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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission File No. 1-2267
THE MEAD CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-0535759
(State of Incorporation) (I.R.S. Employer Identification No.)
MEAD WORLD HEADQUARTERS
COURTHOUSE PLAZA NORTHEAST
DAYTON, OHIO 45463
(Address of principal executive offices)
Registrant's telephone number, including area code: 937-495-6323
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No __ .
The number of Common Shares outstanding at March 29, 1998 was
104,067,481.
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<PAGE>
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
--------------------------------------------------
QUARTERLY PERIOD ENDED MARCH 29, 1998
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PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
BALANCE SHEETS
- --------------
(All dollar amounts in millions)
Mar. 29, Dec. 31,
1998 1997
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 18.7 $ 29.5
Accounts receivable 611.3 586.1
Inventories 606.4 524.5
Other current assets 88.9 77.5
--------- ---------
Total current assets 1,325.3 1,217.6
Investments and other assets:
Investees 149.2 151.1
Other assets 584.6 551.2
--------- ---------
733.8 702.3
Property, plant and equipment - net 5,608.6 5,540.9
Less accumulated depreciation and
amortization (2,285.3) (2,231.1)
--------- ---------
3,323.3 3,309.8
--------- ---------
Total assets $ 5,382.4 $ 5,229.7
========= =========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Notes payable $ 138.4 $
Accounts payable 338.5 330.4
Accrued liabilities 364.2 382.6
Current maturities of long-term
debt 3.2 1.8
--------- ---------
Total current liabilities 844.3 714.8
Long-term debt 1,428.0 1,428.0
Commitments and contingent liabilities
Deferred items 810.1 798.4
Shareowners' equity:
Common shares 155.1 154.9
Additional paid-in capital 62.9 53.5
Foreign currency translation
adjustment (24.4) (20.5)
Retained earnings 2,106.4 2,100.6
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2,300.0 2,288.5
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Total liabilities and
shareowners' equity $ 5,382.4 $ 5,229.7
========= =========
See notes to financial statements.
<PAGE>
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
STATEMENTS OF EARNINGS
- ---------------------
(All dollar amounts in millions, except per share amounts)
First Quarter Ended
----------------------
Mar. 29, Mar. 30,
1998 1997
--------- ---------
Net sales $ 1,167.4 $ 1,135.7
Cost of products sold 950.8 940.5
--------- ---------
Gross profit 216.6 195.2
Selling and administrative expenses 140.2 142.3
--------- ---------
Earnings from operations 76.4 52.9
Other revenues - net 3.4 2.6
Interest and debt expense (26.5) (23.3)
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Earnings from continuing
operations before income taxes 53.3 32.2
Income taxes 19.7 11.8
--------- ---------
Earnings from continuing
operations before equity in net
earnings (loss) of investees 33.6 20.4
Equity in net earnings (loss)
of investees (3.0) (.2)
--------- ---------
Net earnings $ 30.6 $ 20.2
========= =========
Earnings per common share - basic
and assuming dilution $ .29 $ .19
========= =========
Cash dividends per common share $ .16 $ .15
========= =========
Weighted-average number of common
shares outstanding (millions) -
basic 103.9 104.4
========= =========
Weighted-average number of common
shares outstanding (millions) -
assuming dilution 105.8 106.1
========= =========
See notes to financial statements.
<PAGE>
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
STATEMENTS OF CASH FLOWS
- ------------------------
(All dollar amounts in millions)
First Quarter Ended
--------------------
Mar. 29, Mar. 30,
1998 1997
------- -------
Cash flows from operating activities:
Net earnings $ 30.6 $ 20.2
Adjustments to reconcile net earnings to
net cash (used in) operating activities:
Depreciation and depletion of property, plant
and equipment 62.7 60.6
Depreciation and amortization of other assets 11.1 11.6
Deferred income taxes 4.3 3.4
Investees-loss and dividends 2.2 (.2)
Other (.1) (5.3)
Change in current assets and liabilities:
Accounts receivable (25.2) 4.4
Inventories (81.9) (73.0)
Other current assets (12.2) (10.0)
Accounts payable and accrued liabilities (10.3) (44.1)
------- -------
Net cash (used in) operating activities (18.8) (32.4)
Cash flows from investing activities:
Capital expenditures (78.5) (66.8)
Additions to equipment rented to others (6.2) (8.9)
Other (31.2) 9.2
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Net cash (used in) investing activities (115.9) (66.5)
Cash flows from financing activities:
Additional borrowings 115.7 539.3
Payments on borrowings (115.0) (531.8)
Notes payable 138.4 100.3
Cash dividends paid (16.6) (15.7)
Common shares issued 10.1 8.1
Common shares purchased (8.7) (7.2)
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Net cash provided by financing activities 123.9 93.0
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(Decrease) in cash and cash equivalents (10.8) (5.9)
Cash and cash equivalents at beginning of year 29.5 20.6
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Cash and cash equivalents at end of quarter $ 18.7 $ 14.7
======= =======
See notes to financial statements.
<PAGE>
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(All dollar amounts in millions)
A - FINANCIAL STATEMENTS
The balance sheet at December 31, 1997, is condensed financial
information taken from the audited balance sheet. The interim financial
statements are unaudited. In the opinion of management, all adjustments
(which consist only of normal recurring adjustments) necessary to
present fairly the financial position and results of operations for the
interim periods presented have been made.
B - ACCOUNTING POLICIES
On an interim basis, all costs subject to recurring year-end adjustments
have been estimated and allocated ratably to the quarters. Income taxes
have been provided based on the estimated tax rate for the respective
years after excluding infrequently occurring items whose specific tax
effect is reported during the same interim period as the related
transaction.
C - INVENTORIES
The amount of inventories is (principally last-in, first-out method):
March 29, Dec. 31,
1998 1997
-------- --------
Finished and semi-finished products $419.4 $342.5
Raw materials 103.6 99.3
Stores and supplies 83.4 82.7
------ ------
$606.4 $524.5
====== ======
D - INVESTEES
The summarized operating data for all investees is presented in the
following table:
First Quarter Ended
----------------------
March 29, March 30,
1998 1997
-------- --------
Revenues $ 176.4 $ 179.3
======= =======
Gross profit $ 1.6 $ 11.7
======= =======
Net earnings (loss) $ (2.5) $ 2.0
======= =======
E - LONG-TERM DEBT
Long-term debt at March 29, 1998, includes $75.0 million of short-term
borrowings which have been classified as long-term debt based on
management's intent and the company's ability to refinance the
borrowings on a long-term basis. After reduction for these financings,
the company has unused long-term lines of credit of $385.0 million.
<PAGE>
F - SHAREOWNERS' EQUITY
During the first quarter of 1998, the company repurchased approximately
252,000 common shares on the open market. The company has outstanding
authorization from the Board of Directors to repurchase up to ten
million common shares, of which 6.4 million shares have been repurchased
as of the end of the first quarter of 1998.
G - COMPREHENSIVE INCOME
Effective January 1, 1998, the company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." The
company's difference between net income and comprehensive income relates
to the changes in foreign currency translation adjustment.
Comprehensive income for the quarters ended March 29, 1998 and March 30,
1997, was $26.7 million and $13.9 million, respectively.
H - ADDITIONAL INFORMATION ON CASH FLOWS
First Quarter Ended
-------------------
March 29, March 30,
1998 1997
-------- --------
Cash paid (refunded) for:
Interest (net of capitalized
interest) $ 42.3 $ 24.4
====== ======
Income taxes $ 7.5 $ (3.0)
====== ======
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULTS OF OPERATIONS
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RESULTS OF OPERATIONS
- ---------------------
Net Sales
- ---------
First quarter 1998 net sales were $1.17 billion, a 3% increase over the
$1.14 billion in the first quarter of 1997. Net earnings for the quarter
were $30.6 million compared with $20.2 million in 1997. Average selling
prices were higher in the first quarter of 1998 for many of the
company's products, especially coated paper and corrugating medium
compared with the first quarter of 1997. Sales volume was slightly lower
for coated and carbonless papers. At Mead's distribution business,
Zellerbach, sales improved compared with the first quarter of 1997.
Sales for School and Office Products declined from the level of the same
quarter of 1997.
Operating Costs and Expenses
- ----------------------------
Gross profit as a percent of sales increased to 18.6% for the first
quarter of 1998 from 17.2% compared with first quarter of 1997 primarily
due to higher selling prices. During the quarter earnings were
negatively affected by higher operating costs at the Rumford, Maine,
mill due to a temporary equipment outage, and at the company's
corrugating medium mill in Stevenson, Alabama, as a result of start-up
costs associated with the paper machine expansion and related
environmental improvement project.
Selling and administrative expenses totaled $140.2 million in the first
quarter, down from $142.3 million in 1997. As a percentage of net sales,
these expenses were 12.0% in the first quarter of 1998 compared with
12.5% in the same quarter in 1997.
Interest and Debt Expense
- -------------------------
First quarter interest and debt expense was $26.5 million, up from the
first quarter of 1997 level of $23.3 million. The increase is
attributable to additional debt levels in 1998, primarily associated
with the expansion project at the Stevenson mill.
Income Taxes
- ------------
The effective tax rate was 37.0% for the first quarter of 1998 compared
to 36.6% for the first quarter of 1997.
Equity in Net Earnings of Investees
- -----------------------------------
Mead's investees, consisting primarily of its 50% owned Northwood
companies, recorded a loss of $3.0 million in the first quarter of 1998
compared with a loss of $.2 million in the same quarter of 1997. Sales
volume for pulp was higher during the quarter compared with 1997,
though prices declined during the quarter and were about even with the
same quarter of 1997. The pulp mill operated well during the quarter
with production rates slightly higher than in the same period last year.
Prices for lumber were much lower in the first quarter of 1998, as were
prices and sales volume for plywood compared with the same quarter in
1997. During the quarter, two of Northwood's sawmills took some
market-related downtime. In the second quarter, Northwood's pulp mill is
scheduled to take effectively 12 days of downtime.
Financial Data by Business
- --------------------------
Paper segment
First Quarter
------------------------------
1998 1997 % Change
---- ---- --------
(All dollar amounts in millions)
Net sales (to unaffiliated
customers) $379.9 $393.5 (3)%
Segment earnings before taxes 59.5 41.8 42%
<PAGE>
Net sales in the segment decreased modestly in the first quarter on
slightly lower sales volume. Sales volume was lower in coated papers and
carbonless papers, and was about even with the first quarter of last
year for uncoated and specialty papers. Earnings for the paper segment
improved over the first quarter of 1997 as a result of higher selling
prices for coated papers, especially for those grades produced at the
Rumford, Maine, and Escanaba, Michigan, paper mills. Prices for most
other grades were about even with those of the prior year. During the
quarter, production increased compared with the same quarter in 1997 at
the Escanaba mill, the Chillicothe, Ohio, mill and the South Lee,
Massachusetts, specialty paper mill. In April, Mead announced the
acquisition of a specialty paper mill in Potsdam, New York, from the
Little Rapids Corporation for an undisclosed cash sum. The mill
manufactures about 22,000 tons annually of pressure-sensitive tape
paper. Mead plans to invest over the next three years to upgrade the
mill's capabilities to allow it to also produce specialty grades such
as those produced at Mead's specialty paper mill in South Lee.
Packaging and Paperboard segment
First Quarter
-----------------------------
1998 1997 % Change
---- ---- --------
(All dollar amounts in millions)
Net sales (to unaffiliated
customers) $342.9 $315.5 9%
Segment earnings before taxes 29.4 21.5 37%
Sales and earnings for the segment increased from the first quarter of
1997. Selling prices for corrugating medium, produced at the Stevenson
mill, increased about 40% from the levels of the same quarter in 1997,
while selling prices for corrugated containers were up slightly. The
division built inventory during the quarter in anticipation of a
scheduled 17-day shutdown of the #2 machine in April to facilitate the
expansion project. The #1 machine will take three days of scheduled
downtime during the same period.
In the Coated Board System, shipments of coated paperboard from the
Mahrt mill in Alabama, to Mead Packaging and the open market increased
by about 10% compared to the first quarter of 1997. Shipment volume of
beverage packaging was higher compared with the first quarter of 1997 as
a result of strong market demand in North America, Europe and Latin
America. Operating performance at Mead's packaging converting facilities
improved over the first quarter of 1997.
Distribution and School and Office Products segment
First Quarter
-----------------------------
1998 1997 % Change
---- ---- --------
(All dollar amounts in millions)
Net sales (to unaffiliated
customers) $444.6 $426.7 4%
Segment earnings before taxes 2.4 3.1 (23)%
Sales for the segment in the first quarter were higher than in the same
quarter of 1997 as result of an eight percent increase in sales volume
at Zellerbach, Mead's distribution business. The increase in sales
occurred in all three of the division's businesses: printing; packaging;
and industrial supplies. Sales were seasonally lower than in the fourth
quarter of 1997. Division selling costs increased compared with the
first quarter of 1997 as a result of strengthening the sales force, but
that increase was offset during the quarter by lower administrative
costs, as the division continues to address operating performance
issues. Sales within the School and Office Products division were lower
than last year. The division's facilities operated well and built
inventory in preparation for the "back-to-school" selling season which
begins in the second quarter.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital on March 29, 1998 was $481.0 million compared to $502.8
million on December 31, 1997. The current ratio of 1.6 at the end of
the first quarter was slightly lower than 1.7 at December 31, 1997.
Inventories are generally higher in the first quarter of the year in
preparation for the Mead School and Office Products "back-to-school"
season. Inventories levels were increased over levels of the first
quarter of 1997 at Zellerbach as part of an effort to grow sales volume,
and at Mead's Containerboard Division in anticipation of a scheduled
shutdown during the second quarter. At the end of the quarter, inventory
levels were much lower in coated paper at the Rumford mill and in coated
paperboard at the Mahrt mill compared to the first quarter of 1997.
Borrowed capital (long-term debt) as a percentage of total capital
(long-term debt plus shareowners' equity) was 38.3% on March 29, 1998,
and was 38.4% on December 31, 1997. On December 31, 1997 the company
classified $155.3 million of short-term borrowings as long-term debt
with the intent to refinance those borrowings on a long-term basis.
During the first quarter, $81.1 million was refinanced.
Capital expenditures totaled $78.5 million for the first quarter of 1998
compared with $66.8 million in the first quarter of 1997. The major
project in both time periods was at the Stevenson corrugating medium
mill.
Under a Board of Directors authorization, Mead repurchased 252,000
shares of its capital stock in the first quarter of 1998. By March 29,
1998, the 10 million share repurchase program (adjusted for the December
1997 two-for-one stock split) was 64% completed.
At the end of the first quarter, Mead paid a fixed rate or capped rate
on 72% of its debt and paid a floating rate of interest on the
remainder. A change of 1% in the floating rate, on an annual basis,
would result in a $.03 change in earnings per share for the year. The
estimated market value of long-term debt, excluding capital leases, was
$65.2 million more than the book value at the end of the first quarter
of 1998.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
No material changes occurred to information previously
provided in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997.
PART II - OTHER INFORMATION
---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
(10) Material Contracts:
(1) Corporate Annual Incentive Plan for 1998 in
which executive officers participate.
(2) Corporate Long Term Incentive Plan effective
1998 in which executive officers participate.
(3) Lease Agreement between The Industrial
Development Board of the City of Stevenson,
Alabama and The Mead Corporation, dated as of
March 1, 1998.
(27.1) Financial Data Schedule Quarter 1, 1998
(27.2) Financial Data Schedule Fiscal year ends 1996, 1995
and Quarters 1, 2, 3 of 1996
(27.3) Financial Data Schedule Quarters 1, 2, 3 of 1997
(b) Reports on Form 8-K
(1) A Form 8-K was filed on February 11, 1998 reporting
under Item 5 certain financial results of Registrant
for the year ended December 31, 1997. Also
filed as an exhibit was a copy of a Press
Release dated January 23, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Date: May 11, 1998
THE MEAD CORPORATION
- --------------------
(Registrant)
By: G. T. GESWEIN
_________________________
G. T. Geswein
Vice President, Controller and
Chief Accounting Officer
<PAGE>
Exhibit 10(1)
THE MEAD CORPORATION
CORPORATE ANNUAL INCENTIVE PLAN
-------------------------------
1998
----
OBJECTIVE
- ---------
The objective of the Corporate Annual Incentive Plan is to recognize and
reward Mead's key executive officers and division leaders for achieving
and sustaining superior business results.
PARTICIPATION ELIGIBILITY
- -------------------------
All Officers of the Corporation are participants in this plan. In
addition, the formula of this plan provides funding for the annual
incentives of all Corporate Center employees.
PAYOUT ELIGIBILITY
- ------------------
Participants must be employees of the company, an affiliate or a
subsidiary at the end of the plan year to receive payout from this plan.
An appropriate proration of earned awards may be made in case of death,
disability, retirement, hire or transfer during the plan year. In such
cases, the annual incentive target will be pro-rated to reflect the
months of service.
ANNUAL INCENTIVE TARGET
- -----------------------
The annual incentive target for each grade is the difference between
Mead's policy total cash compensation target and the midpoint. This
target will be adjusted annually, based on market total cash
compensation data. In addition, the Compensation Committee may increase
the annual incentive targets in any plan year, to reflect Mead's
competitive base salary position. For the 1998 plan year, annual
incentive targets for all grades have been increased by up to 3%. The
current targets are shown in Attachment 1.
