall not redeem any No Par Preferred
Shares (unless all outstanding No Par Preferred Shares shall be redeemed) or
purchase any No Par Preferred Shares, or permit any Subsidiary or Affiliate to
make any such purchase, unless such redemption or purchase shall be accomplished
not earlier than 30 days and not later than 90 days after the mailing of a
written purchase offer to each holder of record of No Par Preferred Shares at
the address of such shareholder registered with the Corporation. Any such
purchase offer shall be made upon terms that will result in holders of No Par
Preferred Shares of the several series being offered prices in proportion to the
several dividend rates applicable thereto.
IX. No Par Preferred Shares acquired by the Corporation through the
exercise by the holders thereof of any conversion privilege shall not be re-
issued except as hereinafter provided. Such shares and any other No Par
Preferred Shares acquired by the Corporation otherwise than through the
operation of any sinking fund and not used to reduce the amount of any sinking
fund instalment shall, upon compliance with such provisions of law relating to
the retirement of shares as may be applicable, have the status of authorized and
unissued No Par Preferred Shares which are unclassified into any series. No Par
Preferred Shares acquired by the Corporation through the operation of any
sinking fund or which have been used to reduce the amount of any sinking fund
instalment shall be cancelled and not re-issued, and the Corporation shall from
time to time take appropriate corporate action to reduce the authorized number
of No Par Preferred Shares accordingly.
X. No holder of No Par Preferred Shares of any series shall, as such
holder, have any preemptive rights in, or preemptive rights to purchase or
subscribe to, any shares of the Corporation, or any bonds, debentures, or other
securities convertible into any shares of the Corporation, other than such
rights of conversion or exchange as shall be expressly granted by the Board of
Directors prior to the initial issuance of the first shares of the series of
which such No Par Preferred Shares shall constitute a part; and, except as
aforesaid, each and every holder of No Par Preferred Shares, by accepting the
same, thereby waives and releases any and all preemptive rights which he might
otherwise have to purchase any shares which may at any time be issued by the
Corporation.
18
<PAGE>
SECTION 5. The express terms and provisions of the Second Preferred Shares
are as follows:
I. The rights and preferences of the Second Preferred Shares shall be
subject in all respects to the rights and preferences of the Preferred Shares,
Voting Preferred Shares and No Par Preferred Shares in the manner and to the
extent provided in this Article FOURTH. The Second Preferred Shares may be
issued in series from time to time. Within the limitations and restrictions set
forth in-this Article FOURTH, the Board of Directors is expressly authorized, at
one time or from time to time, to adopt amendments to the Articles of
Incorporation in respect of any authorized and unissued Second Preferred Shares
to fix or alter the division of such shares into series, the designation and
number of shares of each series, the dividend rates, redemption rights,
redemption prices, liquidation prices, sinking fund and market fund
requirements, conversion rights, and restrictions on issuance of shares of the
same series or of any other class or series. The express terms and provisions of
Second Preferred Shares of different series shall be identical except that there
may be variations in respect of any or all of the particulars hereinabove set
forth in this subsection I. In case the stated dividends or the amounts payable
on dissolution, liquidation or sale of assets of the Corporation are not paid in
full, all Second Preferred Shares of all series shall participate ratably ln the
payment of dividends, including accumulations, if any, in proportion to the sums
which would be payable thereon if all dividends thereon were paid in full, and,
in any distribution of assets other than by way of dividends, in proportion to
the sums which would be payable on such distribution if all sums payable thereon
to holders of Second Preferred Shares were discharged in full.
II. The Second Preferred Shares shall rank junior to the Preferred Shares,
Voting Preferred Shares and No Par Preferred Shares with respect to the payment
of dividends. Subject to the prior rights of the holders of Preferred Shares,
Voting Preferred Shares and No Par Preferred Shares, the holders of Second
Preferred Shares shall be entitled to receive when and as declared out of the
surplus of the Corporation, subject to any limitations prescribed by statute,
cash dividends at the respective rates fixed as aforesaid by the Board of
Directors for the shares of the several series of Second Preferred Shares, and
no more. Dividends on the Second Preferred Shares shall be payable quarterly on
the first day of March, June, September and December in each year. Dividends on
each Second Preferred Share shall be cumulative from the first day of the
dividend period in which such share is issued, except that if any share is
issued after the record date fixed for determining the holders of Second
Preferred Shares of such series entitled to the dividend for such period,
dividends on such shares shall be cumulative from the first day of the dividend
period next following the date of issuance of such share, and except that
dividends on any share of a particular series issued prior to the first dividend
payment date for shares of such series shall be cumulative from such date as
shall be fixed by the Board of Directors prior to the issuance thereof, but not
earlier than the beginning of the current dividend period.
Subject to the provisions of this Article FOURTH, the holders of all shares
ranking junior to the Second Preferred Shares with respect to the payment of
dividends shall be entitled to receive such dividends as may from time to time
be declared thereon by the Board of Directors.
III. Except as may be otherwise expressly provided in this Article FOURTH,
the Corporation shall have the right to redeem the Second Preferred Shares of
any one or more series at any time, either in whole or in such portions, as,
from time to time, the Board of Directors may determine, upon the payment to the
respective holders thereof of the "General Redemption Price" thereof. The
General Redemption Price for shares of each series shall be an amount equal to
the sum of (a) the redemption price fixed by the Board of Directors for the
shares of such series prior to the initial issuance of the first shares of such
series; and (b) an amount equivalent to all accumulated and unpaid dividends on
the shares to be redeemed to the date fixed for redemption (hereinafter referred
to as the "Redemption Date"), whether or not such dividends shall have been
earned or declared. In lieu of such payment the Corporation may deposit the
General Redemption Price of the shares to be redeemed on or prior to the
Redemption Date, with such responsible bank or trust company or bank and trust
company in the Borough of Manhattan, in the City of New York, State of New York,
having a capital and surplus
19
<PAGE>
of not less than $5,000,000, as may be designated by the Board of Directors, in
trust, for payment on or after the date of such deposit (without awaiting the
Redemption Date) to the holders of the Second Preferred Shares then to be
redeemed. If less than the whole amount of outstanding Second Preferred Shares
of any particular series shall be redeemed at any time, the shares thereof to be
redeemed shall be selected by lot.
Notice of any such redemption, in whole or in part, and of any such
deposit made or to be made of such General Redemption Price, shall be mailed to
each holder of Second Preferred Shares so to be redeemed, at his address
registered with the Corporation not less than thirty days prior to the
Redemption Date, and, if less than all of the said shares owned by such
shareholder are to be redeemed, the notice shall specify the number of shares
thereof which are to be redeemed. Such notice having been so given, or
irrevocable written authority to the depositary having been given at the time of
making the deposit provided for herein forthwith to give such notice, all
rights of the respective holders of the said shares as shareholders of the
Corporation by reason of the ownership of such shares, except the right to
receive the General Redemption Price of such shares upon presentation and
surrender of their respective certificates representing the said shares, shall
cease from and after the Redemption Date (unless default shall be made by
the Corporation in providing moneys for the payment of the General Redemption
Price), or, if the General Redemption Price shall have been deposited on or
prior to the Redemption Date as above permitted, from and after the date of
such deposit; provided, however, that in lieu of the right to receive the
General Redemption Price, any rights of conversion or exchange may be
exercised up to the close of business on the Redemption Date. If after such
deposit any Second Preferred Shares so called shall be so converted or
exchanged, the amount theretofore deposited with the depositary for the
redemption thereof shall forthwith be paid over by it to the Corporation. Any
other moneys so deposited which shall remain unclaimed by the holders of Second
Preferred Shares so called for redemption at the end of two years after the
Redemption Date shall be paid by such depositary to the Corporation, after which
the holders of such Second Preferred Shares shall look only to the Corporation
for payment of the General Redemption Price thereof, without interest.
IV. The Second Preferred Shares shall rank junior to the Preferred
Shares, Voting Preferred Shares and No Par Preferred Shares with respect to
payment upon dissolution, liquidation or sale of assets of the Corporation.
Subject to the prior rights of the holders of Preferred Shares, Voting Preferred
Shares and No Par Preferred Shares, the holders of Second Preferred Shares, upon
the dissolution, liquidation or sale of all or substantially all the assets of
the Corporation, shall be entitled to receive the following sums, before any
payment shall be made to any other class of shares ranking junior to the Second
Preferred Shares with respect to payment upon dissolution, liquidation or sale
of assets:
(a) in case of any involuntary dissolution or liquidation or forced
sale of all or substantially all the assets of the Corporation, each Second
Preferred Share of each series shall be entitled to receive the sum of $50,
together with a sum, whether or not earned or declared, equivalent to all
accumulated and unpaid dividends thereon to the date of such payment; or
(b) in case of any voluntary dissolution or liquidation or voluntary
sale of all or substantially all the assets of the Corporation, each Second
Preferred Share of each series shall be entitled to receive the amount
fixed for such contingency by the Board of Directors for the shares of such
series prior to the initial issuance of the first shares of such series,
together with a sum, whether or not earned or declared, equivalent to all
accumulated and unpaid dividends thereon to the date of such payment.
After all sums payable on the Second Preferred Shares as herein provided upon a
particular contingency shall have been paid in full but not prior thereto, the
other classes of shares ranking junior to the Second Preferred Shares with
respect to payment upon dissolution, liquidation or sale of assets shall be
entitled to payment of all other sums then distributable, subject to the
respective terms and provisions (if any) applying to such class or classes of
shares, respectively. For the purpose of this subsection IV, a con-
20
<PAGE>
solidation or merger of the Corporation with or into any other corporation or a
consolidation or merger of any other corporation with or into the Corporation
shall not be deemed a dissolution, liquidation or sale of assets.
V. Except as herein or by law expressly provided to the contrary, the
holders of Second Preferred Shares shall have no right as such holders to vote
at or participate in any meeting of shareholders of the Corporation or to
receive any notice of any such meeting. If, however, dividends on any of the
Second Preferred Shares shall be in arrears in an amount equal to the annual
dividends thereon, the holders of all of the Second Preferred Shares shall be
entitled to vote at all meetings of shareholders of the Corporation and to
receive notice of all such meetings. Such voting rights of the holders of Second
Preferred Shares shall continue until all accumulated and unpaid dividends on
all Second Preferred Shares shall have been paid, whereupon all such voting
rights shall cease, subject to being revived from time to time upon the
reoccurrence of the conditions above described as giving rise thereto.
At any meeting at which the holders of the Second Preferred Shares shall be
entitled to vote, each vote cast pursuant to the provisions of this subsection V
on behalf of the holder of a Second Preferred Share shall be counted as such
number of votes as shall equal the quotient derived from dividing the number of
Second Preferred Shares of all series then outstanding into one-third of the
total number of votes to which at such time all outstanding shares ranking
junior to the Second Preferred Shares with respect to the payment of dividends
or distributions in liquidation may be collectively entitled. For the purposes
of the above computation, shares held by the Corporation or by any Subsidiary or
Affiliate shall not be deemed to be outstanding, and such shares shall have no
right whatsoever to vote at or to receive notice of any meeting other than such
rights as may be expressly granted by law.
VI. So long as any of the Second Preferred Shares shall remain outstanding,
no dividend (other than dividends payable in shares ranking junior to the Second
Preferred Shares with respect to the payment of dividends and distributions in
liquidation) shall be paid, nor shall any distribution (by purchase, redemption,
payment to any sinking fund, or otherwise) be made, on any shares ranking junior
to the Second Preferred Shares with respect to the payment of dividends or
distributions in liquidation, unless:
(a) all dividends on all outstanding Second Preferred Shares shall
have been paid and full dividends thereon for the then current quarterly
dividend period shall have been declared and a sum sufficient for the
payment thereof set apart therefor;
(b) the Corporation shall not be in arrears in respect of any sinking
fund obligation in respect of any series of Second Preferred Shares; and
(c) after giving effect to the payment of the proposed dividend or
distribution, the aggregate of all such dividends and distributions paid,
subsequent to December 29, 1945, shall not exceed the sum of (i)
Consolidated Net Income earned after said date, less the aggregate of all
dividends and all payments into any sinking fund for the Preferred Shares,
the Voting Preferred Shares, the No Par Preferred Shares or the Second
Preferred Shares, and all amounts credited against any sinking fund
instalment with respect to the Preferred Shares, the Voting Preferred
Shares, the No Par Preferred Shares or the Second Preferred Shares for the
voluntary purchase or redemption of Preferred Shares, Voting Preferred
Shares, No Par Preferred Shares or Second Preferred Shares, (ii) the net
proceeds of the sale subsequent to September 1, 1946 of shares ranking
junior to the Second Preferred Shares with respect to the payment of
dividends and distributions in liquidation, (iii) the principal amount of
indebtedness converted, subsequent to April 1, 1967, and the stated capital
of shares ranking equal with or prior to the Second Preferred Shares with
respect to the payment of dividends and distributions in liquidation
converted, subsequent to April 1, 1967, into shares ranking junior to the
Second Preferred Shares with respect to the payment of dividends and
distributions in liquidation, and (iv) $500,000.
