<PAGE>
PRELIMINARY COPY
The Mead Corporation
Mead World Headquarters
Courthouse Plaza Northeast
Dayton, Ohio 45463
March ___, 1996
To the Holders of Common Shares:
The Annual Meeting of Shareholders of The Mead
Corporation will be held at the Blair Auditorium,
Sinclair Community College, 444 West Third Street,
Dayton, Ohio, on Thursday, April 25, 1996 at 4:00
p.m. The format of the Meeting has been changed
from prior years to eliminate nonessentials and to
shorten the length. Formal Notice of the Meeting
and Proxy Statement accompany this letter.
A prompt execution and return of your proxy will
both assure the presence of a quorum at the
meeting and minimize the cost of the proxy
solicitation. A postage paid envelope is enclosed
for your convenience in replying.
Very truly yours,
Steven C. Mason
Chairman of the Board
<PAGE>
Notice of Annual
Meeting Of Shareholders
The Mead Corporation Dayton, Ohio
Mead World Headquarters March ___, 1996
Courthouse Plaza Northeast
Dayton, Ohio 45463
To the Holders of Common Shares of
THE MEAD CORPORATION
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of The Mead Corporation will be held
at the Blair Auditorium, Sinclair Community
College, 444 West Third Street, Dayton, Ohio, on
Thursday, April 25, 1996 at 4:00 p.m., for the
following purposes:
1. To elect four directors for a term of
three years or one year, depending on the
vote to amend the Regulations.
2. To consider and vote upon approval of the
1996 Stock Option Plan;
3. To consider and vote upon approval of
certain amendments to the Restricted
Stock Plan;
4. To consider and vote upon adoption of
amendments to Article II, Sections 2, 3
and 5 of the Regulations to provide for
the annual election of directors in a
manner that does not affect the unexpired
terms of directors previously elected.
5. To consider and vote upon a shareholder
proposal urging Mead's Board of Directors
to seek shareholder approval for all
present and future executive officer
severance agreements, which is opposed by
the Board of Directors; and
6. To transact such other business as may
properly come before the meeting or any
adjournment.
The close of business on February 27, 1996 has
been fixed as the record date for the
determination of the shareholders entitled to
notice of and to vote at the Annual Meeting and
any adjournment. The stock transfer books will
not be closed.
Please complete, sign, date and return the
enclosed proxy promptly so that we may have the
fullest expression possible of the wishes of the
shareholders.
By order of the Board of Directors
George J. Maly, Jr.
Secretary
<PAGE>
Proxy Statement
For 1996 Annual Meeting
The Mead Corporation
Mead World Headquarters
Courthouse Plaza Northeast
Dayton, Ohio 45463
March ___, 1996
This Proxy Statement is furnished in connection
with the solicitation by the Board of Directors of
The Mead Corporation ("Mead") of proxies to be
used at the Annual Meeting of Shareholders to be
held on April 25, 1996 and any adjournment. The
close of business on February 27, 1996 has been
fixed as the record date for the determination of
the holders of Common Shares entitled to notice
and to vote. There were outstanding on the record
date __________ Common Shares.
The holders of Common Shares are entitled to one
vote per share upon all matters set forth in the
Notice of the Annual Meeting.
A shareholder signing and returning a proxy has
the power to revoke it at any time prior to its
exercise by giving notice to Mead in writing or in
open meeting, but without affecting any vote
previously taken. Unless revoked, the shares
represented by the proxy will be voted as stated
thereon.
1
<PAGE>
Election of Directors
Mead's Regulations provide that the Board of Directors is classified into three
classes with each class serving a three-year term and with one class standing
for election at each Annual Meeting. At the 1996 Annual Meeting, the terms of
John A. Krol, Steven C. Mason, Paul F. Miller, Jr., and Lee J. Styslinger, Jr.
expire, and in accordance with a recommendation of the Board of Directors and
its Nominating & Organization Committee, each of them will stand for re-election
to a new three-year term expiring at the Annual Meeting in 1999. If the
proposed amendments to Article II, Sections 2, 3 and 5 of the Regulations are
adopted, the directors being voted upon at this year's 1996 Annual Meeting will
be elected for a term of one year.
James G. Kaiser was elected to the Board of Directors on October 28, 1995 for a
term expiring at the 1998 Annual Meeting. Susan J. Kropf was elected to the
Board of Directors on January 25, 1996 for a term expiring at the 1997 Annual
Meeting.
Barbara C. Jordan passed away on January 17, 1996. Ms. Jordan's vision of the
world we live in coupled with her extraordinary dedication to Mead's mission,
guided and counselled us beyond her role as a director. Her commitment to
social justice, diversity and the environment significantly contributed to
Mead's progress and focus in these areas. Ms. Jordan will be missed.
The business experience and other information concerning the nominees for
director, and the directors continuing in office after the Annual Meeting, are
set forth on pages 3 through 5.
Directors are elected by a plurality of the votes cast. Abstentions and nonvotes
are not considered. It is the intention of the persons named in the
accompanying form of proxy, unless authorization to do so is withheld, to vote
for the election of the four nominees. The holders of the proxies may, in their
discretion, vote for a substitute nominee(s) designated by the directors in the
event that any nominee becomes unable to serve for any reason presently unknown.
Under Ohio law, if a shareholder gives written notice to the President, a Vice
President or the Secretary, not less than 48 hours before the time fixed for the
Annual Meeting, that such shareholder desires the voting at the election of
directors to be cumulative, and if an announcement of the giving of such notice
is made upon the convening of the meeting by or on behalf of the shareholder
giving such notice, then the directors will be elected by cumulative voting. In
such event, each shareholder has the right to give one candidate a number of
votes equal to the number of directors then being elected multiplied by the
number of such shareholder's shares, or to distribute such shareholder's votes
on the same principle among two or more candidates within such class. In the
event of cumulative voting for directors, unless otherwise indicated by the
shareholder, a vote for the nominees of the Board of Directors will give the
proxyholders discretionary authority to cumulate all votes to which the
shareholder is entitled and to allocate them in favor of any one or more of such
nominees as the persons named in the enclosed proxy determine. If a shareholder
desires specifically to allocate votes among one or more nominees, the
shareholder should so specify on the proxy card.
2
<PAGE>
Nominees for Director for a three-year term expiring in 1999
or 1997, depending on the vote to amend the Regulations
Picture of John A. Krol
John A. Krol
Mr. Krol has been a director
and Vice Chairman of E. I. du
Pont de Nemours and
Company since April 1992. In
1995 he was elected
President and Chief Executive
Officer. He was Senior Vice
President - DuPont Fibers
from November 1990 through
March 1992.
Age: 59
Director Since: 1994
Committees:
Corporate Objectives
Corporate Responsibility
Finance
Nominating & Organization
Picture of Steven C. Mason
Steven C. Mason
Mr. Mason was elected
Chairman of the Board and
Chief Executive Officer in
May 1992 and President in
December 1994. Prior to
that he was elected Vice
Chairman in April 1991 and
served as President and
Chief Operating Officer
during 1982-1991.
Age: 60
Director Since: 1982
Committees:
Executive (chairman) and
ex-officio member of the
other Committees of the
Board
Other Directorships:
PPG Industries, Inc.
Picture of Paul F. Miller, Jr.
Paul F. Miller, Jr.
Mr. Miller was a founding
partner of Miller, Anderson
& Sherrerd, an investment
management firm. He
retired as a general partner
in 1991, and was a limited
partner with the firm
through 1995. He is now
sole proprietor of Miller
Associates and engages in
private investing.
Age: 68
Director Since: 1963
Committees:
Audit
Corporate Objectives
Corporate Responsibility
Executive (vice chairman)
Finance
Nominating & Organization
(chairman)
Other Directorships:
Hewlett-Packard Company
Rohm and Haas Company
LTCB-MAS, Inc.
World Wildlife Fund
Picture of Lee J. Styslinger,
Jr.
Lee J. Styslinger, Jr.
Mr. Styslinger is Chairman of
the Board of ALTEC
Industries, Inc. He was
Chairman of the Board and
Chief Executive Officer of
ALTEC Industries from 1990
to 1992.
Age: 62
Director Since: 1992
Committees:
Audit (chairman)
Compensation
Corporate Objectives
Executive
Nominating & Organization
Other Directorships:
Global Rental Company
Jemison Investment Company
Regions Financial Corporation
Southern Research
Technology
3
<PAGE>
Directors whose terms expire in 1997
Picture of John C. Bogle
John C. Bogle
Mr. Bogle is Chairman of the
Board of The Vanguard
Group of Investment
Companies, and Chairman of
the mutual funds in The
Vanguard Group. He was
Chief Executive Officer of The
Vanguard Group of
Investment Companies until
January 31, 1996.
Age: 66
Director Since: 1978
Committees:
Compensation
Corporate Objectives
Finance
Nominating & Organization
Other Directorships:
The General Accident
Group of Insurance
Companies
Picture of William E.
Hoglund
William E. Hoglund
Mr. Hoglund retired as
Director and Executive Vice
President, Corporate Affairs
and Staff Support Group of
General Motors Corporation
in January 1995. He was
Executive Vice President
and Chief Financial Officer
of GM from April 1992
through November 1992,
and Executive Vice
President, Automotive
Components Group, from
1988 through 1992.
Age: 61
Director Since: 1993
Committees:
Compensation
Corporate Objectives
(chairman)
Corporate Responsibility
Executive
Finance
Nominating &
Organization
Other Directorships:
Standard Federal Bank
Detroit Diesel Corporation
Trustee:
The Sloan Foundation
Picture of William S.
Shanahan
William S. Shanahan
Mr. Shanahan was elected
President and Chief
Operating Officer of
Colgate-Palmolive
Company in 1992. Prior to
that, he was Chief
Operating Officer of
Colgate-Palmolive
Company from 1990 to
1992.
Age: 55
Director Since: 1992
Committees:
Compensation
Corporate Objectives
Corporate Responsibility
Nominating & Organization
Other Directorships:
Molson Ltd. (Canada)
Picture of Susan J. Kropf
Susan J. Kropf
Ms. Kropf has been Senior
Vice President - Global
Product and Business
Development of Avon
Products, Inc. and President,
Eastern Europe since 1994.
Prior to that, she was Group
Vice President, U.S. Product
Marketing Group from 1992
to 1994. Prior to that, she
was Vice President, Senior
Officer, Product Development
of Avon Products, Inc. from
1990 to 1992.
Age: 48
Director Since: 1996
Committees:
Corporate Objectives
Nominating & Organization
Other Directorships:
Green Point Financial
Corporation
4
<PAGE>
Nominees for Director for a three-year term expiring in 1998
Picture of John G. Breen
John G. Breen
Mr. Breen is Chairman, Chief
Executive Officer and a
Director of The
Sherwin-Williams Company.
Age: 61
Director Since: 1986
Committees:
Audit
Compensation (chairman)
Corporate Objectives
Executive
Finance
Nominating & Organization
Other Directorships:
National City Corporation
Parker-Hannifin Corporation
The Goodyear Tire &
Rubber Company
Picture of Charles S.
Mechem, Jr.
Charles S. Mechem, Jr.
Mr. Mechem is the
Commissioner Emeritus of
the Ladies Professional Golf
Association. Prior to that
he was Commissioner of
the LPGA from 1991
through 1995 and Chairman
of United States Shoe
Corporation from 1993 to
1995.
Age: 65
Director Since: 1976
Committees:
Compensation; Corporate
Objectives; Finance;
Nominating & Organization
Other Directorships:
AGCO Corporation
Cincinnati Bell
Ohio National Life
Insurance Company
J.M. Smucker Company
Star Banc Corporation
Star Bank, N.A.
Myers Y. Cooper Company
Picture of Thomas B.
Stanley, Jr.
Thomas B. Stanley, Jr.
Mr. Stanley is a private
investor.
Age: 69
Director Since: 1970
Committees:
Audit
Corporate Objectives
Executive
Finance (chairman)
Nominating & Organization
Other Directorships:
Piedmont Bankgroup, Inc.
Picture of James G. Kaiser
James G. Kaiser
Mr. Kaiser is associated with
Corning Incorporated. He
was President and Chief
Executive Officer of Quanterra
Incorporated (a joint venture
of Corning Incorporated and
International Technology
Corporation) from 1994 to
1996. Prior to that he was
President and CEO of Enseco
Incorporated from 1992 to
1994. Prior to that he was
Senior Vice President and
General Manager of the
Technical Products Division
and Latin America and Asia
Pacific Exports of Corning
Incorporated.