PAYOUT FUNDING
- --------------
The individual annual incentive target is multiplied by the Payout
Factor under this Plan. This Payout Factor is determined as:
Payout = Mead ROTC X Mead ROTC
-------------------- ------------------
Factor Mead Cost of Capital FP Peers ROTC
where ROTC = (EAT + ((1 - Tax Rate) X Current Interest Expense)) X 100
---------------------------------------------------
(Average Equity + Average Long-Term Debt)
Mead's Forest Products peers (FP Peers) are comprised of those members
of the Paper Industry Compensation Association whose major business
lines are similar to the Mead business segments, and for which public
financial reporting is provided by Value Line Reports. For the 1998
plan year, these companies are identified as:
Boise Cascade
Champion International
Consolidated Paper
Georgia Pacific
International Paper
Potlatch
Stone Container
Temple-Inland
Union Camp
Westvaco
Weyerhaeuser
Willamette
<PAGE>
The Compensation Committee may alter the membership of this FP Peer
group as corporate structures or market business lines of the indicated
companies changes.
The annual incentive payout is determined as:
Annual Incentive Payout = Annual Incentive Target x Payout Factor
While this formula determines an available pool of annual incentive
dollars, allocation of incentive awards to individuals is based solely
on the criteria for "Individual Payout Determination" defined in the
following section.
INDIVIDUAL PAYOUT DETERMINATION
- -------------------------------
Payout under this Plan for all Participants will be determined by an
assessment of each individual's contribution to the business results for
the performance period. This assessment for each Participant shall be
determined by that participant's manager, subject to review of the CEO.
PAYOUT LIMITATIONS
- ------------------
Payout shall be limited on the basis of the following financial results
of the corporation:
1. There shall be no payout to any participant if any corporate
earnings are negative for the calendar year.
2. Maximum payout is 75% of target for any financial
performance under 6.0% ROTC
3. Payout is capped at 200% of target, for any level of
performance.
ACCOUNTING FOR PAYOUT
- ---------------------
Payout will be estimated periodically and the required corporate accrual
of payout will be booked against earnings during the year. Approved
incentive payments will be prepared and expensed to earnings at the time
of payout.
RECOMMENDATIONS AND APPROVAL
- ----------------------------
The Compensation Committee approves this Plan, and reviews total funding
and individual payouts under the plan, and the amount, use and
replenishment of any reserve funds.
The CEO recommends all individual payouts to the Compensation Committee
of the Board of Directors for approval. Payouts for the CEO and the COO
are recommended to the Board of Directors by the Compensation Committee.
The Compensation Committee may also determine if payout will be in cash,
restricted stock, or replaced with stock options, or a combination
thereof. The Board of Directors may require a mandatory deferral of all
or any portion of the payout to ensure full deductibility of
compensation to any executive.
ADMINISTRATION
- --------------
The Plan is administered by the Compensation Committee of the Board.
The Compensation Committee has delegated administration to the Corporate
Vice President, Human Resources.
RESERVED RIGHTS
- ---------------
The Mead Corporation reserves the right to alter, amend, suspend or
terminate any or all provisions of this Corporate Annual Incentive Plan,
except such actions shall neither inhibit nor hinder the rights of any
individual with respect to earned and credited awards which have been
deferred. Designation of a position as eligible for participation
neither guarantees the individual a right to an incentive payment nor a
right to continued employment.
JEROME F. TATAR MAY 11, 1998
----------------- --------------------
Approved Date
<PAGE>
Attachment 1
CORPORATE ANNUAL INCENTIVE PLAN
-------------------------------
PAYOUT TARGETS
--------------
1998
----
1998 Policy Policy 1998 Annual
Grade Midpoint Annual Target TCC Target Incentive Target*
- ----- -------- ------------- ---------- -----------------
33 $772,236 $756,700 $1,528,900 $766,400
32 684,300 626,900 1,311,200 636,000
31 597,600 521,000 1,118,600 529,300
30 525,144 419,000 944,100 426,600
29 461,064 343,000 804,100 350,000
28 383,868 282,700 687,400 289,100
27 354,648 232,900 587,500 238,700
26 310,212 191,000 501,200 196,300
25 271,524 157,200 428,700 162,000
24 237,048 128,100 365,100 132,400
23 206,616 115,700 322,300 119,600
22 183,360 102,290 285,700 105,900
21 160,728 87,890 248,600 91,160
*For 1998 the above Incentive Targets include up to an addition of 3%
of Midpoint.
Exhibit 10(2)
THE MEAD CORPORATION
THE CORPORATE LONG TERM INCENTIVE PLAN
--------------------------------------
1998
----
OBJECTIVE
- ---------
The objective of the Corporate Long Term Incentive Plan is to reward
senior executives for adding value to the Corporation by delivering
shareholder value that is that ranks high relative to shareholder value
achieved by the S&P 500 index and by Mead's Forest Products peers.
TERM OF THE PLAN
- ----------------
This Corporate Long Term Incentive Plan is a two year plan spanning 1997
and 1998, with the performance period ending December 31, 1998. The
next Long Term Incentive Plan covers the period 1998 and 1999, with the
performance period ending December 31, 1999. All eligible executives
are thus participants in two plan cycles at any time.
PARTICIPATION ELIGIBILITY
- -------------------------
All officers of the Corporation, division presidents and executives of salary
grade 23 or above are participants in the plan.
PAYOUT ELIGIBILITY
- ------------------
Participants must be employees of the company, an affiliate or a
subsidiary at the end of the two-year plan performance period to receive
payout from this plan. An appropriate proration of earned awards may be
made in case of death, disability, retirement, hire or transfer during
the year. In such cases, the incentive target will be pro-rated to
reflect the months of service.
LONG TERM INCENTIVE TARGET
- --------------------------
The 1998 Long Term Incentive Target by grade is shown in Attachment 1.
This Target will be adjusted annually, based on competitive data.
TOTAL PAYOUT DETERMINATION
- ---------------------------
This plan uses as the key performance measure, the 2-year Total
Shareholder Return - TSR - (stock price growth plus dividend
reinvestment) of Mead relative to two comparator groups:
1. The S&P 500 Index
2. Mead's Forest Products peers (FP Peers), comprising of those
members of the Paper Industry Compensation Association whose
major business lines are similar to the Mead business
segments, and for which public financial reporting is
provided by Value Line Reports. For the plan cycle ending
December 31, 1998, these companies are identified as:
Boise Cascade
Champion International
Consolidated Paper
Georgia Pacific
International Paper
Potlatch
Stone Container
Temple-Inland
Union Camp
Westvaco
Weyerhaeuser
Willamette
<PAGE>
For the current plan period, the TSR is measured on December 31, 1996
and December 31, 1998.
A single matrix (Attachment 2) determines the Payout Factor on the basis
of Mead's TSR relative to the TSR of each of the above comparator
groups.
The long term incentive payout is determined as:
L. T. Incentive Payout = L. T. Incentive Target X Payout Factor
INDIVIDUAL PAYOUT DETERMINATION
- -------------------------------
The above calculation will not normally be further adjusted for any
Participant on the basis of individual contribution, except by approval
of the Compensation Committee.
PAYOUT LIMITATION
- -----------------
Payout shall be limited on the basis of the following financial results
for the corporation:
1. The Committee may, but is not obligated to, determine a ZERO
payout if Mead TSR is negative, even if Mead TSR exceeds
either or both comparator groups.
2. There shall be no payout to any participant if corporate
earnings are negative in the final year of the performance
period.
3. Payout is capped at 200% of target, for any level of
performance.
ACCOUNTING FOR PAYOUT
- ---------------------
Payout will be estimated periodically and the required corporate accrual
of payout will be booked against earnings during the year. Approved
incentive awards will be prepared and expensed to earnings at the time
of payout. Restricted stock certificates will be issued by the Transfer
Agent of the corporation.
RECOMMENDATIONS AND APPROVAL
- ----------------------------
The Compensation Committee approves this Plan, and reviews total funding
and individual payouts under the plan, and the amount, use and
replenishment of any reserve funds.
The CEO recommends all individual payouts to the Compensation Committee
of the Board of Directors for approval. Payouts for the CEO and the COO
are approved by the Board of Directors.
Form of payout will be determined by the Compensation Committee. Payout
will normally be delivered to all participants as 100% restricted stock
(with a 6-month vesting period). The Board of Directors may require a
mandatory deferral of all or any portion of the payout to ensure full
deductibility of compensation to any executive.
ADMINISTRATION
- --------------
The Plan is administered by the Compensation Committee of the Board.
The Compensation Committee has delegated administration to the Corporate
Vice President, Human Resources.
RESERVED RIGHTS
- ---------------
The Mead Corporation reserves the right to alter, amend, suspend or
terminate any or all provisions of this Corporate Long Term Incentive
Plan, except such actions shall neither inhibit nor hinder the rights of
any individual with respect to earned and credited awards which have
been deferred. Designation of a position as eligible for participation
neither guarantees the individual a right to an incentive payment nor a
right to continued employment.
JEROME F. TATAR MAY 11, 1998
--------------- -----------------
Approved Date
<PAGE>
Attachment 1
THE CORPORATE LONG TERM INCENTIVE PLAN
--------------------------------------
PAYOUT TARGETS
--------------
1998
Grade Incentive Target
33 $ 756,700
32 626,900
31 521,000
30 419,000
29 343,000
28 282,700
27 232,900
26 191,000
25 157,200
24 128,100
23 103,600
22 73,400
21 58,100
<PAGE>
Mead Corporate Long Term Incentive Plan
---------------------------------------
Mead Performance Factor
(% of Target)
Mead 2-Yr +35% 1.70 0% 170% 187% 200% 200% 200% 200% 200%
TSR +30% 1.60 0% 160% 176% 192% 200% 200% 200% 200%
Relative +25% 1.50 0% 150% 165% 180% 195% 200% 200% 200%
to S&P 500 +20% 1.40 0% 140% 154% 168% 182% 196% 200% 200%
+15% 1.30 0% 130% 143% 156% 169% 182% 195% 200%
+10% 1.20 0% 120% 132% 144% 156% 168% 180% 192%
+5% 1.10 0% 110% 121% 132% 143% 154% 165% 176%
Average 1.00 0% 100% 110% 120% 130% 140% 150% 160%
-5% 0.90 0% 90% 99% 108% 117% 126% 135% 144%
-10% 0.80 0% 80% 88% 96% 104% 112% 120% 128%
-15% 0.70 0% 70% 77% 84% 91% 98% 105% 112%
-20% 0.60 0% 60% 66% 72% 78% 84% 90% 96%
-25% 0.50 0% 50% 55% 60% 65% 70% 75% 80%
-30% 0.40 0% 40% 44% 48% 52% 56% 60% 64%
-35% 0.30 0% 30% 33% 36% 39% 42% 45% 48%
-40% 0.20 0% 20% 22% 24% 26% 28% 30% 32%
-45% 0.10 0% 10% 11% 12% 13% 14% 15% 16%
-50 0.00 0% 0% 0% 0% 0% 0% 0% 0%
Multipliers 0 1.00 1.10 1.20 1.30 1.40 1.50 1.60
8-14 7 6 5 4 3 2 1
Median Top
Max Payout: 200% Mead vs. Forest Products
Ranking of 2-Year Total Shareholder Return (TSR)
Exhibit 10(3)
================================================================================
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF STEVENSON
and
THE MEAD CORPORATION
---------------------------------------------
LEASE AGREEMENT
---------------------------------------------
Dated as of March 1, 1998
Relating to Environmental Improvement Revenue Bonds (The Mead
Corporation Project) of The Industrial Development Board of the City of
Stevenson
================================================================================
TABLE OF CONTENTS
(The Table of Contents for this Lease Agreement is for convenience of
reference only and is not intended to define, limit or describe the
scope or intent of any provisions of this Lease Agreement.)
Page
----
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Certain Rules of Interpretation . . . . . . . . . . 8
ARTICLE II - REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8
Section 2.1 Representations by the Issuer . . . . . . . . . . . 8
Section 2.2 Representations by the Company. . . . . . . . . . .10
ARTICLE III - LEASING CLAUSES AND TITLE TO PROJECT . . . . . . . . . .11
Section 3.1 Lease of the Project. . . . . . . . . . . . . . . .11
Section 3.2 Title to Project. . . . . . . . . . . . . . . . . .11
Section 3.3 Quiet Enjoyment . . . . . . . . . . . . . . . . . .11
ARTICLE IV - ACQUISITION, CONSTRUCTION, INSTALLATION,EQUIPPING AND
COMPLETION OF THE PROJECT;ISSUANCE OF THE BONDS. . . . . . . . .11
Section 4.1 Acquisition, Construction, Installation, Equipping
and Completion of the Project. . . . . . . . . . . .11
Section 4.2 Issuance of Bonds; Disbursements from the Project
Funds. . . . . . . . . . . . . . . . . . . . . . . .13
Section 4.3 Establishment of Completion Date; Excess Proceeds .13
Section 4.4 Insufficiency of Project Funds. . . . . . . . . . .14
Section 4.5 Issuer to Pursue Remedies Against Suppliers,
Contractors and Subcontractors and Their Sureties. .14
ARTICLE V - EFFECTIVE DATE OF THIS AGREEMENT;DURATION OF LEASE TERM;
RENTAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . .15
Section 5.1 Effective Date of This Agreement; Duration of Lease
Term . . . . . . . . . . . . . . . . . . . . . . . .15
Section 5.2 Delivery and Acceptance of Possession . . . . . . .15
Section 5.3 Rental Payments . . . . . . . . . . . . . . . . . .15
Section 5.4 Obligation of the Company Unconditional . . . . . .16
Section 5.5 Assignment and Pledge of Rental Payments and the
Agreement. . . . . . . . . . . . . . . . . . . . . .17
Section 5.6 Purchase of Bonds . . . . . . . . . . . . . . . . .17
Section 5.7 Mandatory Purchase of Bonds . . . . . . . . . . . .17
Section 5.8 Determination of Interest Rate Periods. . . . . . .18
ARTICLE VI - SPECIAL COVENANTS . . . . . . . . . . . . . . . . . . . .18
Section 6.1 Use of Project. . . . . . . . . . . . . . . . . . .18
Section 6.2 Use of Proceeds . . . . . . . . . . . . . . . . . .18
Section 6.3 Indemnity Against Claims. . . . . . . . . . . . . .18
Section 6.4 Inspection of the Project . . . . . . . . . . . . .19
Section 6.5 Company to Maintain Its Corporate Existence;
Conditions Under Which Exceptions Permitted. . . . . 19
Section 6.6 Ownership; Further Assurances and Corrective
Instruments. . . . . . . . . . . . . . . . . . . . . 19
Section 6.7 Maintenance of Project by Company . . . . . . . . .19
Section 6.8 Redemption or Purchase of Bonds . . . . . . . . . .20
Section 6.9 Investment of Bond Fund and Project Fund Moneys
Permitted. . . . . . . . . . . . . . . . . . . . . ..21
Section 6.10 Non-Arbitrage Covenant . . . . . . . . . . . . . .21
Section 6.11 Removal and Substitution of Portions of Project. .22
Section 6.12 Taxes, Other Governmental Charges and Utility
Charges. . . . . . . . . . . . . . . . . . . . . . .23
Section 6.13 Insurance Required . . . . . . . . . . . . . . . .24
Section 6.14 Application of Net Proceeds of Insurance . . . . .24
Section 6.15 Additional Provisions Respecting Insurance . . . .24
Section 6.16 Granting of Easements. . . . . . . . . . . . . . .24
Section 6.17 Release of Certain Land. . . . . . . . . . . . . .25
ARTICLE VII - DAMAGE, DESTRUCTION AND CONDEMNATION . . . . . . . . . .26
Section 7.1 Damage and Destruction. . . . . . . . . . . . . . .26
Section 7.2 Condemnation. . . . . . . . . . . . . . . . . . . .26
Section 7.3 Condemnation of Company-Owned Property. . . . . . .27
<PAGE>
ARTICLE VIII - ASSIGNMENT, SUBLEASING, PLEDGING AND SELLING;REDEMPTION;
RENT PREPAYMENT AND ABATEMENT;OPTION AND OBLIGATION TO PURCHASE
PROJECT;OPTION TO EXTEND TERM OF AGREEMENT . . . . . . . . . . .28
Section 8.1 Assignment and Subleasing . . . . . . . . . . . . .28
Section 8.2 Pledge Under Indenture. . . . . . . . . . . . . . .28
Section 8.3 Restrictions on Sale of Project by Issuer . . . . .28
Section 8.4 Prepayment of Rents; Option to Purchase Project;
Obligation to Purchase Project . . . . . . . . . . .29
Section 8.5 Rent Abatements If Bonds Paid Prior to Maturity . .30
Section 8.6 References to Bonds Ineffective After Bonds Paid. .30
Section 8.7 Option to Extend. . . . . . . . . . . . . . . . . .31
ARTICLE IX - AMENDMENTS AND SUPPLEMENTS. . . . . . . . . . . . . . . .31
Section 9.1 Additional Bonds. . . . . . . . . . . . . . . . . .31
Section 9.2 Conveyance of Project . . . . . . . . . . . . . . .31
Section 9.3 No Other Amendments . . . . . . . . . . . . . . . .31
ARTICLE X - EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . .32
Section 10.1 Events of Default. . . . . . . . . . . . . . . . .32
Section 10.2 Remedies on Default. . . . . . . . . . . . . . . .33
Section 10.3 Agreement to Pay Attorneys' Fees and Expenses. . .34
Section 10.4 No Additional Waiver Implied by One Waiver . . . .34
Section 10.5 Notice of Default. . . . . . . . . . . . . . . . .34
ARTICLE XI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . .34
Section 11.1 Notices. . . . . . . . . . . . . . . . . . . . . .34
Section 11.2 Binding Effect . . . . . . . . . . . . . . . . . .35
Section 11.3 Severability . . . . . . . . . . . . . . . . . . .35
Section 11.4 Amounts Remaining in the Bond Fund . . . . . . . .35
Section 11.5 Termination. . . . . . . . . . . . . . . . . . . .35
Section 11.6 Execution in Counterparts. . . . . . . . . . . . .35
Section 11.7 Applicable Law . . . . . . . . . . . . . . . . . .35
Section 11.8 Captions . . . . . . . . . . . . . . . . . . . . .35
Section 11.9 Recording of Agreement . . . . . . . . . . . . . .35
Section 11.10 Net Lease . . . . . . . . . . . . . . . . . . . .35
Exhibit A Project Land . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit B Description of Project . . . . . . . . . . . . . . . . . B-1
Exhibit C Form of Requisition. . . . . . . . . . . . . . . . . . . C-1
<PAGE>
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT, dated as of March 1, 1998, between THE
INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF STEVENSON, a public
corporation duly organized and existing under the laws of the State of
Alabama, as lessor (the "Issuer"), and THE MEAD CORPORATION, a
corporation organized and existing under the laws of the State of Ohio
(the "Company"), evidencing the agreement of the parties hereto.