21
<PAGE>
The purchase or other acquisition by a Subsidiary or Affiliate of shares of the
Corporation shall be deemed a purchase or acquisition of such shares by the
Corporation within the meaning of this subsection VI.
VII. Without the affirmative vote at a meeting, or the written consent with
or without a meeting, of the holders of at least two-thirds of the Second
Preferred Shares at the time outstanding, as a class, the Corporation shall not:
(a) increase the number of authorized Preferred Shares to an amount in
excess of 100,000, or the number of authorized Voting Preferred Shares to
an amount in excess of 20,000,000, or the number of authorized No Par
Preferred Shares to an amount in excess of 20,000,000, or the number of
authorized Second Preferred Shares to an amount in excess of 295,540;
(b) authorize or issue any shares other than Preferred Shares, Voting
Preferred Shares, No Par Preferred Shares, Second Preferred Shares or
shares ranking junior to the Second Preferred Shares with respect to the
payment of dividends and distributions in liquidation;
(c) adopt or effect any amendment to its Articles of Incorporation
which would be substantially prejudicial to the holders of Second Preferred
Shares; provided, however, that if such amendment would be substantially
prejudicial to the holders of Second Preferred Shares of one or more
series, but less than all of the several series of Second Preferred Shares,
or would unequally affect two or more series in a substantially prejudicial
manner, the affirmative vote at a meeting, or the written consent with or
without a meeting, of the holders of at least two-thirds of the shares of
each series so affected at the time outstanding, voting as a sub-class,
shall be required in addition to the said vote or written consent of the
holders of at least two-thirds of the Second Preferred Shares of all series
at the time outstanding, voting as a class; and provided, further, that any
such amendment, when effected upon such vote or consent, shall not confer
upon dissenting holders of Second Preferred Shares any right to payment for
their shares;
(d) sell, convey, lease or otherwise part with all or substantially
all of its assets, property or business, or consolidate or merge with or
into any other corporation, or merge any other corporation into itself;
provided, however, that this restriction shall not apply to a consolidation
or merger to which the Corporation is a party if none of the rights or
preferences of the Second Preferred Shares shall be adversely affected
thereby; or
(e) give any guarantee or similar obligation for the payment of any
share or dividend by any other corporation or person; provided, however,
that this restriction shall not apply to any guarantee or similar
obligation for the payment of any share or dividend by any corporation
which at the time the guarantee or similar obligation is given is a
Subsidiary.
For the purpose of determining whether such affirmative vote or written consent
required by this subsection VII has been obtained, Second Preferred Shares held
by the Corporation or by any Subsidiary or Affiliate shall not be deemed to be
outstanding or entitled to participate in any such vote or consent.
VIII. So long as any dividend on any Second Preferred Shares shall be in
arrears and unpaid, the Corporation shall not redeem any Second Preferred
Shares (unless all outstanding Second Preferred Shares shall be redeemed) or
purchase any Second Preferred Shares, or permit any Subsidiary or Affiliate to
make any such purchase, unless such redemption or purchase shall be accomplished
not earlier than 30 days and not later than 90 days after the mailing of a
written purchase offer to each holder of record of Second Preferred Shares at
the address of such shareholder registered with the Corporation. Any such
purchase offer shall be made upon terms that will result in holders of Second
Preferred Shares of the several series being offered prices in proportion to the
several dividend rates applicable thereto.
IX. Second Preferred Shares acquired by the Corporation through the
exercise by the holders thereof of any conversion privilege shall not be re-
issued except as hereinafter provided. Such Second
22
<PAGE>
Preferred Shares and any other Second Preferred Shares acquired by the
Corporation otherwise than through the operation of any sinking fund and not
used to reduce the amount of any sinking fund instalment shall, upon compliance
with such provisions of law relating to the retirement of shares as may be
applicable have the status of authorized and unissued Second Preferred Shares
which are unclassified into any series. Second Preferred Shares acquired by the
Corporation through the operation of any sinking fund which have been used to
reduce the amount of any sinking fund instalment shall be cancelled and not re-
issued, and the Corporation shall from time to time take appropriate corporate
action to reduce the authorized number of Second Preferred Shares accordingly.
X. No holder of Second Preferred Shares of any series shall, as such
holder, have any preemptive rights in, or preemptive rights to purchase or
subscribe to, any shares of the Corporation, or any bonds, debentures, or other
securities convertible into any shares of the Corporation, other than such
rights of conversion or exchange as shall be expressly granted by the Board of
Directors prior to the initial issuance of the first shares of the series of
which such Second Preferred Shares constitute a part; and except as aforesaid
each and every holder of Second Preferred Shares, by accepting the same, thereby
waives and releases any and all preemptive rights he might otherwise have to
purchase any shares which may at any time be issued by the Corporation.
SECTION 6. The express terms and provisions of the Common Shares are as
follows:
I. The rights and preferences of the Common Shares shall be subject in all
respects to the rights and preferences of the Preferred Shares, the Voting
Preferred Shares, the No Par Preferred Shares and the Second Preferred Shares,
in the manner and to the extent provided in this Article Fourth.
II. The Common Shares shall rank junior to the Preferred Shares, the Voting
Preferred Shares, the No Par Preferred Shares and the Second Preferred Shares
with respect to the payment of dividends. Out of the assets of the Corporation
available for dividends remaining after there shall have been paid or declared
and set apart for payment full dividends on all shares ranking prior to the
Common Shares with respect to the payment of dividends, and subject to the
restrictions or limitations contained in the express terms and provisions of all
shares ranking prior to the Common Shares with respect to the payment of
dividends, dividends may be declared and paid upon the Common Shares, but only
when and as determined by the Board of Directors.
III. The Common Shares shall rank junior to the Preferred Shares, the
Voting Preferred Shares, the No Par Preferred Shares and the Second Preferred
Shares with respect to payment upon dissolution, liquidation or sale of assets
of the Corporation. Upon the dissolution, liquidation or sale of all or
substantially all the assets of the Corporation, after there shall have been
paid to or set apart for holders of all shares ranking senior to the Common
Shares the full preferential amounts to which they are respectively entitled,
the holders of Common Shares shall be entitled to receive pro rata all of the
remaining assets of the Corporation available for distribution to its
shareholders.
IV. The holders of Common Shares shall be entitled to one vote for each
Common Share held by them respectively.
V. No present or future holder of Common Shares shall, as such holder, have
any preemptive rights in, or preemptive rights to purchase or subscribe to, any
shares of the Corporation, or any bonds, debentures, or other securities
convertible into any shares of the Corporation.
FIFTH: Subject to the restrictions and limitations set forth in Article
FOURTH hereof, this Corporation may purchase shares of any class of the stock
issued by it to the extent of the surplus available for cash dividends, when
authorized by the affirmative vote of the Board of Directors, but no such
purchase shall be made so as to favor any shareholder over any other, except as
herein provided.
23
<PAGE>
SIXTH: Subject to the restrictions and limitations set forth in Article
FOURTH hereof, to the fullest extent permitted by law, the Board of Directors
may, from time to time, without any vote, consent or other action of or by the
shareholders, borrow or raise money, without limit as to amount, for any of the
purposes of the Corporation, and may authorize the issue of bonds, debentures,
notes or other obligations of any nature or in any manner for money so borrowed,
and may confer upon the respective holders thereof the right to convert the
principal thereof into shares of any class or series upon such terms and
conditions as the Board of Directors may, in its discretion, deem advisable, and
may authorize the creation of mortgages upon, or the pledge, conveyance or
assignment of the whole or any part of, the property of the Corporation, real,
personal or mixed, whether at the time owned or to be acquired thereafter, to
secure the payment of such obligations and the interest and premium (if any)
thereon, and may authorize the sale, pledge or other disposition of such
obligations at such prices, upon such terms and to such persons as the Board of
Directors, in its discretion, may deem advisable.
SEVENTH: These Amended Articles of Incorporation supersede the existing
Articles of Incorporation.
FURTHER RESOLVED, That the foregoing Amended Articles of
Incorporation, which shall supersede and take the place of the existing
Amended Articles of Incorporation, be, and they hereby are, in all respects
authorized, approved and adopted.
FURTHER RESOLVED, That the President and the Secretary be, and they
hereby are, authorized and directed to execute and file in the Office of
the Secretary of State of the State of Ohio a certificate containing a copy
of these resolutions and to execute, deliver and file any other certificate
or instrument which they may deem necessary or appropriate to render
effective or otherwise fully to carry out the intent and purposes of these
resolutions."
IN WITNESS WHEREOF, said Steven C. Mason, President, and George J. Maly,
Jr., Secretary, of The Mead Corporation, acting for and on behalf of said
Corporation, have hereunto subscribed their names and cause the seal of said
Corporation to be hereunto affixed this 28th day of May, 1987.
/s/ STEVEN C. MASON
---------------------------------
Steven C. Mason, President
/s/ GEORGE J. MALY, JR.
---------------------------------
George J. Maly Jr., Secretary
24
<PAGE>
EXHIBIT 5
---------
DAVID L. SANTEZ
The Mead Corporation
Mead World Headquarters
Courthouse Plaza Northeast
Dayton, Ohio 45463
November 15, 1996
The Mead Corporation
Mead World Headquarters
Courthouse Plaza Northeast
Dayton, Ohio 45463
Ladies and Gentlemen:
As an Associate General Counsel of The Mead Corporation, an Ohio
corporation, (the "Company"), I have assisted the Company in the preparation
and filing of the Company's Registration Statement on Form S-3
("Registration Statement") relating to 4,067,597 Common Shares, without par
value, of the Company (the "Shares") that may be issued upon the exercise of
stock options under the Company's 1984 Stock Option Plan, 1991 Stock Option
Plan and 1996 Stock Option Plan (collectively, the "Plans").
In addition to having assisted the Company in the preparation and
filing of the Registration Statement, I have examined the Plans and such
corporate proceedings and records of the Company, and have made such other
investigations, as I have deemed necessary for purposes of this opinion.
Based upon the foregoing, it is my opinion that the Shares have
been duly authorized, and when issued and paid for in accordance with the
terms of the Plans, will be validly issued, fully paid and non-accessable.
I am a member of the bar of the State of Ohio and I do not express
any opinion herein concerning any laws other than the laws of the State of
Ohio and the federal laws of the United States.
I consent to the use of this opinion as an Exhibit to the
Registration Statement, and I consent to the reference to me under the
caption "Legal Matters" in the Prospectus forming a part of the Registration
Statement.
Very truly yours,
/s/ David L. Santez
David L. Santez
<PAGE>
EXHIBIT 23.2
------------
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement,
related to 4,067,597 Common Shares, of The Mead Corporation on Form S-3 of
our report dated January 25, 1996, appearing in the Annual Report on Form
10-K of The Mead Corporation for the year ended December 31, 1995 and to the
reference to us under the heading "Experts" in the Prospectus, which is part
of this Registration Statement.
/s/ Deloitte & Touche llp
Dayton, Ohio
November 12, 1996
<PAGE>
Exhibit 99.1
THE MEAD CORPORATION COMPOSITE
---------
1984 STOCK OPTION PLAN 11/09/96
------------------------
Section 1. Purposes.
- ---------- ---------
The purposes of this 1984 Stock Option Plan (the "Plan") are (i) to
provide incentives to officers and other key employees of the Company upon whose
judgment, initiative and efforts the long-term growth and success of the Company
is largely dependent; (ii) to assist the Company in attracting and retaining key
employees of proven ability; and (iii) to increase the identity of interests of
such key employees with those of the Company's shareholders by providing such
employees with options to acquire Common Shares of the Company.
Section 2. Definitions.
- ---------- ------------
For purposes of the Plan:
(a) "Acquisition Transaction" means a transaction of the type
described in Section 8(b)(ii).
(b) "Affiliate" means a person controlling, controlled by or under
common control with the Company.
(c) "Board of Directors" means the Board of Directors of the
Company.
(d) "Change in Composition of the Board" means an event of the type
described in Section 8(b)(iv).
(e) "Change in Control" means a transaction of the type described
in Section 8(b)(iii).
(f) "Committee" means the committee referred to in Section 4.
(g) "Code" means the Internal Revenue Code of 1954, as amended.
(h) "Company" means The Mead Corporation; when used in the Plan
with reference to employment, "Company" shall include any Subsidiary of the
Company.
<PAGE>
(i) "Designation of Beneficiary" means such person(s) or entity
whom the Option Holder has designated by a transfer on death or other
designation of beneficiary to receive the Holder's Option on the Holder's death
in accordance with such procedures established from time to time by the
Committee.
(j) "Fair Market Value" means the highest sale price of a Share on
the date the value of a Share is to be determined, as reported on the New York
Stock Exchange - Composite Transactions Tape or, if no sale is reported for such
date, then on the next preceding date for which a sale is reported.
(k) "Grantee" means the employee who received the option from the
Company.
(l) "Holder" means the person(s) or entity who owns the option,
whether Grantee, Transferee, heir or other beneficiary.
(m) "Incentive Stock Option" means an option granted under the Plan
which qualifies as an incentive stock option under Section 422 of the Internal
Revenue Code of 1954, as amended.
(n) "Limited Right" means a right granted under Section 8 of the
Plan.
