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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 July 4, 1999
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 July 4, 1999 was 102,341,053.
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<PAGE>
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------------
QUARTERLY PERIOD ENDED JULY 4, 1999
-----------------------------------
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
BALANCE SHEETS
- --------------
(All amounts in millions)
July 4, Dec. 31,
1999 1998
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 36.0 $ 102.0
Accounts receivable 568.7 414.7
Inventories 481.6 479.5
Other current assets 88.1 90.2
-------- --------
Total current assets 1,174.4 1,086.4
Investments and other assets:
Investees 134.4 127.5
Other assets 581.3 555.6
-------- --------
715.7 683.1
Property, plant and equipment 5,773.5 5,741.8
Less accumulated depreciation and
amortization (2,473.8) (2,369.1)
-------- --------
3,299.7 3,372.7
-------- --------
Total assets $5,189.8 $5,142.2
======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 256.4 $ 275.9
Accrued liabilities 409.8 395.7
Current maturities of long-term debt 27.1 7.9
-------- --------
Total current liabilities 693.3 679.5
Long-term debt 1,346.1 1,367.4
Commitments and contingent liabilities
Deferred items 854.7 843.3
Shareowners' equity:
Common shares 152.7 151.9
Additional paid-in capital 108.3 66.3
Retained earnings 2,078.5 2,076.9
Other comprehensive loss (43.8) (43.1)
-------- --------
2,295.7 2,252.0
-------- --------
Total liabilities and
shareowners' equity $5,189.8 $5,142.2
======== ========
See notes to financial statements.
<PAGE>
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
STATEMENTS OF EARNINGS
- ----------------------
(All amounts in millions, except per share amounts)
<TABLE>
<CAPTION>
Second Quarter Ended First Half Ended
--------------------- ---------------------
July 4, June 28, July 4, June 28
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $1,004.8 $1,050.9 $1,868.0 $1,889.9
Cost of products sold 823.7 853.4 1,528.2 1,514.4
-------- -------- -------- --------
Gross profit 181.1 197.5 339.8 375.5
Selling and administrative expenses 102.5 101.3 207.8 197.6
-------- -------- -------- --------
Earnings from operations 78.6 96.2 132.0 177.9
Other revenues 4.8 1.6 8.8 4.2
Interest and debt expense (25.1) (28.9) (51.8) (55.4)
-------- -------- -------- --------
Earnings from continuing
operations before income taxes 58.3 68.9 89.0 126.7
Income taxes 21.0 28.2 32.1 49.4
-------- -------- -------- --------
Earnings from continuing
operations before equity in
net earnings (loss) of investees 37.3 40.7 56.9 77.3
Equity in net earnings (loss)
of investees 7.5 (.5) 10.8 (3.5)
-------- -------- -------- --------
Earnings from continuing
operations 44.8 40.2 67.7 73.8
Discontinued operations (25.0) (28.0)
-------- -------- -------- --------
Net earnings $ 44.8 $ 15.2 $ 67.7 $ 45.8
======== ======== ======== ========
Per common share - basic:
Earnings from continuing
operations $ .44 $ .39 $ .66 $ .71
Discontinued operations (.24) (.27)
-------- -------- -------- --------
Net earnings $ .44 $ .15 $ .66 $ .44
======== ======== ======== ========
Per common share - assuming
dilution:
Earnings from continuing
operations $ .43 $ .38 $ .65 $ .70
Discontinued operations (.24) (.27)
-------- -------- -------- --------
Net earnings $ .43 $ .14 $ .65 $ .43
======== ======== ======== ========
Cash dividends per
common share $ .16 $ .16 $ .32 $ .32
======== ======== ======== ========
Weighted-average number of common
shares outstanding - basic 102.2 103.9 101.9 103.9
======== ======== ======== ========
Weighted-average number of common
shares outstanding
- assuming dilution 105.1 105.8 104.8 105.8
======== ======== ======== ========
</TABLE>
See notes to financial statements.
<PAGE>
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
STATEMENTS OF CASH FLOWS
- ------------------------
(All amounts in millions)
First Half Ended
--------------------
July 4, June 28,
1999 1998
------- -------
Cash flows from operating activities:
Net earnings $ 67.7 $ 45.8
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and depletion of property, plant
and equipment 135.6 125.7
Depreciation and amortization of other assets 20.3 20.9
Deferred income taxes (3.9) (6.5)
Investees-earnings and dividends (2.8) 4.4
Discontinued operations 28.0
Other 14.0 14.4
Change in current assets and liabilities:
Accounts receivable (159.8) (160.0)
Inventories (9.4) (67.7)
Other current assets 11.7 (12.7)
Accounts payable and accrued liabilities (6.0) 90.1
Cash (used in) discontinued operations (22.8)
------ ------
Net cash provided by operating activities 67.4 59.6
------ ------
Cash flows from investing activities:
Capital expenditures (90.5) (192.1)
Additions to equipment rented to others (13.6) (14.8)
Proceeds from sale of assets 21.4
Payment for acquired business (13.6)
Other (24.3) (21.8)
------ ------
Net cash (used in) investing activities (107.0) (242.3)
------ ------
Cash flows from financing activities:
Additional borrowings 15.0 140.5
Payments on borrowings (18.1) (191.9)
Notes payable 273.8
Cash dividends paid (32.7) (33.3)
Common shares issued 45.1 12.7
Common shares purchased (35.7) (17.4)
------ ------
Net cash provided by (used in)
financing activities (26.4) 184.4
------ ------
Increase (decrease) in cash and cash equivalents (66.0) 1.7
Cash and cash equivalents at beginning of year 102.0 29.5
------ ------
Cash and cash equivalents at end of half $ 36.0 $ 31.2
====== ======
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, 1998, 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):
July 4, Dec. 31,
1999 1998
------- -------
Finished and semi-finished products $304.5 $295.0
Raw materials 102.3 109.2
Stores and supplies 74.8 75.3
------ ------
$481.6 $479.5
====== ======
D - INVESTEES
The summarized operating data for all investees is presented
in the following table:
Second Quarter Ended First Half Ended
-------------------- ----------------------
July 4, June 28, July 4, June 28,
1999 1998 1999 1998
------- ------- ------- -------
Revenues $196.1 $181.4 $369.1 $357.8
====== ====== ====== ======
Gross profit $ 32.6 $ 11.1 $ 54.0 $ 12.7
====== ====== ====== ======
Net earnings $ 21.1 $ 4.3 $ 32.4 $ 1.8
====== ====== ====== ======
E - ASSET WRITEDOWNS AND EMPLOYEE TERMINATIONS
During the second quarter of 1999, the company recorded a pre-
tax charge of $15.6 million for asset write-offs and severance
costs related to the shutdown of four uncoated paper machines
in its mill in Rumford, Maine. The charges were comprised of
$7.9 million to write down fixed assets to be shutdown, $3.8
million in severance costs for salaried personnel notified
during the quarter; $2.6 million to write off other assets;
and $1.3 million to write down stores and supplies inventory
associated exclusively with the four machines. Of the above
charge, $14.2 million is included in cost of sales and $1.4
million is included in selling and administrative expenses.
The $3.8 million in severance costs relates to 52 salaried
employees and includes medical, dental and other benefits,
none of which were paid at the end of the second quarter. The
shutdown is expected to be completed and all personnel
<PAGE>
terminated by December 31, 1999, although some severance and
benefit payments may be made thereafter.
In the third quarter of 1998, the company adopted a plan to
make organizational changes and reduce its overall workforce,
and recorded a charge for employee severance and related
costs. The following is a summary of the remaining accrual at
July 4, 1999 (in millions):
Balance at December 31, 1998 $9.9
Used for intended purpose (4.1)
----
Balance at July 4, 1999 $5.8
====
F - SHAREOWNERS' EQUITY
During the second quarter of 1999, the company repurchased
approximately 500,000 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 9.8 million shares have been repurchased as of the end
of the first half of 1999. Comprehensive earnings for the
half years ended July 4, 1999 and June 28, 1998, were $67.0
million and $43.0 million. Comprehensive earnings for the
quarters ended July 4, 1999 and June 28, 1998, were $41.9
million and $16.3 million.
G - ADDITIONAL INFORMATION ON CASH FLOWS
<TABLE>
<CAPTION>
First Half Ended
-------------------
July 4, June 28,
1999 1998
------- -------
<S> <C> <C>
Cash paid for:
Interest $ 51.1 $ 56.7
====== ======
Income taxes $ 31.2 $ 20.0
====== ======
</TABLE>
H - SEGMENT INFORMATION
<TABLE>
<CAPTION>
Second Quarter Ended First Half Ended
-------------------- ------------------
July 4, June 28, July 4, June 28,
1999 1998 1999 1998
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Net sales:
Industry segments:
Paper $ 433.8 $ 445.2 $ 887.7 $ 879.1
Packaging and Paperboard 403.7 408.5 751.4 751.4
School and Office Products 167.3 197.2 228.9 259.4
-------- -------- -------- --------
Total $1,004.8 $1,050.9 $1,868.0 $1,889.9
======== ======== ======== ========
Earnings (loss) from Continuing
Operations Before Income Taxes:
Industry segments:
Paper $ 15.2 $ 47.0 $ 61.3 $ 106.7
Packaging and Paperboard 59.3 37.8 83.9 67.2
School and Office Products 22.4 31.6 23.8 38.3
Corporate and Other (1) (38.6) (47.5) (80.0) (85.5)
-------- -------- -------- --------
Total $ 58.3 $ 68.9 $ 89.0 $ 126.7
======== ======== ======== ========
<PAGE>
(1) Corporate and other includes the following:
Other revenue $ 5.3 $ 1.5 $ 9.3 $ 4.5
Interest expense (25.1) (28.9) (51.8) (55.4)
Other expense (18.8) (20.1) (37.5) (34.6)
--------- --------- -------- ---------
Total $ (38.6) $ (47.5) $ (80.0) $ (85.5)
========= ========= ======== =========
</TABLE>
Identifiable assets have not changed significantly at July 4,
1999, compared to December 31, 1998.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
RESULTS OF OPERATIONS
- ---------------------
During the second quarter, Mead recorded a pre-tax charge of
$15.6 million or $.09 per share for asset write-offs and
severance costs related to the shutdown of four uncoated paper
machines in its mill in Rumford, Maine. Mead expects to take
additional charges in the second half of 1999 in line with the
company's announcement to take total pre-tax charges of
approximately $25 million associated with the shutdown.
Net Sales
- ---------
Second quarter 1999 net sales of $1.00 billion decreased
slightly from $1.05 billion in the second quarter of 1998.
For the first half, net sales were $1.87 billion in 1999
compared to $1.89 billion in 1998. The decline resulted
primarily from lower prices for paper and lower prices and
volume for school and office products. During the quarter,
average selling prices were lower for coated paper, uncoated
paper and carbonless paper and for coated paperboard and pulp.
The decline in prices more than offset higher sales volume of
paper and corrugated medium compared to the second quarter of
1998.
Operating Costs and Expenses
- ----------------------------
Gross profit as a percentage of sales decreased to 18.0% from
18.8% in the second quarter of 1998. Likewise, this percentage
was 18.2% for the first half compared with 19.9% in the same
period of last year.
Selling and administrative expenses of $102.5 million were up
from $101.3 million in the second quarter of 1998. First half 1999
selling and administrative expenses of $207.8 million were up from
$197.6 million for the same period of 1998 largely due to expenses
related to the initial phase of implementation of the company's
enterprise resource planning system and development of the company's
financial services center.
The levels of gross profit and selling and administrative expenses were
negatively affected by special items during the second
quarters of both 1999 and 1998. In 1999's second quarter, a
charge of $15.6 million was recorded for costs related to the
shutdown of four uncoated paper machines at the company's
Rumford, Maine, facility. The $15.6 million charge included:
$7.9 million to write-down fixed assets to be shutdown; $3.8
million in severance costs for salaried personnel notified
during the quarter; $2.6 million to write off other assets;
$1.3 million to write down stores and supplies inventory
associated exclusively with the four machines. In 1998, a
charge of $31.5 million for asset write downs was recorded to
reduce the carrying value of stores and supplies inventory,
assets of a Japanese packaging operation, certain equipment
replaced by new equipment and certain capitalized software
made obsolete by a decision to move to an enterprise resource
planning system.
Other Revenue
- -------------
Other revenue of $8.8 million and $4.8 million in 1999
increased from $4.2 million and $1.6 million in the first half
and second quarter of 1998, respectively. These increases are
the result of a gain on the sale of non-strategic real estate.
Interest and Debt Expense
- -------------------------
In the second quarter of 1999, interest and debt expense of
$25.1 million decreased from $28.9 million in the second
quarter of 1998 as a result of lower debt levels. Similarly,
first half 1999 interest and debt expense of $51.8 million
decreased from $55.4 million in 1998.
Income Taxes
- ------------
The effective tax rate was 36.0% for the second quarter of
1999 compared to 40.9% for the second quarter of 1998. In
1998, the income tax rate was higher as a result of the effect
of a non-deductible portion of asset write downs taken during
the second quarter of that year. For the half, this rate was
36.1% in 1999 and 39.0% in 1998.
Equity in Net Earnings (Loss) of Investees
- ------------------------------------------
Mead's investees earned $7.5 million in the second quarter
compared to a loss of $.5 million in the second quarter of
1998. For the first half, Mead's share of earnings was $10.8
<PAGE>
million in 1999 compared to a loss of $3.5 million posted for
1998. The increase was primarily a result of higher shipments
and prices for wood products at Mead's 50%-owned Northwood
companies. Shipments and prices were higher for lumber,
oriented structural board (OSB) and plywood. Shipments and
prices were lower for pulp compared to the first half of 1998.
During the first half, the pulp mill took 13 days of
maintenance downtime.
Earnings from Continuing Operations
- -----------------------------------
Earnings from continuing operations for the second quarter of
1999 were $44.8 million compared to $40.2 million in the
second quarter of 1998. For the first half of 1999, earnings
from continuing operations were $67.7 million compared to
$73.8 million in 1998.
Financial Data by Business
- --------------------------
Paper segment
<TABLE>
<CAPTION>
Second Quarter First Half
------------------------ ------------------------
1999 1998 % Change 1999 1998 % Change
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
(All dollar amounts in millions)
Net sales (to unaffiliated
customers) $433.8 $445.2 (3)% $887.7 $879.1 1%
Segment earnings before
taxes 15.2 47.0 (68)% 61.3 106.7 (43)%
</TABLE>
First half net sales for the paper segment were slightly ahead
of last year's levels, though sales for the second quarter
were down. Earnings for the first half of 1999 were $61.3
million compared to $106.7 million in 1998. The weakness in
selling prices sharply affected the first half results of the
paper segment.
Earnings for the segment decreased from the second quarter of
1998 affected in part by charges of $15.6 million for special
items related to the shutdown of four uncoated paper machines
at the Rumford, Maine paper mill. Excluding special items,
earnings were $30.8 million in the second quarter of 1999
compared to segment earnings before special items of $59.1
million in the second quarter of 1998. (In the second quarter
of 1998, earnings of $47.0 million included $12.1 million in
charges related to the write down of certain assets.)
Earnings in the second quarter of 1999 were lower as a result
of lower average selling prices for paper. For example,
coated and uncoated paper prices were down more than 10% from
the same quarter last year, carbonless paper prices were down
5% from prior year. In the second quarter of 1999, shipment
volume increased for coated and uncoated paper. The mills
generally operated well, taking some scheduled maintenance
downtime in pulping operations. As previously announced, the
company took 25,000 tons of market-related downtime in coated
paper production during the quarter. Paper inventories
declined from the levels of the prior quarter and were about
even with the level of the second quarter of 1998.
Packaging and Paperboard segment
<TABLE>
<CAPTION>
Second Quarter First Half
------------------------ -----------------------
1999 1998 % Change 1999 1998 % Change
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
(All dollar amounts in millions)
Net sales (to unaffiliated
customers) $403.7 $408.5 (1)% $751.4 $751.4 --
Segment earnings before
taxes 59.3 37.8 57% 83.9 67.2 25%
</TABLE>
Net sales for the packaging and paperboard segment were even
with last year although slightly down for the quarter.
Earnings for the first half increased 25% to $83.9 million
from $67.2 million for the same period in 1998. Segment
earnings for the quarter of $59.3 million
<PAGE>
improved 6% from $55.9 million in the second quarter of 1998,
before $18.1 million in charges related to the write down of
certain assets in 1998. The improvement in earnings in the
first half of 1999 came primarily from higher shipments of
corrugating medium from the company's expanded mill in
Stevenson, Alabama. Shipments of medium increased 27% during
the second quarter of 1999 from the second quarter of last
year. Prices for medium recovered during the quarter bringing
average selling prices to the level of last year's second
quarter. Ongoing operational difficulties in the mill's new
chemical recovery and conversion systems and production issues
on the number two paper machine led to costs that, while below
last year, were higher than expected. The company estimates
this had a negative impact on earnings of approximately $5
million or $.03 per share during the quarter.