W I T N E S S E T H:
-------------------
In consideration of the respective representations and agreements
hereinafter contained, the parties hereto agree as follows (provided
that in the performance of the agreements of the Issuer herein
contained, any obligation the Issuer may thereby incur for the payment
of money shall not be a general debt, liability or obligation of the
Issuer, or of the State or any political subdivision thereof, but shall
be payable solely out of the rents, revenues and proceeds derived from
this Agreement (hereinafter defined) and the sale of the Bonds referred
to herein:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. In addition to the words and terms
elsewhere defined herein, the following words and terms as used herein
have the following meanings unless the context or use clearly indicates
another or different meaning or intent, and any other words and terms
not defined herein and defined in the Series 1998A Indenture have the
same meanings as assigned to them in the Series 1998A Indenture when
used herein unless the context or use clearly indicates another or
different meaning or intent:
"Act" means the statutes codified as Code of Alabama 1975, Title
11, Chapter 54, Article 4, as amended and supplemented and at the time
in force and effect.
"Additional Bonds" means bonds that may be issued under any
Subsequent Indenture and that are provided for in this Agreement or one
or more Supplemental Leases as provided in Section 9.1 of this
Agreement.
"Agreement" means this Lease Agreement and any amendments and
supplements hereto.
"Authorized Company Representative" means any person or persons
designated to act on behalf of the Company by a certificate filed with
the Issuer and a Trustee containing the specimen signature of each such
person and signed by the President, Vice President or Treasurer of the
Company.
"Authorized Issuer Representative" means any person or persons
designated to act on behalf of the Issuer by a certificate filed with
the Issuer and a Trustee containing the specimen signature of each such
person and signed by the Chairman or Secretary of the Issuer.
"Bond Counsel" means an attorney-at-law or a firm of attorneys of
nationally recognized standing in matters pertaining to the tax-exempt
nature of interest on bonds issued by states and their political
subdivisions, duly admitted to the practice of law before the highest
court of any state of the United States of America, selected by the
Company and acceptable to the applicable Trustee.
"Bond Funds" means the Series 1998A Bond Fund and any similar
funds created under Subsequent Indentures for payment of principal and
interest on Additional Bonds.
"Bonds" means the Series 1998A Bonds and any Additional Bonds.
<PAGE>
"Business Day" means any day other than (i) a Saturday or Sunday
or legal holiday or a day on which banking institutions in the city or
cities (A) in which the principal offices of any Trustee, Tender Agent
or Remarketing Agent are located or (B) in which drawings under any
Credit Facility are required to be made, are authorized by law to close
or (ii) a day on which the New York Stock Exchange is closed.
"Code" means the United States Internal Revenue Code of 1986, as
amended. References to the Code and to Sections of the Code shall
include relevant final, temporary or proposed regulations thereunder.
"Completion Date" means the date of completion of the acquisition,
construction, installation and equipping of the Project (hereinafter
defined) as such date shall be certified as provided in Section 4.3
hereof.
"Cost of Construction" with respect to the Project means the
following:
(a) obligations incurred for labor and materials (including
reimbursements payable to the Company or the Issuer and payments
on contracts in the name of the Company or the Issuer) in
connection with the acquisition, construction, installation and
equipping of the Project;
(b) the cost of contract bonds and of insurance of all
kinds that may be required or necessary during the course of
construction of the Project;
(c) all costs of engineering services, including the costs
for test borings, surveys, estimates, plans and specifications and
preliminary investigation therefor, and for supervising
construction, as well as for the performance of all other duties
required by or consequent upon the proper construction of the
Project;
(d) overhead of the Company, to the extent not included in
subparagraph (c) above, allocable to the Project by the Company in
accordance with generally accepted accounting principles;
(e) interest to accrue in respect of the Bonds and costs of
any Credit Facilities to the Completion Date;
(f) amounts paid to the United States Treasury pursuant to
regulations promulgated pursuant to Section 148(f) of the Code;
(g) subject to the limitations of Section 147(g) of the
Code, all expenses incurred in connection with the issuance of the
Bonds or Additional Bonds, including without limitation initial
compensation and expenses of the Trustee, legal expenses and fees,
costs of printing and engraving, recording and filing fees,
compensation of the underwriters, if any, and rating agency fees;
(h) all other costs which may properly be paid or accrued
for the acquisition, construction, installation, equipping or
financing of the Project; and
(i) any sums required to reimburse the Company for advances
made for any of the above items or for any other costs incurred or
for work done which are properly chargeable to the Project.
"Event of Default" means any of the occurrences enumerated in
Section 10.1 of this Agreement.
<PAGE>
"Exempt Costs" means Cost of Construction of the Project to the
extent that the payment thereof would constitute, within the meaning of
Sections 142(a)(5) or 142(a)(6) of the Code, the payment of costs to
provide facilities that are sewage or solid waste disposal facilities
within the meaning of such sections of the Code or facilities
functionally related and subordinate thereto, excluding amounts paid as
costs of issuance of the Bonds but including fees paid to any issuer of
a Credit Facility during the construction of the Project.
"Extraordinary Services" and "Extraordinary Expenses" means all
services rendered and all expenses incurred by the Trustees under the
Indentures other than Ordinary Services and Ordinary Expenses.
"Government Obligations" has the meaning set forth in Article I of
the Series 1998A Indenture.
"Guarantee" means the Guarantee Agreement dated as of March 1,
1998 by and between the Company and the Series 1998A Trustee with
respect to the Series 1998A Bonds, and with respect to any issue or
series of Additional Bonds, any guarantee agreement between the Company
and a Trustee under the Indenture applicable to such issue or series of
Additional Bonds.
"Indentures" means the Series 1998A Indenture and any Subsequent
Indentures.
"Issuer" means The Industrial Development Board of the City of
Stevenson, a public corporation of the State created and existing
pursuant to the Act by a Certificate of Incorporation duly filed for
record in the office of the Judge of Probate of Jackson County, Alabama
on June 11, 1962, as amended, on March 13, 1973, and its successors and
assigns.
"Lease Term" means the duration of the leasehold interest created
hereby as specified in Section 5.1.
"Mill" means the corrugating medium mill operated by the Company
and located near Stevenson, Alabama.
"Net Proceeds" means, with respect to the Bonds, the amount of the
proceeds of the sale of the Bonds deposited into the Project Funds less
the amount paid or to be paid out from such proceeds for the payment of
costs of issuance of the Bonds plus any investment income earned on
moneys in the Project Funds.
"Net Proceeds" means, with respect to any insurance or
condemnation awards, the gross proceeds from the insurance or
condemnation award with respect to which that term is used remaining
after the payment of all expenses (including, without limitation,
attorneys' fees and any Extraordinary Expenses of the Trustees) incurred
in the collection of such gross proceeds.
"Ordinary Services" and "Ordinary Expenses" mean those services
normally rendered and those expenses normally incurred by a trustee
under instruments comparable to the Indentures, including but not
limited to reasonable fees of its counsel.
"Paying Agent" means the paying agent appointed by the Issuer
pursuant to Section 9.01 of the Series 1998A Indenture and any paying
agents appointed pursuant to the applicable provisions of any Subsequent
Indentures.
"Permitted Encumbrances" means, as of any particular time,
(a) liens for ad valorem taxes, special assessments or
other governmental charges not then delinquent or permitted to
exist as provided in Section 6.12;
(b) this Agreement;
(c) such utility, access or other easements and rights-of-
way, restrictions, reservations, reversions and exceptions as the
Authorized Company Representative certifies will not materially
interfere with or impair the operation of the Project (or, if it
is not being operated, the operations for which it was designed or
last modified);
<PAGE>
(d) unfiled and inchoate mechanics' and materialmen's
liens for construction work in progress;
(e) mechanics', materialmen's, suppliers' and vendors'
liens or other similar liens not then payable, and those permitted
to exist as provided in Section 6.7;
(f) such minor defects, irregularities, encumbrances,
easements, rights-of-way and clouds on title as the Authorized
Company Representative certifies do not, in the aggregate,
materially impair the property affected thereby for the purpose
for which it was acquired or is held by the Issuer or the Company;
(g) that certain Lease Agreement dated as of September 1,
1974 between the Company and the Issuer;
(h) that certain Mortgage and Indenture of Trust dated as
of September 1, 1974 between the Issuer and First National Bank of
Birmingham, as trustee;
(i) that certain Lease Agreement dated as of December 1,
1974 between the Company and the Issuer;
(j) that certain Mortgage and Indenture of Trust dated as
of December 1, 1974 between the Issuer and First National Bank of
Birmingham, as trustee;
(k) that certain Lease Agreement dated as of February 1,
1975 between the Company and the Issuer;
(l) that certain Mortgage and Indenture of Trust dated as
of February 1, 1975 between the Issuer and First National Bank of
Birmingham, as trustee;
(m) that certain Lease Agreement dated as of June 1, 1978
between the Company and the Issuer;
(n) that certain Mortgage and Indenture of Trust dated as
of June 1, 1978 between the Issuer and The First National Bank of
Birmingham, as trustee;
(o) that certain Lease Agreement dated as of April 1, 1979
between the Company and the Issuer;
(p) that certain Mortgage and Indenture of Trust dated as
of April 1, 1979 between the Issuer and The First National Bank of
Birmingham, as trustee;
(q) that certain Lease Agreement dated as of November 1,
1986 between the Company and the Issuer;
(r) that certain Mortgage and Trust Indenture dated as of
November 1, 1986 between the Issuer and Irving Trust Company, as
trustee;
(s) that certain Lease Agreement dated as of April 1,
1991, as amended, between the Company and the Issuer;
(t) that certain Lease Agreement dated as of December 1,
1993, as amended, between the Company and the Issuer;
(u) that certain Lease Agreement dated as of February 1,
1996 between the Company and the Issuer; and
(v) that certain Lease Agreement dated as of June 1, 1997
between the Company and the Issuer.
<PAGE>
"Permitted Investments" has the meaning set forth in Article I of
the Series 1998A Indenture.
"Plans" means the plans and specifications prepared by or on
behalf of the Company for the Project, as the same may be revised from
time to time by the Company in accordance with the second paragraph of
Section 4.1 hereof, which are on file with the Company and accessible to
the Issuer.
"Project" means the acquisition, construction and installation of
sewage and solid waste disposal facilities, including sewage collection,
treatment and disposal facilities and a chemical recovery and recycling
system, including a recovery boiler and a woodwaste boiler and related
wood waste handling systems, as described in Exhibit "B" hereto.
"Project Land" means the real property described in Exhibit "A"
hereto less such real property as may be released from this Agreement
pursuant to Section 6.17 or taken by the exercise of the power of
eminent domain as provided in Section 7.2.
"Project Funds" means the Series 1998A Project Fund and the Series
1998B Project Fund.
"Project Site" means the site of the Mill.
"Remarketing Agent" means the remarketing agent appointed in
accordance with Section 12.01 of the Series 1998A Indenture and any
additional remarketing agents appointed in accordance with the
applicable provisions of any Subsequent Indentures.
"Series 1998A Bonds" means The Industrial Development Board of the
City of Stevenson Environmental Improvement Revenue Bonds (The Mead
Corporation Project), Series 1998A (Taxable) issued in the aggregate
principal amount of $82,500,000.
"Series 1998A Bond Fund" means the fund created by Section 5.02 of
the Series 1998A Indenture for payment of principal and interest on the
Series 1998A Bonds.
"Series 1998A Indenture" means the Trust Indenture dated as of
March 1, 1998 between the Issuer and the Series 1998A Trustee with
respect to the Series 1998A Bonds, pursuant to which the Series 1998A
Bonds are authorized to be issued, as amended or supplemented from time
to time.
"Series 1998A Project Fund" means the fund created pursuant to
Section 5.04 of the Series 1998A Indenture.
"Series 1998A Tender Agent" means the initial and any successor
tender agent appointed in accordance with Section 12.02 of the Series
1998A Indenture.
"Series 1998A Trustee" means Citibank, N.A., New York, New York,
and its successors and assigns and any other entity that may be serving
as successor trustee or co-trustee under the Series 1998A Indenture.
"Series 1998B Bonds" means The Industrial Development Board of the
City of Stevenson Environmental Improvement Revenue Bonds (The Mead
Corporation Project), Series 1998B to be issued in the aggregate
principal amount of $25,000,000.
"Series 1998B Indenture" means the Trust Indenture to be dated as
of April 1, 1998 between the Issuer and a Trustee with respect to the
Series 1998B Bonds, pursuant to which the Series 1998B Bonds are
authorized to be issued, as amended or supplemented from time to time.
"Series 1998B Project Fund" means the fund to be created under the
Series 1998B Indenture for the disbursement of proceeds of the Series
1998B Bonds to pay costs of the Project.
"State" means the State of Alabama.
"Subsequent Indenture" means any one or more Indentures, other
than the Series 1998A Indenture, between the Issuer and a Trustee with
respect to any issue or series of Additional Bonds, which provides for
the financing of additional costs of the Project or the refunding of all
or any portion of the Series 1998A Bonds or any Additional Bonds in
accordance with the terms of the Series 1998A Indenture or any
Subsequent Indenture relating to the refunded Additional Bonds.
"Supplemental Lease" means any supplement to or amendment of this
Agreement entered into by the Issuer and the Company pursuant to and in
accordance with Section 9.1 hereof.
"Taxable Bonds" means the Series 1998A Bonds and any Additional
Bonds that are not Tax-Exempt Bonds.
"Tax-Exempt Bonds" means any Additional Bonds issued by the Issuer
under the Act, the interest on which is excludable from the gross income
of the holders thereof for federal income tax purposes under Section 103
of the Code.
"Tender Agents" means the Series 1998A Tender Agent and any
additional tender agents appointed in accordance with the applicable
provisions of any Subsequent Indentures.
"Trust Estate" means, with respect to each Indenture, the property
described in the granting clauses of such Indenture.
"Trustees" means the Series 1998A Trustee and all other entities,
if any, serving as trustees under any Subsequent Indentures.
Section 1.2 Certain Rules of Interpretation. The definitions set
forth in Section 1.1 shall be equally applicable to both the singular
and plural forms of the words and terms therein defined and shall cover
all genders.
"Herein", "hereby", "hereunder", "hereof", "hereinbefore",
"hereinafter" and other equivalent words refer to this Agreement and not
solely to the particular Article, Section or subdivision in which such
word is used.
Reference herein to an Article number (e.g., Article IV) or a
Section number (e.g., Section 3.2) shall be construed to be a reference
to the designated Article number or Section number hereof unless the
context or use clearly indicates another or different meaning or intent.
ARTICLE II
REPRESENTATIONS
Section 2.1 Representations by the Issuer. The Issuer makes the
following representations as the basis for the undertakings on its part
herein contained:
(a) Organization and Authority. The Issuer is a public
--------------------------
corporation duly organized and validly existing under the
provisions of the Act by a Certificate of Incorporation duly filed
for record in the office of the Judge of Probate of Jackson
County, Alabama on June 11, 1962, as amended on March 13, 1973,
which Certificate of Incorporation has not been further amended or
revoked and is of full force and effect. The Issuer has all
requisite power and authority under the Act to (i) issue the
Series 1998A Bonds, (ii) use the proceeds thereof to acquire,
construct, install and equip the Project, (iii) own, lease and
dispose of the Project, and (iv) enter into, and perform its
obligations under this Agreement and the Series 1998A Indenture.
This Agreement and the Series 1998A Indenture have been duly
authorized, executed and delivered by the Issuer and are legal,
valid and binding agreements enforceable against the Issuer in
accordance with their respective terms.
<PAGE>
(b) Pending Litigation. There are no actions, suits,
------------------
proceedings, inquiries or investigations pending, or, to the
knowledge of the Issuer, threatened against or affecting the
Issuer in any court or before any governmental authority or
arbitration board or tribunal, which involve the possibility of
materially and adversely affecting the transactions contemplated
by this Agreement or the Series 1998A Indenture or which, in any
way, would adversely affect the validity or enforceability of the
Series 1998A Bonds, the Series 1998A Indenture, this Agreement or
any agreement or instrument to which the Issuer is a party and
which is used or contemplated for use in the consummation of the
transactions contemplated hereby or thereby.