Age: 53
Director Since: 1995
Committees:
Corporate Objectives
Nominating & Organization
Other Directorships:
The Stanley Works
The Sun Company
5
<PAGE>
Certain Information Concerning the Board of Directors
There were seven meetings of the Board of Directors
during 1995. The seven standing committees of the Board
and the number of meetings of each committee during
1995 follow:
<TABLE>
<CAPTION>
Number of
Committee Meetings
--------- --------
<S> <C>
Audit.................................................... 2
Compensation............................................. 3
Corporate Objectives..................................... 3
Corporate Responsibility................................. 3
Executive................................................ 0
Finance.................................................. 2
Nominating & Organization................................ 2
</TABLE>
The Chairman of the Board and Chief Executive Officer serves as an ex-officio,
nonvoting member of all standing committees, other than the Executive Committee.
Duties and Members
Each standing committee of the Board of Directors is composed
of directors who are not employed by Mead, except the Executive Committee. The
duties and membership of each committee are as follows:
The Audit Committee recommends annually to the Board for its approval the
engagement of the independent certified public accountants, verifies and assures
their independence, reviews the professional services they provide, reviews the
fees charged for audit and non-audit services, reviews the broad scope of the
internal and external audit programs, and reviews with the independent certified
public accountants, at the completion of their audit, Mead's financial
statements and matters relating to the audit.
Members:
- -------
Styslinger (chairman)
Breen
Miller
Stanley
6
<PAGE>
The Compensation Committee is charged with the broad responsibility for assuring
that officers and key management personnel are effectively compensated in terms
which are internally equitable and externally competitive. The Committee
authorizes the compensation of officers and senior management and recommends to
the Board the compensation of the Chairman of the Board and the President and
reviews the salaries of other key executives, reviews executive compensation
policies and recommends modifications in existing retirement or benefit plans.
The Committee also approves grants under and administers Mead's stock option and
restricted stock plans.
Members:
- -------
Breen (chairman)
Bogle
Hoglund
Mechem
Shanahan
Styslinger
The Corporate Objectives Committee is charged with reviewing Mead's objectives
and strategies and evaluating management's recommendations for long-term growth
and profitability. Further, the Committee makes appropriate recommendations to
the full Board with regard to specific proposals by management of major
strategic importance, including acquisitions. The Committee also monitors growth
programs to measure progress, reviews the potential impact of economic trends on
operations and reviews technological trends with the view toward allocating
resources to areas offering greatest potential growth.
Members:
- -------
Hoglund (chairman)
Bogle
Breen
Kaiser
Krol
Kropf
Mechem
Miller
Shanahan
Stanley
Styslinger
The Corporate Responsibility Committee is charged with questioning and
evaluating Mead's plans and responses relating to changing needs and concerns of
those major constituencies (both internal and external) which can be expected to
judge Mead's behavior and social performance.
Members:
- -------
Hoglund
Krol
Miller
Shanahan
7
<PAGE>
The Executive Committee is empowered under Ohio law to exercise the full
authority of the Board, except as to matters not delegable. However, in
practice, there are no scheduled meetings of this Committee and such powers
would be exercised only in special situations.
Members:
- -------
Mason (chairman)
Miller (vice chairman)
Breen
Hoglund
Stanley
Styslinger
The Finance Committee is charged with overseeing Mead's financial affairs and
recommending such financial actions and policies as are most appropriate to
accommodate Mead's strategic and operating strategies while maintaining its
sound financial condition. The Committee reviews programs designed to inform and
to maintain and improve shareholder and financial community relations.
Members:
- -------
Stanley (chairman)
Bogle
Breen
Hoglund
Krol
Mechem
Miller
The Nominating & Organization Committee has as its principal concerns the
nomination of candidates to the Board, evaluation of the performance of the
Chief Executive Officer, organizational development, and review of shareholder
proposals and suggestions. The Committee develops criteria and evaluates the
performance of the Chief Executive Officer. The Committee also furnishes its
evaluation to the Compensation Committee and reviews the compensation set by the
Compensation Committee to ensure it appropriately relates to shareholder value.
Members:
- -------
Miller (chairman)
Bogle
Breen
Hoglund
Kaiser
Krol
Kropf
Mechem
Shanahan
Stanley
Styslinger
Mead's Regulations require nominations for the Board from any shareholder to be
delivered not less than 50 nor more than 75 days prior to the meeting of the
shareholders to which the nomination relates, and to contain specified
information about the nominee and the shareholder making such nomination. In
addition to any nominations made pursuant to Mead's Regulations, the Nominating
& Organization Committee will consider such suggestions for nominations to the
Board as may be offered by shareholders. Such suggestions for nominations should
be submitted to Thomas E. Palmer, Secretary of the Committee. Directors are
selected on the basis of recognized achievements and their ability to bring
essential skills and experience to the deliberations of the Board.
Directors who are not employees receive $20,500 annually for services as a
director and $1,200 per meeting for attendance at meetings of the Board and its
committees. Directors who are Mead employees are not compensated for their
services as directors. In 1995, each director other than Messrs. Bogle, Mechem
and Shanahan attended 75% or more of the Board and committee meetings.
Mead has a deferred compensation plan for non-employee directors pursuant to
which receipt of compensation for Board service, together with interest thereon,
may be deferred until after termination of service.
8
<PAGE>
In 1987, Mead adopted a Restricted Stock Plan under which directors who are not
employees or officers of Mead will receive grants of Common Shares with a market
value of $37,500 at five-year intervals. Grants have been made in January 1988
and January 1993. A pro rata portion of $37,500 is granted to such directors
who are elected during the five-year period. The shares are subject to
forfeiture if the director leaves Mead within five years, unless the director
leaves as a result of death, disability or normal retirement (in which event,
all restrictions will lapse with respect to a pro rata portion of the restricted
shares granted at five-year intervals). Additionally, all rights to the shares
will earlier vest upon the occurrence of certain "change in control" events. The
plan also permits directors under certain conditions to defer a portion of their
cash retainer in the form of restricted shares on the same terms.
In 1990, Mead adopted a retirement plan for eligible outside directors which
provides for a payment for the life of the director of the director's annual
cash retainer at the time of retirement plus one-fifth of the dollar amount
specified in the preceding paragraph paid to directors under the Restricted
Stock Plan. The retirement benefit commences at age 70 and is paid to all
outside directors who retire with at least 10 years of service on the Board or
who retire at age 70 regardless of years of service. In October, 1995 this plan
was terminated and no further benefits continue to accrue under the plan.
Securities Ownership
Set forth in the following table is information as of January 26, 1996 with
respect to the number of Common Shares beneficially owned by each nominee and
director, each of the named executive officers, and by all nominees, directors
and executive officers as a group.
A person is considered to "beneficially own" any shares: (i) over which such
person exercises sole or shared voting or investment power or (ii) of which such
person has the right to acquire beneficial ownership at any time within 60 days
(e.g., through the exercise of employee stock options).
Unless otherwise indicated, voting and investment power is exercised solely by
the beneficial owner or is shared by such owner and such owner's spouse or
children.
Ownership of Mead Common Shares
-------------------------------
as of January 26, 1996/(1)/
<TABLE>
<CAPTION>
(A) (B)
Option Shares Number of Shares
Including Shares Beneficially Owned
Which May including Option Shares
Name of be Acquired in Column (A)
Beneficial Owner Within 60 Days January 26, 1996/(1)/
- --------------------------- --------------- ---------------------
<S> <C> <C>
John C. Bogle.............. -0- 4,011
John G. Breen.............. -0- 4,011
William R. Graber.......... 36,900 39,079
William E. Hoglund......... -0- 2,312
James G. Kaiser............ -0- 398
Elias M. Karter............ 82,300 89,391
John A. Krol............... -0- 858
Susan J. Kropf............. -0- 299
Raymond W. Lane............ 55,300 63,328
Steven C. Mason............ 295,000 370,016
Charles S. Mechem, Jr...... -0- 4,889
Thomas E. Palmer........... 39,506 45,709
Paul F. Miller, Jr......... -0- 14,736
William S. Shanahan........ -0- 2,173
Thomas B. Stanley, Jr...... -0- 729,511/(2)/
Lee J. Styslinger, Jr...... -0- 21,173
Jerome F. Tatar............ 66,230 72,456
- ------------------------
All directors, nominees
and executive officers as
a group (20 persons)...... 699,436 1,607,970
- -----------------------
</TABLE>
(1) Includes restricted shares granted under Mead's Restricted Stock Plan, and
shares held in the named executive's common stock account as of December 31,
1995, in the Mead Salaried Savings Plan. The named executives may vote and
direct the disposition of shares in their account, except to the extent such
shares constitute Mead matching shares.
(2) Includes 471,980 shares held in family trusts with respect to which Mr.
Stanley is one of three co-trustees who share the voting and investment power.
9
<PAGE>
As of January 26, 1996, the number of shares beneficially owned (i) by the
directors and executive officers as a group was approximately 3.04% of
outstanding, (ii) by Mr. Stanley, 1.38% and (iii) by all other directors
individually, less than 1%.
The following table sets forth certain information with respect to persons known
to Mead to be beneficial owners of more than five percent of the outstanding
Common Shares:
<TABLE>
Percent of Common
Number of Common Shares Shares Outstanding
Name and Address of Beneficial Owners Beneficially Owned as of January 26, 1996
- ------------------------------------- ----------------------- ----------------------
<S> <C> <C>
Oppenheimer Group, Inc., Oppenheimer Tower, 2,825,219/(1)/ 5.25%
World Financial Center, New York, NY 10281
</TABLE>
- ------------------------
(1) Source: Schedule 13G dated February 1, 1996, filed by beneficial owner
with SEC.
Report of Compensation Committee on Executive Compensation
The Compensation Committee is comprised of six Directors of the Board who are
not employees of the Company. This Committee is responsible for setting
competitive compensation structures and approving payout levels for officers and
senior management.
Mr. Mason, Chairman of the Board, President and Chief Executive Officer, serves
as an ex-officio, nonvoting member of the Board's standing committees, including
the Compensation Committee. He was not present during any discussion of his
compensation.
Mead's executive compensation structure is based on competitiveness within
Mead's business environment. The actual compensation levels delivered to
executives are designed to directly link to the financial performance of the
Company; align the interests of the executives with Company performance, thus
increasing shareholder value; to attract, retain and motivate executive talent;
and, to provide a balanced total compensation package that recognizes the
individual contributions of the executive and the business results of the
Company.
Base Salaries
- -------------
Salary range midpoints are set to approximate those midpoints of industrial
companies of similar size to Mead, as annually reported in the Hay Industrial
Management USA survey, representing 385 parent organizations and 630 independent
operating units of all types of industrial employers in the United States (the
"Hay Competition"). Around these midpoints for each salary grade is an
established salary range, characterized by a defined minimum and maximum.
Actual salaries paid to executives are targeted to be competitive with the
average salaries for that same survey group, with a particular comparison to a
selected group of Forest Product company competitive peers. These peers (the "FP
Peers") are Boise Cascade Corporation, Champion International Corporation,
Georgia-Pacific Corporation, International Paper Company, James River
Corporation, Potlatch Corporation, Riverwood International, Stone Container
Corporation, Temple-Inland Inc., Union Camp Corporation, Westvaco Corporation,
Weyerhaeuser Company, and Willamette Industries, Inc.
Salary increases for the executive group as a whole are determined primarily by
a review of Mead's competitive position relative to the Hay Competition, and an
10
<PAGE>
assessment of competitive salary increase movement for the upcoming year. The
salary increase for each named executive officer is determined by individual
performance, influenced to a minor degree by that individual's position in the
salary range. A fundamental basis of Mead's compensation philosophy is to
deliver moderate salary increases, in favor of incentive payouts that reward for
the performance of the Company and the contribution of the executive.
Mr. Mason's 1995 salary shows a modest increase over the 1994 level, tracking
the moderate movement in CEO pay of the Hay Competition. His salary remains
below the salary midpoint for his position, but the gap below the Hay
Competition has been reduced to approximately 5%.
The salaries of the other named executives remain well below the Mead midpoint
for their respective grades, and also lag the Hay Competition.
Annual Incentives
- -----------------
Annual incentive targets are set at levels that achieve a combined salary
midpoint plus incentive target that equals actual competitive average base
salaries plus annual bonuses, as determined by an analysis of the total cash
compensation paid by the Hay Competition.
Actual incentive payouts are determined under the Mead Management Incentive Plan
("MMIP") by a comparison of Mead Return on Total Capital ("ROTC") to both the FP
Peers (as measured in the Value Line Report) and also to the Value Line
Industrial Composite (the "Industrial Composite"), representing approximately
780 major industrial, retail and transportation companies that account for about
80% of the income earned by all U.S. nonfinancial corporations. The Mead ROTC
comparison to the ROTC of each of the FP Peers and the Industrial Composite is
weighted equally.