Within the Coated Board System, which includes the Packaging
and Coated Board divisions, sales of beverage packaging were
ahead for the first half and even with the second quarter of
1998. Shipments of coated paperboard to the company's
packaging business and to open market customers declined
slightly from the second quarter of 1998. Prices and
shipments of wood products at the Coated Board division's two
sawmills were higher than the same quarter last year.
Production of coated paperboard at the Mahrt mill continued at
very strong levels during the quarter, and the mill enhanced
its cost position compared to the second quarter of 1998. In
the third quarter of 1999, the mill plans to take
approximately 25,000 tons of market-related downtime to help
manage its inventory levels, which are higher than the level
of the second quarter last year.
School and Office Products segment
<TABLE>
<CAPTION>
Second Quarter First Half
------------------------ ---------------------------
1999 1998 % Change 1999 1998 % Change
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
(All dollar amounts in millions)
Net sales (to unaffiliated
customers) $167.3 $197.2 (15)% $228.9 $259.4 (12)%
Segment earnings before
taxes 22.4 31.6 (29)% 23.8 38.3 (38)%
</TABLE>
Sales and earnings for the School and Office Products segment
declined in the first half and second quarter of 1999 compared
to the first half and second quarter of 1998 due to several
factors affecting price and volume. These factors include
lower selling prices for paper-based products compared to
prior year. They also include shifts in the way mass
retailers are managing inventories leading to an overall
reduction in the inventory levels they hold; increased foreign
competition in commodity-based and some value-added products;
and a lack of strong new products for the back-to-school
selling season. The company does not expect School and Office
Products to make up its shortfall in sales and earnings by the
end of 1999. The segment under the direction of new division
management has begun to strengthen its efforts in new product
development and sales growth for future years. During the
quarter, the division's converting facilities operated well.
The division shipped product to customers for the back-to-
school selling season on a timely basis.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital on July 4, 1999 was $481 million compared to
$407 million on December 31, 1998. The current ratio was 1.7
at the end of the second quarter and was 1.6 on December 31,
1998. Consistent with Mead's highly seasonal School and
Office Products business, inventories and receivables
increased during the first half. During the quarter,
inventories of coated and uncoated paper declined slightly
from the level of the first quarter and were equal to second
quarter 1998. Inventories of coated paperboard decreased from
the first quarter but were higher than the level of the second
quarter 1998. The paper segment took market-related downtime
in the second quarter and is expected to take market related
downtime in the second half. Market-related downtime will be
taken in the second half in coated paperboard to help manage
the company's inventory levels.
<PAGE>
Borrowed capital (long-term debt) as a percentage of total
capital (long-term debt plus shareowners' equity) was 37.0% on
July 4, 1999, and was 37.8% on December 31, 1998.
Capital expenditures totaled $91 million in the first half of
1999 compared to $192 million in the first half of 1998. The
company expects its full year 1999 capital expenditures to be
in the range of $200 million to $225 million.
Proceeds for the sale of assets were $21.4 million in the
first half of 1999, including $13.6 million in the first
quarter and $7.8 million in the second quarter.
Under a Board of Directors authorization, Mead repurchased approximately
500,000 shares of its capital stock in the second quarter of
1999. The 10 million share repurchase authorization was 98%
completed by the end of the second quarter 1999.
At the end of the second quarter, Mead paid a fixed rate or
capped rate on 78% 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 $.02 change in
earnings per share for the year. The estimated market value
of long-term debt, excluding capital leases, was $23.5 million
more than the book value at the end of the second quarter
1998.
OUTLOOK
Year 2000 Readiness Disclosure
- ------------------------------
The Year 2000 issue concerns the inability of computerized
information and process control systems to properly recognize
and process date-sensitive information as the year 2000
approaches. Mead expects costs associated with the Year 2000
issue will not have a material adverse impact on results of
operations, liquidity or capital resources.
Mead is making progress as it works through a five-step
process in dealing with the Year 2000 issue: inventory;
assessment; corrective action; testing; and implementation.
With regard to its Information Technology (IT) systems
corrective action is essentially completed for the company's
corporate functions and its three business segments: Paper,
Packaging and Paperboard, and School and Office Products.
Testing and implementation are underway or have been completed
in each of these areas. The company expects the risk to be
low that its IT systems will be disrupted by Year the 2000
issue.
Non-IT systems include process control systems in
manufacturing and converting facilities for monitoring and
regulating power, production, emissions and safety equipment.
At the end of the second quarter, approximately 88% of the
company's process control systems were Year 2000 ready, 6%
were being fixed or replaced and 6% were in the process of
being reviewed. Mead has engaged a third-party consultant to
assist in this process. More specifically, within Mead's
business segments, corrective action and testing will be
essentially complete in the Paper segment in the third
quarter. Within the Packaging and Paperboard segment,
corrective action and testing have been essentially completed
for the Packaging division's domestic and international
operations. Completion is expected in the second half for the
Containerboard and Coated Board divisions, some during periods
of normal maintenance downtime. In the School and Office
Products segment, corrective action and testing of non-IT
systems will be completed by year-end or by the first quarter
of 2000. Year-end completion of corrective action and testing
of non-IT systems is not as critical to School & Office
Products given the seasonal nature of its business with most
orders produced and shipped in the second and third quarters
of the year. Mead fully expects to complete corrective action
and testing of all critical non-IT systems within its three
business segments in 1999. The company expects the risk to be
low that its non-IT systems will be disrupted by the Year 2000
issue. Mead has initiated both internal and external reviews
of non-IT systems to provide an independent assessment of its
Y2K readiness.
The costs associated with the company's remediation of the
Year 2000 issue include amounts for upgrading and replacing
non-compliant software and hardware systems and the costs
related to the use of third-party solution providers. Through
the second quarter of 1999, the total cost of remediation was
$21 million. This total includes approximately $12 million in
repair costs and $9 million in replacement costs. The total
cost Mead expects to incur between 1997 and 2000 related to
the Year 2000 issue is $30 million to $35 million, a reduction
from
<PAGE>
original estimates of $35 million to $45 million. The
majority of the remaining costs relate to replacement or
modification of process control systems. These costs will be
expensed as incurred, except for new systems that would be
capitalized.
Mead has completed a detailed review of its critical suppliers
of raw materials, energy, equipment, supplies and
transportation to determine their level of Year 2000
readiness. Based on this review, the company expects there is
a low level of risk related to Year 2000 readiness with over
90% of these suppliers and medium level of risk with remaining
suppliers. The company is developing plans for alternative
sources of supply where it believes it is necessary.
Significant interruptions caused by suppliers could affect
Mead's operations overall and its ability to deliver products
and services to its customers.
The company has prepared contingency plans within each of its
businesses for addressing the greatest areas of risk of
noncompliance or threats to business operations or company
assets related to the Year 2000 issue. The company expects to
continue to refine these plans in the second half of 1999.
The company believes that the greatest risk to company assets
from Year 2000 issues would most likely come from the failure
of third-parties, including government agencies, to deliver
utilities or fuel to operate the boiler systems of the
company's major paper and paperboard mills during a severe
winter. The greatest risk of interruption to the
manufacturing process would be the failure of suppliers to
deliver raw materials for an extended period of time. The
company could supply customers from finished inventory for a
period of time. If customers were to experience Year 2000
interruptions in their own operations, it could result in
reduced sales for Mead.
THE ESTIMATES AND CONCLUSIONS STATED HERE CONTAIN FORWARD-
LOOKING STATEMENTS AND ARE BASED ON MANAGEMENT'S BEST
ESTIMATES OF FUTURE EVENTS. RISKS ASSOCIATED WITH THE
COMPLETION OF THE PLAN INCLUDE THE CONTINUED AVAILABILITY OF
RESOURCES FROM SUPPLIERS AND THIRD-PARTY CONTRACTORS, THE
ABILITY OF SUPPLIERS AND CUSTOMERS TO BE Y2K COMPLIANT, AND
THE ABILITY TO IDENTIFY AND COMPLETE CONTINGENCY PLANS FOR
SYSTEMATIC FAILURES NOT UNDER COMPANY CONTROL.
CERTAIN STATEMENTS IN THIS REPORT ARE FORWARD-LOOKING
STATEMENTS. THESE STATEMENTS INCLUDE RISKS AND UNCERTAINTIES.
ACTUAL RESULTS MAY DIFFER. CERTAIN FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER ARE DESCRIBED IN THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31 1998 AND IN
QUARTERLY REPORTS ON FORM 10-Q FILED IN 1999.
<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, 1998.
PART II - OTHER INFORMATION
---------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
(a) The Annual Meeting of Shareholders of Mead was held
on April 22, 1999.
(b) Proxies were solicited for the meeting pursuant to
Regulation 14A. There was no solicitation in
opposition to management's nominees listed in the
proxy statement, and John C. Bogle, John G. Breen,
William E. Hoglund, James G. Kaiser, Robert J.
Kohlhepp, John A. Krol, Susan J. Kropf, Charles S.
Mechem, Jr., Lee J. Styslinger, Jr., Jerome F.
Tatar and J. Lawrence Wilson were elected.
(c) The results of the election of directors are as
follows:
<TABLE>
<CAPTION>
Number of Votes
---------------
Nominee For Withheld Abstentions Broker Non-Votes
------- --- -------- ----------- ----------------
<S> <C> <C> <C> <C>
John C. Bogle 91,501,198 548,216 -0- -0-
John G. Breen 91,505,006 544,407 -0- -0-
William E. Hoglund 91,508,647 540,767 -0- -0-
James G. Kaiser 91,536,677 512,736 -0- -0-
Robert J. Kohlhepp 90,832,949 1,216,464 -0- -0-
John A. Krol 91,237,623 811,791 -0- -0-
Susan J. Kropf 91,529,735 519,679 -0- -0-
Charles S. Mechem, Jr. 91,497,454 551,960 -0- -0-
Lee J. Styslinger, Jr. 91,525,531 523,882 -0- -0-
Jerome F. Tatar 91,472,726 576,687 -0- -0-
J. Lawrence Wilson 91,526,897 522,516 -0- -0-
</TABLE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
(10) Material Contracts:
(1) 1984 Stock Option Plan of the Registrant
as amended through June 24, 1999.
(2) 1991 Stock Option Plan of the Registrant
as amended through June 24, 1999.
(3) 1996 Stock Option Plan of the Registrant
as amended through June 24, 1999.
(4) Form of Indemnification Agreement between
Registrant and each of John C. Bogle,
John G. Breen, Duane E. Collins, William
E. Hoglund, James G. Kaiser, Robert J.
Kohlhepp, John A. Krol, Susan J. Kropf,
Charles S. Mechem, Jr., Heidi G. Miller,
Lee J. Styslinger, Jr., Jerome F. Tatar
and J. Lawrence Wilson.
(5) 1987 Restricted Stock Plan of the
Registrant as amended through June 24,
1999.
(27) Financial Data Schedule Quarter 2, 1999.
(b) No current reports on Form 8-K were filed with the
Commission in the second quarter of 1999.
<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: August 10, 1999
THE MEAD CORPORATION
- --------------------
(Registrant)
By: TIMOTHY R. MCLEVISH
__________________________________
Timothy R. McLevish
Vice President, Finance and Treasurer
(Chief Accounting Officer)
Exhibit 10.1
THE MEAD CORPORATION
1984 STOCK OPTION PLAN
----------------------
COMPOSITE
---------
06/24/99
Section 1. Purposes.
- ---------- ---------
The purposes of this 1984 Stock Option Plan
(the "Plan") are (i) to provide incentives to officers and
other key employees of the Company upon whose judgment,
initiative and efforts the long-term growth and success of
the Company is largely dependent; (ii) to assist the Company
in attracting and retaining key employees of proven ability;
and (iii) to increase the identity of interests of such key
employees with those of the Company's shareholders by
providing such employees with options to acquire Common
Shares of the Company.
Section 2. Definitions.
- --------- -----------
For purposes of the Plan:
(a) "Acquisition Transaction" means a
transaction of the type described in Section 8(b) (ii).
(b) "Affiliate" means a person controlling,
controlled by or under common control with the Company.
(c) "Board of Directors" means the Board of
Directors of the Company.
(d) "Change in Composition of the Board"
means an event of the type described in Section 8(b) (iv).
(e) "Change in Control" means a transaction
of the type described in Section 8(b) (iii).
(f) "Committee" means the committee referred
to in Section 4.
(g) "Code" means the Internal Revenue Code
of 1954, as amended.
(h) "Company" means The Mead Corporation;
when used in the Plan with reference to employment,
"Company" shall include any Subsidiary of the Company.
(i) "Designation of Beneficiary" means such
person(s) or entity whom the Option Holder has designated by
a transfer on death or other designation of beneficiary to
receive the Holder's Option on the Holder's death in
accordance with such procedures established from time to
time by the Committee.
(j) "Fair Market Value" means the highest
sale price of a Share on the date the value of a Share is to
be determined, as reported on the New York Stock Exchange-
Composite Transactions Tape or, if no sale is reported for
such date, then on the next preceding date for which a sale
is reported.
(k) "Grantee" means the employee who
received the option from the Company.
<PAGE>
(l) "Holder" means the person(s) or
entity who owns the option, whether Grantee,
Transferee, heir or other beneficiary.
(m) "Incentive Stock Option" means an
option granted under the Plan which qualifies as an
incentive stock option under Section 422 of the Internal
Revenue Code of 1954, as amended.
(n) "Limited Right" means a right
granted under Section 8 of the Plan.
(o) "Nonqualified Option" means an
option granted under the Plan which does not
qualify as an incentive stock option under
Section 422 of the Internal Revenue Code of
1954, as amended.
(p) "Share" or "Shares" means the
Common Shares, without par value, of the
Company.
(q) "Subsidiary" means any company 50%
or more of the voting stock of which is owned
or controlled, directly or indirectly, by the
Company.
(r) "Tax Date" means the date as of
which the amount of the withholding tax
payment with respect to the exercise of a
Nonqualified Option is calculated.
(s) "Tender Offer" means a tender offer
or a request or invitation for tenders or an
exchange offer subject to regulation under
Section 14(d) of the Securities Exchange Act
of 1934, as amended, and the rules and
regulations thereunder, as the same may be
amended, modified or superseded from time to
time.
(t) "Transferee" means the person who
received the option from the Grantee during the
Grantee's lifetime.
Section 3. Shares Subject to the Plan.
- ---------- ---------------------------
(a) Number of Shares. Subject to adjustment
----------------
as provided in Section 10, the maximum number of Shares that
may be issued and/or delivered under the Plan upon the
exercise of options is 1,700,000. Such Shares may be either
authorized and unissued or treasury Shares. Any Shares
subject to an option which for any reason has terminated or
expired or has been cancelled prior to being fully exercised
may again be subject to option under the Plan.
(b) The maximum number of Limited Rights
which may be granted under the Plan is 1,700,000. Any
Limited Rights granted under the Plan which for any reason
terminate or expire or have been cancelled prior to being
fully exercised may again be granted under the Plan.
Section 4. Administration.
- ---------- --------------
The Plan shall be administered by a Committee
of the Board of Directors, consisting of three or more
directors, who shall from time to time be appointed by, and
serve at the pleasure of, the Board of Directors. No
director shall serve as a member of the Committee if he is
then, or was at any time within one year prior to his
appointment, eligible for selection as a person to whom
stock may be allocated or to whom stock options or stock
appreciation rights may be granted pursuant to the Plan or
any other plan of the Company or any Affiliate entitling the
participants therein to acquire stock, stock options or
stock appreciation rights of the Company or any Affiliate.
<PAGE>
The Committee shall have and exercise all the
power and authority granted to it under the Plan. Subject
to the provisions of the Plan, the Committee shall in its
sole discretion determine the persons to whom, and the times
at which, Incentive Stock Options, Nonqualified Options and
Limited Rights shall be granted; the number of Shares to be
subject to each option; the option price per Share; and the
term of each option. In making such determinations, the
Committee may take into consideration each employee's
present and/or potential contribution to the success of the
Company and its Subsidiaries and any other factors which the
Committee may deem relevant and proper. Subject to the
provisions of the Plan, the Board of Directors or the
Committee shall also interpret the Plan; prescribe, amend
and rescind rules and regulations relating to the Plan;
correct defects, supply omissions and reconcile any
inconsistencies in the Plan; and make all other
determinations necessary or advisable for the administration
of the Plan. Such determinations of the Board of Directors,
or of the Committee (to the extent not reversed or modified
by the Board of Directors), shall be conclusive. A majority
of the Committee shall constitute a quorum for meetings of
the Committee, and the act of a majority of the Committee at
a meeting, or an act reduced to or approved in writing by
all members of the Committee, shall be the act of the
Committee.
Section 5. Eligibility.
- ---------- -----------
From time to time during the term of the
Plan, the Committee may grant one or more Incentive Stock
Options and/or Nonstatutory Options to any person who is
then an officer or other key employee of the Company. A
director who is not also an employee of the Company shall
not be eligible to receive options granted under the Plan.