(o) "Nonqualified Option" means an option granted under the Plan
which does not qualify as an incentive stock option under Section 422 of the
Internal Revenue Code of 1954, as amended.
(p) "Share" or "Shares" means the Common Shares, without par value,
of the Company.
(q) "Subsidiary" means any company 50% or more of the voting stock
of which is owned or controlled, directly or indirectly, by the Company.
(r) "Tax Date" means the date as of which the amount of the
withholding tax payment with respect to the exercise of a Nonqualified Option is
calculated.
2
<PAGE>
(s) "Tender Offer" means a tender offer or a request or invitation
for tenders or an exchange offer subject to regulation under Section 14(d) of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder, as the same may be amended, modified or superseded from time to
time.
(t) "Transferee" means the person who received the option from the
Grantee during the Grantee's lifetime.
Section 3. Shares Subject to the Plan.
- ---------- ---------------------------
(a) Number of Shares. Subject to adjustment as provided in Section
10, the maximum number of Shares that may be issued and/or delivered under the
Plan upon the exercise of options is 1,700,000. Such Shares may be either
authorized and unissued or treasury Shares. Any Shares subject to an option
which for any reason has terminated or expired or has been cancelled prior to
being fully exercised may again be subject to option under the Plan.
(b) The maximum number of Limited Rights which may be granted under
the Plan is 1,700,000. Any Limited Rights granted under the Plan which for any
reason terminate or expire or have been cancelled prior to being fully exercised
may again be granted under the Plan.
Section 4. Administration.
- ---------- ---------------
The Plan shall be administered by a Committee of the Board of
Directors, consisting of three or more directors, who shall from time to time be
appointed by, and serve at the pleasure of, the Board of Directors. No director
shall serve as a member of the Committee if he is then, or was at any time
within one year prior to his appointment, eligible for selection as a person to
whom stock may be allocated or to whom stock options or stock appreciation
rights may be granted pursuant to the Plan or any other plan of the Company or
any Affiliate entitling the participants therein to acquire stock, stock options
or stock appreciation rights of the Company or any Affiliate.
3
<PAGE>
The Committee shall have and exercise all the power and authority
granted to it under the Plan. Subject to the provisions of the Plan, the
Committee shall in its sole discretion determine the persons to whom, and the
times at which, Incentive Stock Options, Nonqualified Options and Limited Rights
shall be granted; the number of Shares to be subject to each option; the option
price per Share; and the term of each option. In making such determinations, the
Committee may take into consideration each employee's present and/or potential
contribution to the success of the Company and its Subsidiaries and any other
factors which the Committee may deem relevant and proper. Subject to the
provisions of the Plan, the Board of Directors or the Committee shall also
interpret the Plan; prescribe, amend and rescind rules and regulations relating
to the Plan; correct defects, supply omissions and reconcile any inconsistencies
in the Plan; and make all other determinations necessary or advisable for the
administration of the Plan. Such determinations of the Board of Directors, or of
the Committee (to the extent not reversed or modified by the Board of
Directors), shall be conclusive. A majority of the Committee shall constitute a
quorum for meetings of the Committee, and the act of a majority of the Committee
at a meeting, or an act reduced to or approved in writing by all members of the
Committee, shall be the act of the Committee.
Section 5. Eligibility.
- ---------- ------------
From time to time during the term of the Plan, the Committee may
grant one or more Incentive Stock Options and/or Nonstatutory Options to any
person who is then an officer or other key employee of the Company. A director
who is not also an employee of the Company shall not be eligible to receive
options granted under the Plan.
Section 6. Terms and Conditions of Options.
- ---------- --------------------------------
(a) Written Agreement. The terms of each option granted under the
Plan shall be set forth in a written agreement, the form of which shall be
approved by the Committee.
(b) Terms and Conditions of General Application. The following
terms and provisions shall apply to all options granted under the Plan:
4
<PAGE>
(1) No option may be granted under the Plan at an option price
per Share which is less than the Fair Market Value of a Share on the date of
grant.
(2) No option may be exercised more than ten years after the
date of grant.
(3) No option shall be exercisable within one year after the
date of grant. At the time an option is granted, the Committee may provide that
after such one year period, the option may be exercised with respect to all
Shares subject thereto, or may be exercised with respect to only a specified
number of Shares over a specified period or periods.
(4) Except as provided in Sections 6(b)(5) and 6(b)(6), an
option may be exercised only if the Grantee thereof has been continuously
employed by the Company since the date of grant. Whether authorized leave of
absence or absence for military or governmental service shall constitute a
termination of employment shall be determined by the Committee, after
consideration of the provisions of Section 1.421-7(h) of the regulations issued
under the Code, if appropriate.
(5) At the time an option is granted, or at such other time as
the Committee may determine, the Committee may provide that, if the Grantee of
the option ceases to be employed by the Company for any reason (including
retirement or disability) other than death, the option will continue to be
exercisable by the Holder (to the extent it was exercisable on the date the
Holder ceased to be employed) for such additional period (not to exceed the
remaining term of such option) after such termination of employment as the
Committee may provide.
(6) At the time an option is granted, the Committee may provide
that, if the Grantee of the option dies while employed by the Company or while
entitled to the benefits of any additional exercise period established by the
Committee with respect to such option in accordance with Section 6(b)(5), then
the option will continue to be exercisable (to the extent it was exercisable on
the date of death) by the person or persons (including the Holder's estate) to
whom the Holder's rights with respect to such option shall have passed by will
or by the laws
5
<PAGE>
of descent and distribution (or in accordance with the procedures set forth in
Section 9 hereof) for such additional period after death (not to exceed the
remaining term of such option) as the Committee may provide.
(7) At the time an option is granted, the Committee may provide
for any restriction or limitation on the exercise of such option and/or for any
restriction or limitation on the transferability of the Shares issuable upon the
exercise of such option as it may deem appropriate.
(c) Additional Provisions Applicable to Incentive Stock Options.
The following additional terms and provisions shall apply to Incentive Stock
Options granted under the Plan, notwithstanding any provision of Section 6(b) to
the contrary:
(1) By its terms, an Incentive Stock Option granted prior to
January 1, 1987 shall not be exercisable if the Holder thereof holds another
outstanding option which was granted by the Company (or a Subsidiary or a parent
corporation or predecessor corporation of the Company) at an earlier date and
which is an Incentive Stock Option within the meaning of Section 422 of the
Code. For purposes of this paragraph, an option which is an Incentive Stock
Option shall be treated as outstanding until such option is exercised in full or
expires by reason of lapse of time or expires as the result of the exercise of a
related Limited Right.
(2) No Incentive Stock Option shall be granted to an officer or
other employee who possesses directly or indirectly (within the meaning of
Section 424(d) of the Code) at the time of grant more than 10% of the voting
power of all classes of shares of the Company or of any parent corporation or
any Subsidiary of the Company unless the option price is at least 110% of the
Fair Market Value of the Shares subject to the option on the date the option is
granted and the option is not exercisable after the expiration of five years
from the date of grant.
(3) With respect to Incentive Stock Options granted on or after
January 1, 1987, no Incentive Stock Option granted under the Plan and under all
other plans of the Company
6
<PAGE>
and any parent corporation or any Subsidiary of the Company is exercisable for
the first time by a Holder in an amount in excess of $100,000 (based on Fair
Market Value at the time the option is granted) during any calendar year in
accordance with Section 422(b)(7) of the Code, as added by the Tax Reform Act of
1986 and thereafter amended.
(d) Waiver of Terms. Subject to the ten-year limitation in Section
6(b)(3), the Committee may waive or modify at any time, either before or after
the granting of an option, any condition or restriction with respect to the
exercise of such option imposed by or pursuant to this Section 6 in such
circumstances as the Committee may deem appropriate (including, without
limitation, in the event the Grantee retires with the approval of the Company,
or in the event of a proposed Acquisition Transaction, a Change in Control,
Tender Offer for Shares, or other similar transaction involving the Company).
(e) Acceleration Upon Certain Events. In the event of a Tender
Offer (other than an offer by the Company) for Shares, if the offeror acquires
Shares pursuant thereto, an Acquisition Transaction, a Change in Control or a
Change in Composition of the Board, all outstanding options granted hereunder
shall become exercisable in full (whether or not otherwise exercisable, but
subject, however, to the one year limitation set forth in Section 6(b)(3) and,
in the case of Incentive Stock Options granted prior to January 1, 1987, to the
limitation on exercise set forth in Section 6(c)(l)), effective on the date of
the first purchase of Shares pursuant to the Tender Offer, or the date of
shareholder approval of the Acquisition Transaction, or the date of filing of
the Schedule 13D or shareholder approval of the control share acquisition giving
rise in either case to the Change in Control, or the date of the Change in
Composition of the Board, as the case may be (the occurrence of any such event
is hereinafter referred to as an "Acceleration").
Section 7. Exercise of Options.
- ---------- --------------------
(a) Notice of Exercise. The Holder of an option granted under the
Plan may exercise all or part of such option by giving written notice of
exercise to the Committee or its
7
<PAGE>
designee; provided, however, that an option may not be exercised for a fraction
of a Share. No Holder of an option nor such Holder's legal representatives,
legatees, Transferees, distributees, or Designation of Beneficiary will be, or
will be deemed to be, a Holder of any Shares covered by such option unless and
until certificates for such Shares are issued in accordance with the Plan.
(b) Payment of Option Price. The option price for Shares with
respect to which an option is exercised shall be paid in full at the time such
notice is given. An option shall be deemed exercised on the date the Committee
or its designee receives written notice of exercise, together with full payment
for the Shares purchased. The option price shall be paid to the Company either
in cash or, with the approval of the Committee, Shares having a Fair Market
Value equal to the option price (or a combination of cash and Shares such that
the sum of the Fair Market Value of the Shares plus the cash equals the option
price).
(c) Payment in Cancellation of Option. The Committee shall have
the authority in its sole discretion to authorize the payment to the Holder of
an option granted under the Plan (with the consent of such Holder), in exchange
for the cancellation of all or a part of such Holder's option, of cash in an
amount not to exceed the difference between the aggregate Fair Market Value on
the date of such cancellation of the shares with respect to which the option is
being cancelled and the aggregate option price of such Shares; provided,
however, that if an Acceleration of options granted hereunder has occurred, for
purposes of this subparagraph, "Fair Market Value" on the date of such
cancellation shall be calculated in the same manner as the "exercise value" of a
Limited Right would be calculated under Section 8(c) with respect to such date
(whether or not any Limited Rights are actually outstanding).
(d) Tax Withholding. With the approval of the Committee, the
Grantee of a Nonqualified Option may elect to have the Company retain from the
Shares to be issued upon the exercise by the Grantee of such option Shares
having a Fair Market Value on the Tax Date equal to all or any part of the
federal, state and local withholding tax payments (whether mandatory or
8
<PAGE>
permissive) to be made by the Grantee with respect to the exercise of the option
(up to a maximum amount determined by the Grantee's top marginal tax rate) in
lieu of making such payments in cash. The Committee may establish from time to
time rules or limitations with respect to the right of a Grantee to elect to
have the Company retain Shares in satisfaction of withholding payments;
provided, however, that, in any event, any such election made by a person
subject to Section 16(b) of the 1934 Act must be made in accordance with any
applicable rules established under such Section.
If a Grantee transfers a Nonqualified Option pursuant to Section 9,
the Grantee is required to satisfy the applicable withholding taxes by paying
cash or other property to the Company with respect to any income recognized by
the Grantee on the exercise of such option by the Transferee. The Grantee's
withholding obligations must be satisfied on the date that the Transferee
exercises the option. If the Grantee does not satisfy the applicable withholding
tax obligation, the Company shall retain from the Shares to be issued Shares
having a Fair Market Value on the Tax Date equal to the mandatory withholding
tax payable by the Grantee.
In connection with the exercise of an option or Limited Right, the
Company has the right to require the Grantee to remit or otherwise make
available to the Company an amount sufficient to satisfy any federal, state
and/or local withholding tax requirements prior to the delivery or transfer of
any certificate or certificates for Shares (and prior to a cash payment in the
case of a Limited Right) or to take whatever action it deems necessary to
protect its interests with respect to tax liabilities in connection with the
issuance of Shares or cash payment.
Section 8. Limited Rights.
- ---------- ---------------
(a) Grant of Limited Rights. The Committee may grant Limited
Rights with respect to any option granted under the Plan either at the time the
option is granted or at any time thereafter prior to the exercise, cancellation,
termination or expiration of such option. The number of Limited Rights covered
by any such grant shall not exceed, but may be less than, the
9
<PAGE>
number of Shares covered by the related option. The term of any Limited Right
shall be the same as the term of the option to which it relates. The right of a
Holder to exercise a Limited Right shall be cancelled if and to the extent a
related option is exercised, and the right of a Holder to exercise an option
shall be cancelled if and to the extent a related Limited Right is exercised.