Mead's financial performance for 1995 showed the fourth consecutive year of
improvement. For incentive purposes, Mead's 1995 operating ROTC of 13.8%
reflects excellent operating results and sales which included strong prices
for Company products. As a result, annual incentives for all named executives,
including Mr. Mason, exceeded target levels.
Long-Term Incentives
- --------------------
The Compensation Committee believes that a significant portion of senior
executive compensation must reflect the desire for sustained operating
excellence, reward competitive long-term financial results, and be linked to the
returns realized by shareholders. Thus, a major portion of the compensation
package reflects awards for long-term results. Mead's long-term compensation is
delivered in three plans:
1. Performance Unit Plan
2. Restricted Stock Plan
3. Stock Option Plan
The Corporate Long-Term Incentive Plan (the "LTIP") is a performance unit plan
that provides incentive awards for attaining acceptable ROTC while growing
productive capital. The plan provides significant financial reward when the
return to shareowners exceeds Mead's cost of capital, particularly when
management is growing Mead's business.
The payout is based on these two components, further adjusted by the
Competitive Industry Factor: the formula involving competitive ROTC performance
including the FP Peers and the Industrial Composite.
The current plan measured business results over a 2-year period: capital growth
over the period 1994 through 1995, and the ROTC achieved in 1995.
The resulting payout to executives determined by the plan exceeded target
payout. The payout is delivered as cash for all participants. The Board of
Directors used their discretion to adjust Mr. Mason's payout downward. In
applying this discretion, the members of the Board recognized his leadership in
achieving the record-level
11
<PAGE>
financial results, but chose to strengthen the alignment of Mr. Mason's
compensation with shareowners by awarding a larger stock option grant. For that
portion normally payable in cash, the Board mandated a deferral of that cash
payout until after the completion of his Mead employment service.
Restricted stock with three to five year restrictions may be granted to
encourage retention of key executives, or in lieu of payment of cash incentives,
or for any other reason consistent with the purposes of Mead's Restricted Stock
Plan. Restricted shares are granted at market prices. No restricted stock
grants were made for 1995.
Stock option grants are based on competitive practices of the Hay Competition
(rather than Mead's past corporate performance), are granted at market price and
cannot be exercised for one year. The objective of stock option grants is to
incent future Company performance, rather than to reward for past contribution.
Mead also believes that granting stock options to senior management further
aligns their interests with shareholders.
The size of annual option grants is based on the grade level of each recipient.
Generally, the number of options granted increases approximately 30% with each
grade level increase. Minor adjustments (+/-10%) are made to grants to recognize
the future potential of the individual.
For 1995, Mr. Mason received a grant of 85,000 stock options, which the
Compensation Committee believed appropriate with respect to the size of
competitive grants for Mr. Mason's grade level, and in light of their decision
to modify downward his 1995 LTIP payout in favor of greater stock ownership
through the stock option program.
Stock Ownership Guidelines
- --------------------------
It is felt that executives are more significant contributors to the success of
the business if they have a significant ownership position in the organization.
The Compensation Committee feels that the design of Mead's executive
compensation plans deliver adequate opportunity for each executive to acquire
Mead shares. For the named executive officers, the Company has established
guidelines that define a level of stock ownership that each executive is
expected to achieve and maintain.
The current proposal to shareowners to approve the 1996 Stock Option Plan
includes a strategic feature that will enhance executive stock ownership: a
provision of the new plan provides Reload Stock Options, to be granted only to
each executive who, upon exercising Incentive Stock Options, purchased and held
Shares. The Reload Stock Option is exercisable if the underlying shares from
the Incentive Stock Options are held for a minimum of three years.
Compensation Deferral Opportunities
- -----------------------------------
Mead maintains the Executive Capital Accumulation Plan (the "ExCAP") to provide
executives with the opportunity to elect deferrals of earned compensation: base
salary, annual incentive payout and long-term incentive payout (cash portions
only). In addition, the plan provides for 401(k) contributions above the
qualified plan limit to be placed in the same non-qualified account, along with
a Company match that is determined by the 401(k) formula.
Funds deferred are credited at a rate set by one of several market-driven
investment indices offered by the Company. Payment of those amounts deferred
commence in accordance with the executive's deferral election, and generally
start at retirement or termination, or on a fixed date.
For 1995, Messrs. Mason, Karter, Lane, Tatar and Graber elected to participate
through compensation deferrals and the 401(k) Top-Up. In addition, the Board of
Directors mandated that Mr. Mason's LTIP payout and a portion of his MMIP payout
be deferred until retirement in order to obtain the maximum tax deduction.
12
<PAGE>
Deductibility of Executive Compensation
- ---------------------------------------
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction
to public companies for individual compensation over one million dollars paid to
a company's Chief Executive Officer and to the four other most highly
compensated executive officers. For 1995, Mr. Mason's compensation would
normally have exceeded one million dollars, driven by the MMIP and LTIP payouts
that reflects excellent financial returns that exceed competitive performance.
To manage executive compensation in the best interests of the Company's
shareowners, the Compensation Committee has recommended and the Board of
Directors has approved a mandatory deferral of Mr. Mason's compensation over the
Section 162(m) limit.
Summary
- -------
The Mead compensation program delivered as the mix of compensation elements
(base pay, annual incentives, long-term incentives and deferral opportunities)
is an effective tool in supporting executive excellence. Mead's operational
reliability and financial results have steadily increased over the past four
years; and, 1995 returns surpassed the returns of both the Industrial Composite
and the FP Peers.
The Compensation Committee remains confident that these elements of the
executive compensation program are key in rewarding executives who contribute to
the success of the Company and in the demonstrated increase in shareholder
value.
Compensation Committee members:
John G. Breen (chairman)
John C. Bogle
William E. Hoglund
Charles S. Mechem, Jr.
William S. Shanahan
Lee J. Styslinger, Jr.
Steven C. Mason (ex-officio, nonvoting member)
13
<PAGE>
Compensation Tables
The compensation for services performed during the fiscal years ended December
31, 1993, 1994 and 1995 for Mr. Mason and each of the other five most highly
compensated executive officers is as follows. No stock appreciation rights were
issued to the named executives during 1993-1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------------------------
Annual Compensation Awards Payouts
------------------------------------------- -----------------------------------------------
Other
Name Annual Restricted Securities All Other
and Compen- Stock Underlying LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($)/(1)/ ($)/(2)/ ($)/(3)/ SARs(#) ($)/(4)/ ($)/(5)/
- ----------- ---- --------- ------------ --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Steven C. 1995 $635,004 $728,600 $ 82,538 $ 0 85,000 /(6)/ $ 398,700 $ 37,754
Mason, 1994 566,672 782,800 61,876 227,813 60,000 0 7,505
Chairman, 1993 518,751 433,100 59,315 29,717 47,800 0 4,497
President
and CEO
Eli M. 1995 $292,980 $219,700 $ 59,396 $ 0 10,700 $ 296,100 $ 13,979
Karter, VP 1994 268,648 182,100 26,125 30,580 20,700 0 4,620
Operating 1993 245,799 150,200 26,617 8,088 8,500 0 4,497
Officer
Jerome F. 1995 $261,344 $219,700 $ 0 $ 0 10,700 $ 296,100 $ 12,760
Tatar, VP 1994 222,675 171,900 0 27,775 20,000 0 4,620
Operating 1993 183,308 92,800 555 6,480 10,000 0 4,497
Officer
Raymond 1995 $252,504 $219,700 $ 372 $ 0 10,700 $ 296,100 $ 13,722
W. Lane, 1994 212,999 212,800 357 27,775 20,000 0 4,620
VP 1993 176,008 189,500 671 6,480 10,000 0 4,497
Operating
Officer
Thomas E. 1995 $259,256 $198,300 $ 0 $ 0 10,700 $266,700 $ 4,620
Palmer, VP 1994 234,096 195,100 0 $ 258,393 13,000 0 4,620
General 1993 216,834 160,600 0 8,088 10,000 0 4,497
Counsel
William R. 1995 $230,760 $198,300 $ 12,778 $ 0 10,700 $266,700 $ 12,176
Graber, 1994 212,100 182,100 0 76,143 11,000 0 $ 4,620
VP/CFO 1993 178,343 138,100 0 4,290 5,000 0 4,497
- ----------------------
</TABLE>
(footnotes on following page)
14
<PAGE>
(1) Bonuses are earned in the year specified and paid in the following year.
Cash bonuses for 1995 consist of payments under the MMIP, an annual
incentive plan. A portion of Mr. Mason's MMIP payout has been deferred
until after completion of his Mead employment service.
(2) Consists solely of interest on deferred compensation in excess of the
applicable federal rate. Mead owns life insurance on the lives of employees
participating in this deferred compensation program which supports the
interest rates used.
(3) Restricted stock holdings at December 31, 1995: Mr. Mason, 7047 shares
($368,205.75 value); Mr. Karter, 744 shares ($38,874 value); Mr. Tatar, 656
shares ($34,276 value); Mr. Lane, 656 shares ($34,276 value); Mr. Palmer
5,744 shares ($300,124 value) and Mr. Graber, 1,659 shares ($86,682.75
value). Dividends are paid on restricted stock in the same manner and
amount as paid on Mead's common shares. The value of the restricted stock
for purposes of the table is based on closing market prices on the date of
the grant; however, for purposes of this footnote (3), it is based on
closing market prices at the end of 1995.
(4) The LTIP is a performance unit plan that measured business results over a 2-
year period: capital growth over the period including 1994 through 1995,
and the ROTC achieved for full year 1995. The payout to executives
determined by the plan exceeded target payout. The payout is delivered as
cash. Mr. Mason's payout was adjusted downward by the Board of Directors. A
larger stock option grant was made to Mr. Mason in February 1996 to
strengthen the alignment of compensation with shareowners. Mr. Mason
deferred the LTIP normally paid in cash until after the completion of his
Mead employment service.
(5) Amounts consist solely of executive life insurance premiums paid by Mead
and matching contributions by Mead to qualified and non-qualified savings
plans.
(6) Includes the award of a stock option grant in February 1996 made in
acknowledgment of an adjustment downward of the LTIP payout covering fiscal
years 1994 through 1995.
15
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows, for the named executive officers, additional
information about option grants during the fiscal year ended December 31, 1995.
No stock appreciation rights were granted in 1995.
<TABLE>
Individual Grants
- ---------------------------
Potential
Percent of Realizable Value at
Number of Total Assumed Annual
Securities Options/ Rates of Stock Price
Underlying SARs Appreciation
Options/ Granted to Exercise for Option Term/(2)/
SARs Employees or Base Expira- -----------------------------------------------------
Granted in Fiscal Price tion
Name (#) /(1)/ Year ($/Sh) Date 0% ($) 5% ($) 10% ($)
- ---- --------- ---------- ------ ---- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Steven C. Mason 45,000/(3)/ 6.2% $54.375 2/22/05 $0 $1,541,531 $3,890,531
Eli M. Karter 10,700 1.5% 54.375 2/22/05 0 366,542 925,082
Jerome F. Tatar 10,700 1.5% 54.375 2/22/05 0 366,542 925,082
Raymond W. Lane 10,700 1.5% 54.375 2/22/05 0 366,542 925,082
Thomas E. Palmer 10,700 1.5% 54.375 2/22/05 0 366,542 925,082
William R. Graber 10,700 1.5% 54.375 2/22/05 0 366,542 925,082
----------------------------------------------------------------------------------------------------------------
0%/(4)/ 5%/(4)/ 10%/(4)/
---------- ---------- ---------
Assumed Stock Price $54.375 $88.63 $140.83
Market Value of All Shareholdings $2.88 billion $4.69 billion $7.46 billion
Named Executives Percentage 0.07% 0.11%
</TABLE>
- ----------------------
(1) Options are granted with terms of ten years and may be exercised beginning
one year after date of grant. Limited stock appreciation rights (described
on page 21) have been granted to each of the named executive officers in an
amount equal to the stock options granted. In addition, the holders of
stock options may under certain conditions pay withholding taxes due upon
the exercise of stock options using shares issued upon such exercise.
(2) The dollar amounts under the 5% and 10% columns are set by the Securities
and Exchange Commission and are not intended to forecast possible future
appreciation of Mead's stock. Mead is also not aware of any formula that
determines with reasonable accuracy the present value of stock options
based on future unknown or volatile factors.
(footnotes continued on following page)
16
<PAGE>
(3) Excludes stock options granted to Mr. Mason in February, 1996 made in
acknowledgment of an adjustment downward of the LTIP payout covering fiscal
years 1994 through 1995.