(c) Issue, Sale and Other Transactions Are Legal and
------------------------------------------------
Authorized. The issuance and sale of the Series 1998A Bonds and
----------
the execution and delivery by the Issuer of this Agreement and the
Series 1998A Indenture, and the compliance by the Issuer with all
of the provisions of each thereof and of the Series 1998A Bonds
(i) are within the purposes, powers and authority of the Issuer,
(ii) to the best of the knowledge of the Issuer, have been done in
full compliance with the provisions of the Act, are legal and will
not conflict with or constitute on the part of the Issuer a
violation of or a breach of or default under, or result in the
creation of any lien, charge or encumbrance upon any property of
the Issuer (other than as contemplated by this Agreement or the
Series 1998A Indenture) under the provisions of, any charter
instrument, by-law, indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which the Issuer is
a party or by which the Issuer is bound, or any license, judgment,
decree, law, statute, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Issuer or
any of its activities or properties, and (iii) have been duly
authorized by all necessary corporate action on the part of the
Issuer;
(d) Governmental Consents. Neither the nature of the
---------------------
Issuer nor any of its activities or properties, nor any
relationship between the Issuer and any other person, nor any
circumstance in connection with the offer, issue, sale or delivery
of any of the Series 1998A Bonds is such as to require the
consent, approval or authorization of, or the filing, registration
or qualification with, any governmental authority on the part of
the Issuer in connection with the execution, delivery and
performance of this Agreement and the Series 1998A Indenture or
the offer, issue, sale or delivery of the Series 1998A Bonds,
other than those already obtained. The Issuer has filed with the
Alabama Securities Commission notification of the Issuer's
intention to issue the Series 1998A Bonds as required by Code of
Alabama, Section 8-6-110 et seq., as amended, and the Director of
the Alabama Securities Commission has issued a Certificate of
Notification with respect to the Series 1998A Bonds pursuant to
the aforesaid act and said Certificate of Notification has not
been revoked or rescinded and is in full force and effect;
(e) No Defaults. To the best of the Issuer's knowledge, no
-----------
event has occurred and no condition exists with respect to the
Issuer which would constitute an "Event of Default" as defined in
this Agreement or the Series 1998A Indenture or which, with the
lapse of time or with the giving of notice or both, would become
such an "Event of Default". The Issuer is not in default under
the Act or under any charter instrument, by-law or other agreement
or instrument to which it is a party or by which is it bound;
(f) No Prior Pledge. Neither the Project, this Agreement
---------------
nor any of the payments to be received pursuant to this Agreement
have been pledged or hypothecated in any manner or for any purpose
other than as provided in the Series 1998A Indenture as security
for the payment of the Series 1998A Bonds; and
<PAGE>
(g) Nature and Location of Project. The Project will
------------------------------
constitute a "project" within the meaning of the Act, and the
acquisition, construction, installation and equipping of the
Project is in furtherance of the public purpose of the Act. The
Project will be located within 25 miles of the corporate limits of
the City of Stevenson, and no part thereof is located within the
corporate limits or the police jurisdiction of any other
incorporated municipality or any county of any state other than
Jackson County, Alabama.
Section 2.2 Representations by the Company. The Company makes
the following representations as the basis for the undertakings on its
part herein contained:
(a) Corporate Organization and Power. The Company (i) is a
--------------------------------
corporation duly organized, validly existing and in good standing
under the laws of the State of Ohio, (ii) is duly qualified to
transact business as a foreign corporation in the State, and
(iii) has all requisite corporate power and authority and all
necessary licenses and permits to own and operate its properties
and to carry on its business as now being conducted and as
presently proposed to be conducted;
(b) Pending Litigation. There is no proceeding pending, or
------------------
to the knowledge of the Company threatened, against or affecting
the Company in any court or before any governmental authority,
arbitration board or tribunal which is likely to materially and
adversely affect the ability of the Company to perform its
obligations under this Agreement;
(c) Agreements Are Legal and Authorized. The execution and
-----------------------------------
delivery by the Company of this Agreement and the compliance by
the Company with all of the provisions hereof and thereof (i) are
within the corporate power of the Company, (ii) will not conflict
with or result in any breach of any of the provisions of, or
constitute a default under or result in the creation of any lien,
charge or encumbrance upon any property of the Company (other than
as contemplated by this Agreement and the Series 1998A Indenture)
under the provisions of the Company's Amended Articles of
Incorporation or Regulations or any agreement or other instrument
to which the Company is a party or by which it may be bound, or
any license, judgment, decree, law, statute, order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its activities or
properties, and (iii) have been duly authorized by all necessary
action on the part of the Company;
(d) Governmental Consent. To the knowledge of the Company,
--------------------
neither the Company nor any of its business or properties, nor any
relationship between the Company and any other person, nor any
circumstances in connection with the execution, delivery and
performance by the Company of this Agreement is such as to require
the consent, approval or authorization of, or the filing,
registration or qualification with, any governmental authority on
the part of the Company other than those already obtained;
(e) No Defaults. To the knowledge of the Company, no event
-----------
has occurred and no condition exists with respect to the Company
that would constitute an Event of Default under this Agreement or
which, with the lapse of time or with the giving of notice or
both, would become such an Event of Default;
(f) Compliance with Law. To the knowledge of the Company,
-------------------
the Company is not in violation of any laws, ordinances,
governmental rules or regulations to which it is subject and has
not failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its
properties or to the conduct of its business, which violation or
failure to obtain is likely to materially and adversely affect the
ability of the Company to perform its obligations hereunder;
(g) Commencement of Construction. The acquisition,
----------------------------
construction, installation and equipping of the Project commenced
after December 27, 1991, and no obligation relating to the
acquisition, construction, installation or equipping of the
Project was paid or incurred prior to such date.
ARTICLE III
LEASING CLAUSES AND TITLE TO PROJECT
Section 3.1 Lease of the Project. The Issuer hereby leases to
the Company, and the Company hereby leases from the Issuer, the Project
at the rent set forth in Section 5.3 and in accordance with the
provisions hereof.
Section 3.2 Title to Project. Upon the execution and delivery
hereof, the Issuer agrees that it will furnish to the Company and the
Trustee an opinion of the Issuer's Counsel or other evidence
satisfactory to the Company demonstrating that the Issuer has good fee
simple title and/or a leasehold interest in and to the Project subject
only to Permitted Encumbrances.
Section 3.3 Quiet Enjoyment. The Issuer warrants and agrees that
it will defend the Company in the quiet enjoyment and peaceable
possession of the Project, free from all claims of all persons claiming
by, through or under the Issuer, throughout the Lease Term, so long as
the Company performs the agreements to be performed by it hereunder, or
so long as the period for remedying any failure in such performance has
not expired.
ARTICLE IV
ACQUISITION, CONSTRUCTION, INSTALLATION,
EQUIPPING AND COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS
Section 4.1 Acquisition, Construction, Installation, Equipping
and Completion of the Project. Not later than the delivery hereof the
Issuer will have acquired fee simple title in and to the Project, and
subject to the provisions of Section 4.4, the Issuer agrees that:
(a) It will acquire, construct, install and equip
facilities necessary for the Project. The aforesaid acquisition,
construction, installation and equipping shall be substantially in
accordance with the Plans. The Project shall be the property of
the Issuer and subject to the terms hereof.
(b) Subject to the provisions of the following paragraphs,
it will cause to be acquired, constructed, installed and equipped
such additional machinery, equipment and related property
described in the attached Exhibit "B" and such other items of
machinery, equipment and related property as in the Company's
judgment may be necessary for the operation of the Project. Such
additional machinery, equipment and related property shall become
a part of the Project and shall be the property of the Issuer and
subject to the terms hereof.
The Issuer and the Company agree that the Company from time to
time may supplement or amend the Plans (including additions thereto or
omissions therefrom), provided that no such amendment may provide for a
material addition to, deletion from or modification of the Plans unless
there has been filed with the Issuer and the Trustee (i) a revised
Exhibit "B" containing a description of the Project as revised by such
amendment or modification, the accuracy of which has been certified by
an Authorized Company Representative, and (ii) the written opinion of a
firm of nationally recognized Bond Counsel experienced in the financing
of sewage and solid waste disposal facilities stating that (a) the
Project as provided for in such modified or amended Plans will
constitute a "project" within the meaning of the Act, and (b) the
expenditure of moneys from the Project Fund to pay the Cost of
Construction in accordance with such amended or modified Plans will not
impair the exclusion from gross income of interest on the Tax-Exempt
Bonds for purposes of federal income taxation.
<PAGE>
The Issuer hereby makes, constitutes and appoints the Company as
its true, lawful and exclusive agent for the acquisition, construction,
installation and equipping of the Project, and the Company hereby
accepts such agency to act and do all things on behalf of the Issuer, to
perform all acts and agreements of the Issuer hereinabove provided in
this Section 4.1, and to bring any actions or proceedings against any
person which the Issuer might bring with respect thereto as the Company
shall deem proper. The Issuer hereby ratifies and confirms all actions
of, and assumes and adopts all contracts entered into by, the Company
with respect to the Project prior to the date hereof. This appointment
of the Company to act as agent and all authority hereby conferred or
granted is conferred and granted irrevocably until all activities in
connection with the acquisition, construction, installation and
equipping of the Project have been completed, and shall not be
terminated prior thereto by act of the Issuer or of the Company. So
long as the Company is not in default hereunder, upon the Completion
Date (or at any time prior thereto upon the request of the Company) the
Issuer will assign to the Company all warranties and guarantees of all
contractors, subcontractors, suppliers, architects and engineers for the
furnishing of labor, materials or equipment or supervision or design in
connection with the Project and any rights or causes of action arising
from or against any of the foregoing.
The Issuer agrees to complete the acquisition, construction,
installation and equipping of the Project as promptly as practicable
after receipt of the proceeds from the sale of the Series 1998A Bonds,
to continue said acquisition, construction, equipping and installation
with all reasonable dispatch and to use its best efforts to cause said
acquisition, construction, equipping and installation to be completed as
soon as practicable, delays incident to strikes, riots, acts of God or
the public enemy beyond the reasonable control of the Issuer only
excepted, but if said acquisition, construction and installation is not
completed within the time herein contemplated there shall be no
resulting liability on the part of the Issuer and no diminution in or
postponement or abatement of the rents and other payments required by
Section 5.3 to be paid by the Company.
Section 4.2 Issuance of Bonds; Disbursements from the Project
Funds. In order to provide funds to finance the Cost of Construction,
the Issuer agrees that it initially will issue and deliver the Series
1998A Bonds to the purchasers thereof and apply and deposit the proceeds
thereof in accordance with the terms of the Series 1998A Indenture. The
Company has approved the Series 1998A Indenture in form and substance,
approves the issuance of the Series 1998A Bonds in accordance with the
Series 1998A Indenture and approves the manner and purposes for which
proceeds of the Series 1998A Bonds may be used and invested pursuant to
the Series 1998A Indenture. The Issuer has authorized and directed the
Series 1998A Trustee to disburse moneys from the Series 1998A Project
Fund for payment or reimbursement of the Cost of Construction.
Each disbursement from a Project Fund shall be made only upon
receipt by the applicable Trustee of a written requisition signed by
the Authorized Company Representative in substantially the form of
Exhibit "C" attached hereto, stating with respect to each payment to be
made: (a) the requisition number, (b) the name and address (or wire
transfer instructions) of the person, firm or corporation to whom
payment is due, (c) the amount to be paid, (d) identifying the
applicable Project Fund and certifying that each obligation mentioned
therein has been properly incurred and is a proper charge against such
Project Fund, specifying in reasonable detail the purpose and
circumstances of such obligation and certifying that such obligation has
not been the basis of any previous withdrawal from any Project Fund, and
(e) with respect to requisitions for the payment of costs other than
Exempt Costs, certifying that, except with respect to amounts requested
for the payment of the costs of issuance of the Bonds, payment of such
requisition will not result in less than 95% of the total proceeds of
the sale of the Bonds expended at that time having been used to pay
Exempt Costs.
<PAGE>
In approving or certifying any requisition under this Section 4.2
the Issuer and the applicable Trustee may rely as to the completeness
and accuracy of all statements in such requisition upon the approval of
or certification to such requisition by the Authorized Company
Representative, and the Company hereby agrees to indemnify and save
harmless the Issuer and the Trustees, and each of their directors,
officers, members, agents and employees from any liability incurred in
connection with any requisition so approved or certified.
Section 4.3 Establishment of Completion Date; Excess Proceeds.
The Completion Date shall be evidenced to the Trustees by a certificate
of the Authorized Company Representative: (i) stating that the Project
has been completed substantially in accordance with the Plans,
(ii) stating that, except for amounts retained by any Trustee at the
Company's direction for any Cost of Construction of the Project not then
due and payable or which is in dispute, the entire Cost of Construction
of the Project has been paid, and (iii) stating that not less than 95%
of the total proceeds of the sale of the Bonds have been used to pay
Exempt Costs. Notwithstanding the foregoing, such certificate may state
that it is given without prejudice to any rights against third parties
which exist at the date of such certificates or which may subsequently
come into being.
If moneys remain in either Project Fund after payment of all of
the Cost of Construction of the Project, such moneys, at the direction
of the Company, shall be used (i) for the redemption of Bonds for which
such Project Fund was established in the largest amount possible at the
earliest date permitted by the applicable Indenture at which the
redemption price for such Bonds to be redeemed is 100% of the principal
amount thereof plus accrued interest to the redemption date, or for the
purchase of such Bonds upon completion of the Project as provided in the
applicable Indenture or otherwise for the purpose of cancellation at any
time prior to the earliest date permitted by the applicable Indenture
for the redemption of such Bonds, (ii) paid into the Bond Fund
established for such Bonds to pay interest on such Bonds, or (iii) a
combination of (i) and (ii) above; provided, however, that if any Tax-
Exempt Bonds are outstanding such moneys shall not be used as described
in (i), (ii) or (iii) above unless the Company supplies the applicable
Trustees with an opinion of Bond Counsel to the effect that such use
will not adversely affect the exclusion from gross income of the
interest on the Tax-Exempt Bonds for federal income tax purposes. The
Company agrees that any investments it may direct of any such amounts
that are held in one or more Project Funds or Bond Funds established for
the deposit of proceeds of Tax-Exempt Bonds shall result in a yield on
such investments, computed in accordance with the applicable provisions
of Sections 1.148-0 to 1.148-11 of the Treasury Regulations, not in excess of
the yield (computed in the same manner) on such Tax-Exempt Bonds.
Section 4.4 Insufficiency of Project Funds. The Issuer does not
make any warranty, either express or implied, that the amounts in the
Project Funds and available for payment of the Cost of Construction of
the Project will be sufficient to pay all of the Cost of Construction.
The Company agrees that in the event that moneys in the Project Funds
are insufficient to pay all of the Cost of Construction, the Company
shall complete the acquisition, construction, installation and equipping
of the Project, and shall pay or make funds available to the Issuer to
pay that portion of the Cost of Construction in excess of the moneys
available therefor in the Project Funds. The Company agrees that, if
after exhaustion of the amounts of the Project Funds, it should pay any
portion of the Cost of Construction, it shall not be entitled to any
diminution of the amounts payable under as provided in Section 5.3
hereof.
<PAGE>
Section 4.5 Issuer to Pursue Remedies Against Suppliers,
Contractors and Subcontractors and Their Sureties. At the direction and
sole cost of the Company (to the extent that such cost is not payable
and actually paid from the Project Funds), the Issuer will promptly
proceed, either separately or in conjunction with others, to exhaust the
remedies of the Issuer against any defaulting supplier, contractor or
subcontractor and against any surety therefor, for the performance of
any contract made in connection with the Project. If the Company so
notifies the Issuer, the Company may, in its own name or in the name of
the Issuer, prosecute or defend any action or proceeding or take any
other action involving any such supplier, contractor, subcontractor or
surety which the Company deems reasonably necessary, and in such event
the Issuer agrees to cooperate fully with the Company and to take all
action necessary, to the extent it might lawfully do so, to effect the
substitution of the Company for the Issuer in any such action or
proceeding. Any moneys recovered by way of damages, refunds,
adjustments or otherwise in connection with the foregoing prior to the
Completion Date shall be paid into the Project Funds and after the
Completion Date shall be used as authorized by Section 4.3.
ARTICLE V
EFFECTIVE DATE OF THIS AGREEMENT;
DURATION OF LEASE TERM; RENTAL PROVISIONS
Section 5.1 Effective Date of This Agreement; Duration of Lease
Term. This Agreement shall become effective upon its execution and
delivery and the leasehold interest created hereby with respect to the
Project shall then begin, and, subject to the other provisions hereof,
shall expire at midnight, March 1, 2033, or sooner upon payment or
redemption of the Bonds as hereinafter provided subject to extension as
provided in Section 8.7.
Section 5.2 Delivery and Acceptance of Possession. The Issuer
agrees to deliver to the Company sole and exclusive possession of the
Project (subject to the right of the Issuer and the Trustees to inspect
the same pursuant to Section 6.4) on the Completion Date and the Company
agrees to accept possession of the Project upon such delivery; provided,
however, that the Company shall be permitted such possession of the
Project prior to the Completion Date as shall not interfere with the
acquisition, construction, installation and equipping of the Project.
Section 5.3 Rental Payments.