Section 6. Terms and Conditions of Options.
- --------- -------------------------------
(a) Written Agreement. The terms of each
------------------
option granted under the Plan shall be set forth in a
written agreement, the form of which shall be approved by
the Committee.
(b) Terms and Conditions of General
--------------------------------
Application. The following terms and provisions shall apply
- -----------
to all optionsgranted under the Plan:
(1) No option may be granted under the
Plan at an option price per Share which is less than the
Fair Market Value of a Share on the date of grant.
(2) No option may be exercised more
than ten years after the date of grant.
(3) No option shall be exercisable
within one year after the date of grant. At the time an
option is granted, the Committee may provide that after such
one year period, the option may be exercised with respect to
all Shares subject thereto, or may be exercised with respect
to only a specified number of Shares over a specified period
or periods.
(4) Except as provided in Sections 6(b)
(5) and 6(b) (6), an option may be exercised only if the
Grantee thereof has been continuously employed by the
Company since the date of grant. Whether authorized leave
of absence or absence for military or governmental service
shall constitute a termination of employment shall be
determined by the Committee, after consideration of the
provisions of Section 1.421-7(h) of the regulations issued
under the Code, if appropriate.
<PAGE>
(5) At the time an option is granted,
or at such other time as the Committee may determine, the
Committee may provide that, if the Grantee of the option
ceases to be employed by the Company for any reason
(including retirement or disability) other than death, the
option will continue to be exercisable by the Holder (to the
extent it was exercisable on the date the Holder ceased to
be employed) for such additional period (not to exceed the
remaining term of such option) after such termination of
employment as the Committee may provide.
(6) At the time an option is granted,
the Committee may provide that, if the Grantee of the option
dies while employed by the Company or while entitled to the
benefits of any additional exercise period established by
the Committee with respect to such option in accordance with
Section 6 (b) (S), then the option will continue to be
exercisable (to the extent it was exercisable on the date of
death) by the person or persons (including the Holder's
estate) to whom the Holder's rights with respect to such
option shall have passed by will or by the laws
of descent and distribution (or in accordance with the
procedures set forth in Section 9 hereof) for such
additional period after death (not to exceed the remaining
term of such option) as the Committee may provide.
(7) At the time an option is granted,
the Committee may provide for any restriction or limitation
on the exercise of such option and/or for any restriction or
limitation on the transferability of the Shares issuable
upon the exercise of such option as it may deem appropriate.
(c) Additional Provisions Applicable to
-----------------------------------
Incentive Stock Options. The following additional terms and
- ------------------------
provisions shall apply to Incentive Stock Options granted
under the Plan, notwithstanding any provision of Section
6(b) to the contrary:
(1) By its terms, an Incentive Stock
Option granted prior to January 1, 1987 shall not be
exercisable if the Holder thereof holds another outstanding
option which was granted by the Company (or a Subsidiary or
a parent corporation or predecessor corporation of the
Company) at an earlier date and which is an Incentive Stock
Option within the meaning of Section 422 of the Code. For
purposes of this paragraph, an option which is an Incentive
Stock Option shall be treated as outstanding until such
option is exercised in full or expires by reason of lapse of
time or expires as the result of the exercise of a related
Limited Right.
(2) No Incentive Stock Option shall be
granted to an officer or other employee who possesses
directly or indirectly (within the meaning of Section 424(d)
of the Code) at the time of grant more than 10% of the
voting power of all classes of shares of the Company or of
any parent corporation or any Subsidiary of the Company
unless the option price is at least 110% of the Fair Market
Value of the Shares subject to the option on the date the
option is granted and the option is not exercisable after
the expiration of five years from the date of grant.
(3) With respect to Incentive Stock
Options granted on or after January 1, 1987, no Incentive
Stock Option granted under the Plan and under all other
plans of the Company and any parent corporation or any
Subsidiary of the Company is exercisable for the first time
by a Holder in an amount in excess of $100,000 (based on
Fair Market Value at the time the option is granted) during
any calendar year in accordance with Section 422(b) (7) of
the Code, as added by the Tax Reform Act of 1986 and
thereafter amended.
<PAGE>
(d) Waiver of Terms. Subject to the ten-
---------------
year limitation in Section 6(b) (3), the Committee may waive
or modify at any time, either before or after the granting
of an option, any condition or restriction with respect to
the exercise of such option imposed by or pursuant to this
Section 6 in such circumstances as the Committee may deem
appropriate (including, without limitation, in the event the
Grantee retires with the approval of the Company, or in the
event of a proposed Acquisition Transaction, a Change in
Control, Tender Offer for Shares, or other similar
transaction involving the Company).
(e) Acceleration Upon Certain Events. In
---------------------------------
the event of a Tender Offer (other than an offer by the
Company) for Shares, if the offeror acquires Shares pursuant
thereto, an Acquisition Transaction, a Change in Control or
a Change in Composition of the Board, all outstanding
options granted hereunder shall become exercisable in full
(whether or not otherwise exercisable, but subject, however,
to the one year limitation set forth in Section 6(b) (3)
and, in the case of Incentive Stock Options granted prior to
January 1, 1987, to the limitation on exercise set forth in
Section 6 (c) (1)), effective on the date of the first
purchase of Shares pursuant to the Tender Offer, or the date
of shareholder approval of the Acquisition Transaction, or
the date of filing of the Schedule 13D or shareholder
approval of the control share acquisition giving rise in
either case to the Change in Control, or the date of the
Change in Composition of the Board, as the case may be (the
occurrence of any such event is hereinafter referred to as
an "Acceleration").
Section 7. Exercise of Options.
- ---------- -------------------
(a) Notice of Exercise. The Holder of an
-------------------
option granted under the Plan may exercise all or part of
such option by giving written notice of exercise to the
Committee or its designee; provided, however, that an option
may not be exercised for a fraction of a Share. No Holder
of an option nor such Holder's legal representatives,
legatees, Transferees, distributees, or Designation of
Beneficiary will be, or will be deemed to be, a Holder of
any Shares covered by such option unless and until
certificates for such Shares are issued in accordance with
the Plan.
(b) Payment of Option Price. The option
------------------------
price for Shares with respect to which an option is
exercised shall be paid in full at the time such notice is
given. An option shall be deemed exercised on the date the
Committee or its designee receives written notice of
exercise, together with full payment for the Shares
purchased. The option price shall be paid to the Company
either in cash or, with the approval of the Committee,
Shares having a Fair Market Value equal to the option price
(or a combination of cash and Shares such that the sum of
the Fair Market Value of the Shares plus the cash equals the
option price).
(c) Payment in Cancellation of Option. The
---------------------------------
Committee shall have the authority in its sole discretion to
authorize the payment to the Holder of an option granted
under the Plan (with the consent of such Holder), in
exchange for the cancellation of all or a part of such
Holder's option, of cash in an amount not to exceed the
difference between the aggregate Fair Market Value on the
date of such cancellation of the shares with respect to
which the option is being cancelled and the aggregate option
price of such Shares; provided, however, that if an
Acceleration of options granted hereunder has occurred, for
purposes of this subparagraph, "Fair Market Value" on the
date of such cancellation shall be calculated in the same
manner as the "exercise value" of a Limited Right would be
calculated under Section 8(c) with respect to such date
(whether or not any Limited Rights are actually
outstanding).
<PAGE>
(d) Tax Withholding. With the approval of
---------------
the Committee, the Grantee of a Nonqualified Option may
elect to have the Company retain from the Shares to be
issued upon the exercise by the Grantee of such option
Shares having a Fair Market Value on the Tax Date equal to
all or any part of the required minimum federal, state and
local withholding tax payments to be made by the Grantee
with respect to the exercise of the option in lieu of making
such payments in cash. The Committee may establish from
time to time rules or limitations with respect to the right
of a Grantee to elect to have the Company retain Shares in
satisfaction of withholding payments; provided, however,
that, in any event, any such election made by a person
subject to Section 16(b) of the 1934 Act must be made in
accordance with any applicable rules established under such
Section.
If a Grantee transfers a Nonqualified Option
pursuant to Section 9, the Grantee is required to satisfy
the applicable withholding taxes by paying cash or other
property to the Company with respect to any income
recognized by the Grantee on the exercise of such option by
the Transferee. The Grantee's withholding obligations must
be satisfied on the date that the Transferee exercises the
option. If the Grantee does not satisfy the applicable
withholding tax obligation, the Company shall retain from
the Shares to be issued Shares having a Fair Market Value on
the Tax Date equal to the mandatory withholding tax payable
by the Grantee.
In connection with the exercise of an option
or Limited Right, the Company has the right to require the
Grantee to remit or otherwise make available to the Company
an amount sufficient to satisfy any federal, state and/or
local withholding tax requirements prior to the delivery or
transfer of any certificate or certificates for Shares (and
prior to a cash payment in the case of a Limited Right) or
to take whatever action it deems necessary to protect its
interests with respect to tax liabilities in connection with
the issuance of Shares or cash payment.
Section 8. Limited Rights.
- ---------- --------------
(a) Grant of Limited Rights. The Committee
-----------------------
may grant Limited Rights with respect to any option granted
under the Plan either at the time the option is granted or
at any time thereafter prior to the exercise, cancellation,
termination or expiration of such option. The number of
Limited Rights covered by any such grant shall not exceed,
but may be less than, the number of Shares covered by the
related option. The term of any Limited Right shall be the
same as the term of the option to which it relates. The
right of a Holder to exercise a Limited Right shall be
cancelled if and to the extent a related option is
exercised, and the right of a Holder to exercise an option
shall be cancelled if and to the extent a related Limited
Right is exercised.
(b) Events Permitting Exercise of Limited
-------------------------------------
Rights. A Limited Right shall be exercisable only if and to
- ------
the extent that the related option is exercisable; provided,
however, that notwithstanding the foregoing, a Limited Right
shall not be exercisable during the first six months of its
term nor shall it be exercisable unless the Fair Market
Value of a Share on the date of exercise exceeds the
exercise price of a Share subject to the related option. A
Limited Right which is otherwise exercisable may be
exercised only during the following periods:
(i) during a period of 30 days
following the date of expiration of a Tender Offer (other
than an offer by the Company) for Shares, if the offeror
acquires Shares pursuant to such Tender Offer;
(ii) during a period of 30 days
following the date of approval by the shareholders of the
Company of a definitive agreement: (x) for the merger or
consolidation of the Company into or with
<PAGE>
another corporation, if the Company will not be the
surviving corporation or will become a Subsidiary of another
corporation, or (y) for the sale of all or substantially all
of the assets of the Company (each of the foregoing
transactions is hereinafter referred to as an "Acquisition
Transaction")
(iii) during a period of 30 days
following: (x) the date upon which the Company is provided
a copy of a Schedule 13D (filed pursuant to Section 13(d) of
the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder) indicating that any
person or group (as such terms are defined in Section 13(d)
(3) of such act) has become the Holder of 20% or more of the
outstanding voting shares of the Company, or (y) the date of
approval by the shareholders of the Company of a control
share acquisition (as such term is defined in Chapter 1701
of the Ohio Revised Code) (each of the foregoing
transactions is hereinafter referred to as a "Change of
Control"); and
(iv) during a period of 30 days
following a change in the composition of the Board of
Directors such that individuals who were members of the
Board of Directors on the date two years prior to such
change (or who were elected, or were nominated for election,
by the Company's shareholders with the affirmative vote of
at least two-thirds of the directors then still in office
who were directors at the beginning of such two year period)
no longer constitute a majority of the Board of Directors
(such a change in composition is hereinafter referred to as
a "Change in Composition of the Board").
(c) Exercise of Limited Rights. Upon
---------------------------
exercise of a Limited Right, the Holder thereof shall
receive from the Company a cash payment equal to the excess
of: (x) the aggregate "exercise value" on the date of
exercise (determined as provided below) of that number of
Shares as is equal to the number of Limited Rights being
exercised over (y) the aggregate exercise price under the
related option of that number of Shares as is equal to the
number of Limited Rights being exercised. A Holder shall
exercise a Limited Right by giving written notice of such
exercise to the Committee. A Limited Right shall be deemed
exercised on the date the Committee receives such written
notice.
The "exercise value" of a Limited Right on
the date of exercise shall be:
(i) in the case of an exercise during a
period described in Section 8(b) (i), the highest price per
Share paid pursuant to any Tender Offer which is in effect
at any time during the 60-day period prior to the date on
which the Limited Right is exercised;
(ii) in the case of an exercise during a
period described in Section 8(b) (ii), the greater of: (x)
the highest sale price of a Share during the 30-day period
prior to the date of shareholder approval of the Acquisition
Transaction, as reported on the New York Stock Exchange -
Composite Transactions Tape, or (y) the highest fixed or
formula per Share price payable pursuant to the Acquisition
Transaction (if determinable on the date of exercise);
(iii) in the case of an exercise during
a period described in Section 8(b) (iii), the greater of:
(x) the highest sale price of a Share during the 30-day
period prior to the date the Company is provided with a copy
of the Schedule 13D, or the date of approval of the control
share acquisition, as reported on the New York Stock
Exchange - Composite Transactions Tape, or (y) the highest
acquisition price of a Share shown on such Schedule 13D or
to be paid in such control share acquisition; and
<PAGE>
(iv) in the case of an exercise during
a period described in Section 8 (b) (iv), the highest sale
price of a Share during the 30-day period prior to the date
of the Change in Composition of the Board, as reported on
the New York Stock Exchange - Composite Transactions Tape.
Notwithstanding the foregoing, in no event
shall the exercise value of a Limited Right issued in
connection with an Incentive Stock Option exceed the maximum
permissible exercise value for such a right under the Code
and the regulations and interpretations issued pursuant
thereto. Any securities or property which form part or all
of the consideration paid for Shares pursuant to a Tender
Offer or Acquisition Transaction shall be valued at the
higher of (1) the valuation placed on such securities or
property by the person making such Tender Offer or the other
party to such Acquisition Transaction, or (2) the value
placed on such securities or property by the Committee.
(d) Compliance with Law. The exercise of
--------------------
Limited Rights by directors and officers of the Company
shall be subject to, and comply with, the applicable
requirements of Rule 16b3(e) promulgated under the
Securities Exchange Act of 1934, as amended, and as the same
may be amended, modified or superseded from time to time.
Section 9. Non-Transferability.
- ---------- --------------------
Except as provided in this Section 9, options
granted under the Plan may not be sold, pledged, assigned,
hypothecated or transferred other than by Designation of
Beneficiary, or, if none, then by will or the laws of
descent and distribution and may be exercised during the
lifetime of the Grantee only by such Grantee or by his
guardian or legal representative.
Upon the death of an Option Holder,
outstanding Options held by such Holder may be exercised
only by Designation of Beneficiary, or, if none, then by the
executor or administrator of the Holder's estate or by a
person who shall have acquired the right to such exercise by
will or by the laws of descent and distribution.
Subject to such conditions as the Committee
may prescribe, during an option Grantee's lifetime, the
Committee may permit the transfer or assignment of an
outstanding option by such Grantee; provided, that such
transfer or assignment shall not apply to (y) an option
which is an Incentive Stock Option (but only if
nontransferability is necessary in order for the option to
qualify as an Incentive Stock Option), and (z) an option
granted to a person subject to Section 16 of the 1934 Act
(but only if nontransferability is necessary in order for
the option to qualify for the exemption under Rule 16b-3 of
the 1934 Act).
Section 10. Adjustments Upon Changes in Capitalization.
- ----------- -------------------------------------------
In the event of a change in outstanding
Shares by reason of a Share dividend, recapitalization,
merger, consolidation, split-up, combination or exchange of
Shares, or the like, the maximum number of Shares subject to
option during the existence of the Plan, the number of
Limited Rights which may be granted under the Plan, the
number of Shares subject to, and the option price of, each
outstanding option, the number of Limited Rights
outstanding, the Fair Market Value of a Share on the date a
Limited Right is granted, and the like shall be
appropriately adjusted by the Committee (disregarding any
fractional Shares resulting therefrom), whose determination
in each case shall be conclusive.
<PAGE>
Section 11. Conditions Upon Granting and Exercise of
----------------------------------------
Options and Limited Rights and Issuance of
------------------------------------------
Shares.
------
No option or Limited Right shall be granted,
no option or Limited Right shall be exercised and Shares
shall not be issued or delivered upon the exercise of an
option unless the grant and exercise thereof, and the
issuance and/or delivery of Shares pursuant thereto, or the
payment therefor, shall comply with all relevant provisions
of state and federal law, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, the rules and regulations
promulgated thereunder, and the requirements of any stock
exchange upon which the Shares then may be listed.
Section 12. Amendment and Termination of Plan.