(4) At an assumed 5% stock price appreciation over a ten-year period, Mead's
stock price would increase from $54.375 per share (the market price on the
grant date) to $88.63 per share, and the aggregate market value of all
shareowner holdings as of the grant date would increase from $2.88
billion to $4.69 billion. At an assumed 10% stock price appreciation over a
ten-year period, Mead's stock price would increase from $54.375 per share
to $140.83 per share, and the aggregate market value of all shareowner
holdings as of the grant date would increase to $7.46 billion. The named
executives would receive only 0.07% and 0.11%, respectively, of any such
increase in market value.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table shows information about stock option exercises during 1995
and unexercised stock options at year end 1995 for the named executive officers.
No stock appreciation rights were granted or exercised in 1995.
<TABLE>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)/(2)/
Shares
Acquired Exercisable/ Exercisable/
Name on Exercise(#) Value Realized ($)/(1)/ Unexercisable Unexercisable
- ---- ------------- ------------------------- -------------- -------------
<S> <C> <C> <C> <C>
Steven C. Mason 4,029 $125,150.81 250,000/45,000 $3,216,156/$-0-
Eli M. Karter 7,600 226,364.50 71,600/10,700 988,794/-0-
Jerome F. Tatar 4,970 141,543.75 55,530/10,700 692,204/-0-
Raymond W. Lane 8,621 238,801.34 44,600/10,700 468,412/-0-
Thomas E. Palmer 7,694 188,862.71 28,806/10,700 273,016/-0-
William R. Graber -0- -0- 26,200/10,700 293,606/-0-
</TABLE>
- ----------------------
(1) Based upon the difference between the fair market value (the average of the
high and the low prices) of Mead common shares on the date of exercise and
the grant price of the stock option.
(2) Based upon the difference between the fair market value (the average of the
high and the low prices) of Mead common shares on the last trading day of
1995 and the grant price of the stock option.
17
<PAGE>
LONG-TERM INCENTIVE PLANS - AWARDS
IN LAST FISCAL YEAR
The following table shows, for the named executive officers, additional
information about the LTIP plan eligibility for the performance period that
commenced in 1995.
<TABLE>
Performance or Estimated Future Payouts
Number of Other Period Under Non-Stock
Shares, Until Price - Based Plans
Units or Maturation -------------------------------------------------
Name Other Rights(#) or Payout/(1)/ Threshold($) Target($) Maximum($)
- ---- -------------- -------------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
Steven C. Mason 538,300 1/1/95 to 12/31/96 $0 $538,300 $1,076,600
Eli M. Karter 181,000 1/1/95 to 12/31/96 0 181,000 362,200
Jerome F. Tatar 181,000 1/1/95 to 12/31/96 0 181,000 362,200
Raymond W. Lane 181,000 1/1/95 to 12/31/96 0 181,000 362,200
Thomas E. Palmer 149,400 1/1/95 to 12/31/96 0 149,400 298,800
William R. Graber 149,400 1/1/95 to 12/31/96 0 149,400 298,800
</TABLE>
- ----------------------
(1) The Company's LTIP is a performance unit plan that provides incentive
awards for attaining acceptable ROTC while growing productive capital. The
plan is based on compound capital growth achieved over the period from
December 31, 1994 to December 31, 1996, and Company ROTC achieved for full
year 1996. The payout factor produced is further multiplied by Mead's
Competitive Industry Factor derived from the FP Peers and the Industrial
Composite.
18
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares Mead's cumulative total shareholder
return over a five year period, assuming $100 invested at December 31, 1990 in
Mead common stock, in the S&P 500 Index and in the S&P Paper and Forest Products
Composite Index. The information on these indices has been provided by Standard
& Poor's Corporation. Shareholder return is based on increases in share price
and dividends paid, assuming reinvestment of dividends.
THE MEAD CORPORATION
CUMULATIVE TOTAL RETURN: 1990-1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Mead Corporation S&P 500 Index S&P Paper & F. P.
<S> <C> <C> <C>
Measurement Pd -
FYE 12/31/90 $100.00 $100.00 $100.00
FYE 12/31/91 138.31 130.47 126.84
FYE 12/31/92 157.40 140.41 145.03
FYE 12/31/93 189.35 154.56 159.84
FYE 12/31/94 209.08 156.60 166.55
FYE 12/31/95 229.11 215.45 183.37
</TABLE>
<TABLE>
<CAPTION>
YEAR
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Mead 100.00 138.31 157.40 189.35 209.08 229.11
S&P 500 100.00 130.47 140.41 154.56 156.60 215.45
S&P Paper & F.P. 100.00 126.84 145.03 159.84 166.55 183.37
</TABLE>
Assumes $100 invested on December 31, 1990 in Mead common stock, S&P index, and
S&P Forest Products Index. Assumes reinvestment of dividends.
19
<PAGE>
Retirement Plans
All salaried employees of Mead are participants in Mead's non-contributory
retirement plan which provides retirement income based upon years of employment
and average annual earnings for the five highest years during the last eleven
years of employment. Benefits under the retirement plan become vested after five
years.
The named executives have the years of credited service indicated: Mr. Mason,
37; Mr. Karter, 13; Mr. Palmer, 3; Mr. Graber, 3; Mr. Lane, 20; Mr. Tatar, 21.
Earnings used for calculation of retirement income for the named executives are
salary, bonus and incentive compensation (other than long-term incentive
payments) paid as described in the Summary Compensation Table. The benefits
payable under Mead's plan are reduced by one-half of the primary Social Security
benefit.
Under the Employee Retirement Income Security Act, an individual's normal annual
benefit from a qualified retirement plan such as Mead's may not exceed specified
limits. To the extent that the amounts calculated under Mead's non-contributory
retirement plan exceed such limits, Mead pays the excess under an unfunded
excess benefit plan.
Mead also maintains an unfunded supplemental retirement plan for senior level
management personnel who become eligible to participate in the plan after they
have completed three years of employment in a qualified job classification. The
plan provides annual retirement benefits for 55% of a participant's final
average earnings (earnings include bonuses and incentive compensation other than
long-term incentive payments, but may not exceed two times base compensation for
any year) for the three highest years during the last eleven years of
employment, less benefits received from other retirement plans of Mead and from
retirement plans of previous employers. Benefits are also reduced by one-half of
a participant's primary Social Security Benefit. A participant may receive full
benefits under this plan after he attains age 62. Messrs. Mason, Karter,
Palmer, Lane and Tatar are currently eligible to participate in this plan. Mr.
Graber is eligible to participate in this plan in 1996.
The approximate annual benefits, on a straight life annuity basis, payable to
the named executive officers under the retirement plan and the excess and
supplemental retirement plans, based on compensation levels to date and assuming
retirement at age 62, calculated prior to the offsets described above, are as
follows: Mr. Mason, $543,838; Mr. Karter, $206,558; Mr. Lane, $206,098; Mr.
Tatar, $174,004; Mr. Palmer, $202,058 and Mr. Graber, $171,877.
Benefit Trust
In 1986, a Benefit Trust was established to preserve the benefits earned under
Mead's unfunded supplemental retirement plan, incentive compensation election
plan, the former directors retirement plan, and excess benefit plan (the
"Plans") in the event of a change in control. Upon the occurrence of any
potential change in control, as defined in the Benefit Trust, Mead will be
obligated to contribute an amount of cash and other property to the Benefit
Trust which is intended to be sufficient to pay, in accordance with the terms of
the Plans, the benefits authorized under such Plans and certain related
expenses. If the funds in the Benefit Trust are insufficient for any reason to
pay amounts due under the Plans, Mead will remain obligated to pay any such
deficiency.
Termination Arrangements
General Severance Program. Mead has formalized a company-wide severance program
for its salaried employees who are involuntarily terminated. The basic program
provides severance pay in a lump sum equal to one week's salary for each full
year of service plus an additional week for each $20,000 of base salary (or
increment thereof) subject to enhancement following a change in control.
Medical, dental and life insurance coverages will be provided for a period of
time equal to the number of weeks of severance, provided certain conditions are
met. The maximum period for severance pay, depending on the salary level of the
employee, will be limited to either 52 or 26 weeks. Based on current
compensation, if the individuals named in the Summary
20
<PAGE>
Compensation Table had been terminated on December 31, 1995, the amounts payable
to each of them would have been as follows: Mr. Mason, $635,000; Mr. Karter,
$167,843; Mr. Palmer, $86,060; Mr. Lane, $173,844; Mr. Tatar, $179,719 and Mr.
Graber, $74,518.
Severance Agreements. Mead has in place severance agreements with executive
officers and other key executives (collectively, the "Key Executives"). The
severance agreements provide for the payment of certain benefits to a Key
Executive (in lieu of amounts payable under the general severance program) if
employment is terminated by Mead other than for "cause," or on account of death,
disability or normal retirement, within two years after a "change in control"
of Mead, or if employment is terminated by the Key Executive for "good reason"
within such period, as such terms are defined in the respective severance
agreements. In general, under such circumstances, the Key Executive is entitled
to a cash payment of two times (three times, in the case of the Chairman) the
sum of (i) the Key Executive's then current annual base salary, and (ii) the
greater of the Key Executive's current target incentive under Mead's incentive
plans or his most recent annual award thereunder. Based on levels of
compensation as of December 31, 1995, if the individuals named in the Summary
Compensation Table had been terminated on such date, the amounts payable to each
of them would have been as follows: Mr. Mason, $8,242,588; Mr. Karter,
$1,910,308; Mr. Palmer, $1,763,803; Mr. Lane, $1,859,706; Mr. Tatar, $1,767,330
and Mr. Graber, $1,663,207.
The severance agreements also provide for (i) the cancellation of all
outstanding stock options granted to the Key Executive under any stock option
plan of Mead in consideration for a cash payment equal to the number of shares
covered by the option multiplied by the difference between the exercise price
per share and the higher of (a) the reported closing price per share on the date
of the Key Executive's termination or (b) the highest price paid per share in
connection with any change in control; (ii) a continuation of benefits under
Mead's life insurance, medical and dental plans (or substantially similar
benefits); and (iii) out placement counseling. If the aggregate severance
benefits to any executive would be subject to an excise tax under the Internal
Revenue Code, the actual benefits will be reduced to the extent necessary to
avoid the imposition of the excise tax.
Limited Stock Appreciation Rights
Mead's stock option plans authorize the Compensation Committee to grant limited
stock appreciation rights ("Limited Rights") with respect to all or any portion
of the shares covered by options. The Committee may grant Limited Rights
simultaneously with the grant of an option or at any time during their
respective terms. Limited rights have been granted to all named executive
officers in an amount equal to stock options granted. In general, Limited
Rights are exercisable only after certain events which constitute a change in
control of Mead. Upon the exercise of a Limited Right, an optionee will receive
an amount in cash equal to the difference between (1) the exercise price per
share of the option to which the Limited Right relates, and (2) a price which in
general represents the value placed upon a Common Share in the change in control
situation. When Limited Rights are exercised, the options to which they relate
will cease to be exercisable.
Certain Transactions
Mr. Mason has the power to direct distributions from a charitable trust he
established in 1988 to hold his shares of a corporation in which he has a
minority interest. Mead paid this corporation approximately $1.56 million in
the ordinary course of business during 1995 for the purchase of paper machine
supplies and equipment. Such purchases did not constitute a material portion of
such corporation's business and were made in accordance with Mead's normal
purchasing policy.
Filings under Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities,
21
<PAGE>
to file reports of ownership and changes in ownership of such securities with
the Securities Exchange Commission and the New York Stock Exchange. Copies of
these reports must also be furnished to the Company. Based solely upon a review
of the copies of the forms filed under Section 16(a) and furnished to the
Company, or written representations from reporting persons, the Company believes
that all filing requirements applicable to its executive officers and directors
were complied with during 1995, except that one report by Paul F. Miller, Jr.
was filed twenty-one days late due to administrative error and one report timely
filed by Eli M. Karter was amended promptly to reflect the inadvertent omission
of the corresponding sale of shares pursuant to the cashless exercise of a stock
option.
Compensation Committee Interlocks and Insider Participation
The members of the Board's Compensation Committee are Messrs. Bogle, Breen,
Hoglund, Mechem, Shanahan and Styslinger. In addition, Mr. Mason, Mead's
Chairman, CEO, President and Chief Executive Officer, is an ex-officio nonvoting
member of the Board's standing committees, including the Compensation Committee
(although Mr. Mason did not participate in any Compensation Committee
discussions regarding his compensation). Mr. Palmer, Mead's Vice President and
General Counsel, is the nonvoting Secretary of the Committee, but is not a
member of the Committee.
Except as described above, none of the members of the Compensation Committee are
or were an officer or employee of Mead, or have any relationship requiring
disclosure under the federal securities rules.
Proposed 1996 Stock Option Plan
The purposes of the 1996 Stock Option Plan (the "Plan) are 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, to assist the Company in attracting and retaining
key employees and non-employee directors of proven ability, 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 common stock of the Company ("Shares"), and to
encourage retention of Shares.