(b) Events Permitting Exercise of Limited Rights. A Limited Right
shall be exercisable only if and to the extent that the related option is
exercisable; provided, however, that notwithstanding the foregoing, a Limited
Right shall not be exercisable during the first six months of its term nor shall
it be exercisable unless the Fair Market Value of a Share on the date of
exercise exceeds the exercise price of a Share subject to the related option. A
Limited Right which is otherwise exercisable may be exercised only during the
following periods:
(i) during a period of 30 days following the date of expiration
of a Tender Offer (other than an offer by the Company) for Shares, if the
offeror acquires Shares pursuant to such Tender Offer;
(ii) during a period of 30 days following the date of approval
by the shareholders of the Company of a definitive agreement: (x) for the merger
or consolidation of the Company into or with another corporation, if the Company
will not be the surviving corporation or will become a Subsidiary of another
corporation, or (y) for the sale of all or substantially all of the assets of
the Company (each of the foregoing transactions is hereinafter referred to as an
"Acquisition Transaction");
(iii) during a period of 30 days following: (x) the date upon
which the Company is provided a copy of a Schedule 13D (filed pursuant to
Section 13(d) of the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder) indicating that any person or group (as such
terms are defined in Section 13(d)(3) of such act) has become the Holder of 20%
or more of the outstanding voting shares of the Company, or (y) the date of
approval by the shareholders of the Company of a control share acquisition (as
such term is defined
10
<PAGE>
in Chapter 1701 of the Ohio Revised Code) (each of the foregoing transactions is
hereinafter referred to as a "Change of Control"); and
(iv) during a period of 30 days following a change in the
composition of the Board of Directors such that individuals who were members of
the Board of Directors on the date two years prior to such change (or who were
elected, or were nominated for election, by the Company's shareholders with the
affirmative vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such two year period) no longer
constitute a majority of the Board of Directors (such a change in composition is
hereinafter referred to as a "Change in Composition of the Board").
(c) Exercise of Limited Rights. Upon exercise of a Limited Right,
the Holder thereof shall receive from the Company a cash payment equal to the
excess of: (x) the aggregate "exercise value" on the date of exercise
(determined as provided below) of that number of Shares as is equal to the
number of Limited Rights being exercised over (y) the aggregate exercise price
under the related option of that number of Shares as is equal to the number of
Limited Rights being exercised. A Holder shall exercise a Limited Right by
giving written notice of such exercise to the Committee. A Limited Right shall
be deemed exercised on the date the Committee receives such written notice.
The "exercise value" of a Limited Right on the date of exercise
shall be:
(i) in the case of an exercise during a period described in
Section 8(b)(i), the highest price per Share paid pursuant to any Tender Offer
which is in effect at any time during the 60-day period prior to the date on
which the Limited Right is exercised;
(ii) in the case of an exercise during a period described in
Section 8(b)(ii), the greater of: (x) the highest sale price of a Share during
the 30-day period prior to the date of shareholder approval of the Acquisition
Transaction, as reported on the New York Stock Exchange - Composite Transactions
Tape, or (y) the highest fixed or formula per Share
11
<PAGE>
price payable pursuant to the Acquisition Transaction (if determinable on the
date of exercise);
(iii) in the case of an exercise during a period described in
Section 8(b)(iii), the greater of: (x) the highest sale price of a Share during
the 30-day period prior to the date the Company is provided with a copy of the
Schedule 13D, or the date of approval of the control share acquisition, as
reported on the New York Stock Exchange - Composite Transactions Tape, or (y)
the highest acquisition price of a Share shown on such Schedule 13D or to be
paid in such control share acquisition; and
(iv) in the case of an exercise during a period described in
Section 8(b)(iv), the highest sale price of a Share during the 30-day period
prior to the date of the Change in Composition of the Board, as reported on the
New York Stock Exchange - Composite Transactions Tape.
Notwithstanding the foregoing, in no event shall the exercise value
of a Limited Right issued in connection with an Incentive Stock Option exceed
the maximum permissible exercise value for such a right under the Code and the
regulations and interpretations issued pursuant thereto. Any securities or
property which form part or all of the consideration paid for Shares pursuant to
a Tender Offer or Acquisition Transaction shall be valued at the higher of (1)
the valuation placed on such securities or property by the person making such
Tender Offer or the other party to such Acquisition Transaction, or (2) the
value placed on such securities or property by the Committee.
(d) Compliance with Law. The exercise of Limited Rights by
directors and officers of the Company shall be subject to, and comply with, the
applicable requirements of Rule 16b3(e) promulgated under the Securities
Exchange Act of 1934, as amended, and as the same may be amended, modified or
superseded from time to time.
Section 9. Non-Transferability.
- ---------- --------------------
Except as provided in this Section 9, options granted under the Plan
may not be sold, pledged, assigned,
12
<PAGE>
hypothecated or transferred other than by Designation of Beneficiary, or, if
none, then by will or the laws of descent and distribution and may be exercised
during the lifetime of the Grantee only by such Grantee or by his guardian or
legal representative.
Upon the death of an Option Holder, outstanding Options held by such
Holder may be exercised only by Designation of Beneficiary, or, if none, then by
the executor or administrator of the Holder's estate or by a person who shall
have acquired the right to such exercise by will or by the laws of descent and
distribution.
Subject to such conditions as the Committee may prescribe, during an
option Grantee's lifetime, the Committee may permit the transfer or assignment
of an outstanding option by such Grantee; provided, that such transfer or
assignment shall not apply to (y) an option which is an Incentive Stock Option
(but only if nontransferability is necessary in order for the option to qualify
as an Incentive Stock Option), and (z) an option granted to a person subject to
Section 16 of the 1934 Act (but only if nontransferability is necessary in order
for the option to qualify for the exemption under Rule l6b-3 of the 1934 Act).
Section 10. Adjustments Upon Changes in Capitalization.
- ----------- -------------------------------------------
In the event of a change in outstanding Shares by reason of a Share
dividend, recapitalization, merger, consolidation, split-up, combination or
exchange of Shares, or the like, the maximum number of Shares subject to option
during the existence of the Plan, the number of Limited Rights which may be
granted under the Plan, the number of Shares subject to, and the option price
of, each outstanding option, the number of Limited Rights outstanding, the Fair
Market Value of a Share on the date a Limited Right is granted, and the like
shall be appropriately adjusted by the Committee (disregarding any fractional
Shares resulting therefrom), whose determination in each case shall be
conclusive.
13
<PAGE>
Section 11. Conditions Upon Granting and Exercise of Options and Limited Rights
and Issuance of Shares.
- -------------------------------------------------------------------------------
No option or Limited Right shall be granted, no option or Limited
Right shall be exercised and Shares shall not be issued or delivered upon the
exercise of an option unless the grant and exercise thereof, and the issuance
and/or delivery of Shares pursuant thereto, or the payment therefor, shall
comply with all relevant provisions of state and federal law, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares then may be listed.
Section 12. Amendment and Termination of Plan.
- ---------------------------------------------
(a) Amendment. The Board of Directors may from time to time amend
the Plan, or any provision thereof, in such respects as the Board of Directors
may deem advisable; provided, however, that any such amendment shall be approved
by the Holders of shares entitling them to exercise a majority of the voting
power of the Company if such amendment would:
(i) materially increase the benefits accruing to participants
under the Plan;
(ii) materially increase the aggregate number of Shares which
may be issued and/or delivered under the Plan and/or the number of Shares which
may be issued and/or delivered to any individual under the Plan; or
(iii) materially modify the requirements as to eligibility for
participation in the Plan.
(b) Termination. The Board may at any time terminate the Plan.
(c) Effect of Amendment or Termination. No amendment to or
termination of the Plan shall adversely affect any option or Limited Right
previously granted under the Plan without the consent of the Holder thereof.
14
<PAGE>
Section 13. Notices.
- --------------------
Each notice relating to this Plan shall be in writing and delivered
in person or by mail to the proper address. Except as otherwise provided by the
Committee, each notice shall be deemed to have been given on the date it is
delivered or mailed, provided, however, that for a notice of exercise given in
accordance with Section 7(b), which shall be deemed to have been given on the
date it is received by the Committee with payment of the option price. Each
notice to the Committee shall be addressed as follows: The Mead Corporation,
Mead World Headquarters, Courthouse Plaza Northeast, Dayton, Ohio 45463,
Attention: Compensation Committee. Each notice to the Holder of an option or
other person or persons then entitled to exercise an option shall be addressed
to such person or persons at the Holder's address as set forth in the records of
the Company. Anyone to whom a notice may be given under this Plan may designate
a new address by written notice to the party to that effect.
Section 14. Benefits of Plan.
- -----------------------------
This Plan shall inure to the benefit of and be binding upon each
successor and assign of the Company. All rights and obligations imposed upon the
Holder of an option and all rights granted to the Company under this Plan shall
be binding upon such Holder's heirs, legal representatives and successors.
Section 15. Pronouns and Plurals.
- ---------------------------------
All pronouns shall be deemed to refer to the masculine, feminine,
singular or plural, as the identity of the person or persons may require.
Section 16. Shareholder Approval and Term of Plan.
- --------------------------------------------------
The Plan shall become effective upon its approval by the affirmative
vote (either in person or by proxy) of the Holders of shares entitling them to
exercise a majority of the voting power of the Company. The Plan shall expire on
January 26, 1994, unless sooner terminated in accordance with Section 12.
15
<PAGE>
-----------------------------------
NOTES:
- ------
(1) Adopted by the Board of Directors of the Company on January 26, 1984,
subject to approval by the shareholders of the Company.
(2) Approved by the shareholders of the Company on April 24, 1986.
(3) Amendment to Section 6(b)(5) adopted by the Board of Directors of the
Company on November 01, 1986.
(4) Amendment to Section 2, 6(4), (5) and (6), 7 and 9 by the Board of
Directors of the Company on November 09, 1996 to permit the transfer of stock
options and to allow for the designation of a beneficiary of the stock option
grant.
16
<PAGE>
Exhibit 99.2
THE MEAD CORPORATION COMPOSITE
1991 STOCK OPTION PLAN ---------
---------------------- 11/09/96
SECTION 1. PURPOSES.
The purposes of this 1991 Stock Option Plan (the "Plan") are (i) to
provide incentives to officers and other key employees of the Company upon whose
judgment, initiative and efforts the long-term growth and success of the Company
is largely dependent; (ii) to assist the Company in attracting and retaining key
employees of proven ability; and (iii) to increase the identity of interests of
such key employees with those of the Company's shareholders by providing such
employees with options to acquire Common Shares of the Company.
SECTION 2. DEFINITIONS.
For purposes of the Plan:
(a) "Acquisition Transaction" means a transaction of the type
described in Section 8(b)(ii).
(b) "Affiliate" means a person controlling, controlled by or under
common control with the Company.
(c) "Board of Directors" means the Board of Directors of the
Company.
(d) "Change in Composition of the Board" means an event of the
type described in Section 8(b)(iv).
(e) "Change in Control" means a transaction of the type described
in Section 8(b)(iii).
(f) "Committee" means the committee referred to in Section 4.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Company" means The Mead Corporation; when used in the Plan
with reference to employment, "Company" shall include any Subsidiary of the
Company.
<PAGE>
(i) "Designation of Beneficiary" means such person(s) or entity
whom the option Holder has designated by a transfer on death or other
designation of beneficiary to receive the Holder's option on the Holder's death
in accordance with such procedures established from time to time by the
Committee.
(j) "Fair Market Value" means the average of the highest sale
price and the lowest sale price of a Share on the date the value of a Share is
to be determined, as reported on the New York Stock Exchange - Composite
Transactions Tape or, if no sale is reported for such date, then on the next
preceding date for which a sale is reported.
(k) "Grantee" means the employee who received the option from the
Company.
(l) "Holder" means the person(s) or entity who owns the option,
whether Grantee, Transferee, heir or other beneficiary.
(m) "Incentive Stock Option" means an option granted under the
Plan which qualifies as an incentive stock option under Section 422 of the Code.
(n) "Limited Right" means a right granted under Section 8 of the
Plan.
(o) "Nonqualified Option" means an option granted under the Plan
which does not qualify as an incentive stock option under Section 422 of the
Code.
(p) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(q) "Share" or "Shares" means the Common Shares, without par
value, of the Company.
(r) "Subsidiary" means any corporation, partnership or other
person or entity at least 10% of the voting or equity interest of which is owned
or controlled, directly or indirectly, by the Company.
2
<PAGE>
(s) "Tender Offer" means a tender offer or a request or invitation
for tenders or an exchange offer subject to regulation under Section 14(d) of
the 1934 Act and the rules and regulations thereunder, as the same may be
amended, modified or superseded from time to time.
(t) "Tax Date" means the date as of which the amount of the
withholding tax payment with respect to the exercise of a Nonqualified Option is
calculated.
(u) "Transferee" means the person who received the option from the
Grantee during the Grantee's lifetime.
SECTION 3. SHARES SUBJECT TO THE PLAN.
(a) Number of Shares. Subject to adjustment as provided in Section
10, the maximum number of Shares that may be issued and/or delivered under the
Plan upon the exercise of options is 4,000,000. Such Shares may be either
authorized and unissued or treasury Shares. Any Shares (i) subject to an option
which for any reason has terminated or expired or has been cancelled prior to
being fully exercised or (ii) which have been received by the Company as full or
partial payment for Shares purchased pursuant to Section 7(b), may again be
subject to option under the Plan.