- ----------- ---------------------------------
(a) Amendment. The Board of Directors may
---------
from time to time amend the Plan, or any provision thereof,
in such respects as the Board of Directors may deem
advisable; provided, however, that any such amendment shall
be approved by the Holders of shares entitling them to
exercise a majority of the voting power of the Company if
such amendment would:
(i) materially increase the benefits
accruing to participants under the Plan;
(ii) materially increase the aggregate
number of Shares which may be issued and/or delivered under
the Plan and/or the number of Shares which may be issued
and/or delivered to any individual under the Plan; or
(iii) materially modify the requirements
as to eligibility for participation in the Plan.
(b) Termination. The Board may at any time
-----------
terminate the Plan.
(c) Effect of Amendment or Termination. No
----------------------------------
amendment to or termination of the Plan shall adversely
affect any option or Limited Right previously granted under
the Plan without the consent of the Holder thereof.
Section 13. Notices.
- ----------- --------
Each notice relating to this Plan shall be in
writing and delivered in person or by mail to the proper
address. Except as otherwise provided by the Committee, each
notice shall be deemed to have been given on the date it is
delivered or mailed, provided, however, that for a notice of
exercise given in accordance with Section 7 (b), which shall
be deemed to have been given on the date it is received by
the Committee with payment of the option price. Each notice
to the Committee shall be addressed as follows: The Mead
Corporation, Mead World Headquarters, Courthouse Plaza
Northeast, Dayton, Ohio 45463, Attention: Compensation
Committee. Each notice to the Holder of an option or other
person or persons then entitled to exercise an option shall
be addressed to such person or persons at the Holder's
address as set forth in the records of the Company. Anyone
to whom a notice may be given under this Plan may designate
a new address by written notice to the party to that effect.
<PAGE>
Section 14. Benefits of Plan.
- ----------- ----------------
This Plan shall inure to the benefit of and
be binding upon each successor and assign of the Company.
All rights and obligations imposed upon the Holder of an
option and all rights granted to the Company under this Plan
shall be binding upon such Holder's heirs, legal
representatives and successors.
Section 15. Pronouns and Plurals.
- ----------- ---------------------
All pronouns shall be deemed to refer to the
masculine, feminine, singular or plural, as the identity of
the person or persons may require.
Section 16. Shareholder Approval and Term of Plan.
- ----------- -------------------------------------
The Plan shall become effective upon its
approval by the affirmative vote (either in person or by
proxy) of the Holders of shares entitling them to exercise a
majority of the voting power of the Company. The Plan shall
expire on January 26, 1994, unless sooner terminated in
accordance with Section 12.
<PAGE>
_______________________________________
NOTES:
- ------
(1) Adopted by the Board of Directors of the Company
on January 26, 1984, subject to approval by the shareholders
of the Company.
(2) Approved by the shareholders of the Company on
April 24, 1986.
(3) Amendment to Section 6(b) (5) adopted by the Board
of Directors of the Company on November 01, 1986.
(4) Amendment to Section 2, 6(4), (5) and (6), 7 and 9
by the Board of Directors of the Company on November 09,
1996 to permit the transfer of stock options and to allow
for the designation of a beneficiary of the stock option
grant.
(5) Administrative Amendment to Section 7(d) as
adopted by the Compensation Committee of the Board of
Directors on June 24, 1999.
Exhibit 10.2
THE MEAD CORPORATION
1991 STOCK OPTION PLAN
----------------------
COMPOSITE
---------
06/24/99
Section 1. Purposes.
- ---------- ---------
The purposes of this 1991 Stock Option Plan (the
----
"Plan") are (i) to provide incentives to officers and other
key employees of the Company upon whose judgment, initiative
and efforts the long-term growth and success of the Company
is largely dependent; (ii) to assist the Company in
attracting and retaining key employees of proven ability;
and (iii) to increase the identity of interests of such key
employees with those of the Company's shareholders by
providing such employees with options to acquire Common
Shares of the Company.
Section 2. Definitions.
- ---------- ------------
For purposes of the Plan:
(a) "Acquisition Transaction" means a transaction of
the type described in Section 8 (b) (ii).
(b) "Affiliate" shall have the meaning set forth in
Rule 12b-2 promulgated under Section 12 of the 1934 Act.
(c) "Board of Directors" means the Board of Directors
of the Company.
(d) "Change in Composition of the Board" means an
event of the type described in Section 8 (b) (iv).
(e) "Change in Control" means a transaction of the
type described in Section 8 (b) (iii).
(f) "Committee" means the committee referred to in
Section 4.
(g) "Code" means the Internal Revenue Code of 1986, as
----
amended.
(h) "Company" means The Mead Corporation; when used in
the Plan with reference to employment, "Company" shall
include any Subsidiary of the Company.
(i) "Designation of Beneficiary" means such person(s)
or entity whom the option Holder has designated by a
transfer on death or other designation of beneficiary to
receive the Holder's option on the Holder's death in
accordance with such procedures established from time to
time by the Committee.
(j) "Fair Market Value" means the average of the
highest sale price and the lowest sale price of a Share on
the date the value of a Share is to be determined, as
reported on the New York Stock Exchange - Composite
Transactions Tape or, if no sale is reported for such date,
then on the next preceding date for which a sale is
reported.
(k) "Grantee" means the employee who received the
option from the Company.
(l) "Holder" means the person(s) or entity who owns
the option, whether Grantee, Transferee, heir or other
beneficiary.
<PAGE>
(m) "Incentive Stock Option" means an option granted
under the Plan which qualifies as an incentive stock option
under Section 422 of the Code.
(n) "Limited Right" means a right granted under
Section 8 of the Plan.
(o) "Nonqualified Option" means an option granted
under the Plan which does not qualify as an incentive stock
option under Section 422 of the Code.
(p) "1934 Act" means the Securities Exchange Act of
1934, as amended.
(q) "Share" or "Shares" means the Common Shares,
without par value, of the Company.
(r) "Subsidiary" means any corporation, partnership or
other person or entity at least 10% of the voting or equity
interest of which is owned or controlled, directly or
indirectly, by the Company.
(s) "Tender Offer" means a tender offer or a request
or invitation for tenders or an exchange offer subject to
regulation under Section 14 (d) of the 1934 Act and the
rules and regulations thereunder, as the same may be
amended, modified or superseded from time to time.
(t) "Tax Date" means the date as of which the amount
of the withholding tax payment with respect to the exercise
of a Nonqualified Option is calculated.
(u) "Transferee" means the person who received the
option from the Grantee during the Grantee's lifetime.
(v) "Person" shall have the meaning given in Section
3(a)(9) of the 1934 Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not
include (i) the Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or
(iv) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
Section 3. Shares Subject to the Plan.
- ---------- ---------------------------
(a) Number of Shares. Subject to adjustment as
----------------
provided in Section 10, the maximum number of Shares that
may be issued and/or delivered under the Plan upon the
exercise of options is 8,000,000. Such Shares may be either
authorized and unissued or treasury Shares. Any Shares (i)
subject to an option which for any reason has terminated or
expired or has been cancelled prior to being fully exercised
or (ii) which have been received by the Company as full or
partial payment for Shares purchased pursuant to Section 7
(b), may again be subject to option under the Plan.
(b) The maximum number of Limited Rights which may be
granted under the Plan is 8,000,000. Any Limited Rights
granted under the Plan which for any reason terminate or
expire or have been cancelled prior to being fully exercised
may again be granted under the Plan.
Section 4. Administration.
- ---------- --------------
The Plan shall be administered by a committee (the
"Committee") of the Board of Directors, consisting of three
or more directors, who shall from time to time be appointed
by, and serve at the pleasure of, the Board of Directors.
No director shall serve as a member of the Committee if he
does not qualify as
<PAGE>
a disinterested person with respect to the Plan under Rule
16b-3 (or any successor provision) under the 1934 Act.
The Committee shall have and exercise all the power and
authority granted to it under the Plan. Subject to the
provisions of the Plan, the Committee shall in its sole
discretion determine the persons to whom, and the times at
which, Incentive Stock Options, Nonqualified Options and
Limited Rights shall be granted; the number of Shares to be
subject to each option; the option price per Share; and the
term of each option. In making such determinations, the
Committee may take into consideration each employee's
present and/or potential contribution to the success of the
Company and its Subsidiaries and any other factors which the
Committee may deem relevant and proper. Subject to the
provisions of the Plan, the Board of Directors or the
Committee shall also interpret the Plan; prescribe, amend
and rescind rules and regulations relating to the Plan;
correct defects, supply omissions and reconcile any
inconsistencies in the Plan; and make all other
determinations necessary or advisable for the administration
of the Plan. The Committee or its designee may in its
discretion change the terms of any Limited Right granted
hereunder in connection with an Incentive Stock Option to
permit the Limited Right to be exercisable even though the
Fair Market Value of a Share on the date of exercise does
not exceed the exercise price of the related option. Such
determinations of the Board of Directors, or of the
Committee (to the extent not reversed or modified by the
Board of Directors), shall be conclusive. A majority of the
Committee shall constitute a quorum for meetings of the
Committee, and the act of a majority of the Committee at a
meeting, or an act reduced to or approved in writing by all
members of the Committee, shall be the act of the Committee.
Section 5. Eligibility.
- ---------- -----------
From time to time during the term of the Plan, the
Committee may grant one or more Incentive Stock Options
and/or Nonqualified Options to any person who is then an
officer or other key employee of the Company. A director
who is not also an employee of the Company shall not be
eligible to receive options granted under the Plan.
Section 6. Terms and Conditions of Options.
- --------- -------------------------------
(a) Written Agreement. The terms of each option
------------------
granted under the Plan shall be set forth in a written
agreement, the form of which shall be approved by the
Committee.
(b) Terms and Conditions of General Application. The
--------------------------------------------
following terms and provisions shall apply to all options
granted under the Plan:
(1) No option may be granted under the Plan at an
option price per Share which is less than the Fair Market
Value of a Share on the date of grant.
(2) No option may be exercised more than ten
years after the date of grant.
(3) No option shall be exercisable within one
year after the date of grant. At the time an option is
granted, the Committee may provide that after such one-year
period, the option may be exercised with respect to all
Shares subject thereto, or may be exercised with respect to
only a specified number of Shares over a specified period or
periods.
(4) Except as provided in Sections 6(b) (5) and
6(b) (6), an option may be exercised only if the Grantee
thereof has been continuously employed by the Company since
the date of grant. Whether authorized leave of absence or
absence for military or governmental service shall
constitute a
<PAGE>
termination of employment shall be determined by the
Committee, after consideration of the provisions of Section
1.421-7(h) of the regulations issued under the Code, if
appropriate.
(5) At the time an option is granted, or at such
other time as the Committee may determine, the Committee may
provide that, if the Grantee of the option ceases to be
employed by the Company for any reason (including retirement
or disability) other than death, the option will continue to
be exercisable by the Grantee for such additional period
(not to exceed the remaining term of such option) after such
termination of employment as the Committee may provide.
(6) At the time an option is granted, the
Committee may provide that, if the Grantee of the option
dies while employed by the Company or while entitled to the
benefits of any additional exercise period established by
the Committee with respect to such option in accordance with
Section 6 (b) (5), then the option will continue to be
exercisable by the person or persons (including the Holder's
estate) to whom the Holder's rights with respect to such
option shall have passed by will or by the laws of descent
and distribution (or in accordance with the procedures set
forth in Section 9 hereof) for such additional period after
death (not to exceed the remaining term of such option) as
the Committee may provide.
(7) At the time an option is granted, the
Committee may provide for any restriction or limitation on
the exercise of such option and/or for any restriction or
limitation on the transferability of the Shares issuable
upon the exercise of such option as it may deem appropriate.
(c) Additional Provisions Applicable to Incentive
---------------------------------------------
Stock Options.
-------------
The following additional terms and provisions shall apply to
Incentive Stock Options granted under the Plan,
notwithstanding any provision of Section 6 (b) to the
contrary:
(1) No Incentive Stock Option shall be granted to
an officer or other employee who possesses directly or
indirectly (within the meaning of Section 424 (d) of the
Code) at the time of grant more than 10% of the voting power
of all classes of shares of the Company or of any parent
corporation or any corporation, 50% or more of the voting
stock of which is owned or controlled, directly or
indirectly, by the Company, unless the option price is at
least 110% of the Fair Market Value of the Shares subject to
the option on the date the option is granted and the option
is not exercisable after the expiration of five years from
the date of grant.
(2) The aggregate Fair Market Value (determined
on the date an Incentive Stock Option is granted) of Shares
with respect to which Incentive Stock Options are
exercisable for the first time by any individual in any
calendar year (under the Plan and all of the plans of the
Company and any Subsidiary and any parent corporation) shall
not exceed $100,000, or such other maximum amount permitted
by the Code.
(d) Waiver of Terms. Subject to the ten-year
----------------
limitation in Section 6(b)(2), the Committee may waive or
modify at any time, either before or after the granting of
an option, any condition or restriction with respect to the
exercise of such option imposed by or pursuant to this
Section 6 in such circumstances as the Committee may deem
appropriate (including, without limitation, in the event the
Grantee retires with the approval of the Company, or in the
event of a proposed Acquisition Transaction, a Change in
Control, Tender Offer for Shares, or other similar
transaction involving the Company).
(e) Acceleration Upon Certain Events. Subject to the
---------------------------------
first sentence of Section 6(b)(3) hereof, but
notwithstanding any other provision of the Plan, immediately
prior to the occurrence of an "Acceleration" (as defined in
<PAGE>
this Section 6(e)), all outstanding options granted
hereunder shall become fully vested and exercisable. As
used in the immediately preceding sentence, "immediately
prior" to the Acceleration shall mean sufficiently in
advance of the Acceleration to permit the grantee to take
all steps reasonably necessary to exercise the option fully
and to deal with the Shares purchased under the option so
that those Shares may be treated in the same manner in
connection with the Acceleration as the Shares of other
shareholders. For purposes of this Section 6(e), an
"Acceleration" shall mean any of the following: (i) the
date of the first purchase of Shares pursuant to a Tender
Offer (other than an offer by the Company), (ii) the date of
shareholder approval of an Acquisition Transaction, (iii)
the date of filing of the Schedule 13D or shareholder
authorization of the control share acquisition giving rise
in either case to a Change in Control, or (iv) the date of a
Change in Composition of the Board.
Section 7. Exercise of Options.
- ---------- --------------------
(a) Notice of Exercise. The Holder of an option
-------------------
granted under the Plan may exercise all or part of such
option by giving written notice of exercise to the Committee
or its designee; provided, however, that an option may not
be exercised for a fraction of a Share. No Holder of an
option nor such Holder's legal representatives, legatees,
Transferees, distributees, or Designation of Beneficiary
will be, or will be deemed to be, a Holder of any Shares
covered by such option unless and until the option shall
have been exercised in accordance with the Plan.
(b) Payment of Option Price. The option price for
------------------------
Shares with respect to which an option is exercised shall be
paid in full at the time such notice is given. An option
shall be deemed exercised on the date the Committee or its
designee receives written notice of exercise, together with
full payment for the Shares purchased. The option price
shall be paid to the Company either in cash or, with the
approval of the Committee, Shares having a Fair Market Value
equal to the option price (or a combination of cash and
Shares such that the sum of the Fair Market Value of the
Shares plus the cash equals the option price).
(c) Payment in Cancellation of Option. The Committee
---------------------------------
shall have the authority in its sole discretion to authorize
the payment to the Holder of an option granted under the
Plan (with the consent of such Holder), in exchange for the
cancellation of all or a part of such Holder's option, of
cash in an amount not to exceed the difference between the
aggregate Fair Market Value on the date of such cancellation
of the Shares with respect to which the option is being
cancelled and the aggregate option price of such Shares;
provided, however, that if an Acceleration has occurred, for
purposes of this subparagraph, "Fair Market Value" on the
date of such cancellation shall be calculated in the same
manner as the "exercise value" of a Limited Right would be
calculated under Section 8 (c) with respect to such date
(whether or not any Limited Rights are actually
outstanding).
(d) Tax Withholding. With the approval of the
---------------
Committee, the Grantee of a Nonqualified Option may elect to
have the Company retain from the Shares to be issued upon
the exercise by the Grantee of such option Shares having a
Fair Market Value on the Tax Date equal to all or any part
of the required minimum federal, state and local withholding
tax payments to be made by the Grantee with respect to the
exercise of the option in lieu of making such payments in
cash. The Committee may establish from time to time rules
or limitations with respect to the right of a Grantee to
elect to have the Company retain Shares in satisfaction of
withholding payments; provided, however, that, in any event,
any such election made by a person subject to Section 16 (b)
of the 1934 Act must be made in accordance with any
applicable rules established under such section.
<PAGE>
If a Grantee transfers a Nonqualified Option pursuant
to Section 9, the Grantee is required to satisfy the
applicable withholding taxes by paying cash or other
property to the Company with respect to any income
recognized by the Grantee on the exercise of such option by
the Transferee. The Grantee's withholding obligations must
be satisfied on the date that the Transferee exercises the
option. If the Grantee does not satisfy the applicable
withholding tax obligation, the Company shall retain from
the Shares to be issued Shares having a Fair Market Value on
the Tax Date equal to the mandatory withholding tax payable
by the Grantee.