The design of the Plan is similar to the 1991 Stock Option Plan previously
approved by shareholders. However, several new design features, notably reload
options and stringent termination provisions, strengthen the alignment of
executive and director compensation with shareholders. In particular, the
reload options include an option price which is the fair market value as of the
date of exercise (not grant) of the original option; reload options are not
exercisable unless the Shares purchased by the exercise of the original option
are owned for at least three years; the protocols of the Compensation Committee
currently provide that reload options will be granted only in connection with
Incentive Stock Options (not nonqualified stock options); and, reload options
are granted as nonqualified stock options which carry no further reload right.
These Plan components encourage stock ownership while avoiding the continuous
cascading or pyramiding effect that negatively characterizes some other reload
programs. Another new Plan feature is that all unexercised options are
cancelled on the last date of employment unless the person is eligible to
retire. This reinforces the philosophy that options are a key component of
compensation that aligns active executives and directors with shareholders.
In 1995, the Board of Directors terminated a retirement plan adopted in 1990 for
eligible outside directors and no benefits continue to accrue under the plan.
The Board of Directors favor instead to structure the compensation of eligible
outside directors to align closer to shareholders through Mead stock ownership.
A portion of the compensation proposed to be delivered would consist of annual
grants of stock options under the Plan.
The current 1991 Stock Option Plan previously approved by shareholders has only
200,000 Shares remaining authorized for issuance.
22
<PAGE>
The Board of Directors recommends approval of the Plan to insure sufficient
options are available for grant to permit the continued use of this form of
compensation. The material features of the Plan are summarized below.
General. The Plan authorizes the grant of options to purchase up to 4,000,000
shares of common stock ("Shares") and up to an equal number of Limited Rights
which may be exercised instead of such options only upon the occurrence of
certain "Triggering Events" (as hereinafter defined). The maximum number of
Shares that may be issued to any individual over the term of the Plan upon the
exercise of options shall not exceed 400,000. Options under the Plan may be
awarded as nonqualified options or as incentive stock options under Section 422
of the Internal Revenue Code ("ISOs"). The options permit the holder to
purchase Shares by paying the option price. The option price is not less than
the fair market value of Shares on the date of grant. No options or Limited
Rights may be granted under the Plan after September 30, 2005. Options and
Limited Rights which terminate, expire or are cancelled prior to being exercised
may be regranted. Options may also be regranted with respect to Shares received
by Mead as payment for options. Options and Limited Rights granted under the
Plan are not transferable except by will or the laws of descent and distribution
and as otherwise described in the Plan.
Administration. The Compensation Committee of the Board (the "Committee") will
administer the Plan, determine the number of options and Limited Rights to be
granted, designate who will receive options and Limited Rights, decide the
number of Shares to be subject to each option and determine the term of each
option subject only to the specific provisions of the Plan.
The Committee shall consist solely of three or more directors of the Company who
are "disinterested" within the meaning of Securities Exchange Act of 1934, as
amended, and "outside directors" within the meaning of the Internal Revenue Code
of 1986, as amended.
Eligible Employees. The Committee may grant options and Limited Rights to
officers and other key employees of Mead, it subsidiaries and other entities in
which Mead owns at least a 10% interest. It is estimated that there will be
approximately 250 employees eligible to participate in the Plan on its effective
date.
Non-Employee Director Options. The Plan provides for automatic grants of non-
qualified options to non-employee directors. Each non-employee director (and
each person who subsequently becomes a non-employee director for the first time)
shall automatically receive grants of options to purchase 300 Shares.
Thereafter, on January 3, 1997 and each annual anniversary thereafter during the
term of the Plan each non-employee director shall automatically receive a grant
which shall equal the product obtained by multiplying 300 by an adjustment
factor. The adjustment factor shall equal the quotient obtained by dividing (i)
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 (ii) the average total compensation
reported by Hay Consulting Group for calendar year 1994 in the previously
described Report (represented as $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). Such options will become
fully exercisable on the first anniversary of the date of grant except in the
case of a change in control, a tender offer, an acquisition transaction, or
change in the composition of the Board as described in the Plan. The option
will have a term of ten years.
Employee Options. Under the Plan, the Committee fixes the term of each option
for a period not exceeding 10 years. Options may not be exercised until at
least one year after grant, except in the case of a change in control, a tender
offer, an acquisition transaction, or
23
<PAGE>
change in the composition of the Board as described in the Plan. Options may be
exercised only if the holder has been continuously employed by Mead since the
date of grant unless the Committee provides that the option may be exercisable
within its term, but after the term of employment or death of the employee.
Payment may be with cash, or, with approval of the Committee, with Shares having
a market value equal to the option price.
The Committee may impose restrictions or limitations on the exercise of options
or on the transferability of Shares issuable upon the exercise of the option by
an eligible employee.
Except for the ten-year maximum term, the Committee may waive or modify any
condition or restriction with respect to the exercise of an option by an
eligible employee.
Options may also be exercised upon the occurrence of a Triggering Event. The
Committee may with the consent of the optionholder pay cash (in an amount equal
to the spread between the fair market value of the Shares and the option price)
in exchange for the cancellation of an option.
Reload Options. Options granted under the Plan may contain, if provided for in
an option agreement, a "reload" feature. An option with a reload feature may
provide that, whenever the grantee of the option exercises the option, the
grantee shall be granted on the date of such exercise (the "Reload Date") a new
option (the "Reload Option") for a number of Shares equal to the number of
shares subject to the option being exercised less the number of Shares which are
withheld or disposed by the Company in payment of the option price or retained
for purposes of tax withholding. The option price per Share covered by the
Reload Option shall be the fair market value as of the Reload Date. The
protocols of the Committee currently provide that Reload Options will be granted
only in connection with ISOs. No change to this protocol is expected unless
there is a change regarding ISOs in the tax code.
ISOs. If the Committee grants ISOs, they will be granted with terms and
conditions consistent with applicable provisions of the Internal Revenue Code.
Limited Rights. The Limited Rights to be authorized by the Plan are
substantially the same as the limited rights authorized under the 1991 Stock
Option Plan. Limited Rights are exercisable only for thirty days following the
occurrence of a Triggering Event. Upon exercise of a Limited Right, the holder
receives a cash payment equal to the difference between the exercise price of
the related option and an exercise value which is premised on the highest sale
price of an equivalent number of Shares resulting from the Triggering Event.
Under the Plan, Limited Rights may only be granted if they are related to
options and cannot exceed the number of Shares covered by the related option.
The term of the Limited Rights must be the same as the term of the related
options. The Limited Right is cancelled if the related option is exercised, and
the option is cancelled if the related Limited Right is exercised. Limited
Rights are exercisable only if the related option is exercisable and only if six
months have passed since the grant.
Triggering Events. As previously described, the exercisability of options will
be accelerated and Limited Rights will become exercisable upon the occurrence of
certain Triggering Events. Such events generally include (with certain
exceptions): (i) a tender offer for shares pursuant to which Shares are
acquired, (ii) a merger approved by the Company's shareholders in which the
Company is not the survivor, unless the outstanding shares continue to represent
at least 80% of the combined voting power of Mead or the surviving company after
the merger, (iii) a sale of substantially all of the Company's assets approved
by shareholders, (iv) an acquisition of 20% or more of outstanding shares, (v) a
"control share acquisition" under the Ohio law which is approved by the
Company's shareholders and (vi) a change in a majority of the Company's
directors in any two-year period.
24
<PAGE>
Amendment and Termination. The Plan may be amended by the Board of Directors,
without shareholder approval, except under circumstances which applicable law
(including Section 16(b) of the Securities Exchange Act of 1934) or the New York
Stock Exchange would require shareholder approval. Currently, the rules under
Section 16(b) require shareholder approval if the amendment would (a) materially
increase the benefits to participants under the Plan, (b) materially increase
the number of Shares which may be issued under the Plan in the aggregate, or to
any individual, or (c) materially modify the requirements as to eligibility for
participation in the Plan.
The Plan will terminate on September 30, 2005; however, the Board may terminate
the Plan at any time without shareholder approval.
Shareholder Rights Plan. Shares issued upon exercise of options granted under
the Plan will include rights to purchase Mead Common Shares pursuant to Mead's
Shareholder Rights Plan during the period in which rights are issuable under
such plan. Until the rights become exercisable, they are evidenced by
certificates representing the Shares issued upon exercise of options granted
under the Plan. The current Rights Plan expires on November 13, 1996.
Tax Treatment. Under the current Federal income tax laws and regulations, a
person will not be taxed upon the grant of an option or a Limited Right. At the
time of exercise of an option other than an ISO, a holder will realize ordinary
income in an amount equal to the excess of the fair market value of the Shares
over the option price, and Mead will generally be entitled to a deduction in the
same amount.
Upon the exercise of a Limited Right or the payment of cash for cancellation of
an option, the holder will be taxed at ordinary income rates on the amount of
cash received, and Mead will generally receive a deduction in the same amount.
If an employee is granted ISOs under the Plan, the employee will not recognize
income at the time the ISOs are exercised, except for the possible application
of the alterative minimum tax. The difference between the amount received by the
employee from the sale of Shares acquired with ISOs and the option price will be
taxed as a capital gain, and Mead will not receive a deduction, unless such
Shares are disposed of within two years from the date of grant of the option or
within one year after the exercise of the option.
As of February 13, 1996, long-term capital gains are subject to a maximum tax
rate of 28 percent and all other income is subject to a maximum tax of 39.6
percent.
Effect on Earnings. Neither the grant of options or Limited Rights will require
a charge to earnings.
In the opinion of the Board, the foregoing is a fair and accurate summary of the
Plan.
Vote Required. The Plan must be approved by the holders of a majority of Common
Shares present in person or by proxy at the 1996 Annual Meeting entitled to vote
thereon . The full text of the Plan may be obtained from George J. Maly, Jr.,
Secretary, by writing to The Mead Corporation, Courthouse Plaza Northeast,
Dayton, Ohio 45463 or calling (513) 495-3148.
The Board of Directors recommends a vote FOR approval of the 1996 Stock Option
Plan.
Proposed Amendments to Restricted Stock Plan
In December 1987, the Board of Directors adopted a restricted stock plan which
provides for the grant of shares of common stock subject to multiyear
restrictions to employees in partial payment of incentive compensation and to
directors who are not officers or employees of Mead in five-year intervals. The
restricted stock plan was approved by the Company's shareholders in April 1988
and amended by the shareholders in April, 1991 to enlarge the eligible
recipients (the "Restricted Stock Plan").
25
<PAGE>
The Board proposes the Restricted Stock Plan be further amended to provide for
an additional automatic grant to non-employee directors, to change the
definition of "Restriction Period" for employees, and to extend the term of the
Plan.
In 1995, the Board of Directors terminated a retirement plan adopted in 1990 for
eligible outside directors and no benefits continue to accrue under the plan.
The Board of Directors favor instead to structure the compensation of eligible
outside directors to align closer to shareholders through Mead stock ownership.
A portion of the compensation to be delivered would consist of annual grants of
Restricted Stock which necessitates amending the Restricted Stock Plan. Under
the proposed amendment, each outside director would receive an initial grant
equal to the quotient obtained by dividing $5,000 by the market value per share
on the date the amendment is approved by shareholders. The grant value in
subsequent years will be adjusted by a formula that tracks the annual change in
board of directors total compensation (annual retainer and meeting fees) as
reported in an index. There is no provision for discretionary adjustment of the
grant value to directors.
The current multiyear restriction period for eligible employees under the
Restricted Stock Plan creates a conflict between taxability of the grant to the
employee who is retirement eligible and the availability of stock to pay for the
employee tax liability. This is an unintended negative consequence of the
application of current tax law to grants under the Restricted Stock Plan to
retirement eligible employees. Changing the restriction period to "six months
or longer" as determined at the time of grant by the Compensation Committee will
ensure the restriction period can coincide with the tax liability, while
retaining the ability of the Compensation Committee to deliver grants with
multiyear restrictions when in the interests of Mead.
The Restricted Stock Plan expires automatically in December 1997. A shareholder
vote would be required in 1997 in order to continue the use of the Restricted
Stock Plan after 1997. The vote on the prior items provides an opportunity to
vote for extension of the term of the Restricted Stock Plan to September, 2005
and eliminate the need for an additional shareholder vote on the Restricted
Stock Plan next year.
Restricted Stock has been granted in small quantities since the inception of the
Restricted Stock Plan. The number of restricted shares remaining to be issued
under the Restricted Stock Plan (431,340 shares) is not being increased at this
time. Non-employee directors and employees receiving shares are not entitled to
delivery of certificates and the shares are restricted as to transfer until
lapse of the restriction period. Recipients of restricted shares otherwise have
the rights and privileges of a holder of shares (including voting and receiving
dividends). The Restricted Stock Plan is further described on pages 11 and 12.