(b) The maximum number of Limited Rights which may be granted
under the Plan is 4,000,000. Any Limited Rights granted under the Plan which for
any reason terminate or expire or have been cancelled prior to being fully
exercised may again be granted under the Plan.
SECTION 4. ADMINISTRATION.
The Plan shall be administered by a committee (the "Committee") of
the Board of Directors, consisting of three or more directors, who shall from
time to time be appointed by, and serve at the pleasure of, the Board of
Directors. No director shall serve as a member of the Committee if he does not
qualify as a disinterested person with respect to the Plan under Rule 16b-3 (or
any successor provision) under the 1934 Act.
3
<PAGE>
The Committee shall have and exercise all the power and authority
granted to it under the Plan. Subject to the provisions of the Plan, the
Committee shall in its sole discretion determine the persons to whom, and the
times at which, Incentive Stock Options, Nonqualified Options and Limited Rights
shall be granted; the number of Shares to be subject to each option; the option
price per Share; and the term of each option. In making such determinations, the
Committee may take into consideration each employee's present and/or potential
contribution to the success of the Company and its Subsidiaries and any other
factors which the Committee may deem relevant and proper. Subject to the
provisions of the Plan, the Board of Directors or the Committee shall also
interpret the Plan; prescribe, amend and rescind rules and regulations relating
to the Plan; correct defects, supply omissions and reconcile any inconsistencies
in the Plan; and make all other determinations necessary or advisable for the
administration of the Plan. The Committee or its designee may in its discretion
change the terms of any Limited Right granted hereunder in connection with an
Incentive Stock Option to permit the Limited Right to be exercisable even though
the Fair Market Value of a Share on the date of exercise does not exceed the
exercise price of the related option. Such determinations of the Board of
Directors, or of the Committee (to the extent not reversed or modified by the
Board of Directors), shall be conclusive. A majority of the Committee shall
constitute a quorum for meetings of the Committee, and the act of a majority of
the Committee at a meeting, or an act reduced to or approved in writing by all
members of the Committee, shall be the act of the Committee.
SECTION 5. ELIGIBILITY.
From time to time during the term of the Plan, the Committee may
grant one or more Incentive Stock Options and/or Nonqualified Options to any
person who is then an officer or other key employee of the Company. A director
who is not also an employee of the Company shall not be eligible to receive
options granted under the Plan.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
(a) Written Agreement. The terms of each option granted under the
Plan shall be set forth in a written agreement, the form of which shall be
approved by the Committee.
4
<PAGE>
(b) Terms and Conditions of General Application. The following terms and
provisions shall apply to all options granted under the Plan:
(1) No option may be granted under the Plan at an option price per
Share which is less than the Fair Market Value of a Share on the date of
grant.
(2) No option may be exercised more than ten years after the date of
grant.
(3) No option shall be exercisable within one year after the date of
grant. At the time an option is granted, the Committee may provide that after
such one-year period, the option may be exercised with respect to all Shares
subject thereto, or may be exercised with respect to only a specified number of
Shares over a specified period or periods.
(4) Except as provided in Sections 6(b)(5) and 6(b)(6), an option may
be exercised only if the Grantee thereof has been continuously employed by the
Company since the date of grant. Whether authorized leave of absence or absence
for military or governmental service shall constitute a termination of
employment shall be determined by the Committee, after consideration of the
provisions of Section 1.421-7(h) of the regulations issued under the Code, if
appropriate.
(5) At the time an option is granted, or at such other time as the
Committee may determine, the Committee may provide that, if the Grantee of the
option ceases to be employed by the Company for any reason (including retirement
or disability) other than death, the option will continue to be exercisable by
the Grantee for such additional period (not to exceed the remaining term of such
option) after such termination of employment as the Committee may provide.
(6) At the time an option is granted, the Committee may provide that,
if the Grantee of the option dies while employed by the Company or while
entitled to the benefits of any additional exercise period established by the
Committee with respect to such option in accordance with Section 6(b)(5), then
the option will continue to be exercisable by the person or
5
<PAGE>
persons (including the Holder's estate) to whom the Holder's rights with respect
to such option shall have passed by will or by the laws of descent and
distribution (or in accordance with the procedures set forth in Section 9
hereof) for such additional period after death (not to exceed the remaining term
of such option) as the Committee may provide.
(7) At the time an option is granted, the Committee may provide for
any restriction or limitation on the exercise of such option and/or for any
restriction or limitation on the transferability of the Shares issuable upon the
exercise of such option as it may deem appropriate.
(c) Additional Provisions Applicable to Incentive Stock Options. The
following additional terms and provisions shall apply to Incentive Stock Options
granted under the Plan, notwithstanding any provision of Section 6(b) to the
contrary:
(1) No Incentive Stock Option shall be granted to an officer or other
employee who possesses directly or indirectly (within the meaning of Section
424(d) of the Code) at the time of grant more than 10% of the voting power of
all classes of shares of the Company or of any parent corporation or any
corporation, 50% or more of the voting stock of which is owned or controlled,
directly or indirectly, by the Company, unless the option price is at least 110%
of the Fair Market Value of the Shares subject to the option on the date the
option is granted and the option is not exercisable after the expiration of five
years from the date of grant.
(2) The aggregate Fair Market Value (determined on the date an
Incentive Stock Option is granted) of Shares with respect to which Incentive
Stock Options are exercisable for the first time by any individual in any
calendar year (under the Plan and all of the plans of the Company and any
Subsidiary and any parent corporation) shall not exceed $100,000, or such other
maximum amount permitted by the Code.
(d) Waiver of Terms. Subject to the ten-year limitation in Section
6(b)(2), the Committee may waive or modify at any time, either before or after
the granting of an option, any condition or restriction with respect to the
exercise of such option imposed by or pursuant to this Section 6 in such
6
<PAGE>
circumstances as the Committee may deem appropriate (including, without
limitation, in the event the Grantee retires with the approval of the Company,
or in the event of a proposed Acquisition Transaction, a Change in Control,
Tender Offer for Shares, or other similar transaction involving the Company).
(e) Acceleration Upon Certain Events. In the event of a Tender
Offer (other than an offer by the Company) for Shares, if the offeror acquires
Shares pursuant thereto, an Acquisition Transaction, a Change in Control or a
Change in Composition of the Board, all outstanding options granted hereunder
shall become exercisable in full (whether or not otherwise exercisable, but
subject, however, to the one-year limitation set forth in Section 6(b)(3)),
effective on the date of the first purchase of Shares pursuant to the Tender
Offer, or the date of shareholder approval of the Acquisition Transaction, or
the date of filing of the Schedule 13D or shareholder authorization of the
control share acquisition giving rise in either case to the Change in Control,
or the date of the Change in Composition of the Board, as the case may be (the
occurrence of any such event is hereinafter referred to as an "Acceleration").
SECTION 7. EXERCISE OF OPTIONS.
(a) Notice of Exercise. The Holder of an option granted under the
Plan may exercise all or part of such option by giving written notice of
exercise to the Committee or its designee; provided, however, that an option may
not be exercised for a fraction of a Share. No Holder of an option nor such
Holder's legal representatives, legatees, Transferees, distributees, or
Designation of Beneficiary will be, or will be deemed to be, a Holder of any
Shares covered by such option unless and until the option shall have been
exercised in accordance with the Plan.
(b) Payment of Option Price. The option price for Shares with
respect to which an option is exercised shall be paid in full at the time such
notice is given. An option shall be deemed exercised on the date the Committee
or its designee receives written notice of exercise, together with full payment
for the Shares purchased. The option price shall be paid to the Company either
in cash or, with the approval of the Committee,
7
<PAGE>
Shares having a Fair Market Value equal to the option price (or a combination of
cash and Shares such that the sum of the Fair Market Value of the Shares plus
the cash equals the option price).
(c) Payment in Cancellation of Option. The Committee shall have the
authority in its sole discretion to authorize the payment to the Holder of an
option granted under the Plan (with the consent of such Holder), in exchange for
the cancellation of all or a part of such Holder's option, of cash in an amount
not to exceed the difference between the aggregate Fair Market Value on the date
of such cancellation of the Shares with respect to which the option is being
cancelled and the aggregate option price of such Shares; provided, however, that
if an Acceleration has occurred, for purposes of this subparagraph, "Fair Market
Value" on the date of such cancellation shall be calculated in the same manner
as the "exercise value" of a Limited Right would be calculated under Section
8(c) with respect to such date (whether or not any Limited Rights are actually
outstanding).
(d) Tax Withholding. With the approval of the Committee, the
Grantee of a Nonqualified Option may elect to have the Company retain from the
Shares to be issued upon the exercise by the Grantee of such option Shares
having a Fair Market Value on the Tax Date equal to all or any part of the
federal, state and local withholding tax payments (whether mandatory or
permissive) to be made by the Grantee with respect to the exercise of the option
(up to a maximum amount determined by the Grantee's top marginal tax rate) in
lieu of making such payments in cash. The Committee may establish from time to
time rules or limitations with respect to the right of a Grantee to elect to
have the Company retain Shares in satisfaction of withholding payments;
provided, however, that, in any event, any such election made by a person
subject to Section 16(b) of the 1934 Act must be made in accordance with any
applicable rules established under such section.
If a Grantee transfers a Nonqualified Option pursuant to Section 9,
the Grantee is required to satisfy the applicable withholding taxes by paying
cash or other property to the Company with respect to any income recognized by
the Grantee on the exercise of such option by the Transferee. The Grantee's
8
<PAGE>
withholding obligations must be satisfied on the date that the Transferee
exercises the option. If the Grantee does not satisfy the applicable withholding
tax obligation, the Company shall retain from the Shares to be issued Shares
having a Fair Market Value on the Tax Date equal to the mandatory withholding
tax payable by the Grantee.
In connection with the exercise of an option or Limited Right, the
Company has the right to require the Grantee to remit or otherwise make
available to the Company an amount sufficient to satisfy any federal, state
and/or local withholding tax requirements prior to the delivery or transfer of
any certificate or certificates for Shares (and prior to a cash payment in the
case of a Limited Right) or to take whatever action it deems necessary to
protect its interests with respect to tax liabilities in connection with the
issuance of Shares or cash payment.
SECTION 8. LIMITED RIGHTS.
(a) Grant of Limited Rights. The Committee may grant Limited Rights
with respect to any option granted under the Plan either at the time the option
is granted or at any time thereafter prior to the exercise, cancellation,
termination or expiration of such option. The number of Limited Rights covered
by any such grant shall not exceed, but may be less than, the number of Shares
covered by the related option. The term of any Limited Right shall be the same
as the term of the option to which it relates. The right of a Holder to exercise
a Limited Right shall be cancelled if and to the extent a related option is
exercised, and the right of a Holder to exercise an option shall be cancelled if
and to the extent a related Limited Right is exercised.
(b) Events Permitting Exercise of Limited Rights. A Limited Right
shall be exercisable only if and to the extent that the related option is
exercisable; provided, however, that notwithstanding the foregoing, (x) a
Limited Right shall not be exercisable during the first six months of its term,
and (y) in the case of a Limited Right issued in connection with an Incentive
Stock Option, such Limited Right shall not be exercisable unless the Fair Market
Value of a Share on the date of exercise exceeds the exercise price of a Share
subject to the
9
<PAGE>
related option. A Limited Right which is otherwise exercisable may be exercised
only during the following periods:
(i) during a period of 30 days following the date of expiration of a
Tender Offer (other than an offer by the Company) for Shares, if the offeror
acquires Shares pursuant to such Tender Offer;
(ii) during a period of 30 days following the date of approval by the
shareholders of the Company of a definitive agreement: (x) for the merger or
consolidation of the Company into or with another corporation, if the Company
will not be the surviving corporation or will become a subsidiary of another
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving or parent entity) at least 80% of the
combined voting power of the voting securities of the Company or such surviving
or parent entity outstanding immediately after such merger or consolidation, or
(y) for the sale of all or substantially all of the assets of the Company (each
of the foregoing transactions is hereinafter referred to as an "Acquisition
Transaction");
(iii) during a period of 30 days following: (x) the date upon which
the Company is provided a copy of a Schedule 13D (filed pursuant to Section
13(d) of the 1934 Act and the rules and regulations promulgated thereunder)
indicating that any person or group (as such terms are defined in Section
13(d)(3) of the 1934 Act) has become the beneficial owner (as defined in Rule
13d-3 of the 1934 Act) of 20% or more of the outstanding voting shares of the
Company, or (y) the date of authorization, by both a majority of the voting
power of the Company and a majority of the portion of such voting power
excluding the voting power of interested shares, of a control share acquisition
(as such term is defined in Chapter 1701 of the Ohio Revised Code) (each of the
foregoing transactions is hereinafter referred to as a "Change in Control"); and
(iv) during a period of 30 days following a change in the composition
of the Board of Directors such that individuals who were members of the Board of
Directors on the
10
<PAGE>
date two years prior to such change (or who were elected, or were nominated for
election, by the Company's shareholders with the affirmative vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such two-year period) no longer constitute a majority of the Board
of Directors (such a change in composition is hereinafter referred to as a
"Change in Composition of the Board").