In connection with the exercise of an option or Limited
Right, the Company has the right to require the Grantee to
remit or otherwise make available to the Company an amount
sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the delivery or
transfer of any certificate or certificates for Shares (and
prior to a cash payment in the case of a Limited Right) or
to take whatever action it deems necessary to protect its
interests with respect to tax liabilities in connection with
the issuance of Shares or cash payment.
Section 8. Limited Rights.
- ---------- ---------------
(a) Grant of Limited Rights. The Committee may grant
------------------------
Limited Rights with respect to any option granted under the
Plan either at the time the option is granted or at any time
thereafter prior to the exercise, cancellation, termination
or expiration of such option. The number of Limited Rights
covered by any such grant shall not exceed, but may be less
than, the number of Shares covered by the related option.
The term of any Limited Right shall be the same as the term
of the option to which it relates. The right of a Holder to
exercise a Limited Right shall be cancelled if and to the
extent a related option is exercised, and the right of a
Holder to exercise an option shall be cancelled if and to
the extent a related Limited Right is exercised.
(b) Events Permitting Exercise of Limited Rights. A
--------------------------------------------
Limited Right shall be exercisable only if and to the extent
that the related option is exercisable; provided, however,
that notwithstanding the foregoing, (x) a Limited Right
shall not be exercisable during the first six months of its
term, and (y) in the case of a Limited Right issued in
connection with an Incentive Stock Option, such Limited
Right shall not be exercisable unless the Fair Market Value
of a Share on the date of exercise exceeds the exercise
price of a Share subject to the related option. A Limited
Right which is otherwise exercisable may be exercised only
during the following periods:
(i) during a period of 30 days following the date
of expiration of a Tender Offer (other than an offer by the
Company), if the offeror acquires Shares pursuant to such
Tender Offer;
(ii) during a period of 30 days following the date
of approval by the shareholders of the Company of a
definitive agreement: (x) for the merger or consolidation
of the Company into or with another corporation, if the
Company will not be the surviving corporation or will become
a subsidiary of another corporation, other than a merger or
consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or parent
entity) at least 80% of the combined voting power of the
voting securities of the Company or such surviving or parent
entity outstanding immediately after such merger or
consolidation, (y) for the merger or consolidation of the
Company with another corporation, if the Company will be the
surviving corporation and will not become a subsidiary of
another corporation, or for the merger or consolidation of
any direct or indirect subsidiary of the Company into or
with another corporation, other than (in either case) a
merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior
<PAGE>
thereto continuing to represent ((i) in the case of a merger
or consolidation of the Company, either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent thereof, or (ii) in the
case of a merger or consolidation of any direct or indirect
subsidiary of the Company, either by remaining outstanding
if the Company continues as a parent of the merged or
consolidated subsidiary or by being converted into voting
securities of the surviving entity or any parent thereof) at
least 51% of the combined voting power of the voting
securities of the Company or surviving or parent entity
outstanding immediately after such merger or consolidation,
or (z) for the sale or disposition of all or substantially
all of the assets of the Company (each of the foregoing
transactions is hereinafter referred to as an "Acquisition
Transaction");
(iii) during a period of 30 days following:
(x) the date upon which the Company is provided a copy of a
Schedule 13D (filed pursuant to Section 13 (d) of the 1934
Act and the rules and regulations promulgated thereunder)
indicating that any person or group (as such terms are
defined in Section 13 (d)(3) of the 1934 Act) has become the
beneficial owner (as defined in Rule 13d-3 of the Exchange
Act) of 20% or more of the outstanding voting shares of the
Company or (y) the date of authorization, by both a majority
of the voting power of the Company and a majority of the
portion of such voting power excluding the voting power of
interested Shares, of a control share acquisition (as such
term is defined in Chapter 1701 of the Ohio Revised Code)
(each of the foregoing transactions is hereinafter referred
to as a "Change in Control"); and
(iv) during a period of 30 days following a change
in the composition of the Board of Directors such that
individuals who were members of the Board of Directors on
the date two years prior to such change (and any new
directors (other than a director whose initial assumption of
office is in connection with an actual or threatened
election contest, including but not limited to a consent
solicitation, relating to the election of directors of the
Company) who were elected, or were nominated for election,
by the Company's shareholders with the affirmative vote of
at least two-thirds of the directors then still in office
who either were directors at the beginning of such two year
period or whose election or nomination for election was
previously so approved) no longer constitute a majority of
the Board of Directors (such a change in composition is
hereinafter referred to as a "Change in Composition of the
Board").
(c) Exercise of Limited Rights. Upon exercise of a
---------------------------
Limited Right, the Holder thereof shall receive from the
Company a cash payment equal to the excess of: (x) the
aggregate "exercise value" on the date of exercise
(determined as provided below) of that number of Shares as
is equal to the number of Limited Rights being exercised
over (y) the aggregate exercise price under the related
option of that number of Shares as is equal to the number of
Limited Rights being exercised. A Holder shall exercise a
Limited Right by giving written notice of such exercise to
the Committee. A Limited Right shall be deemed exercised on
the date the Committee receives such written notice.
The "exercise value" of a Limited Right on the date of
exercise shall be:
(i) in the case of an exercise during a period
described in Section 8 (b) (i), the highest price per Share
paid pursuant to any Tender Offer which is in effect at any
time during the 60-day period prior to the date on which the
Limited Right is exercised;
(ii) in the case of an exercise during a period
described in Section 8 (b) (ii), the greater of: (x) the
highest sale price of a Share during the 30-day period prior
to the date of shareholder approval of the
<PAGE>
Acquisition Transaction, as reported on the New York Stock
Exchange - Composite Transaction Tape, or (y) the highest
fixed or formula per Share price payable pursuant to the
Acquisition Transaction (if determinable on the date of
exercise);
(iii) in the case of an exercise during a
period described in Section 8 (b) (iii), the greater of:
(x) the highest sale price of a Share during the 30-day
period prior to the date the Company is provided with a copy
of the Schedule 13D, or the date of authorization of the
control share acquisition, as reported on the New York Stock
Exchange - Composite Transactions Tape, or (y) the highest
acquisition price of a Share shown on such Schedule 13D or
to be paid in such control share acquisition; and
(iv) in the case of an exercise during a period
described in Section 8 (b) (iv), the highest sale price of a
Share during the 30-day period prior to the date of the
Change in Composition of the Board, as reported on the New
York Stock Exchange - Composite Transactions Tape.
Notwithstanding the foregoing, in no event shall the
exercise value of a Limited Right issued in connection with
an Incentive Stock Option exceed the maximum permissible
exercise value for such a right under the Code and the
regulations and interpretations issued pursuant thereto.
Any securities or property which form part or all of the
consideration paid for Shares pursuant to a Tender Offer or
Acquisition Transaction shall be valued at the higher of (1)
the valuation placed on such securities or property by the
person making such Tender Offer or the other party to such
Acquisition Transaction, or (2) the value placed on such
securities or property by the Committee.
(d) Compliance with Law. The exercise of Limited
--------------------
Rights by directors and officers of the Company shall be
subject to, and comply with, the applicable requirements of
Rule 16b-3 (e) under the 1934 Act (or any successor
provision), as the same may be amended, modified or
superseded from time to time.
Section 9. Non-Transferability.
- --------- -------------------
Except as provided in this Section 9, options granted
under the Plan may not be sold, pledged, assigned,
hypothecated or transferred other than by Designation of
Beneficiary, or, if none, then by will or the laws of
descent and distribution and may be exercised during the
lifetime of the Grantee only by such Grantee or by his
guardian or legal representative.
Upon the death of an option Holder, outstanding options
held by such Holder may be exercised only by Designation of
Beneficiary, or, if none, then by the executor or
administrator of the Holder's estate or by a person who
shall have acquired the right to such exercise by will or by
the laws of descent and distribution.
Subject to such conditions as the Committee may
prescribe, during an option Grantee's lifetime, the
Committee may permit the transfer or assignment of an
outstanding option by such Grantee; provided, that such
transfer or assignment shall not apply to (y) an option
which is an Incentive Stock Option (but only if
nontransferability is necessary in order for the option to
qualify as an Incentive Stock Option), and (z) an option
granted to a person subject to Section 16 of the 1934 Act
(but only if nontransferability is necessary in order for
the option to qualify for the exemption under Rule 16b-3 of
the 1934 Act).
Section 10. Adjustments Upon Changes in Capitalization.
- ----------- ------------------------------------------
In the event of a change in outstanding Shares by
reason of a Share dividend, recapitalization, merger,
consolidation, split-up, combination or
<PAGE>
exchange of shares, or the like, the maximum number of
Shares subject to option during the existence of the Plan,
the number of Limited Rights which may be granted under the
Plan, the number of Shares subject to, and the option price
of, each outstanding option, the number of Limited Rights
outstanding, the Fair Market Value of a Share on the date a
Limited Right is granted, and the like shall be
appropriately adjusted by the Committee (disregarding any
fractional Shares resulting therefrom), whose determination
in each case shall be conclusive.
Section 11. Conditions Upon Granting and Exercise of
- ----------- ----------------------------------------
Options and Limited Rights and Issuance of
------------------------------------------
Shares.
-------
No option or Limited Right shall be granted, no option
or Limited Right shall be exercised and Shares shall not be
issued or delivered upon the exercise of an option unless
the grant and exercise thereof, and the issuance and/or
delivery of Shares pursuant thereto, or the payment
therefor, shall comply with all relevant provisions of state
and federal law, including, without limitation, the
Securities Act of 1933, as amended, the 1934 Act, the rules
and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the Shares then may be
listed.
Section 12. Amendment and Termination of Plan.
- ---------- ---------------------------------
(a) Amendment. The Board of Directors may from time
---------
to time amend the Plan, or any provision thereof, in such
respects as the Board of Directors may deem advisable;
provided, however, that any such amendment shall be approved
by the Holders of Shares by such vote and otherwise in
compliance with applicable federal or state law (including
Rule 16b-3 (or any successor provision) under the 1934 Act)
or the requirements of any stock exchange upon which the
Shares may then be listed.
(b) Termination. The Board may at any time terminate
-----------
the Plan.
(c) Effect of Amendment or Termination. No amendment
----------------------------------
to or termination of the Plan shall adversely affect any
option or Limited Right previously granted under the Plan
without the consent of the Holder thereof.
Section 13. Notices.
- ----------- --------
Each notice relating to this Plan shall be in writing
and delivered in person or by mail to the proper address.
Except as otherwise provided by the Committee, each notice
shall be deemed to have been given on the date it is
delivered or mailed, provided, however, that for a notice of
exercise given in accordance with Section 7 (b), which shall
be deemed to have been given on the date it is received by
the Committee with payment of the option price. Each notice
to the Committee shall be addressed as follows: The Mead
Corporation, Mead World Headquarters, Courthouse Plaza
Northeast, Dayton, Ohio 45463, Attention: Compensation
Committee. Each notice to the Holder of an option or other
person or persons then entitled to exercise an option shall
be addressed to such person or persons at the Holder's
address as set forth in the records of the Company. Anyone
to whom a notice may be given under this Plan may designate
a new address by written notice to the party to that effect.
Section 14. Benefits of Plan.
- ----------- -----------------
This Plan shall inure to the benefit of and be binding
upon each successor and assign of the Company. All rights
and obligations imposed upon the Holder of an option and all
rights granted to the Company under this Plan shall be
binding upon such Holder's heirs, legal representatives and
successors.
<PAGE>
Section 15. Pronouns and Plurals.
- ----------- ---------------------
All pronouns shall be deemed to refer to the masculine,
feminine, singular or plural, as the identity of the person
or persons may require.
Section 16. Shareholder Approval and Term of Plan.
- ----------- --------------------------------------
The Plan shall become effective upon its approval by
the affirmative vote of the Holders of a majority of the
Shares entitled to vote thereon held by shareholders present
in person or by proxy at any shareholders' meeting at which
a quorum is present. The Plan shall expire on January 24,
2001, unless sooner terminated in accordance with Section
12.
<PAGE>
______________________________________________
NOTES:
- ------
(1) Adopted by the Board of Directors of the
Company on January 24, 1991, and approved by the Company's
shareholders on April 25, 1991.
(2) Amendments to Sections 2, 7 (a), (b), (c), and 9
adopted by the Board of Directors of the Company on November
09, 1996 to permit the transfer of stock options and to
allow for the designation of a beneficiary of the stock
option grant.
(3) Amendments to Sections 2(b) with addition of
Section 2(w); Section 6(e); Section 8(b) with addition of
subsections (i), (ii), (iii), (iv) as adopted by the Board
of Directors on June 24, 1998.
(4) Administrative Amendment to Section 7(d) as
adopted by the Compensation Committee of the Board of
Directors on June 24, 1999.
Exhibit 10.3
THE MEAD CORPORATION
1996 STOCK OPTION PLAN
----------------------
COMPOSITE
---------
06/24/99
Section 1. Purposes.
---------- ---------
The purposes of The Mead Corporation 1996 Stock Option Plan
(the "Plan") are (i) to provide incentives to officers, other key
employees and non-employee directors of the Company upon whose
judgment, initiative and efforts the long-term growth and success
of the Company is largely dependent; (ii) to assist the Company in
attracting and retaining key employees and non-employee directors
of proven ability; and (iii) to increase the identity of interests
of such key employees and non-employee directors with those of the
Company's shareholders by providing such employees and directors
with options to acquire Shares of the Company.
Section 2. Definitions.
---------- ------------
For purposes of the Plan:
(a) "Acquisition Transaction" means a transaction of the
type described in Section 9(b) (ii).
(b) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the 1934 Act.
(c) "Board of Directors" or "Board" means the Board of
Directors of the Company.
(d) "Change in Composition of the Board," means an event
of the type described in Section 9(b) (iv).
(e) "Change in Control," means a transaction of the type
described in Section 9 (b) (iii).
(f) "Committee" means the committee referred to in Section
4.
(g) "Code" means the Internal Revenue Code of 1986, as
amended.
(h) "Company" means The Mead Corporation, an Ohio
corporation; when used in the Plan with reference to employment,
"Company" shall include any Subsidiary of the Company.
(i) "Designation of Beneficiary" means such person(s) or
entity whom the Option Holder has designated by a transfer on
death or other designation of beneficiary to receive the Holder's
Option on the Holder's death in accordance with such procedures
established from time to time by the Committee.
(j) "Fair Market Value" means the average of the highest
sale price and the lowest sale price of a Share on the date the
value of a Share is to be determined, as reported on the New York
Stock Exchange - Composite Transactions Tape or, if no sale is
reported for such date, then on the next preceding date for which
a sale is reported.
(k) "Grantee" means the employee who received the option
from the Company.
<PAGE>
(l) "Holder" means the person(s) or entity who owns the
option, whether Grantee, Transferee, heir or other beneficiary.
(m) "Incentive Stock Option" means an option granted under
the Plan which qualifies as an Incentive Stock Option under
Section 422 of the Code.
(n) "Initial Director" means a person who is a Non-
Employee Director at the date of requisite approval of this Plan
by the shareholders of the Company.
(o) "Limited Right" means a right granted under Section 9
of the Plan.
(p) "Non-Employee Director" means a member of the Board
who is not also an employee of the Company.
(q) "Nonqualified Option" means an option granted under
the Plan which does not qualify as an Incentive Stock Option under
Section 422 of the Code.
(r) "1934 Act" means the Securities Exchange Act of 1934,
as amended.
(s) "Reload Option" means a Nonqualified Option granted
under Section 6(d) of the Plan.
(t) "Share" or "Shares" means shares of common stock,
without par value, of the Company.
(u) "Subsequent Director" means a person who becomes a
Non-Employee Director subsequent to the date of requisite approval
of this Plan by the shareholders of the Company.
(v) "Subsidiary" means any corporation, partnership or
other person or entity at least 10% of the voting or equity
interest of which is owned or controlled, directly or indirectly,
by the Company.
(w) "Tender Offer" means a tender offer or a request or
invitation for tenders or an exchange offer subject to regulation
under Section 14(d) of the 1934 Act and the rules and regulations
thereunder, as the same may be amended, modified or superseded
from time to time.
(x) "Tax Date" means the date as of which the amount of
the withholding tax payment with respect to the exercise of a
Nonqualified Option is calculated.
(y) "Transferee" means the person who received the option
from the Grantee during the Grantee's lifetime.
(z) "Person" shall have the meaning given in Section
3(a)(9) of the 1934 Act, as modified and used in Sections 13(d)
and 14(d) thereof, except that such term shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or
(iv) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions
as their ownership of stock of the Company.
<PAGE>
Section 3. Shares Subject to the Plan.