Proposed Amendments. The primary purposes of the amendments are to extend the
term of the Restricted Stock Plan to September, 2005, to change the definition
of "Restriction Period" for employee grants to "six months or longer", as
determined upon grant by a Committee of the Board of Directors, and to provide
additional automatic grants of restricted stock to eligible non-employee
directors. Each eligible non-employee director shall automatically receive an
initial grant equal to the quotient obtained by dividing $5,000 by the market
value per share on the date this amendment is approved by shareholders.
Thereafter, on January 3, 1997 and each annual anniversary thereafter during the
term of the Restricted Stock Plan each eligible non-employee director shall
automatically receive a number of restricted shares equal to the initial grant
multiplied by an adjustment factor (the "Factor"). The Factor shall equal the
quotient obtained by dividing (i) 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 (ii)
the average total compensation reported by Hay Consulting Group for calendar
year 1994 in the previously described Report
26
<PAGE>
(represented as $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). The restricted shares authorized by this amendment
for non-employee directors shall include a restriction period which shall not
lapse until the date the recipient becomes age 55 or six months from the date
the restricted shares are granted, whichever is later, subject further to the
provisions of the Restricted Stock Plan regarding death, disability or normal
retirement.
The proposed amendments to the Restricted Stock Plan must be approved by the
holders of a majority of the outstanding Common Shares. The full text of the
Restricted Stock Plan as amended may be obtained from George J. Maly, Jr.,
Secretary, by writing to The Mead Corporation, Courthouse Plaza Northeast,
Dayton, Ohio 45463 or calling (513) 495-3148.
The Board of Directors recommends a vote FOR approval of the proposed amendments
to the Restricted Stock Plan.
Amendments to Regulations
A shareholder proposal on declassification of the Board of Directors has been
proposed at the 1994 and 1995 Annual Meetings. The Board of Directors has
determined that the shareholders should decide whether declassification is
affirmatively desired by 75% or more of the outstanding voting shares. Although
the votes in favor of declassification in each of the last two years have been
significantly less than the 75% affirmative vote of outstanding shares required
to amend the Regulations, the majority of shares cast in each of those years
voted in favor of declassification. The shareholders adopted changes to
institute a classified Board of Directors in 1985. The stated reasons for
adoption of the classified board at that time were to increase the likelihood of
continuity and stability in both the composition of and the long-range policies
formulated by the directors; and was designed to permit the Board of Directors
to more effectively represent the interests of all shareholders, including
responding to circumstances created by demands or actions by a minority
shareholder or group. While the Board of Directors has not determined those
reasons to be invalid, it does recognize there are now varied views on the
efficacy of the classified board as a model of board structure.
Given the obvious desire of some shareholders to declassify the board, the Board
of Directors determined to put the issue to a definitive vote this year.
Further, to give the issue fair opportunity of being resolved in favor of
adoption, the Board of Directors recommends a vote for the proposal.
Accordingly, the Board of Directors places the following proposal on the agenda
of the 1996 Shareholders Annual Meeting:
"BE IT RESOLVED: That Article II, Sections 2, 3 and 5 of the Regulations of The
Mead Corporation be amended and restated as follows:
Section 2. Directors. Directors shall hold office until the annual meeting next
succeeding their election or until their successors are chosen and qualified;
provided, however, no director shall be required to stand for election sooner
than would have been otherwise required due to participation as a member of a
class of directors elected in a year prior to 1996.
Section 3. Change in Number of Directors. The whole number of directors may be
changed either by the affirmative vote of the holders of record of at least 75%
of the voting power of the Corporation at a meeting of shareholders called for
that purpose and for the purpose of electing directors, or by the affirmative
vote of a majority of the directors.
Section 5. Removal of Directors. No director may be removed prior to the
expiration of such director's term of office, except by the affirmative vote of
the holders of 75% of the voting power of the Corporation entitled to vote in
the election of directors; provided, however, that unless all the directors are
removed, no individual director shall be removed if the votes of a sufficient
number of shares are cast against his removal which, if cumulatively voted at an
election of all the directors would be sufficient to elect at least one
director."
27
<PAGE>
The resolution must be approved by the affirmative vote of the holders of 75% of
the outstanding Common Shares entitled to vote thereon in person or by proxy at
the 1996 Annual Meeting to adopt the proposed amendment.
The Board of Directors recommends a vote FOR approval of the amendments to the
Regulations.
Shareholder Proposal on Severance Agreements with Executive Officers
Kentucky State District Council of Carpenters, AFL-CIO Pension Fund, 632
Comanche Trail, Frankfort, KY 40601 has represented that, as of November 8,
1995, it owned 4,300 shares of Mead's common stock, and has notified Mead that
it intends to introduce a resolution urging the Board of Directors seek
shareholder approval for all present and future severance agreements with
executive officers. To be adopted, the resolution, which is OPPOSED by the
Board of Directors, would require the affirmative vote of a majority of shares
entitled to vote on the proposal and held by persons present in person or by
proxy at the Annual Meeting. Abstentions will, while broker nonvotes will not,
be treated as "present" for purposes of the preceding sentence. Abstentions and
broker nonvotes will not be counted as "affirmative votes."
The resolution reads as follows:
"BE IT RESOLVED: That the shareholders of The Mead Corporation ("Company") urge
the Board of Directors to seek shareholder approval for all present and future
severance agreements with executive officers."
In support of the resolution, the shareholder has submitted the following
statement:
"Golden parachutes are one of the lucrative executive benefits which have
contributed to the public perception that many senior executive officers of
major, publicly-traded companies are more concerned with cashing in on a system
designed to their advantage than the effective operation of companies. At last
year's annual meeting, this proposal received 45% of the vote.
"Our Company currently has lucrative severance agreements, commonly referred to
as golden parachutes, with Messrs. Mason, Karter, Palmer, Lane, Tatar and Graber
that provide for compensation payments of two times (THREE TIMES for the
Chairman and President) current salary and incentive compensation in the event
employment is terminated after a change in control of the Company. Had the
golden parachutes been triggered on December 31, 1994, payments would have been
as follows: Mason, $5,495,059; Karter, $1,273,539; Palmer, $1,175,869; Lane,
$1,239,804; Tatar, $1,178,220 and Graber, $1,108,805.
"We believe golden parachutes are NOT in the best interest of shareholders
because they reduce shareholder value and financially reward mismanagement. Our
concerns over shareholder value are based on a 1990 study by the United
Shareholders Association of 1,000 major U.S. corporations which found that the
average annualized two-year return was 20 percent higher for the 559 companies
whose management did not hold golden parachutes.
"Our concerns regarding rewarding mismanagement are based on the following
logic. We believe a change in control of our Company will most likely occur if
our Company is not managed in a way that realized the full value of its assets.
If this type of mismanagement occurs and shareholders seek to protect the value
of their investment by voting in a new Board of Directors or tendering their
shares for an above market price, the very managers who failed to maximize
shareholder value will receive a lucrative financial reward for their own
mismanagement.
"We urge all shareholders to VOTE FOR this proposal urging our Board to allow
shareholders to evaluate the wisdom of executives granting themselves such
lucrative severance benefits."
28
<PAGE>
Statement in Opposition
The Board of Directors recommends a vote AGAINST this proposal.
Mead executive officers do not grant themselves severance benefits. Under Ohio
law, the Board is charged with responsibility for establishing compensation for
services provided to the Company. The Board believes it should retain the
ability to provide reasonable severance agreements to help enable it to attract
and retain experienced and highly qualified executives. Past experience has
shown that the security provided by severance agreements enables executives
during a critical situation to remain focused and objective, ignore distractive
efforts of executive recruiters and act decisively to maximize shareholder
value. However, requiring shareholder approval of each agreement would reduce
the Company's flexibility and might well make the Company less competitive in
recruiting and retaining executives. This is especially true since executives at
many of the companies with which Mead competes for talent offer similar types of
agreements.
From a practical perspective, the Board notes that the existing agreements
provide only for reasonable compensation and only to those executives who are
involuntarily terminated without cause following a change in control. Mead does
not have severance agreements of the type often criticized in the press which
trigger payments to executives upon any change in control. In addition, any
payments under Mead's agreements would be within the limits established by the
Internal Revenue Code as being "reasonable compensation."
The Board of Directors and management of Mead remain committed to performance
and building shareholder value. In the last several years, the Company has
accomplished a number of important steps, including refocusing the Company on
its core businesses, selling Mead Data Central for $1.5 billion, selling the
Kingsport, Tennessee paper mill, and implementing meaningful cost reduction
programs. Over the last twelve months, the Company's common stock has traded at
all time highs. Contrary to the proponent's assertion, severance agreements are
not related to, and do not otherwise affect, management's commitment to be the
best that it can be for Mead.
This proposal was voted upon and rejected by the shareholders at the 1995 Annual
Meeting.
In sum, the Board is committed to building shareholder value and, accordingly,
believes it should retain the necessary means, including the granting of
reasonable severance agreements, to employ the best people to enhance its
ability to achieve this objective.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST
THIS PROPOSAL.
Other Business
The Board of Directors does not intend to present, and has no knowledge that
others will present, any other business at the meeting. However, if any other
matters are properly brought before the meeting it is intended that the holders
of proxies will vote thereon in their discretion.
Independent Public Accountants
The independent certified public accounting firm of Deloitte & Touche LLP has
been appointed by the Board of Directors to serve as independent public
accountants for Mead and its subsidiaries for the fiscal year ending December
31, 1996. Deloitte & Touche LLP served in such capacity for the fiscal year
ended December 31, 1995. Representatives of Deloitte & Touche LLP will be
present at the Annual Meeting, will have an opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions
from shareholders.
Shareholder Proposals
Any proposal by a shareholder intended for inclusion in Mead's proxy statement
and form of proxy for the 1997 Annual Meeting of Shareholders must be received
by Mead at Courthouse Plaza Northeast, Dayton, Ohio
29
<PAGE>
45463, Attention: George J. Maly, Jr., Secretary, on or before November 15, 1996
in order to be eligible for such inclusion.
Solicitation of Proxies
The entire cost of solicitation will be borne by Mead. In addition to the use
of the mails, proxy solicitations may be made by officers and employees of Mead,
personally or by telephone and telegram. It is also anticipated that banks,
brokerage houses and other custodians, nominees and fiduciaries will be
requested to forward soliciting material to their principals and to obtain
authorization for the execution of proxies. Mead has retained Kissel-Blake Inc.
to aid in the solicitation of proxies, for which Mead will pay an estimated
$12,500. In addition, Mead will reimburse Kissel-Blake Inc., banks, brokerage
houses and other custodians, nominees and fiduciaries for their out-of-pocket
expenses.
By order of the Board of Directors
Steven C. Mason
Chairman of the Board
Printed on [50# New Era Matte]
30
<PAGE>
THE MEAD CORPORATION APPENDIX A
Annual Meeting of Shareholders, April 25, 1996
The undersigned holder(s) of Common Shares of THE MEAD CORPORATION, an
Ohio corporation (hereinafter referred to as the "Company"), hereby appoints
John G. Breen, William E. Hoglund and Thomas B. Stanley, Jr., and each of them,
attorneys of the undersigned, with power of substitution, to vote all of the
Common Shares of the undersigned entitled to vote at the Annual Meeting of the
Company to be held at the Blair Auditorium, Sinclair Community College, 444 West
Third Street, Dayton, Ohio on Thursday, April 25, 1996 at 4:00 p.m. and at any
and all adjournments of such meeting, upon the matters set forth on the reverse
side hereof, and in their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO INSTRUCTION IS INDICATED, THE
SHARES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE DIRECTORS.
IN THE EVENT OF CUMULATIVE VOTING FOR DIRECTORS, EXCEPT AS OTHERWISE INDICATED
BY THE UNDERSIGNED, A VOTE FOR THE NOMINEES LISTED HEREIN WILL GIVE THE
PROXYHOLDERS DISCRETIONARY AUTHORITY TO CUMULATE ALL VOTES TO WHICH THE
UNDERSIGNED IS ENTITLED AND TO ALLOCATE THEM IN FAVOR OF ANY ONE OR MORE OF THE
NOMINEES, AS THE PROXYHOLDERS DETERMINE.
------------
(CONTINUED AND TO BE VOTED AND SIGNED ON REVERSE SIDE) SEE REVERSE
SIDE
------------
<PAGE>
[x] Please mark
votes as in
this example
- ------------------------------------------------------------------
The Board recommends a vote FOR proposals, 1, 2, 3 and 4
- ------------------------------------------------------------------
1. Election of Directors
Nominees: J. A. Krol, S. C. Mason,
P. F. Miller, Jr., L. J. Styslinger, Jr.
FOR WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[ ] [ ]
[ ]
- ----------------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To approve the 1996
Stock Option Plan. [ ] [ ] [ ]
3. To amend the
Restricted Stock
Plan. [ ] [ ] [ ]
4. To amend the Regu- [ ] [ ] [ ]
lations to declassify
the Board.