(c) Exercise of Limited Rights. Upon exercise of a Limited Right, the
Holder thereof shall receive from the Company a cash payment equal to the excess
of: (x) the aggregate "exercise value" on the date of exercise (determined as
provided below) of that number of Shares as is equal to the number of Limited
Rights being exercised over (y) the aggregate exercise price under the related
option of that number of Shares as is equal to the number of Limited Rights
being exercised. A Holder shall exercise a Limited Right by giving written
notice of such exercise to the Committee. A Limited Right shall be deemed
exercised on the date the Committee receives such written notice.
The "exercise value" of a Limited Right on the date of exercise shall be:
(i) in the case of an exercise during a period described in Section
8(b)(i), the highest price per Share paid pursuant to any Tender Offer which is
in effect at any time during the 60-day period prior to the date on which the
Limited Right is exercised;
(ii) in the case of an exercise during a period described in Section
8(b)(ii), the greater of: (x) the highest sale price of a Share during the 30-
day period prior to the date of shareholder approval of the Acquisition
Transaction, as reported on the New York Stock Exchange - Composite Transactions
Tape, or (y) the highest fixed or formula per Share price payable pursuant to
the Acquisition Transaction (if determinable on the date of exercise);
(iii) in the case of an exercise during a period described in Section
8(b)(iii), the greater of: (x) the highest sale price of a Share during the 30-
day period prior to the date the Company is provided with a copy of the Schedule
13D, or the date of authorization of the control share acquisition, as
11
<PAGE>
reported on the New York Stock Exchange - Composite Transactions Tape, or (y)
the highest acquisition price of a Share shown on such Schedule 13D or to be
paid in such control share acquisition; and
(iv) in the case of an exercise during a period described in Section
8(b)(iv), the highest sale price of a Share during the 30-day period prior to
the date of the Change in Composition of the Board, as reported on the New York
Stock Exchange - Composite Transactions Tape.
Notwithstanding the foregoing, in no event shall the exercise value of a
Limited Right issued in connection with an Incentive Stock Option exceed the
maximum permissible exercise value for such a right under the Code and the
regulations and interpretations issued pursuant thereto. Any securities or
property which form part or all of the consideration paid for Shares pursuant to
a Tender Offer or Acquisition Transaction shall be valued at the higher of (1)
the valuation placed on such securities or property by the person making such
Tender Offer or the other party to such Acquisition Transaction, or (2) the
value placed on such securities or property by the Committee.
(d) Compliance with Law. The exercise of Limited Rights by directors
and officers of the Company shall be subject to, and comply with, the applicable
requirements of Rule 16b-3(e) under the 1934 Act (or any successor provision),
as the same may be amended, modified or superseded from time to time.
SECTION 9. NON-TRANSFERABILITY.
Except as provided in this Section 9, options granted under the Plan may
not be sold, pledged, assigned, hypothecated or transferred other than by
Designation of Beneficiary, or, if none, then by will or the laws of descent and
distribution and may be exercised during the lifetime of the Grantee only by
such Grantee or by his guardian or legal representative.
Upon the death of an option Holder, outstanding options held by such Holder
may be exercised only by Designation of Beneficiary, or, if none, then by the
executor or administrator of the Holder's estate or by a person who shall
12
<PAGE>
have acquired the right to such exercise by will or by the laws of descent and
distribution.
Subject to such conditions as the Committee may prescribe, during an option
Grantee's lifetime, the Committee may permit the transfer or assignment of an
outstanding option by such Grantee; provided, that such transfer or assignment
shall not apply to (y) an option which is an Incentive Stock Option (but only if
nontransferability is necessary in order for the option to qualify as an
Incentive Stock Option), and (z) an option granted to a person subject to
Section 16 of the 1934 Act (but only if nontransferability is necessary in order
for the option to qualify for the exemption under Rule l6b-3 of the 1934 Act).
SECTION 10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
In the event of a change in outstanding Shares by reason of a Share
dividend, recapitalization, merger, consolidation, split-up, combination or
exchange of shares, or the like, the maximum number of Shares subject to option
during the existence of the Plan, the number of Limited Rights which may be
granted under the Plan, the number of Shares subject to, and the option price
of, each outstanding option, the number of Limited Rights outstanding, the Fair
Market Value of a Share on the date a Limited Right is granted, and the like
shall be appropriately adjusted by the Committee (disregarding any fractional
Shares resulting therefrom), whose determination in each case shall be
conclusive.
SECTION 11. CONDITIONS UPON GRANTING AND EXERCISE OF OPTIONS AND LIMITED RIGHTS
AND ISSUANCE OF SHARES.
No option or Limited Right shall be granted, no option or Limited Right
shall be exercised and Shares shall not be issued or delivered upon the exercise
of an option unless the grant and exercise thereof, and the issuance and/or
delivery of Shares pursuant thereto, or the payment therefor, shall comply with
all relevant provisions of state and federal law, including, without limitation,
the Securities Act of 1933, as amended, the 1934 Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares then may be listed.
13
<PAGE>
SECTION 12. AMENDMENT AND TERMINATION OF PLAN.
(a) Amendment. The Board of Directors may from time to time amend the
Plan, or any provision thereof, in such respects as the Board of Directors may
deem advisable; provided, however, that any such amendment shall be approved by
the Holders of Shares by such vote and otherwise in compliance with applicable
federal or state law (including Rule 16b-3 (or any successor provision) under
the 1934 Act) or the requirements of any stock exchange upon which the Shares
may then be listed.
(b) Termination. The Board may at any time terminate the Plan.
(c) Effect of Amendment or Termination. No amendment to or termination
of the Plan shall adversely affect any option or Limited Right previously
granted under the Plan without the consent of the Holder thereof.
SECTION 13. NOTICES.
Each notice relating to this Plan shall be in writing and delivered in
person or by mail to the proper address. Except as otherwise provided by the
Committee, each notice shall be deemed to have been given on the date it is
delivered or mailed, provided, however, that for a notice of exercise given in
accordance with Section 7(b), which shall be deemed to have been given on the
date it is received by the Committee with payment of the option price. Each
notice to the Committee shall be addressed as follows: The Mead Corporation,
Mead World Headquarters, Courthouse Plaza Northeast, Dayton, Ohio 45463,
Attention: Compensation Committee. Each notice to the Holder of an option or
other person or persons then entitled to exercise an option shall be addressed
to such person or persons at the Holder's address as set forth in the records of
the Company. Anyone to whom a notice may be given under this Plan may designate
a new address by written notice to the party to that effect.
SECTION 14. BENEFITS OF PLAN.
This Plan shall inure to the benefit of and be binding upon each successor
and assign of the Company. All
14
<PAGE>
rights and obligations imposed upon the Holder of an option and all rights
granted to the Company under this Plan shall be binding upon such Holder's
heirs, legal representatives and successors.
SECTION 15. PRONOUNS AND PLURALS.
All pronouns shall be deemed to refer to the masculine, feminine,
singular or plural, as the identity of the person or persons may require.
SECTION 16. SHAREHOLDER APPROVAL AND TERM OF PLAN.
The Plan shall become effective upon its approval by the affirmative vote
of the Holders of a majority of the Shares entitled to vote thereon held by
shareholders present in person or by proxy at any shareholders' meeting at which
a quorum is present. The Plan shall expire on January 24, 2001, unless sooner
terminated in accordance with Section 12.
-----------------------------------
NOTES:
- ------
(1) Adopted by the Board of Directors of the Company on January 24, 1991,
and approved by the Company's shareholders on April 25, 1991.
(2) Amendments to Sections 2, 7(a),(b),(c), and 9 adopted by the Board of
Directors of the Company on November 09, 1996 to permit the transfer of stock
options and to allow for the designation of a beneficiary of the stock option
grant.
15
<PAGE>
Exhibit 99.3
THE MEAD CORPORATION COMPOSITE
---------
1996 STOCK OPTION PLAN 11/09/96
----------------------
SECTION 1. PURPOSES.
The purposes of The Mead Corporation 1996 Stock Option Plan (the
"Plan") are (i) to provide incentives to officers, other key employees and non-
employee directors of the Company upon whose judgment, initiative and efforts
the long-term growth and success of the Company is largely dependent; (ii) to
assist the Company in attracting and retaining key employees and non-employee
directors of proven ability; and (iii) to increase the identity of interests of
such key employees and non-employee directors with those of the Company's
shareholders by providing such employees and directors with options to acquire
Shares of the Company.
SECTION 2. DEFINITIONS.
For purposes of the Plan:
(a) "Acquisition Transaction" means a transaction of the type
described in Section 9(b)(ii).
(b) "Affiliate" means a person controlling, controlled by or under
common control with the Company.
(c) "Board of Directors" or "Board" means the Board of Directors of
the Company.
(d) "Change in Composition of the Board" means an event of the type
described in Section 9(b)(iv).
(e) "Change in Control" means a transaction of the type described in
Section 9(b)(iii).
(f) "Committee" means the committee referred to in Section 4.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>
(h) "Company" means The Mead Corporation, an Ohio corporation; when
used in the Plan with reference to employment, "Company" shall include any
Subsidiary of the Company.
(i) "Designation of Beneficiary" means such person(s) or entity whom
the Option Holder has designated by a transfer on death or other designation of
beneficiary to receive the Holder's Option on the Holder's death in accordance
with such procedures established from time to time by the Committee.
(j) "Fair Market Value" means the average of the highest sale price
and the lowest sale price of a Share on the date the value of a Share is to be
determined, as reported on the New York Stock Exchange - composite Transactions
Tape or, if no sale is reported for such date, then on the next preceding date
for which a sale is reported.
(k) "Grantee" means the employee who received the option from the
Company.
(l) "Holder" means the person(s) or entity who owns the option,
whether Grantee, Transferee, heir or other beneficiary.
(m) "Incentive Stock Option" means an option granted under the Plan
which qualifies as an Incentive Stock Option under Section 422 of the Code.
(n) "Initial Director" means a person who is a Non-Employee Director
at the date of requisite approval of this Plan by the shareholders of the
Company.
(o) "Limited Right" means a right granted under Section 9 of the Plan.
(p) "Non-Employee Director" means a member of the Board who is not
also an employee of the Company.
(q) "Nonqualified Option" means an option granted under the Plan which
does not qualify as an Incentive Stock Option under Section 422 of the Code.
2
<PAGE>
(r) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(s) "Reload Option" means a Nonqualified Option granted under Section
6(d) of the Plan.
(t) "Share" or "Shares" means shares of common stock, without par
value, of the Company.
(u) "Subsequent Director" means a person who becomes a Non-Employee
Director subsequent to the date of requisite approval of this Plan by the
shareholders of the Company.
(v) "Subsidiary" means any corporation, partnership or other person or
entity at least 10% of the voting or equity interest of which is owned or
controlled, directly or indirectly, by the Company.
(w) "Tender Offer" means a tender offer or a request or invitation for
tenders or an exchange offer subject to regulation under Section 14(d) of the
1934 Act and the rules and regulations thereunder, as the same may be amended,
modified or superseded from time to time.
(x) "Tax Date" means the date as of which the amount of the
withholding tax payment with respect to the exercise of a Nonqualified Option is
calculated.
(y) "Transferee" means the person who received the option from the
Grantee during the Grantee's lifetime.
SECTION 3. SHARES SUBJECT TO THE PLAN.
(a) Number of Shares. Subject to adjustment as provided in Section 11,
the maximum number of Shares that may be issued and/or delivered under the Plan
upon the exercise of options is 4,000,000. Subject to adjustment as provided in
Section 11, the maximum number of Shares that may be issued and/or delivered
under the Plan to any individual over the term of the Plan upon the exercise of
options shall not exceed 400,000. Such Shares may be either authorized and
unissued or treasury Shares. Any shares (i) subject to an option which for
3
<PAGE>
any reason has terminated or expired or has been cancelled prior to being fully
exercised or (ii) which have been received by the Company as full or partial
payment for Shares purchased pursuant to Section 8(b), may again be granted
pursuant to options under the Plan.
(b) Subject to adjustment as provided in Section 11, the maximum
number of Limited Rights which may be granted under the Plan is 4,000,000.
Subject to adjustment as provided in Section 11, the maximum number of Limited
Rights that may be granted under the Plan to any individual over the term of the
Plan shall not exceed 400,000. Any Limited Rights granted under the Plan which
for any reason terminate or expire or have been cancelled prior to being fully
exercised may again be granted under the Plan.
SECTION 4. ADMINISTRATION.
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors, consisting of three or more directors, who shall from time
to time be appointed by and serve at the pleasure of, the Board of Directors. No
director shall serve as a member of the Committee if (i) he or she does not
qualify as a disinterested person with respect to the Plan under Rule 16b-3 (or
any successor provision) under the 1934 Act or (ii) he or she does not qualify
as an outside director within the meaning of Section 162(m) of the Code.