---------- ---------------------------
(a) Number of Shares. Subject to adjustment as provided
-----------------
in Section 11, the maximum number of Shares that may be issued
and/or delivered under the Plan upon the exercise of options is
8,000,000. Subject to adjustment as provided in Section 11, the
maximum number of Shares that may be issued and/or delivered under
the Plan to any individual over the term of the Plan upon the
exercise of options shall not exceed 800,000. Such Shares may be
either authorized and unissued or treasury Shares. Any shares (i)
subject to an option which for any reason has terminated or
expired or has been cancelled prior to being fully exercised or
(ii) which have been received by the Company as full or partial
payment for Shares purchased pursuant to Section 8(b), may again
be granted pursuant to options under the Plan.
(b) Subject to adjustment as provided in Section 11, the
maximum number of Limited Rights which may be granted under the
Plan is 8,000,000. Subject to adjustment as provided in Section
11, the maximum number of Limited Rights that may be granted under
the Plan to any individual over the term of the Plan shall not
exceed 800,000. Any Limited Rights granted under the Plan which
for any reason terminate or expire or have been cancelled prior to
being fully exercised may again be granted under the Plan.
Section 4. Administration.
---------- --------------
The Plan shall be administered by a committee (the
"Committee") of the Board of Directors, consisting of three or
more directors, who shall from time to time be appointed by and
serve at the pleasure of, the Board of Directors. No director
shall serve as a member of the Committee if (i) he or she does not
qualify as a disinterested person with respect to the Plan under
Rule 16b-3 (or any successor provision) under the 1934 Act or (ii)
he or she does not qualify as an outside director within the
meaning of Section 162(m) of the Code.
The Committee shall have and exercise all the power and
authority granted to it under the Plan. Subject to the provisions
of the Plan, the Committee shall in its sole discretion determine
the persons to whom, and the times at which, Incentive Stock
Options, Nonqualified Options, Reload Options and Limited Rights
shall be granted; the number of Shares to be subject to each
option; the option price per Share; and the term of each option.
In making such determinations, the Committee may take into
consideration each participant's present and/or potential
contribution to the success of the Company and any other factors
which the Committee may deem relevant and proper. Subject to the
provisions of the Plan, the Committee shall also interpret the
Plan; prescribe, amend and rescind rules and regulations relating
to the Plan; correct defects, supply omissions and reconcile any
inconsistencies in the Plan; and make all other determinations
necessary or advisable for the administration of the Plan. The
Committee may in its discretion change the terms of any Limited
Right granted hereunder in connection with an Incentive Stock
Option to permit the Limited Right to be exercisable even though
the Fair Market Value of a Share on the date of exercise does not
exceed the exercise price of the related option. Such
determinations of the Committee shall be conclusive. A majority
of the Committee shall constitute a quorum for meetings of the
Committee, and the act of a majority of the Committee at a
meeting, or an act reduced to or approved in writing by all
members of the Committee, shall be the act of the Committee.
<PAGE>
Section 5. Eligibility.
---------- ------------
From time to time during the term of the Plan, the Committee
may grant one or more Incentive Stock Options, Nonqualified
Options and Reload Options to any person who is then an officer or
other key employee of the Company. Each Non-Employee Director
shall be eligible to receive Nonqualified Options granted under
the formula provision set forth in Section 7 of the Plan.
Section 6. Terms and Conditions of Options.
---------- --------------------------------
(a) Option Grant Document. The terms of each option
----------------------
granted under the Plan (at any time after the establishment of the
Plan) shall be set forth in a written agreement or other grant
document, the form of which shall be approved by the Committee.
(b) Terms and Conditions of General Application. The
--------------------------------------------
following terms and provisions shall apply to all options granted
under the Plan, except to the extent otherwise provided in
Sections 6 (c), 6 (d), 6 (e), 6 (f) and 7 hereof, if applicable:
(1) No option may be granted under the Plan at an
option price per Share which is less than the Fair Market Value of
a share on the date of grant.
(2) No option may be exercised more than ten years
after the date of grant.
(3) No option shall be exercisable within one year
after the date of grant. At the time an option is granted, the
Committee may provide that after such one year period, the option
may be exercised with respect to all Shares subject thereto, or
may be exercised with respect to only a specified number of Shares
over a specified period or periods.
(4) Except as provided in Sections 6 (b) (5) and 6
(b) (6), an option may be exercised only if the Grantee of such
option has been continuously employed by the Company since the
date of grant. Whether authorized leave of absence or absence for
military or governmental service shall constitute a termination of
employment shall be determined by the Committee in its sole
discretion.
(5) At the time an option is granted, or at such
other time as the Committee may determine, the Committee may
provide that, if the Grantee of the Option ceases to be employed
by the Company for any reason (including retirement or disability)
other than death, the option will continue to be exercisable by
the Holder (including a Transferee under Section 10 hereof) for
such additional period (not to exceed the remaining term of such
option) after such termination of employment as the Committee may
provide.
(6) At the time an option is granted, the Committee
may provide that, if the Grantee of such option dies while
employed by the Company or while entitled to the benefits of any
additional exercise period established by the Committee with
respect to such option in accordance with Section 6(b) (5), then
the option will continue to be exercisable by the person or
persons to whom the Grantee's rights with respect to such option
shall have passed by will or by the laws of descent and
distribution (or in accordance with the procedures set forth in
Section 10 hereof) for such additional period after death (not to
exceed the remaining term of such option) as the Committee may
provide.
<PAGE>
(7) At the time an option is granted, the Committee
may provide for any restriction or limitation on the exercise of
such option and/or for any restriction or limitation on the
transferability of the Shares issuable upon the exercise of such
option as it may deem appropriate.
(c) Additional Provisions Applicable to Incentive Stock
Options. ------------------------------------------------------
--------
The following additional terms and provisions shall apply to
Incentive Stock Options granted under the Plan, notwithstanding
any provision of Section 6 (b) to the contrary:
(1) No Incentive Stock Option shall be granted to an
officer or other employee who possesses directly or indirectly
(within the meaning of Section 424(d) of the Code) at the time of
grant more than 10% of the voting power of all classes of Shares
of the Company or of any parent corporation or any corporation,
50% or more of the voting stock of which is owned or controlled,
directly or indirectly, by the Company, unless the option price is
at least 110% of the Fair Market Value of the Shares subject to
the option on the date the option is granted and the option is not
exercisable after the expiration of five years from the date of
grant.
(2) The aggregate Fair Market Value (determined on
the date an Incentive Stock Option is granted) of Shares with
respect to which Incentive Stock Options are exercisable for the
first time by any individual in any calendar year (under the Plan
and all of the plans of the Company and any Subsidiary and any
parent corporation) shall not exceed $100,000, or such other
maximum amount permitted by the Code.
(3) Any Stock Option granted under the Plan may
contain a feature providing for, upon the exercise thereof, the
grant of a Reload Option subject to and in accordance with the
terms and conditions set forth in Section 6 (d) below.
(d) Additional Provisions Applicable to Reload Options.
---------------------------------------------------
Whenever the Grantee of any option containing a reload feature
(the "Original Option") outstanding under this Plan exercises such
Original Option, the Grantee of such Original Option (except as
provided in Section 6 (d) (5) below) shall be granted on the date
of such exercise (the "Reload Date") a new option (the "Reload
Option") for a number of Shares (the "Original Shares") equal to
the number of Shares subject to the Original Option being
exercised less the number of Shares subject to the Original Option
which are (A) withheld by the Company as full or partial payment
of the option price for such Original Option, (B) otherwise
disposed of for purposes of having the proceeds applied for such
purpose or (C) withheld by the Company for purposes of tax
withholding in accordance with Section 8 (d) hereof. The
following additional terms and provisions shall apply to Reload
Options granted under the Plan, notwithstanding any provision of
Section 6 (b) to the contrary:
(1) Option Price. The option price per Share
-------------
covered by a Reload Option shall be an amount equal to the Fair
Market Value per Share as of the Reload Date.
(2) Expiration Date. Subject to Section 6 (d) (4)
----------------
below, the option exercise period shall expire on, and the Reload
Option shall no longer be exercisable following, the tenth
anniversary of the Reload Date.
(3) Vesting Period. Reload Options granted under
---------------
this Section 6 (d) shall vest and become exercisable with respect
to all
<PAGE>
Shares covered thereby on the third anniversary of the Reload
Date, subject to Section 6 (f) hereof.
(4) Automatic Cancellation. Except as otherwise
-----------------------
provided in the agreement evidencing a Reload Option, a Reload
Option shall be immediately cancelled (without any action taken by
the Company) with respect to that number of Shares subject to such
Reload Option (such number of Shares being determined in
accordance with the succeeding sentence), effective immediately
upon any sale, disposition or purported assignment or transfer of
any or all of the Original Shares subject to the Original Option
prior to the third anniversary of the Reload Date. The number of
Shares subject to the Reload Option so cancelled shall equal the
number of Original Shares subject to the Original Option so sold,
disposed of, assigned or transferred prior to the third
anniversary of the Reload Date; provided, however, that such
-----------------
Shares subject to the Reload Option shall not be cancelled if such
Original Shares are used in connection with the exercise of
another option with respect to which Section 6 (d) hereof applies.
(5) Active Employee. No Reload Option shall be
----------------
granted to any person who is not employed by the Company at the
time of exercise of an Original Option.
(e) Waiver of Terms. Subject to the ten-year limitation
----------------
in Section 6 (b) (3), the Committee may waive or modify at any
time, either before or after the granting of an option (including
a Reload Option but excluding any option granted under Section 7
hereof) any condition or restriction with respect to the exercise
of such option imposed by or pursuant to this Section 6 in such
circumstances as the committee may deem appropriate (including,
without limitation, in the event the Grantee retires with the
approval of the Company, or in the event of a proposed Acquisition
Transaction, a Change in Control, Tender Offer for Shares, or
other similar transaction involving the Company).
(f) Acceleration Upon Certain Events. Subject to the
---------------------------------
first sentence of Section 6(b)(3) hereof, but notwithstanding any
other provision of the Plan, immediately prior to the occurrence
of an "Acceleration" (as defined in this Section 6(e)), all
outstanding options granted hereunder (including Reload Options
and options granted pursuant to Section 7 hereof) shall become
fully vested and exercisable. As used in the immediately
preceding sentence, "immediately prior" to the Acceleration shall
mean sufficiently in advance of the Acceleration to permit the
grantee to take all steps reasonably necessary to exercise the
option fully and to deal with the Shares purchased under the
option so that those Shares may be treated in the same manner in
connection with the Acceleration as the Shares of other
shareholders. For purposes of this Section 6 (e), an
"Acceleration" shall mean any of the following: (i) the date of
the first purchase of Shares pursuant to a Tender Offer (other
than an offer by the Company), (ii) the date of shareholder
approval of an Acquisition Transaction, (iii) the date of filing
of the Schedule 13D or shareholder authorization of the control
share acquisition giving rise in either case to a Change in
Control, or (iv) the date of a Change in Composition of the Board.
Section 7. Non-Employee Directors Formula Options.
---------- ---------------------------------------
The following additional terms and provisions of this
Section 7 shall apply to grants of options to Non-Employee
Directors under the Plan, notwithstanding any provision of Section
6(b) to the contrary. The provisions of this Section 7 shall not
be amended more than once every six months, other than to comport
with changes in the Code, the
<PAGE>
Employee Retirement Income Security Act of 1974, as amended, or
the rules promulgated thereunder.
(a) General. Non-Employee Directors shall receive
--------
Nonqualified Options under the Plan. The option price per Share
shall equal the Fair Market Value of a Share on the date of grant.
(b) Initial Grants to Initial Directors. Upon the
------------------------------------
requisite approval of the Plan by the shareholders of the Company,
each Initial Director shall be granted automatically an option to
purchase 600 Shares.
(c) Initial Grants To Subsequent Directors. Each
---------------------------------------
Subsequent Director shall, at the time such director becomes a
Non-Employee Director, be granted automatically an option to
purchase 600 Shares.
(d) Subsequent Grants To Directors. On January 3rd of
-------------------------------
each year beginning on January 3, 1997, each continuing Initial
Director shall be granted automatically an option to purchase a
number of Shares determined below. On January 3rd of each year
subsequent to a Subsequent Director's becoming a Non-Employee
Director, each Subsequent Director shall be granted automatically
an option to purchase a number of Shares determined below. The
number of Shares subject to each grant made pursuant to this
Paragraph (d) shall equal the product obtained by multiplying (w)
600, by (x) an adjustment factor (the "Factor"). The Factor shall
equal the quotient obtained by dividing (y) the "base line number"
for average "total compensation" paid to directors by companies
with annual sales in excess of $4 billion, as published in the Hay
Consulting Group's "Directors Compensation Report" (or comparable
successor report) in the calendar year immediately preceding the
year in which such grant is made, which report covers compensation
paid in the year ending immediately prior to the year of
publication, by (z) $36,246. In the event that such Directors
Compensation Report (or comparable successor report) is not
published with respect to any year, the Factor shall equal one
(1).
(e) Exercisability. Subject to Section 6 (f) hereof, each
---------------
option granted under this Section 7 shall be exercisable as to 100
percent of the Shares covered by the option on the first
anniversary of the date the option is granted.
(f) Termination. Upon the termination of a Non-Employee
-----------
Director from such position, for any reason, after such director
has attained either age 70 or ten (10) years of service as a
director of the Company (whether or not as a Non-Employee
Director), each option granted to such Non-Employee Director
pursuant to this Section 7 which is exercisable at the time of
such termination shall remain exercisable for the remainder of its
term. Upon the termination of a Non-Employee Director from such
position, for any reason, prior to the attainment of age 70 or ten
(10) years of service as a director of the Company (whether or not
as a Non-Employee Director), all options granted to such Non-
Employee Director pursuant to this Section 7 which are exercisable
at the time of such termination shall remain exercisable for a
period of one year following the date of such termination, but in
no event may the term of an option be extended beyond its
expiration date. Each option granted pursuant to this Section 7
which is not exercisable at the time of such termination shall be
immediately cancelled.
Section 8. Exercise of Options.
---------- -------------------
(a) Notice of Exercise. The Holder of an option granted
------------------
under the Plan may exercise all or part of such option by giving
written
<PAGE>
notice of exercise to the Committee or its designee; provided,
however, that an option may not be exercised for a fraction of a
Share. No Holder of an option nor such Holder's legal
representatives, legatees, Transferees, distributees or
Designation of Beneficiary will be, or will be deemed to be, a
Holder of any Shares covered by such option unless and until the
option shall have been exercised in accordance with the Plan.
(b) Payment of Option Price. The option price for Shares
-----------------------
with respect to which an option is exercised shall be paid in full
at the time such notice is given. An option shall be deemed
exercised on the date the Committee or its designee receives
written notice of exercise, together with full payment for the
Shares purchased. The option price shall be paid to the Company
either in cash or Shares (including Shares withheld from the
Shares otherwise receivable by the Option Holder upon the exercise
of the option) having a Fair Market Value equal to the option
price (or a combination of cash and Shares such that the sum of
the Fair Market Value of the Shares plus the cash equals the
option price). The Committee shall have the authority, subject to
such conditions and procedures that it deems necessary and
advisable, to authorize the use of a cashless exercise procedure
with a registered broker/dealer.
(c) Payment in Cancellation of Option. The Committee
---------------------------------
shall have the authority in its sole discretion to authorize the
payment to an Option Holder (with the consent of such Holder) in
exchange for the cancellation of all or a part of such Holder's
Option (other than an option granted under Section 7 hereof), of
cash in an amount per Share not to exceed the difference between
the aggregate Fair Market Value on the date of such cancellation
of the Shares and the aggregate option price of such Shares;
provided, however, that if an Acceleration has occurred, for
purposes of this subparagraph, "Fair Market Value" on the date of
such cancellation shall be calculated in the same manner as the
"exercise value" of a Limited Right would be calculated under
Section 9(c) with respect to such date (whether or not any Limited
Rights are actually outstanding).
(d) Tax Withholding. With the approval of the Committee,
---------------
the Grantee of a Nonqualified Option may elect to have the Company
retain from the Shares to be issued upon the exercise by the
Grantee of such option Shares having a Fair Market Value on the
Tax Date equal to all or any part of the required minimum federal,
state and local withholding tax payments to be made by the Grantee
with respect to the exercise of the option in lieu of making such
payments in cash. The Committee may establish from time to time
rules or limitations with respect to the right of a Grantee to
elect to have the Company retain Shares in satisfaction of
withholding payments; provided, however, that, in any event, any
such election made by a person subject to Section 16(b) of the
1934 Act must be made in accordance with any applicable rules
established under such Section.
If a Grantee transfers a Nonqualified Option pursuant to
Section 10, the Grantee is required to satisfy the applicable
withholding taxes by paying cash or other property to the Company
with respect to any income recognized by the Grantee on the
exercise of such option by the Transferee. The Grantee's
withholding obligations must be satisfied on the date that the
Transferee exercises the option. If the Grantee does not satisfy
the applicable withholding tax obligation, the Company shall
retain from the Shares to be issued Shares having a Fair Market
Value on the Tax Date equal to the mandatory withholding tax
payable by the Grantee.