- ----------------------------------------------
The Board recommends a vote AGAINST
the following shareholder proposal 5:
- ----------------------------------------------
FOR AGAINST ABSTAIN
5. Shareholder Proposal
on Severance Agree-
ments [ ] [ ] [ ]
MARK HERE
FOR ADDRESS
CHANGE AND
NOTE AT LEFT [ ]
Receipt is acknowledged of Notice of the Annual
Meeting and Proxy Statement relating thereto.
Shareholders should mark, date this proxy and sign exactly
as name(s) appears hereon and return in the enclosed
envelope. If stock is held jointly, both owners should
sign this proxy. Executors, administrators, trustees,
guardians and others signing in a representative capacity
should indicate the capacity in which they sign.
Signature:________________________ Date:____________
Signature:________________________ Date:____________
<PAGE>
APPENDIX B
THE MEAD CORPORATION
1996 STOCK OPTION PLAN
----------------------
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.
(h) "Company" means The Mead Corporation, an Ohio corporation; when
used in the Plan with reference to
<PAGE>
employment, "Company" shall include any Subsidiary of the Company.
(i) "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.
(j) "Incentive Stock Option" means an option granted under the Plan
which qualifies as an incentive stock option under Section 422 of the Code.
(k) "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.
(l) "Limited Right" means a right granted under Section 9 of the Plan.
(m) "Non-Employee Director" means a member of the Board who is not
also an employee of the Company.
(n) "Nonqualified Option" means an option granted under the Plan which
does not qualify as an incentive stock option under Section 422 of the Code.
(o) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(p) "Reload Option" means a Nonqualified Option granted under Section
6(d) of the Plan.
(q) "Share" or "Shares" means shares of common stock, without par
value, of the Company.
(r) "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.
(s) "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>
(t) "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.
(u) "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.
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 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 disin-
3
<PAGE>
terested 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 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.
4
<PAGE>
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.
(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)
5
<PAGE>
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.
(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
6
<PAGE>
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 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.
7
<PAGE>
(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.
(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 holder 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).
8
<PAGE>
(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.
(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.
9
<PAGE>
(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.
(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 the
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
10
<PAGE>
pursuant to this Section 7 which are exercisable at the time of such termination
shall remain exercisable for a period of 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 or distributees 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 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
11
<PAGE>
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 holder
---------------
of a Nonqualified Option may elect to have the Company retain from the Shares to
be issued upon the exercise 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
holder with respect to the exercise of the option (up to a maximum amount
determined by the holder'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 holder 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.
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.
12
<PAGE>
(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 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
13
<PAGE>
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 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
14
<PAGE>
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 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 13D, 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 (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.
15
<PAGE>
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
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 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 l6 of the l934 Act (but only if nontransferability is necessary in order
for the option to qualify for the exemption under Rule l6b-3 of the l934 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
16
<PAGE>
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 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. Each notice shall be deemed to have
been given on the date it is delivered or mailed, except for a notice of
exercise given in accordance with Section 8(b), which shall be deemed to have
been given on the date it
17
<PAGE>
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 15. 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 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.
18
<PAGE>
APPENDIX C
THE MEAD CORPORATION
RESTRICTED STOCK PLAN
---------------------
ARTICLE I. GENERAL PROVISIONS
- ---------- ------------------
Section 1. Purpose. The purpose of The Mead Corporation Restricted Stock
---------- --------
Plan (the "Plan") is to provide certain compensation to eligible directors and
employees in the form of Common Shares ("Shares") of The Mead Corporation (the
"Company") which are restricted in accordance with the terms and conditions set
forth below and to encourage the continued high level of performance of such
directors and employees by increasing the identity of interests of such
directors and employees with the shareholders of the Company. The Plan is
intended to be an unfunded program established for the purpose of providing
compensation for eligible directors and a select group of management employees
and is exempt from Parts 1 through 4 of Title I of the Employee Retirement
Income Security Act of 1974, as amended.
Section 2. Definitions. For purposes of the Plan, the following terms
---------- ------------
shall have the following meanings:
(a) "Board of Directors" means the Board of Directors of the Company.
(b) "Change in Control" means the occurrence of any of the following:
(i) any "person" or "group" within the meaning of Sections 13(d) and 14(d) (2)
of the Securities Exchange Act of 1934, as amended (the "Act"), becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act) of more than 25% of
the then outstanding voting shares of the Company otherwise than through a
transaction arranged by, or consummated with the prior approval of, the Board of
Directors, or (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors (and any new
director whose election by the Board of Directors or whose nomination for
election by the Company's shareholders was approved by a vote of at least two-
thirds of the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority thereof.
(c) "Committee" means the Compensation Committee of the Board of
Directors.
(d) "Company" means The Mead Corporation; however, when used with
reference to employment, "Company" also includes 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.
(e) "Eligible Director" means any director of the Company who is not
also an employee of the Company.
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(f) "Eligible Employee" means any employee of the Company selected by
the Committee.
(g) "Grant Date" means the date on which Restricted Shares are to be
granted pursuant to Article II, Section 1.
(h) "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 other similar source) or, if no sale is reported for such date, then on
the next preceding date for which a sale is reported.
(i) "Participant" means any individual who holds Restricted Shares
granted under the Plan.
(j) "Restriction Period" means (i) in the case of Restricted Shares
granted pursuant to Article II. Section 1(a) or (b), the period of five years
from the date the Restricted Shares are granted, (ii) in the case of Restricted
Shares granted pursuant to Article II. Section 1(c), the date the grantee
becomes age 55 or six months from the date the Restricted Shares are granted,
whichever is later, and (iii) in the case of Restricted Shares granted pursuant
to Article III, the period of six months or longer (as determined by the
Committee) from the date Restricted Shares are granted.
(k) "Restricted Shares" means any Shares issued or delivered pursuant to
the Plan which remain subject to the restrictions set forth in Article I,
Section 5 of the Plan.
(l) "Shares" means the Common Shares, without par value, of the Company.
Section 3. Administration. (a) The Plan shall be administered by the
---------- ---------------
Committee. Subject to the express provisions of the Plan, the Committee and the
Board of Directors shall each have authority to construe and interpret the Plan,
to prescribe, amend, and rescind rules and regulations relating to the Plan, and
to make all other determinations necessary or advisable for administering the
Plan. The Committee or the Board of Directors may correct any defect or supply
any omission or reconcile any inconsistency in the Plan in the manner and to the
extent it shall deem expedient to carry it into effect. The determination of
the Committee or the Board of Directors on any matters within the scope of this
section 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.
In the case of Restricted Shares granted pursuant to Article III, the Committee
may in its discretion impose additional conditions or restrictions as to the
attainment of specified performance goals during the Restriction Period for all
or a portion of the shares or all or a portion of the years in the Restriction
Period.
2
<PAGE>
(b) The Committee may waive or modify at any time any condition or
restriction (including, without limitation, any of the restrictions set forth in
Article I, Section 5) with respect to any Restricted Shares issued pursuant to
Article III.
Section 4. Shares Subject to the Plan. Subject to adjustment as provided
---------- ---------------------------
in Section 1 of Article IV, the maximum number of Shares which may be granted as
Restricted Shares under the Plan is 500,000; the maximum number of Shares which
may be granted as Restricted Shares to any individual pursuant to Section 2 of
Article II is 20,000; and, the maximum number of Shares which may be granted as
Restricted Shares to any eligible employee pursuant to Article III is 150,000.
Shares granted as Restricted Shares under the Plan may be authorized and
unissued Shares or Shares held in the Company's treasury. Any Shares which are
granted as Restricted Shares under the Plan and which are thereafter forfeited
by the participant may again be granted under the Plan as Restricted Shares.
Section 5. Terms and Conditions of Restricted Shares. (a) Subject to the
---------- ------------------------------------------
provisions of paragraph (b) of this Section 5, Restricted Shares issued pursuant
to the Plan shall be subject to the following restrictions:
(i) the Participant shall not be entitled to receive delivery of the
certificate for such Restricted Shares until the expiration of the Restriction
Period;
(ii) such Restricted Shares shall not be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of during the Restriction Period;
and
(iii) all such Restricted Shares shall be forfeited and all right of the
Participant to such Restricted Shares shall terminate without further
obligations on the part of the Company if the Participant ceases to be a
director of the Company (in the case of a Participant who received Restricted
Shares as an Eligible Director) or an employee of the Company (in the case of a
Participant who received Restricted Shares as an Eligible Employee) prior to the
end of the Restriction Period.
Upon the forfeiture of Restricted Shares, such Shares shall be returned to the
status of authorized and unissued Shares or treasury Shares, as determined by
the Committee.
(b) Notwithstanding the provisions of paragraph (a) of this Section 5,
in the event a Participant ceases to be a director of the Company (in the case
of a Participant who received Restricted Shares as an Eligible Director) or an
employee of the Company (in the case of a Participant who received Restricted
Shares as an Eligible Employee) prior to the end of a Restriction Period as a
result of such Participant's death, disability or normal retirement in
accordance with the Company's policies, then the restrictions set forth in
paragraph (a) of this Section 5 shall immediately cease to apply to (and all
rights of the Participant shall immediately vest with respect to):
3
<PAGE>
(i) all of the Restricted Shares, if any, registered in the name of such
Participant which were granted pursuant to Section 1(c) or 2 of Article II of
the Plan or Article III of the Plan;
(ii) a number of the Restricted Shares, if any, registered in the name of
such Participant which were granted pursuant to Section 1(a) of Article II of
the Plan (rounded to the nearest whole share) determined as if such restrictions
had ceased with respect to 20% of such Restricted Shares on the date on which
such Restricted Shares were granted and on each anniversary of such date
occurring prior to the Participant's death, disability or retirement; and
(iii) a number of the Restricted Shares, if any, registered in the name of
such Participant which were granted pursuant to Section 1(b) of Article II of
the Plan (rounded to the nearest whole share) equal to the number of Restricted
Shares which on the date such Restricted Shares were granted had a Market Value
equal to the product of $7,500 times the number of full or partial calendar
years expiring since such Restricted Shares were granted and prior to the
Participant's death, disability or retirement.
In any event, all such Restricted Shares shall be forfeited and all rights of
the Participant to such Restricted Shares shall terminate without further
obligations on the part of the Company if the Participant, directly or
indirectly, individually or as an agent, officer, director, employee,
shareholder (excluding being the holder of any stock which represents less than
1% interest in a corporation), partner or in any other capacity whatsoever
engages prior to the time such restrictions cease to apply in any activity
competitive with or adverse to the Company's business or in the sale,
distribution, production or attempted sale or distribution of any goods,
products or services then sold or being developed by the Company.
(c) Upon the occurrence of a Change in Control, all of the restrictions
set forth in this Section 5 shall immediately cease to apply to all Restricted
Shares issued pursuant to the Plan, except to the extent that the lapse of such
restrictions would, in the opinion of counsel selected by the Company's
independent auditors, constitute "parachute payments" within the meaning of
Section 280G(b)(2)(A) of the Internal Revenue Code (the "Code") and, when added
to any other "parachute payments" which would be received by the Participant
pursuant to the terms of any other plan, arrangement or agreement with the
Company, any person whose actions result in a change in control of the Company
or any person affiliated with the Company or such person, would be subject to
the tax imposed by Section 4999 of the Code.
(d) At the end of the Restriction Period, or at such earlier time as it
is provided for in paragraphs (b) or (c) of this Section 5, the restrictions
applicable to the Restricted Shares pursuant to this Section 5 shall cease and a
share certificate for the number of Restricted Shares with respect to which the
restrictions have ceased shall be delivered, free of all such restrictions and
all restrictive legends, to the Participant or the Participant's beneficiary or
estate, as the case may be.
4
<PAGE>
(e) If required by the Committee, each grant of Restricted Shares shall
be evidenced by a written agreement between the Company and the Participant.
(f) In the event that the restrictions set forth in paragraph (a) of
this Section 5 shall cease to apply to any Restricted Shares granted to Eligible
Employees subject to Section 16 of the Act prior to the date which is six months
after the date of grant of such Restricted Shares, then, notwithstanding any
provision to the contrary in this Section 5, the restrictions set forth in
paragraphs (a)(i) and (a)(ii) of this Section 5 shall continue in effect until
the date which is six months after the date of such grant.
(g) Notwithstanding any provision to the contrary in this Section 5, but
subject nonetheless to paragraph (c) of this Section 5, in the case of
Restricted Shares granted pursuant to Article III, if the Participant fails to
attain specified performance goals set forth with respect to such Restricted
Shares during the Restriction Period, the Participant will forfeit such
Restricted Shares to the extent specified in the grant of such Restricted Shares
and the right of the Participant to such Restricted Shares shall terminate to
the extent specified in the grant of such Restricted Shares without any further
obligations on the part of the Company.