The Committee shall have and exercise all the power and authority
granted to it under the Plan. Subject to the provisions of the Plan, the
Committee shall in its sole discretion determine the persons to whom, and the
times at which, Incentive Stock Options, Nonqualified Options, Reload Options
and Limited Rights shall be granted; the number of Shares to be subject to each
option; the option price per Share; and the term of each option. In making such
determinations, the Committee may take into consideration each participant's
present and/or potential contribution to the success of the Company and any
other factors which the Committee may deem relevant and proper. Subject to the
provisions of the Plan, the Committee shall also interpret the Plan; prescribe,
amend and rescind rules and regulations relating to the Plan; correct defects,
supply omissions and
4
<PAGE>
reconcile any inconsistencies in the Plan; and make all other determinations
necessary or advisable for the administration of the Plan. The Committee may in
its discretion change the terms of any Limited Right granted hereunder in
connection with an Incentive Stock Option to permit the Limited Right to be
exercisable even though the Fair Market Value of a Share on the date of exercise
does not exceed the exercise price of the related option. Such determinations of
the Committee shall be conclusive. A majority of the Committee shall constitute
a quorum for meetings of the Committee, and the act of a majority of the
Committee at a meeting, or an act reduced to or approved in writing by all
members of the Committee, shall be the act of the Committee.
SECTION 5. ELIGIBILITY.
From time to time during the term of the Plan, the Committee may grant
one or more Incentive Stock Options, Nonqualified Options and Reload Options to
any person who is then an officer or other key employee of the Company. Each
Non-Employee Director shall be eligible to receive Nonqualified Options granted
under the formula provision set forth in Section 7 of the Plan.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
(a) Written Agreement. The terms of each option granted under the Plan
shall be set forth in a written agreement, the form of which shall be approved
by the Committee.
(b) Terms and conditions of General Application. The following terms
and provisions shall apply to all options granted under the Plan, except to the
extent otherwise provided in Sections 6(c), 6(d), 6(e), 6(f) and 7 hereof, if
applicable:
(1) No option may be granted under the Plan at an option price
per Share which is less than the Fair Market Value of a share on the date of
grant.
(2) No option may be exercised more than ten years after the date
of grant.
5
<PAGE>
(3) No option shall be exercisable within one year after the date
of grant. At the time an option is granted, the Committee may provide that after
such one year period, the option may be exercised with respect to all Shares
subject thereto, or may be exercised with respect to only a specified number of
Shares over a specified period or periods.
(4) Except as provided in Sections 6(b) (5) and 6(b)(6), an
option may be exercised only if the Grantee of such option has been continuously
employed by the Company since the date of grant. Whether authorized leave of
absence or absence for military or governmental service shall constitute a
termination of employment shall be determined by the Committee in its sole
discretion.
(5) At the time an option is granted, or at such other time as
the Committee may determine, the Committee may provide that, if the Grantee of
the option ceases to be employed by the Company for any reason (including
retirement or disability) other than death, the option will continue to be
exercisable by the Holder (including a Transferee under Section 10 hereof) for
such additional period (not to exceed the remaining term of such option) after
such termination of employment as the Committee may provide.
(6) At the time an option is granted, the Committee may provide
that, if the Grantee of such option dies while employed by the Company or while
entitled to the benefits of any additional exercise period established by the
Committee with respect to such option in accordance with Section 6(b)(5), then
the option will continue to be exercisable by the person or persons to whom the
Grantee's rights with respect to such option shall have passed by will or by the
laws of descent and distribution (or in accordance with the procedures set forth
in Section 10 hereof) for such additional period after death (not to exceed the
remaining term of such option) as the Committee may provide.
(7) At the time an option is granted, the Committee may provide
for any restriction or limitation on the exercise of such option and/or for any
restriction or limitation on the transferability of the Shares issuable upon the
exercise of such option as it may deem appropriate.
6
<PAGE>
(c) Additional Provisions Applicable to Incentive Stock Options. The
following additional terms and provisions shall apply to Incentive Stock Options
granted under the Plan, notwithstanding any provision of Section 6(b) to the
contrary:
(1) No Incentive Stock Option shall be granted to an officer or
other employee who possesses directly or indirectly (within the meaning of
Section 424(d) of the Code) at the time of grant more than 10% of the voting
power of all classes of Shares of the Company or of any parent corporation or
any corporation, 50% or more of the voting stock of which is owned or
controlled, directly or indirectly, by the Company, unless the option price is
at least 110% of the Fair Market Value of the Shares subject to the option on
the date the option is granted and the option is not exercisable after the
expiration of five years from the date of grant.
(2) The aggregate Fair Market Value (determined on the date an
Incentive Stock Option is granted) of Shares with respect to which Incentive
Stock Options are exercisable for the first time by any individual in any
calendar year (under the Plan and all of the plans of the Company and any
Subsidiary and any parent corporation) shall not exceed $100,000, or such other
maximum amount permitted by the Code.
(3) Any Stock Option granted under the Plan may contain a feature
providing for, upon the exercise thereof, the grant of a Reload Option subject
to and in accordance with the terms and conditions set forth in Section 6(d)
below.
(d) Additional Provisions Applicable to Reload Options. Whenever the
Grantee of any option containing a reload feature (the "Original Option")
outstanding under this Plan exercises such Original Option, the Grantee of such
Original Option (except as provided in Section 6(d)(5) below) shall be granted
on the date of such exercise (the "Reload Date") a new option (the "Reload
Option") for a number of Shares (the "Original Shares") equal to the number of
Shares subject to the Original Option being exercised less the number of Shares
subject to the Original Option which are (A) withheld by the Company as full or
partial payment of the option price
7
<PAGE>
for such Original Option, (B) otherwise disposed of for purposes of having the
proceeds applied for such purpose or (C) withheld by the Company for purposes of
tax withholding in accordance with Section 8(d) hereof. The following additional
terms and provisions shall apply to Reload Options granted under the Plan,
notwithstanding any provision of Section 6(b) to the contrary:
(1) Option Price. The option price per Share covered by a
Reload Option shall be an amount equal to the Fair Market Value per Share as of
the Reload Date.
(2) Expiration Date. Subject to Section 6(d)(4) below, the
option exercise period shall expire on, and the Reload Option shall no longer be
exercisable following, the tenth anniversary of the Reload Date.
(3) Vesting Period. Reload Options granted under this Section
6(d) shall vest and become exercisable with respect to all Shares covered
thereby on the third anniversary of the Reload Date, subject to Section 6(f)
hereof.
(4) Automatic Cancellation. Except as otherwise provided in the
agreement evidencing a Reload Option, a Reload Option shall be immediately
cancelled (without any action taken by the Company) with respect to that number
of Shares subject to such Reload Option (such number of Shares being determined
in accordance with the succeeding sentence), effective immediately upon any
sale, disposition or purported assignment or transfer of any or all of the
Original Shares subject to the Original Option prior to the third anniversary of
the Reload Date. The number of Shares subject to the Reload Option so cancelled
shall equal the number of Original Shares subject to the Original Option so
sold, disposed of, assigned or transferred prior to the third anniversary of the
Reload Date; provided, however, that such Shares subject to the Reload Option
shall not be cancelled if such Original Shares are used in connection with the
exercise of another option with respect to which Section 6(d) hereof applies.
(5) Active Employee. No Reload Option shall be granted to any
person who is not employed by the Company at the time of exercise of an Original
Option.
8
<PAGE>
(e) Waiver of Terms. Subject to the ten-year limitation in Section
6(b)(3), the Committee may waive or modify at any time, either before or after
the granting of an option (including a Reload Option but excluding any option
granted under Section 7 hereof) any condition or restriction with respect to the
exercise of such option imposed by or pursuant to this Section 6 in such
circumstances as the committee may deem appropriate (including, without
limitation, in the event the Grantee retires with the approval of the Company,
or in the event of a proposed Acquisition Transaction, a Change in Control,
Tender Offer for Shares, or other similar transaction involving the Company).
(f) Acceleration Upon Certain Events. Notwithstanding any other
provision of the Plan to the contrary, in the event of a Tender Offer (other
than an offer by the Company) for Shares pursuant to which the offeror acquires
Shares, or in the event of an Acquisition Transaction, a Change in control or a
Change in Composition of the Board, all outstanding options granted hereunder
(including Reload Options and options granted pursuant to Section 7 below) shall
become exercisable in full (whether or not otherwise exercisable) effective on
the date of the first purchase of Shares pursuant to the Tender Offer, or the
date of shareholder approval of the Acquisition Transaction, or the date of
filing of the Schedule 13D or shareholder authorization of the control Share
acquisition giving rise in either case to the Change in Control, or the date of
the change in Composition of the Board, as the case may be (the occurrence of
any such event is hereinafter referred to as an "Acceleration"); provided,
however, that no option shall be exercisable under this subpart (f) until six
months after the date of grant.
SECTION 7. NON-EMPLOYEE DIRECTORS FORMULA OPTIONS.
The following additional terms and provisions of this Section 7 shall
apply to grants of options to Non-Employee Directors under the Plan,
notwithstanding any provision of Section 6(b) to the contrary. The provisions of
this Section 7 shall not be amended more than once every six months, other than
to comport with changes in the Code, the Employee Retirement Income Security Act
of 1974, as amended, or the rules promulgated thereunder.
9
<PAGE>
(a) General. Non-Employee Directors shall receive Nonqualified
Options under the Plan. The option price per Share shall equal the Fair Market
Value of a Share on the date of grant.
(b) Initial Grants to Initial Directors. Upon the requisite
approval of the Plan by the shareholders of the Company, each Initial Director
shall be granted automatically an option to purchase 300 Shares.
(c) Initial Grants To Subsequent Directors. Each Subsequent
Director shall, at the time such director becomes a Non-Employee Director, be
granted automatically an option to purchase 300 Shares.
(d) Subsequent Grants To Directors. On January 3rd of each year
beginning on January 3, 1997, each continuing Initial Director shall be granted
automatically an option to purchase a number of Shares determined below. On
January 3rd of each year subsequent to a Subsequent Director's becoming a Non-
Employee Director, each Subsequent Director shall be granted automatically an
option to purchase a number of Shares determined below. The number of Shares
subject to each grant made pursuant to this Paragraph (d) shall equal the
product obtained by multiplying (w) 300, by (x) an adjustment factor (the
"Factor"). The Factor shall equal the quotient obtained by dividing (y) the
"base line number" for average "total compensation" paid to directors by
companies with annual sales in excess of $4 billion, as published in the Hay
Consulting Group's "Directors Compensation Report" (or comparable successor
report) in the calendar year immediately preceding the year in which such grant
is made, which report covers compensation paid in the year ending immediately
prior to the year of publication, by (z) $36,246. In the event that such
Directors Compensation Report (or comparable successor report) is not published
with respect to any year, the Factor shall equal one (1).
(e) Exercisability. Subject to Section 6(f) hereof, each option
granted under this Section 7 shall be exercisable as to 100 percent of the
Shares covered by the option on the first anniversary of the date the option is
granted.
10
<PAGE>
(f) Termination. Upon the termination of a Non-Employee Director
from such position, for any reason, after such director has attained either age
70 or ten (10) years of service as a director of the Company (whether or not as
a Non-Employee Director), each option granted to such Non-Employee Director
pursuant to this Section 7 which is exercisable at the time of such termination
shall remain exercisable for the remainder of its term. Upon the termination of
a Non-Employee Director from such position, for any reason, prior to me
attainment of age 70 or ten (10) years of service as a director of the Company
(whether or not as a Non-Employee Director), all options granted to such Non-
Employee Director pursuant to this Section 7 which are exercisable at the time
of such termination shall remain exercisable for a period or one year following
the date of such termination, but in no event may the term of an option be
extended beyond its expiration date. Each option granted pursuant to this
Section 7 which is not exercisable at the time of such termination shall be
immediately cancelled.
SECTION 8. EXERCISE OF OPTIONS.
(a) Notice of Exercise. The Holder of an option granted under the
Plan may exercise all or part of such option by giving written notice of
exercise to the Committee or its designee; provided, however, that an option may
not be exercised for a fraction of a Share. No Holder of an option nor such
Holder's legal representatives, legatees, Transferees, distributees or
Designation of Beneficiary will be, or will be deemed to be, a Holder of any
Shares covered by such option unless and until the option shall have been
exercised in accordance with the Plan.
(b) Payment of Option Price. The option price for Shares with
respect to which an option is exercised shall be paid in full at the time such
notice is given. An option shall be deemed exercised on the date the Committee
or its designee receives written notice of exercise, together with full payment
for the Shares purchased. The option price shall be paid to the Company either
in cash or Shares (including Shares withheld from the Shares otherwise
receivable by the Option Holder upon the exercise of the option) having a Fair
Market Value equal to the option price (or a combination of
11
<PAGE>
cash and Shares such that the sum of the Fair Market Value of the Shares plus
the cash equals the option price). The Committee shall have the authority,
subject to such conditions and procedures that it deems necessary and advisable,
to authorize the use of a cashless exercise procedure with a registered
broker/dealer.