<PAGE>
In connection with the exercise of an option or Limited
Right, the Company has the right to require the Grantee to remit
or otherwise make available to the Company an amount sufficient to
satisfy any federal, state and/or local withholding tax
requirements prior to the delivery or transfer of any certificate
or certificates for Shares (and prior to a cash payment in the
case of a Limited Right) or to take whatever action it deems
necessary to protect its interests with respect to tax liabilities
in connection with the issuance of Shares or cash payment.
Section 9. Limited Rights
---------- --------------
(a) Grant of Limited Rights. The Committee may grant
------------------------
Limited Rights with respect to any option granted under the Plan
(other than an option granted under Section 7) either at the time
the option is granted or at any time thereafter prior to the
exercise, cancellation, termination or expiration of such option.
The number of Limited Rights covered by any such grant shall not
exceed, but may be less than, the number of Shares covered by the
related option. The term of any Limited Right shall be the same
as the term of the option to which it relates. The right of a
Holder to exercise a Limited Right shall be cancelled if and to
the extent a related option is exercised, and the right of a
Holder to exercise an option shall be cancelled if and to the
extent a related Limited Right is exercised.
(b) Events permitting Exercise of Limited Rights. A
--------------------------------------------
Limited Right shall be exercisable only if and to the extent that
the related option is exercisable; provided, however, that
notwithstanding the foregoing, (x) a Limited Right shall not be
exercisable during the first six months of its term, and (y) in
the case of a Limited Right issued in connection with an Incentive
Stock Option, such Limited Right shall not be exercisable unless
the Fair Market Value of a Share on the date of exercise exceeds
the exercise price of a Share subject to the related option. A
Limited Right which is otherwise exercisable may be exercised only
during the following periods:
(i) during a period of 30 days following the date of
expiration of a Tender Offer (other than an offer by the Company),
if the offeror acquires Shares pursuant to such Tender Offer;
(ii) during a period of 30 days following the date of
approval by the shareholders of the Company of a definitive
agreement: (x) for the merger or consolidation of the Company
into or with another corporation, if the Company will not be the
surviving corporation or will become a subsidiary of another
corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving or parent entity) at least 80% of the combined
voting power of the voting securities of the Company or such
surviving or parent entity outstanding immediately after such
merger or consolidation, (y) for the merger or consolidation of
the Company with another corporation, if the Company will be the
surviving corporation and will not become a subsidiary of another
corporation, or for the merger or consolidation of any direct or
indirect subsidiary of the Company into or with another
corporation, other than (in either case) a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent ((i)
in the case of a merger or consolidation of the Company, either by
remaining outstanding or by being converted into voting securities
of the surviving entity or any parent thereof, or (ii) in the
case of a merger or consolidation of any direct or indirect
subsidiary of the Company, either by remaining outstanding if the
<PAGE>
Company continues as a parent of the merged or consolidated
subsidiary or by being converted into voting securities of the
surviving entity or any parent thereof) at least 51% of the
combined voting power of the voting securities of the Company or
surviving or parent entity outstanding immediately after such
merger or consolidation, or (z) for the sale or disposition of all
or substantially all of the assets of the Company (each of the
foregoing transactions is hereinafter referred to as an
"Acquisition Transaction");
(iii) during a period of 30 days following: (x) the
date upon which the Company is provided a copy of a Schedule 13D
(filed pursuant to Section 13(d) of the 1934 Act and the rules and
regulations promulgated thereunder) indicating that any person or
group (as such terms are defined in Section 13(d)(3) of the 1934
Act) has become the beneficial owner (as defined in Rule 13d-3 of
the Exchange Act) of 20% or more of the outstanding voting Shares
of the Company or (y) the date of authorization, by both a
majority of the voting power of the Company and a majority of the
portion of such voting power excluding the voting power of
interested Shares, of a control share acquisition (as such term is
defined in Chapter 1701 of the Ohio Revised Code) (each of the
foregoing transactions is hereinafter referred to as a "Change in
Control"); and
(iv) during a period of 30 days following a change in
the composition of the Board of Directors such that individuals
who were members of the Board of Directors on the date two years
prior to such change (and any new directors (other than a director
whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company) who were elected, or were nominated for election, by the
Company's shareholders with the affirmative vote of at least two-
thirds of the directors then still in office who either were
directors at the beginning of such two year period or whose
election or nomination for election was previously so approved) no
longer constitute a majority of the Board of Directors (such a
change in composition is hereinafter referred to as a "Change in
Composition of the Board").
(c) Exercise of Limited Rights. Upon exercise of a
--------------------------
Limited Right, the Holder thereof shall receive from the Company a
cash payment equal to the excess of: (x) the aggregate "exercise
value" on the date of exercise (determined as provided below) of
that number of Shares as is equal to the number of Limited Rights
being exercised over (y) the aggregate exercise price under the
related option of that number of Shares as is equal to the number
of Limited Rights being exercised. A Holder shall exercise a
Limited Right by giving written notice of such exercise to the
Committee. A Limited Right shall be deemed exercised on the date
the Committee receives such written notice.
The "exercise value" of a Limited Right on the date of
exercise shall be:
(i) in the case of an exercise during a period
described in Section 9 (b) (i), the highest price per Share paid
pursuant to any Tender Offer which is in effect at any time during
the 60-day period prior to the date on which the Limited Right is
exercised;
(ii) in the case of an exercise during a period
described in Section 9(b) (ii), the greater of: (x) the highest
sale price of a Share during the 30-day period prior to the date
of shareholder approval of the Acquisition Transaction, as
reported on the New York Stock
<PAGE>
Exchange -Composite Transactions Tape, or (y) the highest fixed or
formula per Share price payable pursuant to the Acquisition
Transaction (if determinable on the date of exercise);
(iii) in the case of an exercise during a period
described in Section 9(b) (iii), the greater of: (x) the highest
sale price of a Share during the 30-day period prior to the date
the Company is provided with a copy of the Schedule 13D, or the
date of authorization of the control Share acquisition, as
reported on the New York Stock Exchange -Composite Transactions
Tape, or (y) the highest acquisition price of a Share shown on
such schedule 13D or to be paid in such control Share acquisition;
and
(iv) in the case of an exercise during a period
described in Section 9 (b) (iv), the highest sale price of a Share
during the 30-day period prior to the date of the change in
Composition of the Board, as reported on the New York Stock
Exchange - Composite Transactions Tape. Notwithstanding the
foregoing, in no event shall the exercise value of a Limited Right
issued in connection with an Incentive Stock Option exceed the
maximum permissible exercise value for such a right for purposes
of Section 422 of the Code and the regulations and interpretations
issued pursuant thereto. Any securities or property which form
part or all of the consideration paid for Shares pursuant to a
Tender Offer or Acquisition Transaction shall be valued at the
higher of (1) the valuation placed on such securities or property
by the person making such Tender Offer or the other party to such
Acquisition Transaction, or (2) the value placed on such
securities or property by the Committee.
(d) Compliance with Law. The exercise of Limited
-------------------
Rights by directors and officers of the Company shall be subject
to, and comply with, the applicable requirements of Rule l6b-3 (e)
under the 1934 Act (or any successor provision), as the same may
be amended, modified or superseded from time to time.
Section 10. Transfers Upon Death; Nonassignability.
----------- --------------------------------------
Except as provided in this Section 10, options granted under
the Plan may not be sold, pledged, assigned, hypothecated or
transferred other than by Designation of Beneficiary, or, if none,
then by will or the laws of descent and distribution and may be
exercised during the lifetime of the Grantee only by such Grantee
or by his guardian or legal representative.
Upon the death of an Option Holder, outstanding Options held
by such Holder may be exercised only by Designation of
Beneficiary, or, if none, then by the executor or administrator of
the Holder's estate or by a person who shall have acquired the
right to such exercise by will or by the laws of descent and
distribution.
Subject to such conditions as the Committee may prescribe,
during an option Grantee's lifetime, the Committee may permit the
transfer or assignment of an outstanding option by such Grantee;
provided, that such transfer or assignment shall not apply to (y)
an option which is an Incentive Stock Option (but only if
nontransferability is necessary in order for the option to qualify
as an Incentive Stock Option) and (z) an option granted to a
person subject to Section 16 of the 1934 Act (but only if
nontransferability is necessary in order for the option to qualify
for the exemption under Rule 16b-3 of the 1934 Act)
<PAGE>
Section 11. Adjustments Upon Changes in Capitalization.
----------- ------------------------------------------
In the event of a change in outstanding Shares by reason of
a Share dividend, recapitalization, merger, consolidation, split-
up, combination or exchange of Shares, or the like, or in the
event of any similar corporate transaction which the Committee
determines requires the adjustments described herein, the maximum
number of Shares subject to option during the existence of the
Plan, the number of Limited Rights which may be granted under the
Plan, the number of Shares subject to, and the option price of,
each outstanding option, the maximum number of Shares or Limited
Rights which may be granted to any individual over the term of the
Plan, the number of Limited Rights outstanding, the Fair Market
Value of a Share on the date a Limited Right is granted, and the
like shall be appropriately adjusted by the Committee
(disregarding any fractional Shares resulting therefrom), whose
determination in each case shall be conclusive.
Section 12. Conditions Upon Granting and Exercise of Options and
----------- ----------------------------------------------------
Limited Rights and Issuance of Shares.
-------------------------------------
No option or Limited Right shall be granted, no option or
Limited Right shall be exercised and Shares shall not be issued or
delivered upon the exercise of an option unless the grant and
exercise thereof, and the issuance and/or delivery of Shares
pursuant thereto, or the payment therefor, shall comply with all
relevant provisions of state and federal law, including, without
limitation, the Securities Act of 1933, as amended, the 1934 Act,
the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares then may
be listed.
Section 13. Amendment and Termination of Plan.
----------- ---------------------------------
(a) Amendment. The Board of Directors may from time to
---------
time amend the Plan, or any provision thereof, in such respects as
the Board of Directors may deem advisable; provided, however, that
any such amendment shall be approved by the holders of Shares by
such vote and otherwise in compliance with applicable federal or
state law (including Rule 16b-3 (or any successor provision) under
the 1934 Act) or the requirements of any stock exchange upon which
the Shares may then be listed.
(b) Termination. The Board may at any time terminate the
------------
Plan.
(c) Effect of Amendment or Termination. No amendment to
----------------------------------
or termination of the Plan shall adversely affect any option or
Limited Right previously granted under the Plan without the
consent of the Holder thereof.
Section 14. Notices.
----------- -------
Each notice relating to this Plan shall be in writing and
delivered in person or by mail to the proper address. Except as
otherwise provided by the Committee, each notice shall be deemed
to have been given on the date it is delivered or mailed,
provided, however, that for a notice of exercise given in
accordance with Section 8 (b), which shall be deemed to have been
given on the date it is received by the Committee with payment of
the option price. Each notice to the Committee shall be addressed
as follows: The Mead Corporation, Mead World Headquarters,
Courthouse Plaza Northeast, Dayton, Ohio 45463, Attention:
Compensation Committee. Each notice to the Holder of an option or
other person or persons then entitled to exercise an option shall
be addressed to such person or persons at The Holder's address as
<PAGE>
set forth in the records of the Company. Anyone to whom a notice
may be given under this Plan may designate a new address by
written notice to the party to that effect.
Section 15. Benefits of Plan.
----------- ----------------
This Plan shall inure to the benefit of and be binding upon
each successor and assign of the Company. All rights and
obligations imposed upon the Holder of an option and all rights
granted to the Company under this Plan shall be binding upon such
Holder's heirs, legal representatives and successors.
Section 16. Pronouns and Plurals.
----------- ---------------------
All pronouns shall be deemed to refer to the masculine,
feminine, singular or plural, as the identity of the person or
persons may require.
Section 17. Shareholder Approval and Term of Plan.
----------- -------------------------------------
The Plan shall become effective upon its approval by the
affirmative vote of the holders of a majority of the Shares
entitled to vote thereon held by shareholders present in person or
by proxy at any shareholders' meeting at which a quorum is
present. The Plan shall expire on September 30, 2005, unless
sooner terminated in accordance with Section 13.
Section 18. Interpretation.
----------- --------------
The Plan is designed and intended to comply with Rule 16b-3
promulgated under the 1934 Act and Section 162(m) of the Code and
all provisions hereof shall be construed in a manner to so comply.
<PAGE>
___________________________________________
NOTES:
- -----
(1) Adopted by the Board of Directors of the Company on October 28,
1995, and approved by the Company's shareholders on April 25,
1996.
(2) Amendments to Sections 2, 6 (b) and (e), 8 (a) and (d), 10 and 14
to allow for the designation of a beneficiary of the stock option
grant.
(3) Amendments to Section 2(b), with an addition of subsection (z);
Section 6(a), (f); Section 9(b) with addition of subsections (i),
(ii), (iii), (iv) as adopted by the Board of Directors on June 24,
1998.
(4) Administrative Amendment to Section 8(d) as adopted by the
Compensation Committee of the Board of Directors on June 24, 1999.
Exhibit 10.4
INDEMNIFICATION AGREEMENT
------------------------
AGREEMENT between The Mead Corporation, an Ohio
corporation (the "Company"), and Duane E. Collins (the
"Indemnitee").
WHEREAS, it is essential to the Company to retain and
attract as directors the most capable persons available;
WHEREAS, Indemnitee is a director of the Company;
WHEREAS, both the Company and Indemnitee recognize the
increased risk of litigation and other claims being asserted
against directors of public companies in today's
environment;
WHEREAS, basic protection against undue risk of
personal liability of directors heretofore has been provided
through insurance coverage providing reasonable protection
at reasonable cost, and Indemnitee has relied on the
availability of such coverage; but as a result of
substantial changes in the marketplace for such insurance it
has become increasingly more difficult to obtain such
insurance on terms providing reasonable protection at
reasonable cost;
WHEREAS, the Regulations of the Company and the Ohio
General Corporation Law each provide that the
indemnification provided therein shall not be exclusive;
WHEREAS, in recognition of Indemnitee's need for
substantial protection against personal liability in order
to enhance Indemnitee's continued service to the Company in
an effective manner, the Company wishes to provide in this
Agreement for the indemnification of and the advancing of
expenses to Indemnitee to the full extent (whether partial
or complete) permitted by law and as set forth in this
Agreement, and, to the extent insurance is maintained, for
the continued coverage of Indemnitee under the Company's
directors' and officers' liability insurance policies;
NOW, THEREFORE, in consideration of the premises and of
Indemnitee continuing to serve the Company directly or, at
its request, with another enterprise, and intending to be
legally bound, the Company and Indemnitee hereby agree as
follows:
1. Certain Definitions.
-------------------
(a) Change in Control: shall be deemed to have
-----------------
occurred if an event set forth in any one of the
following paragraphs shall have occurred:
(i) date of expiration of a Tender Offer
(other than an offer by the Company), if the
offeror acquires Shares pursuant to such Tender
Offer;
(ii) the date of approval by the shareholders
of the Company of a definitive agreement: (x) for
the merger or consolidation of the Company or any
direct or indirect subsidiary of the Company into
or with another corporation, other than (1) a
merger or consolidation which would result in the
voting securities of the Company outstanding
immediately prior thereto continuing to represent
((i) in the case of a merger or consolidation of
the Company, either by remaining outstanding or by
being converted into voting securities of the
surviving entity or any parent thereof, or (ii) in
the case of a merger or consolidation of any
direct or indirect subsidiary of the Company,
either by remaining
<PAGE>
outstanding if the Company continues as a parent
of the merged or consolidated subsidiary or by
being converted into voting securities of the
surviving entity or any parent thereof) at least
51% of the combined voting power of the voting
securities of the Company or such surviving or
parent entity outstanding immediately after such
merger or consolidation, or (2) a merger or
consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the
securities Beneficially Owned by such Person any
securities acquired directly from the Company or
its Affiliates) representing 20% or more of the
combined voting power of the Company's then
outstanding securities, or (y) for the sale or
disposition of all or substantially all of the
assets of the Company, other than a sale or
disposition by the Company of all or substantially
all of the Company's assets to an entity, at least
51% of the combined voting power of the voting
securities of which are owned (directly or
indirectly) by shareholders of the Company in
substantially the same proportions as their
ownership of the Company immediately prior to such
sale or disposition;
(iii) (x) any Person is or becomes the
Beneficial Owner of 20% or more of the voting
power of the then outstanding securities of the
Company (not including in the securities
beneficially owned by such Person any securities
acquired directly from the Company or its
affiliates), excluding any Person who becomes such
a Beneficial Owner in connection with a
transaction described in clause (x) (1) of
paragraph (ii) above or (y) the date of
authorization, by both a majority of the voting
power of the Company and a majority of the portion
of such voting power excluding the voting power of
interested Shares, of a control share acquisition
(as such term in defined in Chapter 1701 of the
Ohio Revised Code); and
(iv) a change in the composition of the Board
of Directors such that individuals who were
members of the Board of Directors on the date two
years prior to such change (and any new directors
(other than a director whose initial assumption of
office is in connection with an actual or
threatened election contest, including but not
limited to a consent solicitation, relating to the
election of directors of the Company) who were
elected, or were nominated for election, by the
Company's shareholders with the affirmative vote
of at least two-thirds of the directors then still
in office who either were directors at the
beginning of such two year period or whose
election or nomination for election was previously
so approved) no longer constitute a majority of
the Board of Directors.