(a) As rent for the Project, the Company agrees to pay to
each Trustee, as assignee and pledgee of and for the account of
the Issuer, for deposit in the respective Bond Fund, amounts
sufficient, together with other moneys held by such Trustee under
the related Indenture and available therefor, to pay the principal
of, and the redemption premium (if any) and the interest on, the
Bonds issued under such Indenture as the same become due pursuant
to the terms of such Indenture, as follows:
(i) On or prior to each date upon which interest on
any of the Bonds is payable under the Indenture relating to
such Bonds, a sum that will be equal to the interest on such
Bonds coming due on such dates;
(ii) On or prior to any redemption date, or any date
on which payment is accelerated, for any of the Bonds, a sum
equal to the principal of, and the redemption premium (if
any) and the interest on, the Bonds that are to be redeemed
or accelerated on such date; and
(iii) On or prior to the date or dates on which
principal of outstanding Bonds issued under any Indenture is
due and payable, a sum that will be equal to the principal
amount of such Bonds coming due on such date.
<PAGE>
If the Company defaults in any payment required by this paragraph
(a), the Company will pay interest (to the extent allowed by law)
on such amount until paid at the rate provided for in the Bonds on
which such amount is payable.
(b) In furtherance of the foregoing, so long as any Bonds
are outstanding the Company will pay all amounts required to
prevent any deficiency by an act or failure to act by any Trustee,
the Company, the Issuer, any Tender Agent or any other person.
(c) The Company will also pay: (i) the fees of the
Trustees for rendering Ordinary Services and the Ordinary Expenses
of the Trustees and any Paying Agents under the Indentures, such
fees and expenses to be paid directly to the Trustees or Paying
Agents for their respective accounts as and when such fees and
expenses become due and payable, (ii) any fees for Extraordinary
Services and the Extraordinary Expenses of the Trustees and (iii)
any expenses in connection with any redemption of Bonds. The
Company may, without constituting grounds for an Event of Default
hereunder, withhold payment of any fees for Ordinary Services and
Extraordinary Services and Ordinary Expenses and Extraordinary
Expenses to contest in good faith the necessity of the same or to
contest in good faith the necessity for any services performed and
expenses paid or incurred by any Paying Agent.
(d) In addition to the payments required to be made by the
Company pursuant to paragraph (a) above, the Company shall pay to
the Trustees amounts sufficient to pay, on or prior to each day on
which a payment of purchase price of a Bond that has been tendered
shall become due, an amount that will enable the applicable
Trustee or Tender Agent, as the case may be, to make such payment
in full in a timely manner. All such payments shall be made to
such Trustee at its principal corporate trust office or to such
Tender Agent at its principal office, as the case may be, in
lawful money of the United States of America.
(e) The Company need not pay any amount paid to Bondholders
from the proceeds of a draw on any Credit Facility.
(f) The Company need not pay any amount required to be paid
by paragraph (d) above to the extent of any amount paid to
Bondholders from the proceeds of a remarketing of Bonds in
accordance with the applicable provisions of the Indentures.
Section 5.4 Obligation of the Company Unconditional. The
obligation of the Company to make the rental payments and payments of
purchase price as provided in Section 5.3 and to perform and observe the
other agreements on its part contained herein shall be absolute and
unconditional notwithstanding any change in the tax or other laws of the
United States of America or of the State or any political subdivision of
either thereof or any failure of the Issuer to perform and observe any
agreement, whether express or implied, or any duty, liability or
obligation arising out of or connected with this Agreement. Nothing
contained in this Section 5.4 shall be construed to release the Issuer
from the performance of any of the agreements on its part herein
contained; and, in the event the Issuer should fail to perform any such
agreement on its part, the Company may institute such action against the
Issuer as the Company may deem necessary to compel performance or
recover its damages for nonperformance so long as such action does not
violate the agreements on the part of the Company contained in the
preceding sentence, but in no event shall the Company be entitled to any
diminution of the amounts payable as provided in Section 5.3 hereof.
Section 5.5 Assignment and Pledge of Rental Payments and the
Agreement. Under each Indenture the Issuer shall assign to the
applicable Trustee as security for the Bonds issued under such Indenture
all rights, title and interest of the Issuer in and to (i) "Revenues"
(as defined in such Indenture) relating to the Bonds issued under such
Indenture, (ii) this Agreement insofar as it relates to all Bonds issued
and outstanding under such Indenture (except for the Issuer's rights
providing that notices, approvals, consent, requests and other
communications be given to the Issuer and the Issuer's rights under
Sections 6.3, 6.4 and 10.3 hereof) and (iii) all amounts on deposit from
time to time in the applicable Project Fund and the applicable Bond
Fund. The Company assents to such assignment and hereby agrees that, as
to the Trustee, its obligations to make such payments shall be absolute
and shall not be subject to any defense or any right of set-off,
counterclaim or recoupment arising out of any breach by the Issuer or
the Trustee of any obligation to the Company, whether hereunder or
otherwise, or out of any indebtedness or liability at any time owing to
the Company by the Issuer or the Trustee.
<PAGE>
Section 5.6 Purchase of Bonds. The Issuer, with the consent of
the Company, has set forth in Section 3.01 of the Series 1998A Indenture
the terms and conditions relating to the purchase of Series 1998A Bonds
and has set forth in Article XII of the Series 1998A Indenture the
duties and responsibilities of the Series 1998A Tender Agent with
respect to the purchase of Series 1998A Bonds and of the Series 1998A
Remarketing Agent with respect to the remarketing of Series 1998A Bonds.
The Company approves the appointment by the Issuer of J.P. Morgan
Securities Inc. as the initial Series 1998A Remarketing Agent and
Citibank, N.A. as the initial Series 1998A Tender Agent and hereby
authorizes and directs the Series 1998A Tender Agent and the Series
1998A Remarketing Agent to purchase, offer, sell and deliver Series
1998A Bonds in accordance with the provisions of Section 3.01 and
Article XII of the Series 1998A Indenture. The Issuer acknowledges that
the Series 1998A Remarketing Agent, in undertaking its duties set forth
in the Series 1998A Indenture with respect to the determination of the
interest rates borne by the Series 1998A Bonds, will be acting as agent
for and on behalf of the Issuer. The Issuer shall have no obligation or
responsibility, financial or otherwise, with respect to the purchase or
remarketing of Series 1998A Bonds or the making or continuation of
arrangements therefor, except that the Issuer shall generally cooperate
with the Company, the Series 1998A Trustee, the Series 1998A Tender
Agent and the Series 1998A Remarketing Agent as contemplated in Article
XII of the Series 1998A Indenture.
Section 5.7 Mandatory Purchase of Bonds. The Company, at any
time and from time to time, shall furnish moneys to the Series 1998A
Tender Agent accompanied by a notice directing that such moneys be
applied to the purchase of Series 1998A Bonds to be purchased upon
mandatory tender for purchase pursuant to Section 3.03 of the Series
1998A Indenture. Series 1998A Bonds so purchased shall be delivered in
accordance with Section 3.06 of the Series 1998A Indenture.
Section 5.8 Determination of Interest Rate Periods. The Company
may determine the duration and type of the Interest Rate Periods (as
defined in the Series 1998A Indenture) as, and to the extent, set forth
in Section 2.02 of the Series 1998A Indenture.
ARTICLE VI
SPECIAL COVENANTS
Section 6.1 Use of Project. The Issuer hereby acknowledges that
the Company shall have singular and exclusive right to the use of the
Project. The Company hereby agrees that so long as the Project is
operated, it shall be operated as sewage or solid waste disposal
facilities within the meaning of Sections 142(a)(5) and 142(a)(6) of the
Code. The Issuer makes no warranty, either express or implied, as to
the Project or that the Project will be suitable for the Company's
purposes.
Section 6.2 Use of Proceeds. The Company hereby covenants that
at least 95% of the total proceeds of the sale of the Bonds will be used
to pay Costs of Construction of the Project which constitute Exempt
Costs and that all of the Net Proceeds of the Bonds deposited within the
Project Funds pursuant to the Indentures will be used to pay the Cost of
Construction of the Project.
<PAGE>
In addition, the Company covenants with the Issuer, for the
benefit of the Tax-Exempt Bondholders, that the proceeds of the Bonds
will not be used in any manner that would result in the loss of the
exclusion from gross income of the interest on the Tax-Exempt Bonds for
federal income tax purposes.
Section 6.3 Indemnity Against Claims. The Company also will pay
and discharge and will indemnify and hold harmless the Issuer and the
members, officers, agents and employees of the Issuer from (a) any
condition of the Project caused by the Company, (b) any liens, taxes,
assessments, impositions and other charges upon payments by the Company
to the Issuer hereunder, (c) any breach or default on the part of the
Company in the performance of any of its obligations hereunder, (d) any
act of negligence of the Company or of its agents, contractors,
servants, employees or licensees, (e) any act of negligence of any
assignee or sublessee of the Company, or of any agents, contractors,
servants, employees or licensees of any assignee or sublessee of the
Company and (f) any and all liability, damages, costs and expenses
arising out of or resulting from the acquisition, construction and
installation of the Project or the use or operation of the Project or
any other activity carried out thereon or in connection therewith or the
transactions contemplated by this Agreement and the Indentures,
including the reasonable fees and expenses of counsel, except as the
same may arise out of the negligence or misconduct on the part of the
Issuer. If any such lien or charge is sought to be imposed upon
payments, or any such taxes, assessments, impositions or other charges
are sought to be imposed, or any such liability, damages, costs and
expenses are sought to be imposed, the Issuer will give prompt notice to
the Company, and the Company shall have the sole right and duty to
assume, and will assume, the defense thereof, with full power to
litigate, compromise or settle the same in its sole discretion. The
indemnification provided by this Section 6.3 shall survive the
termination of this Agreement.
The Company agrees to indemnify each Trustee, and to hold it
harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of the Indenture to which such
Trustee is a party, including the reasonable costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties thereunder or
hereunder.
Section 6.4 Inspection of the Project. The Company agrees that
the Issuer and its duly authorized agents at reasonable times, and with
the written consent of the Company which shall not be unreasonably
withheld, may enter upon the Project Site and examine and inspect the
Project and the books and records of the Company with respect to the
Project.
Section 6.5 Company to Maintain Its Corporate Existence;
Conditions Under Which Exceptions Permitted. The Company will maintain
its corporate existence, will continue to be a corporation in good
standing under the laws of the State, will not dissolve or otherwise
dispose of all or substantially all of its assets and will consolidate
with or merge into another legal entity or permit one or more other
legal entities (other than one or more subsidiaries of the Company) to
consolidate with or merge into it, or sell or otherwise transfer to
another legal entity all or substantially all its assets as an entirety
and dissolve, only if (a) the surviving, resulting or transferee legal
entity is organized and existing under the laws of the United States, a
state thereof or the District of Columbia, is solvent, is qualified to
do business in the State as a foreign corporation and (if not the
Company) assumes in writing all the obligations of the Company under
this Agreement and (b) the Company or the surviving entity is not
immediately after such merger, consolidation or transfer in default in
any material respect under this Agreement.
Section 6.6 Ownership; Further Assurances and Corrective
Instruments. The Issuer covenants that it lawfully owns and is lawfully
possessed of the Project Land, that it has good and marketable fee
simple title therein and thereto and that it has or will acquire good
and marketable fee simple title to the Project and that it will defend
said title and every part thereof against the claims of all persons
whomsoever. The Issuer and the Company agree that they will, from time
to time execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such supplements hereto and such further
instruments as may reasonably be required for correcting any inadequate
or incorrect description of the Project and for carrying out the
intention or facilitating the performance of this Agreement.
<PAGE>
Section 6.7 Maintenance of Project by Company.
(a) The Company agrees that during the Lease Term, it will
pay all costs of operating, maintaining and repairing the Project;
provided, that nothing in this Section 6.7 will require the
Company to maintain, operate or repair the Project if, in the sole
judgment of the Company, the Company determines that operation of
the Project or the manufacturing facilities the Project is
designed to serve is impossible, impracticable or uneconomic.
(b) The Company may, from time to time, in its sole
discretion and at its own expense, make any additions,
modifications or improvements to the Project, including
installation of additional machinery, equipment, and related
property, which it may deem desirable for its business purposes;
provided that all such additions, modifications and improvements
do not adversely affect the use of the Project as sewage or solid
waste disposal facilities. All machinery, equipment and related
personal property so installed by the Company shall not be subject
to this Agreement or the liens of the Indentures but shall be
subject to the landlord's lien created under the Code of Alabama,
1975, Section 35-9-60. All such machinery, equipment and related
property so installed by the Company may be modified or removed at
any time while there exists no Event of Default hereunder;
provided, that any damage to the Project occasioned by such
modification or removal shall be repaired by the Company at its
own expense.
(c) The Company shall not permit any mechanics',
materialmen's, suppliers', vendors' or other similar lien to be
established or remain against the Project for labor or materials
furnished or services rendered in connection with any additions,
modifications, improvements, repairs, renewals or replacements so
made by it; provided, that if the Company shall first notify the
Trustee of its intention so to do, the Company may in good faith
contest any mechanics', materialmen's, suppliers', vendors' or
other similar lien filed or established against the Project, and
in such event may permit the items so contested to remain
undischarged and unsatisfied during the period of such contest and
any appeal therefrom unless the Issuer or the Trustees notify the
Company that by nonpayment of any such items, the lien or security
interests afforded by this Agreement or as to any part of the
Project or the payments to be made pursuant to the Agreement or
the Revenues will be materially endangered or the Project or any
part thereof or the payments to be made pursuant to the Agreement
or the Revenues will be subject to loss or forfeiture, in which
event the Company shall promptly pay and cause to be satisfied and
discharged all such unpaid items. The Issuer will cooperate fully
with the Company in any such contest.
Section 6.8 Redemption or Purchase of Bonds. The Issuer shall
not cause the redemption or purchase of any Bonds except upon the
direction of the Company. The Issuer shall take all steps then
necessary under the applicable provisions of the applicable Indentures
for the redemption or purchase of Bonds upon receipt by the Issuer and
the applicable Trustee from the Company of a written notice specifying:
(a) the principal amount of Bonds to be redeemed or
purchased;
(b) the date of such redemption or purchase; and
<PAGE>
(c) in the case of a redemption of Bonds, directions to
mail a notice of redemption in accordance with Section 8.04 of the
Series 1998A Indenture or the applicable provisions of the
appropriate Subsequent Indentures or in the case of a purchase of
Bonds, directions to mail a notice of mandatory tender for
purchase in accordance with Section 3.03(g) of the Series 1998A
Indenture or the applicable provisions of the appropriate
Subsequent Indentures.
Section 6.9 Investment of Bond Fund and Project Fund Moneys
Permitted. Any moneys held in the Bond Funds or the Project Funds shall
be invested or reinvested by the Trustee upon the request and direction
of the Company in Government Obligations and Permitted Investments,
respectively. All such directions by the Company shall be in compliance
with applicable laws of the State. All investments of moneys in the
Bond Funds and the Project Funds shall be made upon telephonic direction
of an Authorized Company Representative which shall be promptly
confirmed in writing and shall mature in such amounts and at such times
as may be necessary to provide funds when needed to make payments from
the Bond Funds or the Project Funds. The Trustee may make any and all
such investments through its own bond department. Any interest or gain
received from such investments shall be credited to and held in the
applicable Bond Fund or Project Fund, respectively, and any loss from
such investments shall be charged against the applicable Bond Fund or
Project Fund, respectively.
Section 6.10 Non-Arbitrage Covenant.
(a) The Company and the Issuer each covenants to the owners
of the Tax-Exempt Bonds that, notwithstanding any other provision
of this Agreement or any other instruments, it shall take no
action, nor shall the Company direct any Trustee to take or
approve any Trustee taking any action or direct any Trustee to
make or approve any Trustee making any investment or use of
proceeds of the Tax-Exempt Bonds or any other moneys which may
arise out of or in connection with, this Agreement, the Indentures
or the Project, which would cause the Tax-Exempt Bonds to be
treated as "arbitrage bonds" within the meaning of Section 148 of
the Code. In addition, the Company covenants and agrees to comply
with the requirements of Section 148(f) of the Code as it may be
applicable to the Tax-Exempt Bonds or the proceeds derived from
the sale of the Tax-Exempt Bonds or any other moneys which may
arise out of or in connection with this Agreement, the Indentures
or the Project throughout the term of the Tax-Exempt Bonds.
(b) The Company will determine the amount of the required
arbitrage rebate, if any, payable to the United States Government
under Section 148 of the Code should gross proceeds (within the
meaning of Section 148(f) of the Code) arise; unless the required
payment is to be paid directly by the Company to the United States
Government, the Company shall deposit the amount of any such
required arbitrage rebate into the appropriate account established
for the deposit of such rebate under the applicable Indenture and
shall make any required payment, in the amounts and at the times
required by Section 148(f) of the Code and applicable Treasury
Regulations, regardless of whether there are any remaining
proceeds or other funds attributable to the Tax-Exempt Bonds that
are available for the purpose of the Tax-Exempt Bonds. The
Company will not permit the amount of gross proceeds invested in
any Bond year applicable to any Tax-Exempt Bonds at a yield
materially higher than the Bond yield on such Tax-Exempt Bonds to
exceed the limits set forth in Section 148 of the Code.
(c) No provision of this Agreement shall be construed to
impose upon the Trustees any obligation or responsibility for
compliance with arbitrage regulations.
Section 6.11 Removal and Substitution of Portions of Project.