Section 6. Rights as a Shareholder.
---------- ------------------------
(a) Upon the grant of Restricted Shares pursuant to Article II or
Article III of the Plan, the Company shall issue a share registered in the name
of the Participant bearing the following legend and any other legend required by
any federal or state securities laws:
"The transferability of this certificate and the Common Shares represented
hereby are subject to the restrictions, terms and conditions (including
forfeiture and restrictions against sale, assignment, transfer, pledge,
hypothecation and other disposition) set forth in The Mead Corporation
Restricted Stock Plan. Copies of such Plan will be mailed to any shareholder
without charge within five days after receipt of written request therefor
address to Secretary, The Mead Corporation, Mead World Headquarters, Courthouse
Plaza Northeast, Dayton, OH 45463."
Each such share shall be retained by the Company until the restrictions set
forth in Article I, Section 5(a) cease to apply to the Shares.
(b) Upon the issuance of Restricted Shares pursuant to paragraph (a) of
this Section 6, the Participant shall, subject to all of the terms, conditions
and restrictions set forth in the Plan, have all of the rights of a holder of
Shares, including the right to vote and to receive dividends and other
distributions with respect thereto.
ARTICLE II. RESTRICTED SHARES FOR ELIGIBLE DIRECTORS
- ----------- ----------------------------------------
Section 1. Grant of Restricted Shares to Eligible Directors. (a) On the
---------- -------------------------------------------------
third business day of January, 1988 and on each fifth anniversary of such date
during the term of the Plan, (each such date is hereinafter referred to as a
5
<PAGE>
"Grant Date"), the Company shall grant a number of Restricted Shares to each
then Eligible Director determined by dividing $37,500 by the Market Value of a
Share on the Grant Date (rounded to the nearest whole shares).
(b) If during the term of the Plan any person becomes an Eligible
Director on a date other than a Grant Date, the Company shall grant such person
a number of Restricted Shares determined by dividing $37,500 (less the product
of $7,500 times the number of full years since the last Grant Date) by the
Market Value of a Share (rounded to the nearest whole share) on the date of such
person's election to the Board of Directors.
(c) Each Eligible Director shall automatically receive a grant of a
number of Restricted Shares of the Company equal to the quotient obtained by
dividing (i) 5,000, by (ii) the Market Value per Share on the date the Plan, as
amended, is approved by the Shareholders (the "Initial Grant"). Thereafter, on
the third business day of January, 1997 and on each annual anniversary of such
date during the term of the Plan, the Company shall grant and each Eligible
Director shall automatically receive a number of Restricted Shares which shall
equal the product obtained by multiplying the Initial Grant by 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).
Section 2. Election to Receive Compensation as Restricted Shares. (a) Not
---------- ------------------------------------------------------
later than June 1 of each year during the term of the Plan, the Committee shall
cause each Eligible Director to be furnished with an appropriate form which
enables the director to elect to receive payment in Restricted Shares of a
minimum of 20% up to a maximum of 100% (in increments of 10%) of the annual
retainer fee to be earned by such director for service on the Board of Directors
during the following calendar year which is paid on or after the first day of
such calendar year. In order to be effective, the election form must be signed
by the director and must be returned to the Committee or its delegate not later
than July 1 of the year prior to the year with respect to which the election is
being made. All such elections are irrevocable.
(b) A new Eligible Director may, by filing the prescribed election form,
elect to receive the annual retainer fee as Restricted Shares as provided in
paragraph (a) of this Section 2 only if the election form is signed and filed at
least six months prior to the date of payment of the annual retainer fee to such
director.
(c) If an Eligible Director has elected to receive all or a portion of
the annual retainer fee as Restricted Shares as provided in this Section 2, then
on the date such fee would otherwise be payable, the Company shall grant to such
director a number of Restricted Shares determined by dividing the compensation
6
<PAGE>
so to be received by the Market Value of a Share on such date such other
compensation would otherwise be payable (rounded to the nearest whole share).
ARTICLE III. RESTRICTED SHARES FOR ELIGIBLE EMPLOYEES
- ------------ ----------------------------------------
Section 1. Grant of Restricted Shares to Eligible Employees. From time to
---------- -------------------------------------------------
time during the term of the Plan, the Committee may determine that Restricted
Shares shall be granted to Eligible Employees either as payment for all or a
portion of the compensation to be paid to any Eligible Employee pursuant to the
Company's incentive compensation plans, or for any other reason consistent with
the purposes of the Plan. Restricted Shares to be granted as payment for all or
a portion of incentive compensation shall be granted on the date the
compensation is awarded, and the number of Restricted Shares so granted shall be
determined by dividing the amount of such compensation by the Market Value of a
Share on the date the compensation is awarded (rounded to the nearest whole
Share).
ARTICLE IV. MISCELLANEOUS
- ----------- -------------
Section 1. Adjustments Upon Changes in Capitalization. Upon any change in
---------- -------------------------------------------
the outstanding Shares by virtue of a share dividend or split, recapitalization,
merger, consolidation, combination or exchange of shares or other similar
change, the number of Restricted Shares which may be granted under the Plan (or
the class of shares which may be granted as Restricted Shares) shall be adjusted
appropriately by the Committee, whose determination with respect to such
adjustment shall be conclusive. Unless the Committee shall otherwise determine,
any securities and other property received by a Participant in connection with
or as a result of any such change with respect to Restricted Shares (excluding
dividends paid in cash) shall be subject to the restrictions then applicable to
Restricted Shares under the Plan (including forfeiture), and shall be deposited
promptly with the Company to be held in custody until the restrictions cease to
apply to the Restricted Shares to which such securities or other property
relates.
Notwithstanding the foregoing, however, in the event any rights to purchase
Shares are issued pursuant to the Company's Shareholder Rights Plan (or any
successor plan) with respect to Restricted Shares, such rights shall cease to be
subject to the restrictions applicable to the underlying Restricted Shares at
such time, if any, as such rights become exercisable.
Section 2. Compliance with Laws. The issuance or delivery of Shares
---------- ---------------------
pursuant to the Plan shall be subject to, and shall comply with, any applicable
requirements of federal and state securities laws, rules and regulations
(including, without limitation, the provisions of the Securities Act of 1933,
the Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder), any securities exchange upon which the Shares may be listed and any
other law or regulation applicable thereto, and the Company shall not be
obligated to issue or deliver any Shares pursuant to the Plan if such issuance
or delivery would violate any such requirements. The foregoing shall not,
however, be deemed to require the Company to effect any registration of Shares
under any such law or regulation.
7
<PAGE>
Section 3. Amendment and Termination. (a) 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 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:
(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 or the number of Shares which may be granted to any
individual under the Plan;
(iii) materially modify the requirements as to eligibility for
participation in the Plan.
(b) The Plan shall terminate and no additional Restricted Shares
shall be granted under the Plan after September 30, 2005; provided, however,
that the Board of Directors may earlier terminate the Plan at any time.
(c) No amendment to or termination or expiration of the Plan shall
adversely affect any Restricted Shares previously granted under the Plan without
the consent of the holder thereof.
(d) Notwithstanding paragraph (a) of this Section 3, the provisions
of Section 1 of Article II may not be amended more than once every six months
other than to comport with changes in the Code, ERISA or the rules thereunder.
Section 4. Notices. Each notice relating to the Plan shall be in writing
---------- --------
and delivered in person or by mail to the proper address. Each notice shall be
deemed to have been given on the date it is delivered or mailed except that an
election to receive compensation as Restricted Shares pursuant to Article II,
Section 2 shall be deemed to have been given on the date it is received by the
Committee. Each notice to the Committee shall be addressed as follows: The
Mead Corporation, Mead World Headquarters, Courthouse Plaza Northeast, Dayton,
Ohio 45463, Attention: Secretary. Each notice to a Participant shall be
addressed to the Participant'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 Company or to the Participants, as the case
may be.
Section 5. Benefits of Plan. The Plan shall inure to the benefit of, and
--------- -----------------
shall be binding upon, each successor and assign of the Company. All rights and
obligations imposed upon a Participant and all rights granted to the Company
under this Plan shall be binding upon such Participant's heirs, legal
representatives and successors. Nothing in the Plan shall be deemed to create
any obligation on the part of the Company to nominate any director for re-
election or to continue the employment of any employee.
Section 6. Taxes. (a) The Company shall have the right to require, prior
---------- ------
to the issuance or delivery of any Restricted Shares, payment by the Participant
8
<PAGE>
of any taxes required by law with respect to the issuance or delivery of such
Restricted Shares.
(b) On any date on or after January 1, 1994 that restrictions
applicable to Restricted Shares granted (or to be granted) hereunder shall have
ceased pursuant to Article I, Section 5 (the "Lapse Date"), and with respect to
persons subject to Section 16 of the Securities Exchange Act of 1934, as amended
(the "1934 Act") on any date thereafter through the end of the next following
period (the "Window Period") specified in Rule 16b-3(e)(3) (or any successor
rule) under the 1934 Act, the Participant to whom such Restricted Shares were
granted may elect to have the Company retain, from the Restricted Shares to be
delivered at the end of the Restriction Period, Shares having a Market Value on
the date of delivery equal to all or any part of the federal, state and local
withholding tax payments (whether mandatory or permissive) to be made by the
Participant with respect to ceasing of the restrictions (up to the maximum
amount determined by the Participant's top marginal tax rate) in lieu of making
such payments in cash; provided that such election may also be made in advance
of the Lapse Date and will be effective on the date specified in the notice of
election (subject, as applicable, to Section 16 of the 1934 Act), and further
provided that, with respect to a Lapse Date that has occurred or will occur
between January 1, 1994 and October 28, 1994, the election may be made by
persons subject to and in accordance with Section 16 of the 1934 Act through the
end of the first Window Period which commences on, includes or follows October
28, 1994. The Committee may establish from time to time rules or limitations
with respect to the right of a Participant to elect to have the Company retain
Restricted Shares in satisfaction of withholding payments; provided, however,
that, in any event, any such rules or limitations must be in accordance with
Section 16 of the 1934 Act and any applicable rules established under such
Section.
Section 7. Governing Law. All grants of Restricted Shares shall be made
---------- --------------
and accepted in the State of Ohio. The laws of the State of Ohio shall control
the interpretation and performance of the provisions of the Plan.
Section 8. Effective Date of the Plan. The effective date of the Plan
---------- ---------------------------
shall be December 10, 1987; provided, however, that if the Plan is not approved
at the 1988 Annual Meeting of Shareholders by the holders of at least a majority
of the outstanding voting power of the Company, the Plan shall immediately
terminate. No dividends shall be paid prior to the 1988 Annual Meeting of
Shareholders with respect to any Restricted Shares granted prior to such
meeting. If the Plan is not approved at such meeting, all Restricted Shares
granted prior thereto shall be retained by the Company, and the Company shall
pay to the Participant in whose name such Restricted Shares were registered an
amount equal to the Market Value on the date of grant of a number of Shares
equal to such number of Restricted Shares.
9
<PAGE>
--------------------------------------
NOTE:
(1) Adopted by the Board of Directors of the Company on December 11,
1987.
(2) Approved by the shareholders of the Company on April 28, 1988.
(3) Addition of Article II, Section 2, subsection (d) adopted by the
Board of Directors of the Company on December 15, 1989 (deleted February 28,
1991).
(4) Amendment to Article I, Section 2, subsection (h) adopted by the
Board of Directors of the Company on January 25, 1990.
(5) Amendments to Article I, Section 2, subsections (d) and (j); Article
I, Section 3, subsection (a); and Article III, Section 1; and addition of
Article 2, Section 5, subsection (g), adopted by the Board of Directors of the
Company on January 24, 1991, and approved by the shareholders of the Company on
April 25, 1991.
(6) Amendments to Article II, Section 2, subsections (a) and (b); and
addition of Article I, Section 5, subsection (f) and Article IV, Section 3,
subsection (d) adopted by the Board of Directors of the Company on February 28,
1991.
(7) Amendments to Article I, Section 5, subsection (b); and addition of
Article I, Section 5, subsection (b)(iii), adopted by the Board of Directors of
the Company on July 23, 1992.
(8) Amendment to Article IV, Section 6, subsection (b) adopted by the
Board of Directors of the Company on April 28, 1994.
(9) Amendments to Article I, Section 2(j), Section 4, Section 5(b)(i),
Section 6, Article II, Section 1(c), Article IV, Section 3(b) adopted by the
Board of Directors of the Company on October 28, 1995, and approved by the
shareholders of the Company on April 25, 1996.
10