(c) Payment in Cancellation of Option. The Committee shall have
the authority in its sole discretion to authorize the payment to an Option
Holder (with the consent of such Holder) in exchange for the cancellation of all
or a part of such Holder's Option (other than an option granted under Section 7
hereof), of cash in an amount per Share not to exceed the difference between the
aggregate Fair Market Value on the date of such cancellation of the Shares and
the aggregate option price of such Shares; provided, however, that if an
Acceleration has occurred, for purposes of this subparagraph, "Fair Market
Value" on the date of such cancellation shall be calculated in the same manner
as the "exercise value" of a Limited Right would be calculated under Section
9(c) with respect to such date (whether or not any Limited Rights are actually
outstanding).
(d) Tax Withholding. With the approval of the Committee, the
Grantee of a Nonqualified Option may elect to have the Company retain from the
Shares to be issued upon the exercise by the Grantee of such option Shares
having a Fair Market Value on the Tax Date equal to all or any part of the
federal, state and local withholding tax payments (whether mandatory or
permissive) to be made by the Grantee with respect to the exercise of the option
(up to a maximum amount determined by the Grantee's top marginal tax rate) in
lieu of making such payments in cash. The Committee may establish from time to
time rules or limitations with respect to the right of a Grantee to elect to
have the Company retain Shares in satisfaction of withholding payments;
provided, however, that, in any event, any such election made by a person
subject to Section 16(b) of the 1934 Act must be made in accordance with any
applicable rules established under such Section.
If a Grantee transfers a Nonqualified Option pursuant to Section 10,
the Grantee is required to satisfy the applicable withholding taxes by paying
cash or other property
12
<PAGE>
to the Company with respect to any income recognized by the Grantee on the
exercise of such option by the Transferee. The Grantee's withholding obligations
must be satisfied on the date that the Transferee exercises the option. If the
Grantee does not satisfy the applicable withholding tax obligation, the Company
shall retain from the Shares to be issued Shares having a Fair Market Value on
the Tax Date equal to the mandatory withholding tax payable by the Grantee.
In connection with the exercise of an option or Limited Right, the
Company has the right to require the Grantee to remit or otherwise make
available to the Company an amount sufficient to satisfy any federal, state
and/or local withholding tax requirements prior to the delivery or transfer of
any certificate or certificates for Shares (and prior to a cash payment in the
case of a Limited Right) or to take whatever action it deems necessary to
protect its interests with respect to tax liabilities in connection with the
issuance of Shares or cash payment.
Section 9. Limited Rights.
(a) Grant of Limited Rights. The Committee may grant Limited
Rights with respect to any option granted under the Plan (other than an option
granted under Section 7) either at the time the option is granted or at any time
thereafter prior to the exercise, cancellation, termination or expiration of
such option. The number of Limited Rights covered by any such grant shall not
exceed, but may be less than, the number of Shares covered by the related
option. The term of any Limited Right shall be the same as the term of the
option to which it relates. The right of a Holder to exercise a Limited Right
shall be cancelled if and to the extent a related option is exercised, and the
right of a Holder to exercise an option shall be cancelled if and to the extent
a related Limited Right is exercised.
(b) Events permitting Exercise of Limited Rights. A Limited Right
shall be exercisable only if and to the extent that the related option is
exercisable; provided, however, that notwithstanding the foregoing, (x) a
Limited Right shall not be exercisable during the first six months of its term,
and (y) in the case of a Limited Right issued in connection with an
13
<PAGE>
Incentive Stock Option, such Limited Right shall not be exercisable unless the
Fair Market Value of a Share on the date of exercise exceeds the exercise price
of a Share subject to the related option. A Limited Right which is otherwise
exercisable may be exercised only during the following periods:
(i) during a period of 30 days following the date of
expiration of a Tender Offer (other than an offer by the Company) for Shares, if
the offeror acquires Shares pursuant to such Tender offer;
(ii) during a period of 30 days following the date of approval
by the shareholders of the Company of a definitive agreement: (x) for the merger
or consolidation of the Company into or with another corporation, if the Company
will not be the surviving corporation or will become a subsidiary of another
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving or parent entity) at least 80% of the
combined voting power of the voting securities of the Company or such surviving
or parent entity outstanding immediately after such merger or consolidation, or
(y) for the sale of all or substantially all of the assets of the Company (each
of the foregoing transactions is hereinafter referred to as an "Acquisition
Transaction");
(iii) during a period of 30 days following: (x) the date upon
which the Company is provided a copy of a Schedule 13D (filed pursuant to
Section 13(d) of the 1934 Act and the rules and regulations promulgated
thereunder) indicating that any person or group (as such terms are defined in
Section 13(d)(3) of the 1934 Act) has become the beneficial owner (as defined in
Rule 13d-3 of the 1934 Act) of 20% or more of the outstanding voting Shares of
the Company or (y) the date of authorization, by both a majority of the voting
power of the Company and a majority of the portion of such voting power
excluding the voting power of interested Shares, of a control Share acquisition
(as such term is defined in Chapter 1701 of the Ohio Revised code) (each of the
foregoing transactions is hereinafter referred to as a "Change in Control"); and
14
<PAGE>
(iv) during a period of 30 days following a change in the
composition of the Board of Directors such that individuals who were members of
the Board of Directors on the date two years prior to such change (or who were
elected, or were nominated for election, by the Company's shareholders with the
affirmative vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such two year period) no longer
constitute a majority of the Board of Directors (such a change in composition is
hereinafter referred to as a "Change in composition of the Board").
(c) Exercise of Limited Rights. Upon exercise of a Limited Right,
the Holder thereof shall receive from the Company a cash payment equal to the
excess of: (x) the aggregate "exercise value" on the date of exercise
(determined as provided below) of that number of Shares as is equal to the
number of Limited Rights being exercised over (y) the aggregate exercise price
under the related option of that number of Shares as is equal to the number of
Limited Rights being exercised. A Holder shall exercise a Limited Right by
giving written notice of such exercise to the Committee. A Limited Right shall
be deemed exercised on the date the Committee receives such written notice.
The "exercise value" of a Limited Right on the date of exercise shall
be:
(i) in the case of an exercise during a period described in
Section 9(b)(i), the highest price per Share paid pursuant to any Tender Offer
which is in effect at any time during the 60-day period prior to the date on
which the Limited Right is exercised;
(ii) in the case of an exercise during a period described in
Section 9(b)(ii), the greater of: (x) the highest sale price of a Share during
the 30-day period prior to the date of shareholder approval of the Acquisition
Transaction, as reported on the New York Stock Exchange - Composite Transactions
Tape, or (y) the highest fixed or formula per Share price payable pursuant to
the Acquisition Transaction (if determinable on the date of exercise);
15
<PAGE>
(iii) in the case of an exercise during a period described in
Section 9(b)(iii), the greater of: (x) the highest sale price of a Share during
the 30-day period prior to the date the Company is provided with a copy of the
Schedule l3D, or the date of authorization of the control Share acquisition, as
reported on the New York Stock Exchange - Composite Transactions Tape, or (y)
the highest acquisition price of a Share shown on such schedule 13D or to be
paid in such control Share acquisition; and
(iv) in the case of an exercise during a period described in
Section 9(b)(iv), the highest sale price of a Share during the 30-day period
prior to the date of the change in Composition of the Board, as reported on the
New York Stock Exchange - Composite Transactions Tape. Notwithstanding the
foregoing, in no event shall the exercise value of a Limited Right issued in
connection with an Incentive Stock Option exceed the maximum permissible
exercise value for such a right for purposes of Section 422 of the Code and the
regulations and interpretations issued pursuant thereto. Any securities or
property which form part or all of the consideration paid for Shares pursuant to
a Tender Offer or Acquisition Transaction shall be valued at the higher of (l)
the valuation placed on such securities or property by the person making such
Tender Offer or the other party to such Acquisition Transaction, or (2) the
value placed on such securities or property by the Committee.
(d) Compliance with Law. The exercise of Limited Rights by directors
and officers of the Company shall be subject to, and comply with, the applicable
requirements of Rule 16b-3(e) under the 1934 Act (or any successor provision),
as the same may be amended, modified or superseded from time to time.
Section 10. Transfers Upon Death; Nonassignability.
Except as provided in this Section 10, options granted under the Plan
may not be sold, pledged, assigned, hypothecated or transferred other than by
Designation of Beneficiary, or, if none, then by will or the laws of descent and
distribution and may be exercised during the lifetime of the Grantee only by
such Grantee or by his guardian or legal representative.
16
<PAGE>
Upon the death of an Option Holder, outstanding Options held by such
Holder may be exercised only by Designation of Beneficiary, or, if none, then by
the executor or administrator of the Holder's estate or by a person who shall
have acquired the right to such exercise by will or by the laws of descent and
distribution.
Subject to such conditions as the Committee may prescribe, during an
option Grantee's lifetime, the Committee may permit the transfer or assignment
of an outstanding option by such Grantee; provided, that such transfer or
assignment shall not apply to (y) an option which is an Incentive Stock Option
(but only if nontransferability is necessary in order for the option to qualify
as an Incentive Stock Option) and (z) an option granted to a person subject to
Section 16 of the 1934 Act (but only if nontransferability is necessary in order
for the option to qualify for the exemption under Rule l6b-3 of the 1934 Act).
Section 11. Adjustments Upon Changes in Capitalization.
In the event of a change in outstanding Shares by reason of a Share
dividend, recapitalization, merger, consolidation, split-up, combination or
exchange of Shares, or the like, or in the event of any similar corporate
transaction which the Committee determines requires the adjustments described
herein, the maximum number of Shares subject to option during the existence of
the Plan, the number of Limited Rights which may be granted under the Plan, the
number of Shares subject to, and the option price of, each outstanding option,
the maximum number of Shares or Limited Rights which may be granted to any
individual over the term of the Plan, the number of Limited Rights outstanding,
the Fair Market Value of a Share on the date a Limited Right is granted, and the
like shall be appropriately adjusted by the Committee (disregarding any
fractional Shares resulting therefrom), whose determination in each case shall
be conclusive.
Section 12. Conditions Upon Granting and Exercise of Options and Limited Rights
and Issuance of Shares.
No option or Limited Right shall be granted, no option or Limited
Right shall be exercised and Shares shall not
17
<PAGE>
be issued or delivered upon the exercise of an option unless the grant and
exercise thereof, and the issuance and/or delivery of Shares pursuant thereto,
or the payment therefor, shall comply with all relevant provisions of state and
federal law, including, without limitation, the Securities Act of 1933, as
amended, the 1934 Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares then may be listed.
SECTION 13. AMENDMENT AND TERMINATION OF PLAN.
(a) Amendment. The Board of Directors may from time to time amend the
Plan, or any provision thereof, in such respects as the Board of Directors may
deem advisable; provided, however, that any such amendment shall be approved by
the holders of Shares by such vote and otherwise in compliance with applicable
federal or state law (including Rule 16b-3 (or any successor provision) under
the 1934 Act) or the requirements of any stock exchange upon which the Shares
may then be listed.
(b) Termination. The Board may at any time terminate the Plan.
(c) Effect of Amendment or Termination. No amendment to or
termination of the Plan shall adversely affect any option or Limited Right
previously granted under the Plan without the consent of the Holder thereof.
SECTION 14. NOTICES.
Each notice relating to this Plan shall be in writing and delivered in
person or by mail to the proper address. Except as otherwise provided by the
Committee, each notice shall be deemed to have been given on the date it is
delivered or mailed, provided, however, that for a notice of exercise given in
accordance with Section 8(b), which shall be deemed to have been given on the
date it is received by the Committee with payment of the option price. Each
notice to the Committee shall be addressed as follows: The Mead Corporation,
Mead World Headquarters, Courthouse Plaza Northeast, Dayton, Ohio 45463,
Attention: Compensation Committee. Each notice to the Holder of an option or
other person or persons then
18
<PAGE>
entitled to exercise an option shall be addressed to such person or persons at
The Holder's address as set forth in the records of the Company. Anyone to whom
a notice may be given under this Plan may designate a new address by written
notice to the party to that effect.
SECTION 15. BENEFITS OF PLAN.
This Plan shall insure to the benefit of and be binding upon each
successor and assign of the Company. All rights and obligations imposed upon the
Holder of an option and all rights granted to the Company under this Plan shall
be binding upon such Holder's heirs, legal representatives and successors.
SECTION 16. PRONOUNS AND PLURALS.
All pronouns shall be deemed to refer to the masculine, feminine,
singular or plural, as the identity of the person or persons may require.
SECTION 17. SHAREHOLDER APPROVAL AND TERM OF PLAN.
The Plan shall become effective upon its approval by the affirmative
vote of the holders of a majority of the Shares entitled to vote thereon held by
shareholders present in person or by proxy at any shareholders' meeting at which
a quorum is present. The Plan shall expire on September 30, 2005, unless sooner
terminated in accordance with Section 13.
SECTION 18. INTERPRETATION.
The Plan is designed and intended to comply with Rule 16b-3
promulgated under the 1934 Act and Section 162(m) of the Code and all provisions
hereof shall be construed in a manner to so comply.
------------------------------------------------
NOTES:
(1) Adopted by the Board of Directors of the Company on October 28, 1995,
and approved by the Company's shareholders on April 25, 1996.
(2) Amendments to Sections 2, 6 (b) and (e), 8 (a) and (d), 10 and 14 to
allow for the designation of a beneficiary of the stock option grant.
19