The Issuer shall not be under any obligation to renew, repair or replace
any inadequate, obsolete, worn out, unsuitable, undesirable,
inappropriate or unnecessary items comprising the Project. If the
Company, in its sole discretion, determines that any such items have
become inadequate, obsolete, worn out, unsuitable, undesirable,
inappropriate or unnecessary for its purposes at such time, the Company
may, without any responsibility or accountability to the Issuer or the
Trustees therefor, remove such items from the Project Site and (on
behalf of the Issuer) sell, trade in, or otherwise dispose of them (as a
whole or in part) provided that the Company shall either:
<PAGE>
(a) substitute (either by direct payment of the costs
thereof or by advancing to the Issuer the moneys necessary
therefor) and install other machinery, equipment or related
property having equal or greater utility (but not necessarily
having the same function or value) in the operation of the Project
as a sewage or solid waste disposal facility (provided such
removal and substitution shall not impair operating unity), all of
which substituted machinery, equipment or related property shall
become a part of the Project; or
(b) not make any such substitution and installation,
provided that (i) in the case of the sale of any such machinery,
equipment or related property to anyone other than itself or in
the case of the scrapping thereof, the Company shall pay into the
Bond Funds the greater of the proceeds from such sale, the scrap
value thereof or the original cost thereof less depreciation in
accordance with generally accepted accounting principles, as the
case may be, (ii) in the case of the trade-in of such machinery,
equipment or related property for other machinery, equipment or
related property not to be installed as a part of the Project, the
Company shall pay into the Bond Funds the amount of the greater of
the credit received by it in such trade-in or the original cost
thereof less depreciation in accordance with generally accepted
accounting principles, and (iii) in the case of the sale of any
such machinery, equipment or related property to the Company or in
the case of any other disposition thereof, the Company shall pay
into the Bond Funds an amount equal to the original cost thereof
less depreciation at rates calculated in accordance with generally
accepted accounting principles.
The removal of any portion of the Project pursuant to the provisions of
this Section 6.11 shall not entitle the Company to any diminution in or
postponement or abatement of the rents payable under Section 5.3.
The Company promptly shall report to the Trustees each such
removal, substitution, sale, trade-in or other disposition which,
together with other prior unreported dispositions, in the aggregate
results in proceeds under this Section 6.11 of $5,000,000 or more and
shall pay to the Trustees such amounts as are required by the provisions
of the preceding subsection (b) of this Section 6.11 to be paid into the
Bond Funds promptly after the sale, trade-in or other disposition
requiring such payment. The Company shall not remove or permit the
removal of any item constituting the Project except in accordance with
the provisions of this Section 6.11.
The Company shall deliver to the Issuer appropriate documents
conveying to the Issuer title to any machinery, equipment or related
property installed or placed at the Project Site pursuant to this
Section 6.11, and upon the request of the Company, the Issuer shall
deliver, and cause or direct the Trustee to deliver, to the Company
appropriate documents conveying to the Company title to any property
removed from the Project Site pursuant to this Section 6.11.
Section 6.12 Taxes, Other Governmental Charges and Utility
Charges. The Company agrees to pay and discharge all lawful real estate
taxes, personal property taxes, water charges, sewer charges,
assessments (including, but not limited to, special assessments for
public improvements or benefits for which the Company would have
otherwise have been liable had it in fact been the owner of the Project)
and all other lawful governmental taxes, impositions and charges of
every kind and nature, ordinary and extraordinary, general or special,
foreseen or unforeseen, whether similar or dissimilar to any of the
foregoing, and all applicable interest and penalties thereon, if any,
which at any time during the term of this Agreement shall be or become
due and payable by the Issuer or the Company and which shall be lawfully
levied, assessed or imposed:
<PAGE>
(a) upon or with respect to, or shall be or become liens
upon, the Project or any portion thereof or any interest of the
Issuer or the Company therein or under this Agreement;
(b) upon or with respect to the income or profits of the
Issuer from the Project or under this Agreement;
(c) upon or with respect to the possession, operation,
management, maintenance, alterations, repair, rebuilding, use or
occupancy of the Project or any portion thereof; or
(d) upon this transaction or any document to which the
Issuer or the Company is a party creating or transferring an
interest or an estate in the Project;
under or by virtue of any present or future law, statute, ordinance,
regulation or other requirement of any governmental authority, whether
federal, state, county, city, municipal, school or otherwise.
The Company shall, at its sole cost and expense, procure or cause
to be procured any and all necessary building permits, other permits,
licenses and other authorizations required for the lawful and proper
construction, use, occupation, operation and management of the Project.
The Company also agrees to pay or cause to be paid all lawful charges
(subject to the right of the Company to contest any such charges) for
gas, water, sewer, electricity, light, heat, power, telephone and other
utility and service used, rendered or supplied to, upon or in connection
with the Project and the Issuer will cooperate with the Company in
securing such permits, licenses and authorizations.
The Company may, at its own expense and in its own name and behalf
or in the name and behalf of the Issuer, in good faith contest any such
taxes, assessments and other charges and, in the event of any such
contest, may permit the taxes, assessments and other charges so
contested to remain unpaid during the period of such contest and any
appeal therefrom. The Issuer shall cooperate fully with the Company in
any such contest. If the Company fails to pay any of the foregoing
items required by this Section 6.12 to be paid by the Company, the
Issuer or any Trustee may (but shall be under no obligation to) pay the
same, and any amounts so advanced therefor by the Issuer or any Trustee
shall become an additional obligation of the Company to the one making
the advancement, which amounts, together with interest thereon at the
lowest rate of interest borne by the Bonds from the date thereof, the
Company agrees to pay.
Section 6.13 Insurance Required. Throughout the Lease Term the
Company shall keep the Project continuously insured against such risks
as are customarily insured against by businesses of like size and type
(other than business interruption insurance), paying as the same become
due all premiums in respect thereto. Notwithstanding the foregoing, the
Company may elect to self-insure.
Section 6.14 Application of Net Proceeds of Insurance. The Net
Proceeds of the insurance carried pursuant to the provisions of Section
6.13 shall be applied as follows: (i) Net Proceeds of property and
casualty insurance shall be applied as provided in Section 7.1, and
(ii) Net Proceeds of liability insurance shall be applied toward
extinguishment or satisfaction of the liability with respect to which
such insurance proceeds may be paid.
Section 6.15 Additional Provisions Respecting Insurance. All
insurance, if any, required in Section 6.13 shall be taken out and
maintained in insurance companies selected by the Company and may be
written with deductible amounts comparable to those on similar policies
carried by other companies engaged in businesses similar in size and
type and other respects as the Company. The insurance hereby required,
if any, may be contained in blanket policies now or hereafter maintained
by the Company.
<PAGE>
Section 6.16 Granting of Easements. If no Event of Default has
occurred and is continuing, the Company at any time or times may cause
to be granted easements (including party wall agreements), licenses,
rights-of-way (temporary or perpetual and including the dedication of
public highways) and other rights or privileges in the nature of
easements with respect to any property included in the Project and such
grant will be free from any lien or security interest created by this
Agreement, or the Company may cause to be released existing easements,
licenses, rights-of-way and other rights or privileges in the nature of
easements, held with respect to any property included in the Project
with or without consideration and the Issuer agrees that it shall
execute and deliver and will cause and direct the Trustees to execute
and deliver any instrument necessary or appropriate to confirm and grant
or release any such easement, license, right-of-way or other right or
privilege upon receipt of:
(a) a copy of the instrument of grant or release, and
(b) a written application signed by the president or any
vice president of the Company requesting the execution and
delivery of such instrument and stating
(i) that such grant or release is not detrimental to
the proper conduct of the business of the Company, and
(ii) that such grant or release will not impair the
effective use or interfere with the operation of the
Project.
Section 6.17 Release of Certain Land. Notwithstanding any other
provision hereof, the parties hereto reserve the right to amend this
Agreement at any time and from time to time by mutual agreement for the
purpose of effecting the release of and removal of:
(a) any unimproved part of the Project Land (on which none
of the components comprising the Project is located but on which
parking, transportation or utility facilities may be located) on
which the Issuer proposes to construct improvements for lease or
sale under another and different agreement, or
(b) any part of the Project Land with respect to which the
Issuer proposes to grant an easement or convey a fee, interest or
other title to a railroad or other public or private carrier or to
any public utility or public body in order that transportation
facilities or services by rail, water, road or other means or
utility services for the Project may be provided, increased or
improved;
provided that if at the time any such amendment is made any of the Bonds
are outstanding, there shall be deposited with the Trustees the
following:
(i) a copy of such amendment as executed;
(ii) a resolution of the Issuer (A) stating that the Issuer
is not in default under any of the provisions hereof or any of the
Indentures and that the Company is not to the knowledge of the
Issuer in default under any of the provisions hereof, (B) giving
an adequate legal description of that portion of the Project Land
to be released, (C) stating the purpose for which the Issuer
desires the release, (D) stating that the improvements which will
be constructed or the facilities and service which will be
provided, increased or improved will be such as will promote at
least one of the public purposes of the Issuer and (E) requesting
such release;
<PAGE>
(iii) a certificate of any officer of the Company approving
such amendment together with an officer's certificate stating that
the Company is not in default under any of the provisions hereof;
(iv) a copy of the agreement between the Issuer and such
person wherein the Issuer agrees to construct improvements on the
portion of the Project Land so requested to be released and agrees
to lease or sell the same to such person, and wherein such person
agrees to lease or purchase the same from the Issuer, or a copy of
the instrument granting the easement or conveying the title or
other interest to a railroad, public utility or public body; and
(v) a certificate of an Authorized Company Representative
dated not more than 60 days prior to the date of such amendment
and stating that, in the opinion of the person signing such
certificate, (A) the portion of the Project Land so proposed to be
released is necessary or desirable for railroad, utility services
or roads to benefit the Project or is not otherwise needed for the
operation of the Project for the purposes hereinabove stated, and
(B) the release so proposed to be made will not impair the
usefulness of the Project as a facility of a type which the Issuer
is authorized to acquire under the laws pursuant to which the
Issuer then exists, and will not destroy the means of ingress
thereto and egress therefrom.
No release effected under this Section 6.17 shall entitle the Company to
any diminution in or postponement or abatement of the rents payable
under Section 5.3.
ARTICLE VII
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 7.1 Damage and Destruction. Unless the Company has
elected to exercise its option to prepay all rentals or purchase the
Project pursuant to the provisions of Section 8.4, if prior to payment
in full of the Bonds the Project is destroyed (in whole or in part) or
is damaged by fire or other casualty, the Company, or the Issuer at the
Company's direction, (i) shall promptly replace, repair, rebuild or
restore the property damaged or destroyed in a manner that provides
facilities generally comparable to the facilities as existed prior to
the event causing such damage or destruction, with such changes,
alterations and modifications (including the substitution and addition
of other property) as may be desired by the Company and as will not
impair the operation of the Project as sewage and solid waste disposal
facilities, and (ii) shall apply for such purpose so much as may be
necessary of any Net Proceeds of insurance resulting from claims for
such losses, as well as any additional moneys of the Company necessary
therefor. All Net Proceeds of insurance resulting from claims for such
losses shall be paid to the Company. If such Net Proceeds are not
sufficient to pay in full the costs of such replacement, repair,
rebuilding or restoration, the Company nonetheless shall complete the
work thereof and shall pay that portion of the costs thereof in excess
of the amount of such Net Proceeds. The Company shall not, by reason of
the payment of such excess costs, be entitled to any reimbursement from
the Issuer or any abatement, diminution or postponement of the amounts
payable under Section 5.3.
Section 7.2 Condemnation. Unless the Company exercises its
option to prepay all rentals or purchase the Project pursuant to the
provisions of Section 8.4, if the title in and to, or the temporary use
of, the Project or any part thereof is taken under the exercise of the
power of eminent domain by any governmental body or by any other person
acting under governmental authority, the Company shall be obligated to
continue to pay the rents specified in Section 5.3. The Issuer and the
Company shall cause the Net Proceeds received by them or any of them,
from any award made in such eminent domain proceeding, to be paid to and
held by the Company and applied in one or more of the following ways:
<PAGE>
(a) the restoration of the Project to substantially the
same condition as existed prior to the exercise of such power of
eminent domain;
(b) the acquisition, by construction or otherwise, of other
sewage or solid waste disposal facilities suitable for the
Company's operations at the Project Site (which sewage or solid
waste disposal facilities will be deemed a part of the Project and
available for use by the Company and will be leased to the Company
hereunder without the payment of any rents other than herein
provided to the same extent as if such other improvements were
specifically described herein); provided, that such sewage or
solid waste disposal facilities will be acquired subject to no
liens, security interests or encumbrances prior to the liens or
security interests afforded by this Agreement and the Indentures,
other than Permitted Encumbrances;
(c) redemption of the Bonds in accordance with the
provisions of Article VIII of the Series 1998A Indenture or the
applicable provisions of any Subsequent Indenture; provided, that
no part of any such condemnation award may be applied for such
redemption unless (1) all of the Bonds are to be redeemed in
accordance with the Indentures upon exercise of the option to
purchase the Project pursuant to the provisions of Section 8.01(a)
of the Series 1998A Indenture and the applicable provisions of the
Subsequent Indentures, if any, or (2) if less than all of the
Bonds are to be redeemed as directed by the Company, the Company
furnishes to the Issuer and the Trustees a certificate of the
Authorized Company Representative stating (i) that the property
forming a part of the Project that was taken in such eminent
domain proceeding is not essential to the Company's use or
occupancy of the Project, (ii) that the Project has been restored
to a condition substantially equivalent to its condition prior to
the taking in such eminent domain proceeding, or (iii) that sewage
or solid waste disposal facilities have been acquired that are
suitable for the Company's operations at the Project as
contemplated by the foregoing subsection (b) of this Section 7.2;
or
(d) payment into the Bond Funds of an amount sufficient to
provide for payment in full of the Bonds.
The Issuer shall cooperate fully with the Company in the handling
and conduct of any prospective or pending eminent domain proceeding with
respect to the Project or any part thereof and shall, to the extent it
may lawfully do so, permit the Company to litigate in any such
proceeding in the name and on behalf of the Issuer. In no event will
the Issuer voluntarily settle, or consent to the settlement of, any
prospective or pending eminent domain proceeding with respect to the
Project or any part thereof without the written consent of the Company.
Section 7.3 Condemnation of Company-Owned Property. The Company
shall be entitled to the proceeds of any condemnation award or portion
thereof made for damages to or taking of its own property or for damages
on account of the taking of or interference with the Company's rights to
possession, use or occupancy of the Project.
ARTICLE VIII
ASSIGNMENT, SUBLEASING, PLEDGING AND SELLING;
REDEMPTION; RENT PREPAYMENT AND ABATEMENT;
OPTION AND OBLIGATION TO PURCHASE PROJECT;
OPTION TO EXTEND TERM OF AGREEMENT
Section 8.1 Assignment and Subleasing. This Agreement may be
assigned by the Company and the Project may be subleased by the Company
without the necessity of obtaining the consent of the Issuer or the
Trustees, subject, however, to the following conditions:
<PAGE>
(a) no assignment (other than pursuant to Section 6.5) or
sublease shall relieve the Company from primary liability for any
of its obligations hereunder, and if any such assignment occurs,
the Company shall continue to remain primarily liable for the
payment of the rents specified in Section 5.3 and for performance
and observance of the other agreements on its part herein provided
to be performed and observed by it; and
(b) the Company shall, within 30 days after the delivery
thereof, furnish or cause to be furnished to the Issuer and to the
Trustees a true and complete copy of each such assignment or
sublease, as the case may be, together with any instrument of
assumption.
Section 8.2 Pledge Under Indenture. Under the terms of each
Indenture, the Issuer shall assign and create a security interest with
respect to its interest in, and pledge all rents, revenues and receipts
arising out of or in connection with its ownership of, the Project to
the Trustee under that Indenture, all as security for the payment of the
principal of and interest on the Bonds issued under such Indenture, but
each Indenture and such assignment and pledge shall be subject and
subordinate to this Agreement.
Section 8.3 Restrictions on Sale of Project by Issuer. The
Issuer agrees that, except as set forth in Section 8.2, it shall not (a)
sell, assign, transfer or convey the Project during the Lease Term, (b)
create or suffer to be created any assignment, pledge, charge, lien or
encumbrance on any Trust Estate, or (c) take any other action which
might reasonably be construed as tending to cause or induce the levy or
assessment of ad valorem taxes on the Project or on its title in and to
the Project. If the laws of the State at the time permit such action to
be taken, nothing contained in this Section 8.3 shall prevent the
consolidation of the Issuer with, or the merger of the Issuer into, or
the transfer of the Project as an entirety to, any public corporation
whose property and income are not subject to taxation and which has
corporate authority to carry on the business of owning and leasing the
Project; provided (i) that no such action shall be taken without the
prior written consent of the Company, unless such action shall be
required by law, and (ii) that upon any such consolidation, merger or
transfer, the due and punctual payment of the principal of and the
interest on the Bonds, and the due and punctual performance and
observance of all the agreements hereof to be kept and performed by the
Issuer, shall be expressly assumed in writing by the corporation
resulting from such consolidation or surviving such merger or to which
the Project shall be transferred as an entirety.
Section 8.4 Prepayment of Rents; Option to Purchase Project;
Obligation to Purchase Project.
(a) The Company shall have the option to prepay any part of
the rents payable under Section 5.3, and the Issuer agrees that
the Trustees may accept such prepayment when the same is tendered
by the Company, upon giving written notice to the Trustees at
least four Business Days prior to the thirtieth day before the
date set for redemption, to the extent that the Bonds are subject
to optional redemption in part pursuant to Section 8.01(a) of the
Series 1998A Indenture or the applicable provisions of any
Subsequent Indenture.
(b) The Company shall have the option to purchase the
Project by prepaying all of the rents payable under Section 5.3,
and the Issuer agrees that the Trustees may accept such prepayment
when the same is tendered by the Company, upon giving written
notice to the Trustees at least four Business Days prior to the
thirtieth day before the date set for redemption, to the extent
that the Bonds are subject to optional redemption in whole
pursuant to Section 8.01(a) of the Series 1998A Indenture and the
applicable provisions of any Subsequent Indenture.
<PAGE>
(c) The Company shall be obligated to prepay a portion of
the rentals payable under Section 5.3, and the Issuer agrees that
the Trustees may accept such prepayment when the same is tendered
by the Company, to the extent that the Bonds are subject to
mandatory redemption in part pursuant to the applicable provisions
of any Subsequent Indenture following the receipt by the Company
of written notice by a Bondholder or a former Bondholder or from
the Internal Revenue Service or the applicable Trustee of a final
determination of the Internal Revenue Service or of a court of
competent jurisdiction to the effect that, as a result of a
failure by the Company to observe or perform any covenant,
agreement, representation or warranty in this Agreement the
interest paid or payable on any Bond to other than a "Substantial
User" of the Project or a "related person" (within the meaning of
Section 147(a) of the Code) is or was includable in the gross
income of the owner thereof for federal income tax purposes under
the Code.
(d) The Company shall be obligated to purchase the Project
by prepaying all of the rents payable under Section 5.3, or to
prepay all of the rents payable under Section 5.3 without
purchasing the Project, and the Issuer agrees that the Trustees
may accept such prepayment when the same is tendered by the
Company, to the extent that the Bonds are subject to mandatory
redemption in whole pursuant to the applicable provisions of any
Subsequent Indenture following the receipt by the Company of
written notice by a Bondholder or a former Bondholder or from the
Internal Revenue Service or the applicable Trustee of a final
determination of the Internal Revenue Service or of a court of
competent jurisdiction to the effect that, as a result of a
failure by the Company to observe or perform any covenant,
agreement, representation or warranty in this Agreement the
interest paid or payable on any Bond to other than a "Substantial
User" of the Project or a "related person" (within the meaning of
Section 147(a) of the Code) is or was includable in the gross
income of the owner thereof for federal income tax purposes under
the Code.
(e) The Company shall have the option to purchase the
Project by providing for payment of the Bonds pursuant to Article
XV of the Series 1998A Indenture and the applicable provisions of
any Subsequent Indenture.
(f) The Company shall be obligated to purchase, and the
Issuer agrees to sell, the Project for $10.00 at the expiration of
the Lease Term, following payment in full of the Bonds.
All prepaid rents shall be used for the redemption or purchase of Bonds
in the manner and to the extent provided in the Indentures. The options
granted to the Company pursuant to this Section 8.4 shall be and remain
prior and superior to the Indentures and may be exercised whether or not
there exists an Event of Default hereunder, provided that the existence
of such Event of Default will not result in nonfulfillment of any
condition to the exercise of any such option. Upon the expiration of
the Lease Term, or the sooner termination of the Lease Term, the Issuer
will, upon receipt of evidence provided by the Trustees satisfactory to
it that none of the Bonds remain outstanding under the Indentures,
deliver to the Company documents conveying to the Company good and
marketable fee simple title in and to the Project, as the Project then
exists, subject to the following: (a) those liens, security interests
and encumbrances (if any) to which said title in and to the Project was
subject when conveyed to the Issuer, (b) those liens, security interests
and encumbrances created by the Company or to the creation or suffering
to which the Company consented, (c) those liens, security interests and
encumbrances resulting from the failure of the Company to perform or
observe any of its agreements contained herein, and (d) any right and
title of any condemning authority.
<PAGE>
Section 8.5 Rent Abatements If Bonds Paid Prior to Maturity. If
at any time the moneys in the Bond Fund are sufficient to retire, in
accordance with the terms of the Indentures, all of the outstanding
Bonds and to pay all fees and charges of the Trustee due or to become
due through the date on which the last of the Bonds is to be retired,
under circumstances not resulting in termination of the Lease Term, and
if the Company is not at the time otherwise in default hereunder, the
Company shall be entitled to use and occupy the Project from the date on
which such moneys are in the Bond Funds until expiration of the
Agreement as set forth in Section 5.1 hereof, without the payment of
rent during that interval (but otherwise on the terms and conditions
hereof).
Section 8.6 References to Bonds Ineffective After Bonds Paid.
Upon payment in full of the Bonds, or any issue of Bonds, and all fees
and charges of the Trustees, or any Trustee for such issue of Bonds, as
the case may be, all references herein to the Bonds and the Trustees, or
such Trustee, shall be ineffective and neither the Trustees nor the
holders of any of the Bonds, or the applicable Trustee and the holders
of such issue of Bonds, as the case may be, shall thereafter have any
rights hereunder saving and excepting those that have theretofore
vested. Reference is hereby made to Section 15.01 of the Series 1998A
Indenture and the applicable provisions of the Subsequent Indentures
which set forth the conditions upon the existence or occurrence of which
payment in full of the Bonds shall be deemed to have been made.
Section 8.7 Option to Extend. The Company shall have, and is
hereby granted, the option to extend the term of this Agreement for an
additional term ending on March 1, 2038; provided, however, that such
option shall not be exercisable at any time an Event of Default has
occurred and is continuing. If at the end of the Lease Term provided
for in Section 5.1 hereof, no Event of Default has occurred and is
continuing, the Company shall be deemed to have exercised such option to
extend the term of this Agreement unless it notifies the Issuer and the
Trustee in writing to the contrary at least 30 days prior to the end of
such Lease Term. For and during such additional term, the Company will
pay to the Issuer an annual rent of $100, payable in advance on March 1,
2033 and on each March 1 thereafter (except March 1, 2038 on which date
such additional term shall end as aforesaid), but otherwise all the
terms and conditions of this Agreement shall apply during such
additional term; except that the provisions of Sections 7.1 and 7.2
shall not apply and except further that the Company shall not be
required to carry any insurance for the benefit of the Trustees, but
shall be required to carry insurance under Section 6.13 for the benefit
of the Issuer as its interest may appear. In the event the Company
exercises the option to extend the Lease Term granted in this Section
8.7, at any time after commencement of such additional term, it shall
have the right to terminate this Agreement upon giving to the Issuer
notice in writing not less than 10 days prior to the date of
termination. At any time during, or at the end of, the extended Lease
Term provided for in this Section 8.7, the Company may purchase the
Project for $100.
ARTICLE IX
AMENDMENTS AND SUPPLEMENTS
Section 9.1 Additional Bonds. This Agreement may be amended or
supplemented at any time and from time to time, without the consent of
the Series 1998A Bondholders or any holders of Additional Bonds, by a
Supplemental Lease authorized by a resolution of the Issuer and by the
Company, to provide for the issuance of Additional Bonds issued under a
Subsequent Indenture.
Section 9.2 Conveyance of Project. This Agreement may be amended
at any time and from time to time, without the consent of the Series
1998A Bondholders or any holders of Additional Bonds, by an amendment
authorized by a resolution of the Issuer and by the Company, to provide
for the conveyance or transfer by the Issuer of all or any portion of
its interest in the Project, subject to the limitations set forth in
Article XIV of the Series 1998A Indenture and the applicable provisions
of any Subsequent Indentures.
<PAGE>
Section 9.3 No Other Amendments. Except as otherwise provided in
Section 9.1 or 9.2, this Agreement may not be amended or supplemented
except by a written agreement signed by the parties hereto, in
accordance with Article XIV of the Series 1998A Indenture and the
applicable provisions of any Subsequent Indentures to the extent
Bondholders under each such Indenture would be affected by the proposed
amendment or supplement.
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.1 Events of Default. Each of the following shall be
an "Event of Default" under this Agreement:
(a) An "Event of Default" occurs and is continuing under
any Indenture or under any Guarantee.
(b) Failure by the Company to observe and perform any
covenant, condition or agreement on its part to be observed or
performed hereunder, for a period of 90 days after written notice,
specifying such failure and requesting that it be remedied, is
given to the Company by the Issuer or any Trustee; provided,
however, if the failure stated in the notice cannot be remedied
within such period, it shall not constitute an "Event of Default"
if corrective action is instituted by the Company within the
applicable period and diligently pursued until the default is
corrected.
(c) The Company shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of it or of all or a substantial
part of its property, (ii) admit in writing its inability, or be
generally unable, to pay its debts as such debts become due, (iii)
make a general assignment for the benefit of its creditors, (iv)
commence a voluntary case under the Federal Bankruptcy Code (as
now or hereafter in effect), (v) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts,
(vi) fail to controvert in a timely or appropriate manner, or
acquiesce in writing to, any petition filed against it in an
involuntary case under said Federal Bankruptcy Code, or (vii) take
any action for the purpose of effecting any of the foregoing.
(d) A proceeding or case shall be commenced, without the
application or consent of the Company, in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization,
dissolution, winding-up, or composition or adjustment of debts, of
the Company, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company or of all or any
substantial part of any of its assets, or (iii) similar relief in
respect of the Company under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or any order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 days from commencement
of such proceeding or case or the date of such order, judgment or
decree, or an order the Company shall be entered in an involuntary
case under the Federal Bankruptcy Code.
(e) The dissolution or liquidation of the Company except as
may be permitted by the terms of Section 6.5.
The foregoing provisions of Section 10.1(b) are subject to the
limitation that, if by reason of force majeure the Company is unable in
whole or in part to carry out its agreements herein contained other than
those set forth in Section 5.3 hereof, an Event of Default shall not be
deemed to have occurred during the continuance of such inability. The
term "force majeure" as used herein shall mean the following: acts of
God; strikes; lockouts or other industrial disturbances; acts of public
enemies; orders of any kind of the government of the United States or of
the State or any of their departments,
<PAGE>
agencies or officials or of any
civil or military authority; insurrections; riots; epidemics;
landslides; lightning; earthquakes; fire; hurricanes; tornadoes; storms;
floods; washouts; droughts; arrests; restraints of government and
people; civil disturbances; explosions; breakage or accident to
machinery, transmission lines, pipes or canals; partial or entire
failure of utilities; or any other cause or event not reasonably within
the control of the Company. The Company agrees, however, to remedy to
the extent practicable with all reasonable dispatch the effects of any
force majeure preventing the Company from carrying out its agreements;
provided that the settlement of strikes, lockouts and other industrial
disturbances shall be entirely within the discretion of the Company, and
the Company shall not be required to make settlement of strikes,
lockouts and other industrial disturbances by acceding to the demands of
the opposing party or parties when such course is in the judgment of the
Company unfavorable to the Company.
Section 10.2 Remedies on Default. Whenever any Event of Default
under Section 10.1(a) has occurred and is continuing, the Issuer may, in
addition to any other remedy now or hereafter existing at law, in equity
or by statute, take either or both of the following remedial steps:
(a) By written notice to the Company, the Issuer may
declare all amounts payable hereunder with respect to the
Indenture or Guarantee under which such Event of Default has
occurred to be immediately due and payable (to the extent
permitted under such Indenture), whereupon the same shall become
immediately due and payable;
(b) The Issuer may take whatever action at law or in equity
may appear necessary or desirable to collect the amounts then due
and thereafter to become due, or, if such Event of Default applies
to all Indentures or all Guarantees, to enforce performance and
observance of any obligation, agreement or covenant of the Company
under this Agreement.
Whenever any Event of Default under Section 10.1(b) through (e)
has occurred and is continuing, the Issuer may, in addition to any other
remedy now or hereafter existing at law, in equity or by statute, take
either or both of the following remedial steps:
(a) By written notice to the Company, the Issuer may
declare all amounts payable hereunder to be immediately due and
payable (to the extent permitted under the related Indenture),
whereupon the same shall become immediately due and payable;
(b) The Issuer may take whatever action at law or in equity
may appear necessary or desirable to collect the amounts then due
and thereafter to become due, or to enforce performance and
observance of any obligation, agreement or covenant of the Company
under this Agreement.
Any amounts collected pursuant to action taken under this Section 10.2
shall be paid into the appropriate Bond Funds and applied in accordance
with the provisions of the applicable Indentures or, if the Bonds have
been fully paid (or provision for payment thereof has been made in
accordance with the provisions of the Indentures) and the fees and
expenses of the Trustees and the Paying Agents and all other amounts
required to be paid under the Indentures have been paid, to the Company.
Section 10.3 Agreement to Pay Attorneys' Fees and Expenses. If
the Company breaches any of the provisions of this Agreement and the
Issuer or any Trustee employs attorneys or incurs other expenses for the
collection of amounts payable hereunder or the enforcement of
performance or observance of any obligation or agreement on the part of
the Company herein contained, the Company agrees that on demand therefor
it will pay to the Issuer or such Trustee (as the case may be) the
reasonable fees of such attorneys and such other reasonable expenses so
incurred by the Issuer.
<PAGE>
Section 10.4 No Additional Waiver Implied by One Waiver. If any
agreement contained in this Agreement is breached by either party and
thereafter waived by the other party, such waiver shall be limited to
the particular breach so waived and shall not be deemed to waive any
other breach hereunder.
Section 10.5 Notice of Default. The Company shall notify the
Trustees and the Issuer of any Event of Default hereunder or under the
Indentures or the Guarantees promptly upon its acquiring knowledge
thereof.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices. All notices, certificates or
communications hereunder shall be sufficiently given and shall be deemed
given when delivered or mailed by registered or certified mail, postage
prepaid, addressed as follows: if to the Issuer, The Industrial
Development Board of the City of Stevenson, Stevenson, Alabama 35772,
Attention: Chairman; if to the Company, The Mead Corporation, Mead World
Headquarters, Courthouse Plaza Northeast, Dayton, Ohio 45463, Attention:
Treasurer; if to the Series 1998A Trustee, Citibank, N.A., 111 Wall
Street, 5th Floor, New York, New York, 10043, Attention: Corporate
Agency & Trust; and if to any other Trustee, the address designated in
any Supplemental Lease as the address to which notices, certificates or
other communications given to such Trustee shall be sent. A duplicate
copy of each notice, certificate or other communication given hereunder
by either the Issuer or the Company to the other shall also be given to
the Series 1998A Trustee. The Issuer, the Company and the Series 1998A
Trustee may, by notice given hereunder, designate any further or
different addresses to which subsequent notices, certificates or other
communications shall be sent.
Section 11.2 Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the Issuer, the Company and their
respective successors and assigns, subject, however, to the limitations
contained in Section 6.5 hereof.
Section 11.3 Severability. In the event any provision of this
Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
Section 11.4 Amounts Remaining in the Bond Fund. Any amounts
remaining in any Bond Fund upon termination of this Agreement, to the
extent provided in the related Indenture, shall belong to and be paid to
the Company by the appropriate Trustee.
Section 11.5 Termination. This Agreement may not be terminated
except in accordance with the provisions hereof.
Section 11.6 Execution in Counterparts. This Agreement may be
executed in several counterparts, each of which shall be an original and
all of which shall constitute but one and same instrument.
Section 11.7 Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State.
Section 11.8 Captions. The captions or headings in this
Agreement are for convenience only and in no way define, limit or
describe the scope or intent of any provisions or sections of this
Agreement.
Section 11.9 Recording of Agreement. This Agreement and every
assignment and modification hereof shall be recorded in the Office of
the Judge of Probate of Jackson County, Alabama, or in such other office
as may be at the time provided by law as the proper place for such
recordation.
<PAGE>
Section 11.10 Net Lease. This Agreement shall be deemed a "net
lease," and the Company shall pay absolutely net during the Lease Term
the rents specified herein, without abatement, deduction or set-off
other than those herein expressly provided.
IN WITNESS WHEREOF, the Issuer and the Company have caused this
Agreement to be executed in their respective corporate names and their
respective corporate seals to be hereunto affixed and attested by their
duly authorized officers, all as of the date first above written.
THE INDUSTRIAL DEVELOPMENT
BOARD OF THE CITY OF STEVENSON
(Seal)
By: Leo Smith
_______________________________________
Chairman
Attest:
Edwin D. Allison
____________________________________
Secretary
THE MEAD CORPORATION
(Seal)
By: William B. Plummer
_________________________________
Title: Treasurer
Attest:
David L. Santez
____________________________________
Title: Assistant Secretary
<PAGE>
STATE OF ALABAMA )
): SS
COUNTY OF JACKSON )
On this 18th day of March, 1998, before me appeared Leo Smith, to
me personally known, who being by me duly sworn, did say that he is
Chairman of The Industrial Development Board of the City of Stevenson
and that the seal affixed to the foregoing Lease Agreement is the seal
of The Industrial Development Board of the City of Stevenson and that
the foregoing Lease Agreement was signed and sealed on behalf of The
Industrial Development Board of the City of Stevenson and the said
Chairman acknowledges the execution of the foregoing Lease Agreement as
the free act and deed of The Industrial Development Board of the City of
Stevenson.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Jack Livingston
___________________________________
Notary Public
My Commission Expires: 9/12/98
[NOTARIAL SEAL]
<PAGE>
STATE OF OHIO )
): SS
COUNTY OF MONTGOMERY )
On this 23rd day of March, 1998, before me appeared William B.
Plummer, to me personally known, who, being by me duly sworn, did say
that he is Treasurer of The Mead Corporation, an Ohio corporation,
qualified to do business in the State of Alabama, and that the seal
affixed to the foregoing Lease Agreement is the seal of The Mead
Corporation, and that the foregoing Lease Agreement was signed and
sealed on behalf of The Mead Corporation by authority of its board of
directors, and the said Treasurer acknowledges the execution of the
foregoing Lease Agreement as the free act and deed of The Mead
Corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Mary Elizabeth Milburn
______________________________
Notary Public
My Commission Expires:
[NOTARIAL SEAL] Mary Elizabeth Milburn, Notary
Public
In and for the State of Ohio
My Commission Expires April 10, 1998
<PAGE>
EXHIBIT A
PROJECT LAND
All said portion of land and structures lying thereon, in Section
15, T2S, R8E, County of Jackson, State of Alabama, more particularly
described as follows:
NO. 2 RECOVERY BOILER AREA AND CHEMICAL CONVERSION AREA
Commence at the plant grid coordinates N 10,000.00, E 10,000.00,
thence S 35 degrees 05' 22" E 482.73' to the point of beginning (N 9605.00, E
10,277.50); thence S 0 degrees 00' 00" E 305.00', thence S 90 degrees 00' 00" E
197.50'; thence N 0 degrees 00' 00" E 365.00; thence N 90 degrees 00' 00"
W 105.00'; thence S 0 degrees 00' 00" W 60.00'; thence N 90 degrees 00' 00" W
92.50',to the point of beginning; said land being 1.53 acres; except any
structures not included in Mead Corporation Contract No. 21-6817; less and
except the following:
NO. 2 RECOVERY BOILER - Commence at the plant grid
coordinates N 10,000.00, E 10,000.00, thence S 35 degrees 41' 06" E
557.69' to the point of beginning (N 9,547.02 E 10,325.32);
thence N 90 degrees 00' 00" E 21.36', thence S 0 degrees 00' 00" E 19.98',
thence N 90 degrees 00' 00" W 21.36', thence N 0 degrees 00' 00" W 19.98',
to the point of beginning; said land being 0.01 acres more
or less; except any structures not included in the Mead
Corporation Contract No. 21-6817.
PRECIPITATOR - Commence at the plant grid coordinates
N 10,000.00, E 10,000.00; thence S 33 degrees 14' 18" E 603.46' to
the point of beginning (N 9,495.27 E 10,330.77); thence S 0 degrees
00' 00" W 9.63', thence N 90 degrees 00' 00" W 10.01', thence S 0 degrees
00' 00" W 68.51', thence S 49 degrees 30' 06" E 14.70', thence S 0 degrees
00' 00" W 8.56', thence S 90 degrees 00' 00" W 10.44', thence S 0 degrees
00' 00" W 31.00', thence N 90 degrees 00' 00" E 22.00', thence N 0 degrees
00' 00" E 16.87', thence N 90 degrees 00' 00" E 31.85', thence N 0 degrees
00' 00" E 88.61', thence N 90 degrees 00' 00" E 4.16', thence N 0 degrees
00' 00" E 20.00', thence N 90 degrees 00' 00" W 20.00', thence S 0 degrees
00' 00" W 20.00', thence S 90 degrees 00' 00" E 4.16', thence S 0 degrees
00' 00" W 79.35', thence S 90 degrees 00' 00" W 20.15', thence N 0 degrees
00' 00" W 4.87', thence N 90 degrees 00' 00" W 3.75', thence N 0 degrees
00' 00" W 8.30', thence N 49 degrees 30' 37" E 15.11', thence N 0 degrees
00' 00" E 68.51', thence N 90 degrees 00' 00" W 10.05', thence N 0 degrees
00' 00" E 9.66', thence N 90 degrees 00' 00" W 10.42' to the point
of beginning; said land being 0.11 acres more or less;
except any structures not included in the Mead Corporation
Contract No. 21-6817.
CHEMICAL CONVERSION COOLING TOWER - Commence at the
plant grid coordinates N 10,000.00, E 10,000.00; thence S
49 degrees 13' 41" E 570.43' to the point of beginning (N 9,627.48
E 10,432.00); thence S 0 degrees 00' 00" W 41.15', thence N 90 degrees 00'
00" E 20.17', thence N 0 degrees 00' 00" E 41.15', thence N 90 degrees 00'
00" W 20.17' to the point of beginning; said land being 0.02
acres more or less; except any structures not included in
the Mead Corporation Contract No. 21-6817.
NO. 2 WASTE FUEL BOILER
Commence at the plant grid coordinates N 10,000.00, E 10,000.00,
thence S 35 degrees 05' 22" E 482.73' to the point of beginning (N 9605.00, E
10,277.50); thence S 0 degrees 00' 00" W 265.00'; thence S 90 degrees 00' 00" W
182.50'; thence N 0 degrees 00' 00" E 248.34'; thence N 88 degrees 35' 31" W
86.85'; thence S 73 degrees 00' 00" W 71.00'; thence N 17 degrees 00' 00" W
13.00'; thence N 73 degrees 00' 00" E 73.11'; thence S 88', 35' 31" E 88.64';
thence N 0 degrees 00' 00" E 3.65'; thence N 90 degrees 00' 00" E 182.50',
to the point of beginning; said land being 1.16 acres more or less; except any
structures not included in Mead Corporation Contract No. 21-6817.
<PAGE>
NO. 6 FUEL OIL SYSTEM
Commence at the plant grid coordinates N 10,000.00, E 10,000.00,
thence S 6 degrees 28' 59" E 664.25'; to the point of beginning (N 9,340.00, E
10,075.00); thence S 0 degrees 00' 00" E 60.00'; thence S 90 degrees 00' 00" E
202.50'; thence N 0 degrees 00' 00" E 60.00'; thence N 90 degrees 00' 00" W
202.50'; to the point of beginning; said land being 0.28 acres more or less;
except any structures not included in Mead Corporation Contract No. 21-
6817.
NO. 2 PRIMARY CLARIFIER
Commence at the plant grid coordinates N 10,000.00, E 10,000.00,
thence S 21 degrees 37' 29" E 753.00' to the point of beginning (N 9,300.00, E
10,277.50); thence S 0 degrees 00' 00" E 210.00'; thence S 90 degrees 00' 00" E
177.50'; thence N 0 degrees 00' 00" E 210.00'; thence N 90 degrees 00' 00" W
177.50' to the point of beginning; said land being 0.86 acres more or less;
except any structures not included in Mead Corporation Contract No. 21-
6817.
SECONDARY WASTE TREATMENT
Commence at the plant grid coordinates N 10,000.00, E 10,000.00,
thence S 10 degrees 47' 55" E 1868.08' to the point of beginning (N 8,165.00, E
10,350.00); thence S 0 degrees 00' 00" E 267.00'; thence S 45 degrees 00' 00" E
138.59'; thence S 90 degrees 00' 00" E 247.50'; thence N 45 degrees 00' 00" E
169.71'; thence N 90 degrees 00' 00" E 104.50'; thence N 0 degrees 00' 00" E
245.00'; thence N 90 degrees 00' 00" W 570.27', to the point of beginning; said
land being 4.21 acres more or less; except any structures not included in Mead
Corporation Contract No. 21-6817.
CONCENTRATOR
Commence at the plant grid coordinates N 10,000.00, E 10,000.00,
thence S 38 degrees 03' 12" E 464.80' to the point of beginning (N 9,634.00, E
10,286.50); thence S 0 degrees 00' 00" E 29.00'; thence S 90 degrees 00' 00" E
73.78'; thence N 0 degrees 00' 00" E 29.00'; thence N 90 degrees 00' 00" W
74.00', to the point of beginning; said land being 0.05 acres more or less;
except any structures not included in Mead Corporation Contract No. 21-6817.
WASTE FUEL STORAGE, CONVEYORS, AND TRUCK DUMPER
Commence at the plant grid coordinates N 10,000.00, E 10,000.00,
thence S 49 degrees 34' 49" W 1100.73' to the point of beginning (N 9,286.31, E
9,162.00); thence S 0 degrees 00' 00" E 176.31'; thence 644.03', 180 degrees
along an arc with a radius point at N 9,110.00, E 9,367.00; thence N 0 degrees
00' 00" E 25.00'; thence N 90 degrees 00' 00" E 483.00'; thence N 00 degrees 00'
00" E 160.00'; thence N 90 degrees 00' 00" W 286.50'; thence N 26 degrees 56'
58" E 183.57'; thence N 63 degrees 03' 02" W 13.00'; thence S 26 degrees 56' 58"
W 199.92'; thence N 90 degrees 00' 00" W 149.34'; thence N 2 degrees 03' 00" W
283.87'; thence N 0 degrees 00' 00" W 18.00'; thence N 90 degrees 00 degrees 00"
W 20.00'; thence S 0 degrees 00' 00" W 18.00'; thence S 2 degrees 03' 00" E
62.04'; thence S 90 degrees 00' 00" W 32.22'; thence S 0 degrees 00' 00" W
23.00'; thence S 90 degrees 00' 00" E 24.67'; thence S 2 degrees 58' 35" E
198.96'; thence S 90 degrees 00' 00" W 413.00', to the point of
beginning; said land being 5.16 acres more or less; except any
structures not included in Mead Corporation Contract No. 21-6817.
<PAGE>
EXHIBIT B
to
Lease Agreement between
THE INDUSTRIAL DEVELOPMENT BOARD OF
THE CITY OF STEVENSON
and
THE MEAD CORPORATION
dated as of March 1, 1998
PROJECT SUMMARY
The Bonds are being issued for the purpose of paying the costs of
acquiring, constructing and installing certain sewage and solid waste
disposal facilities and related facilities (the "Project"), being
constructed at the corrugating medium mill (the "Mill") of The Mead
Corporation (the "Company") located in Jackson County, Alabama, near the
City of Stevenson.
The Project consists generally of sewage and solid waste disposal
facilities, including sewage collection, treatment and disposal
facilities and a chemical recovery and recycling system, including a
recovery boiler, a woodwaste boiler and related wood waste handling
systems.
Specific components of the Project include the following:
Chemical Recovery and Recycling System
Sitework
Recovery Boiler
Boiler feedwater, fuel oil and power
distribution systems and pipe bridges
Chemical conversion and recovery
Concentrator
Modifications to Existing Boiler
New Boiler
Sitework
Boiler
Boiler feedwater, M&A and power
distribution systems and
pipe bridges
Woodwaste Handling System
Waste Treatment System
Sitework
Primary waste treatment
Secondary waste treatment
Sludge disposal and other systems
Sludge press
<PAGE>
EXHIBIT C
REQUISITION AND CERTIFICATION
Request No. _____ Date: ____________
TO: Citibank, N.A., as Trustee
111 Wall Street, 5th Floor
New York, New York 10043
Attention: Corporate Agency & Trust
The undersigned Authorized Company Representative designated
pursuant to the terms of a Lease Agreement, dated as of March 1, 1998
(the "Agreement"), by and between The Industrial Development Board of
the City of Stevenson, a public corporation created and existing under
the laws of the State of Alabama (the "Issuer") and The Mead
Corporation, an Ohio corporation (the "Company"), hereby requests that
there be paid from the "Project Fund" (herein below described) the sum
of $____________ and in that connection, DOES HEREBY CERTIFY, as
follows:
1. The requested payment has been properly incurred and
is a proper charge against The Industrial Development Board of the
City of Stevenson Project Fund -- The Mead Corporation Project,
Series ________ and has not been the basis of any previous
withdrawal from said Project Fund.
2. Payment should be made to:
Name:
Address or Wire Instructions:
3. The purpose and circumstances of such obligation are
as follows:
4. Except with respect to amounts requested for the
payment of the costs of issuance of the Bonds, payment of such
obligation will not result in less than 95% of the total proceeds
of the sale of the "Bonds" (defined in the Agreement) deposited
with the Project Fund expended as of the date hereof having been
used to pay "Exempt Costs" (as defined in the Agreement).
[Applicable only to requisitions for the payment of other than
Exempt Costs.]
This ____ day of __________, 19__.
THE MEAD CORPORATION
By:_______________________________________
Authorized Company Representative
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q OF THE MEAD CORPORATION FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
THIS SCHEDULE SHALL NOT BE DEEMED TO BE FILED FOR PURPOSES OF SECTION 11 OF THE
SECURITIES ACT OF 1933, SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
SECTION 323 OF THE TRUST INDENTURE ACT OF 1939, OR OTHERWISE SUBJECT TO THE
LIABILITIES OF SUCH SECTIONS, NOR SHALL IT BE DEEMED A PART OF ANY REGISTRATION
STATEMENT TO WHICH IT RELATES.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 19
<SECURITIES> 0
<RECEIVABLES> 611
<ALLOWANCES> 0
<INVENTORY> 606
<CURRENT-ASSETS> 1,325
<PP&E> 5,609
<DEPRECIATION> 2,285
<TOTAL-ASSETS> 5,382
<CURRENT-LIABILITIES> 844
<BONDS> 1,428
0
0
<COMMON> 155
<OTHER-SE> 2,145
<TOTAL-LIABILITY-AND-EQUITY> 5,382
<SALES> 0
<TOTAL-REVENUES> 1,167
<CGS> 0
<TOTAL-COSTS> 951
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> 53
<INCOME-TAX> 20
<INCOME-CONTINUING> 31
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT ON FORM 10-K OF THE MEAD CORPORATION FOR THE YEAR ENDED DECEMBER 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
THIS SCHEDULE SHALL NOT BE DEEMED TO BE FILED FOR PURPOSES OF SECTION 11 OF THE
SECURITIES ACT OF 1933, SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
SECTION 323 OF THE TRUST INDENTURE ACT OF 1939, OR OTHERWISE SUBJECT TO THE
LIABILITIES OF SUCH SECTIONS, NOR SHALL IT BE DEEMED A PART OF ANY REGISTRATION
STATEMENT TO WHICH IT RELATES.
</LEGEND>
<RESTATED>
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS 6-MOS 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1996 MAR-31-1996 JUN-30-1996 SEP-29-1996 DEC-31-1995
<CASH> 21 138 22 122 293
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 606 516 691 640 613
<ALLOWANCES> 28 0 0 0 27
<INVENTORY> 509 524 479 412 411
<CURRENT-ASSETS> 1,189 1,271 1,283 1,266 1,367
<PP&E> 5,199 4,378 4,457 4,536 4,319
<DEPRECIATION> 2,078 1,994 2,029 2,057 1,955
<TOTAL-ASSETS> 4,986 4,333 4,383 4,405 4,373
<CURRENT-LIABILITIES> 1,240 722 743 688 822
<BONDS> 1,240 726 727 721 695
0 0 0 0 0
0 0 0 0 0
<COMMON> 156 157 156 156 158
<OTHER-SE> 2,091 2,013 2,035 2,085 2,002
<TOTAL-LIABILITY-AND-EQUITY> 4,986 4,333 4,383 4,405 4,373
<SALES> 0 0 0 0 0
<TOTAL-REVENUES> 4,707 1,067 2,326 3,557 5,179
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 4,368 863 1,864 2,859 4,656
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 58 15 27 40 69
<INCOME-PRETAX> 295 61 168 253 488
<INCOME-TAX> 109 23 62 93 184
<INCOME-CONTINUING> 186 31 106 161 304
<DISCONTINUED> 5 5 0 5 8
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 195 36 103 166 350
<EPS-PRIMARY> 1.86 .34 .98 1.58 3.22
<EPS-DILUTED> 1.84 .34 .97 1.56 3.17
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT ON FORM 10-K OF THE MEAD CORPORATION FOR THE YEAR ENDED DECEMBER 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
THIS SCHEDULE SHALL NOT BE DEEMED TO BE FILED FOR PURPOSES OF SECTION 11 OF THE
SECURITIES ACT OF 1933, SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
SECTION 323 OF THE TRUST INDENTURE ACT OF 1939, OR OTHERWISE SUBJECT TO THE
LIABILITIES OF SUCH SECTIONS, NOR SHALL IT BE DEEMED A PART OF ANY REGISTRATION
STATEMENT TO WHICH IT RELATES.
</LEGEND>
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-30-1997 JUN-29-1997 SEP-29-1997
<CASH> 15 16 20
<SECURITIES> 0 0 0
<RECEIVABLES> 574 756 689
<ALLOWANCES> 0 0 0
<INVENTORY> 582 541 478
<CURRENT-ASSETS> 1,260 1,407 1,272
<PP&E> 5,238 5,343 5,443
<DEPRECIATION> 2,121 2,167 2,214
<TOTAL-ASSETS> 5,063 5,298 5,218
<CURRENT-LIABILITIES> 813 964 849
<BONDS> 1,249 1,274 1,274
0 0 0
0 0 0
<COMMON> 156 156 156
<OTHER-SE> 2,090 2,124 2,148
<TOTAL-LIABILITY-AND-EQUITY> 5,063 5,298 5,218
<SALES> 0 0 0
<TOTAL-REVENUES> 1,136 1,322 3,834
<CGS> 0 0 0
<TOTAL-COSTS> 941 1,088 3,164
<OTHER-EXPENSES> 0 0 428
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 23 25 74
<INCOME-PRETAX> 32 69 173
<INCOME-TAX> 12 26 63
<INCOME-CONTINUING> 20 48 118
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 20 48 118
<EPS-PRIMARY> .19 .46 1.13
<EPS-DILUTED> .19 .45 1.11
</TABLE>