Notwithstanding the foregoing, a "Change in
Control" shall not be deemed to have occurred by
virtue of the consummation of any transaction or
series of integrated transactions immediately
following which the record holders of the common
stock of the Company immediately prior to such
transaction or series of transactions continue to
have substantially the same proportionate
ownership in an entity which owns all or
substantially all of the assets of the Company
immediately following such transaction or series
of transactions.
For purposes of this paragraph, the following
terms shall have the following meanings:
<PAGE>
"Affiliate" shall have the meaning set forth
in Rule 12b-2 promulgated under Section 12 of the
1934 Act.
"Beneficial Owner" shall have the meaning
defined in Rule 13d-3 under the 1934 Act.
"Person" shall have the meaning given in
Section 3(a)(9) of the 1934 Act, as modified and
used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company
or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an
employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly
or indirectly, by the shareholders of the Company
in substantially the same proportions as their
ownership of stock of the Company.
(b) Claim: any threatened, pending or completed
-----
action, suit or proceeding, or any inquiry or investigation,
whether conducted by the Company or any other party, that
Indemnitee in good faith believes might lead to the
institution of any such action, suit or proceeding, whether
civil, criminal, administrative, investigative or other.
(c) Expenses: include attorneys' fees and all
--------
other costs, expenses and obligations paid or incurred in
connection with investigating, defending, being a witness in
or participating in (including on appeal) or preparing to
defend, be a witness in or participate in any Claim relating
to any Indemnifiable Event (including all interest,
assessments and other charges paid or payable in connection
with or in respect of any of the foregoing).
(d) Judgments: include judgments, fines,
---------
penalties and amounts paid in settlement that are paid or
payable in connection with any Claim relating to any
Indemnifiable Event (including all interest, assessments and
other charges paid or payable in connection with or in
respect of any of the foregoing).
(e) Indemnifiable Event: any event or occurrence
-------------------
related to the fact that Indemnitee is or was a director of
the Company, or is or was serving at the request of the
Company as a director, trustee, officer, employee, agent or
representative of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise,
or by reason of anything done or not done by Indemnitee in
any such capacity.
(f) Reviewing Party: any appropriate person or
---------------
body consisting of a member or members of the Company's
Board of Directors or any other person or any other person
or body appointed by the Board (including the special,
independent counsel referred to in Section 4) who is not a
party to the particular Claim for which Indemnitee is
seeking indemnification.
(g) Voting Securities: any securities of the
-----------------
Company which vote generally in the election of directors.
2. Scope of Indemnification.
------------------------
(a) Basic Indemnification Arrangement. In the
---------------------------------
event Indemnitee was, is or becomes a party to or witness or
other participant in, or is threatened to be made a party to
or witness or other participant in, a Claim by reason of (or
arising in part out of), an Indemnifiable Event, the Company
shall indemnify Indemnitee to the fullest extent permitted
by law as soon as practicable but in any event no later than
30 days after written demand is presented to the Company
against any and all Judgments arising from or relating to
such Claim.
<PAGE>
(b) Expenses. Any and all Expenses and any and
--------
all expenses referred to in Section 2(c) shall be paid by
the Company promptly as they are incurred by Indemnitee (any
such payment of expenses by the Company is hereinafter
referred to as an "Expense Advance"). Indemnitee hereby
agrees to repay the amount of Expenses so paid if it is
proved by clear and convincing evidence in a court of
competent jurisdiction that his action or failure to act
involved an act or omission undertaken with deliberate
intent to cause injury to the Company or undertaken with
reckless disregard for the best interests of the Company.
Indemnitee hereby further agrees to reasonably cooperate
with the Company concerning any Claim.
(c) Indemnification for Additional Expenses. The
---------------------------------------
Company shall indemnify Indemnitee against any and all
expenses (including attorneys' fees) which are incurred by
Indemnitee in connection with any claim asserted against or
action brought by Indemnitee for (i) indemnification of
Expenses or Judgments or advance payment of Expenses by the
Company under this Agreement or under any other agreement,
the Company's Regulations, statute or rule of law now or
hereafter in effect relating to Claims for Indemnifiable
Events and/or (ii) recovery under any directors' and
officers' liability insurance policy or policies maintained
by the Company, regardless of whether Indemnitee ultimately
is determined to be entitled to such indemnification,
advance expense payment or insurance recovery, as the case
may be.
(d) Partial Indemnity. If Indemnitee is entitled
-----------------
under any provision of this Agreement to indemnification by
the Company for some or a portion of the Judgments arising
from or relating to a Claim but not, however, for all of the
total amount thereof, the Company shall nevertheless
indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled.
(e) Indemnification of Successful Defense
-------------------------------------
Expenses.
--------
Notwithstanding any other provision of this Agreement, to
the extent that Indemnitee has been successful on the merits
or otherwise in defense of any or all Claims relating in
whole or in part to an Indemnifiable Event or in defense of
any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all
Expenses incurred in connection therewith.
3. Reviewing Party Determinations.
------------------------------
(a) General Rules. Notwithstanding the
-------------
provisions of Section 2, the obligations of the Company
under Section 2(a) shall be subject to the condition that
the Reviewing Party shall not have determined (in a written
opinion, in any case in which the special, independent
counsel referred to in Section 4 hereof is involved) that
Indemnitee would not be permitted to be indemnified under
applicable law; provided, however, that if Indemnitee has
commenced legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee
should be indemnified under applicable law, any
determination made by the Reviewing Party that Indemnitee
would not be permitted to be indemnified under applicable
law shall not be binding until a final judicial
determination is made with respect thereto (as to which all
rights of appeal therefrom have been exhausted or lapsed)
and any such determination by the Reviewing Party shall be
modified, to the extent necessary, to conform to such final
judicial determination.
(b) Selection of Reviewing Party. If there has
----------------------------
not been a Change in Control, the Reviewing Party shall be
selected by the Board of Directors. If there has been such
a Change in Control, the Reviewing Party shall be the
special, independent counsel referred to in Section 4
hereof.
(c) Judicial Review. If there has been no
---------------
determination by the Reviewing Party or if the Reviewing
Party determines that Indemnitee substantively would not be
permitted to be indemnified in whole or in part
<PAGE>
under applicable law, Indemnitee shall have the right to
commence litigation in any court in the state of Ohio having
subject matter jurisdiction thereof and in which venue is
proper seeking an initial determination by the court or
challenging any such determination by the Reviewing Party or
any aspect thereof, and the Company hereby consents to
service of process and to appear in any such proceeding.
Any determination by the Reviewing Party otherwise shall be
conclusive and binding on the Company and Indemnitee.
(d) Burden of Proof. In connection with any
---------------
determination by the Reviewing Party pursuant to Section
3(a), or by a court of competent jurisdiction pursuant to
Section 3(c) or otherwise, as to whether Indemnitee is
entitled to be indemnified hereunder, the burden of proof
shall be on the Company to establish by clear and convincing
evidence that Indemnitee is not so entitled.
4. Change in Control. The Company agrees that if
-----------------
there is a Change in Control of the Company (other than a
Change in Control which has been approved by a majority of
the Company's Board of Directors who were directors
immediately prior to such Change in Control) then with
respect to all matters thereafter arising concerning the
rights of Indemnitee to indemnity payments under this
Agreement or under any other agreement, the Company's
Regulations, statute or rule of law now or hereafter in
effect relating to Claims for Indemnifiable Events, the
Company shall seek legal advice only from special,
independent counsel selected by Indemnitee and approved by
the Company (which approval shall not be unreasonably
withheld), and who has not otherwise performed services for
the Company within the last five years (other than in
connection with such matters) or Indemnitee. Unless
Indemnitee has theretofore selected counsel pursuant to this
Section 4 and such counsel has been approved by the Company,
the firms on the attached Exhibit I hereto shall be deemed
to satisfy the requirements set forth above, except with
respect to any such firms which the Company or Indemnitee
shall have engaged for any purpose at any time within the
five years preceding such engagement (other than, in the
case of the Company, with respect to matters concerning the
rights of Indemnitee (or of other indemnitees under similar
indemnity agreements) to indemnity payments). The Company
agrees to pay the reasonable fees of the special,
independent counsel referred to above and to indemnify fully
such counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising
out of or relating to this Agreement or its engagement
pursuant hereto.
5. No Presumption. For purposes of this Agreement,
--------------
the termination of any claim, action, suit or proceeding, by
judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo
----
contendere, or its equivalent, shall not create a
- ----------
presumption that Indemnitee did not meet any particular
standard of conduct or have any particular belief or that a
court has determined that indemnification is not permitted
by applicable law.
6. Non-exclusivity. The rights of Indemnitee
---------------
hereunder shall be in addition to any other rights
Indemnitee may now or hereafter have to indemnification by
the Company. More specifically, the parties intend that
Indemnitee shall be entitled to indemnification to the
maximum extent permitted by any or all of the following:
(a) The fullest benefits provided by
the Company's Regulations in effect on the
date hereof, a copy of the relevant portions
of which are attached hereto as Exhibit II;
(b) The fullest benefits provided by
the Articles of Incorporation, Regulations,
or Bylaws or their equivalent of
<PAGE>
the Company in effect at the time the
Indemnifiable Event occurs or at the time
Expenses are incurred by Indemnitee;
(c) The fullest benefits allowable
under Ohio law in effect at the date hereof,
a copy of the relevant portions of which are
attached hereto as Exhibit III, or as the
same may be amended to the extent that such
benefits are increased thereby;
(d) The fullest benefits allowable
under the law of the jurisdiction under which
the Company exists at the time the
Indemnifiable Event occurs or at the time
Expenses are incurred by the Indemnitee; and
(e) Such other benefits as are or may
be otherwise available to Indemnitee pursuant
to this Agreement, any other agreement or
otherwise.
The parties intend that combination of two or more of the
benefits referred to in (a) through (e) shall be available to
Indemnitee to the extent that the document or law providing
for such benefits does not require that the benefits provided
therein be exclusive of other benefits. The Company hereby
undertakes to use its best efforts to assist Indemnitee, in
all proper and legal ways, to obtain all such benefits to
which Indemnitee is entitled.
7. Liability Insurance. The rights of the Indemnitee
-------------------
hereunder shall also be in addition to any other rights
Indemnitee may now or hereafter have under policies of
insurance maintained by the Company or otherwise. To the
extent the Company maintains an insurance policy or policies
providing directors' and officers' liability insurance,
Indemnitee shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of
the coverage available for any Company director. The
parties hereby acknowledge that the Company presently
maintains directors' and officers' liability insurance under
policies issued by the following insurers and with the
following limits of liability: National Union Fire
Insurance Company of Pittsburgh ($25 million); Federal
Insurance Company ($25 million in excess of $25 million);
Continental Casualty Company ($15 million in excess of $50
million); Zurich - American Insurance Company ($25 million
in excess of $65 million); and Executive Risk Indemnity,
Inc. of New York ($10 million in excess of $90 million).
The scope of such insurance is described in the "Executive
Summary" attached hereto as Exhibit IV. The Company shall
maintain such insurance coverage for so long as Indemnitee's
services are covered hereunder, provided and to the extent
that such insurance is available on a basis acceptable to
the Company. In the event that such insurance becomes
unavailable in the amount of the present policy limits or in
the present scope of coverage at premium costs and on other
terms acceptable to the Company, then the Company may forego
maintenance of all or a portion of such insurance coverage.
However, in the event of any reduction in (or cancellation
of) such insurance coverage (whether voluntary or
involuntary), the Company shall, and hereby agrees to, stand
as a self-insurer with respect to the coverage, or portion
thereof, not retained and shall indemnify the Indemnitee
against any loss arising out of the reduction in or
cancellation of such insurance coverage; provided that the
Company's obligation as a self-insurer and indemnitor
hereunder shall only extend to the first $60 million of such
coverage.
8. Escrow Fund. As collateral security for its
-----------
obligations hereunder (including specifically its indemnity
obligations (other than Judgments) and other obligations
pursuant to Sections 2, 6 and 7) and under similar
agreements with other directors, officers and
representatives, in the event of a Change in Control, the
Company shall dedicate and maintain, for a period of five
years following the Change in Control, an escrow account in
the aggregate
<PAGE>
of TEN MILLION DOLLARS ($10,000,000) by depositing assets or
bank letters of credit in escrow or reserving lines of
credit that may be drawn down by an escrow agent in said
amount (the "Escrow Reserve"). The Company shall promptly,
following establishment of the Escrow Reserve, provide
Indemnitee with a true and complete copy of the agreement
relating to the establishment and operation of the Escrow
Reserve, together with such additional documentation or
information with respect to the Escrow Reserve as Indemnitee
may from time to time reasonably request. The Company shall
promptly, following establishment of the Escrow Reserve,
deliver an executed copy of this Agreement to the escrow
agent for the Escrow Reserve to evidence to that agent that
Indemnitee is a beneficiary of the Escrow Reserve and shall
deliver to Indemnitee the escrow agent's signed receipt
evidencing that delivery. Notwithstanding anything to the
contrary contained in this Section 8, any assets deposited
by the Company in the Escrow Reserve shall at all times be
and remain subject to the claims of the general creditors of
the Company.
9. Period of Limitations. No legal action shall be
---------------------
brought and no cause of action shall be asserted by or on
behalf of the Company or any affiliate of the Company
against Indemnitee, Indemnitee's spouse, heirs, executors or
personal or legal representatives after the expiration of
two years from the date of accrual of such cause of action,
and any claim or cause of action of the Company or its
affiliate shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such
two year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such
cause of action such shorter period shall govern.
10. Liability Standards. This Agreement shall be
-------------------
construed on the basis of the duties owed by Indemnitee as a
director of the Company, and the standards for determining
liability in damages for a breach thereof, which apply to
each particular Claim. The parties acknowledge that changes
in such duties or such liability standards may result in an
expansion or contraction of the Company's indemnification
exposure hereunder.
11. Amendments, Etc. No supplement, modification or
---------------
amendment of this Agreement shall be binding unless executed
in writing by both of the parties hereto. No waiver of any
of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions hereof (whether
or not similar) nor shall such waiver constitute a
continuing waiver.
12. Subrogation. In the event of payment under this
-----------
Agreement, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery of Indemnitee,
who shall execute all papers required and shall do
everything that may be necessary to secure such rights,
including the execution of such documents necessary to
enable the Company effectively to bring suit to enforce such
rights.
13. No Duplication of Payments. The Company shall not
--------------------------
be liable under this Agreement to make any payment in
connection with any Claim made against Indemnitee to the
extent Indemnitee has otherwise actually received payment
(under any insurance policy, the Company's Regulations or
otherwise) of the amounts otherwise indemnifiable hereunder.
14. Binding Effect, Etc. This Agreement shall be
-------------------
binding upon and inure to the benefit of and be enforceable
by the parties hereto and their respective successors,
assigns, including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the
Company, spouses, heirs, personal and legal representatives.
This Agreement shall continue in effect regardless of
whether Indemnitee continues to serve as a director of the
Company or as a director, trustee, officer, agent or
representative of any other enterprise at the Company's
request.
<PAGE>
15. Severability. The provisions of this Agreement
------------
shall be severable in the event that any of the provisions
hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable,
and the remaining provisions shall remain enforceable to the
fullest extent permitted by law.
16. Governing Law. This Agreement shall be governed
-------------
by and construed and enforced in accordance with the laws of
the state of Ohio applicable to contracts made and to be
performed in such state without giving effect to the
principles of conflicts of laws.
Executed and effective this 24th day of June, 1999.
JEROME F. TATAR
By ________________________
Jerome F. Tatar
Chairman of the Board
DUANE E. COLLINS
________________________
Duane E. Collins
Director
<PAGE> Exhibit I
Special, Independent, Counsel
Taft, Stettinius & Hollister LLP Kirkland & Ellis
1800 Firstar Tower 200 East Randolph Dr.
425 Walnut Center Chicago, IL 60601
Cincinnati, Ohio 45202-3957 (312) 861-2000
(513) 381-2838
Baker & Hostetler Vorys, Sater, Seymour and Pease
3200 National City Center 52 East Gay Street
1900 East Ninth Street P.O. Box 1008
Cleveland, Ohio 44114 Columbus, OH 43216-1008
(216) 621-0200 (614) 464-6400
<PAGE> Exhibit IV
EXECUTIVE SUMMARY
Director & Officer
Indemnification & Insurance
Mead provides two methods of protecting its directors:
indemnification and insurance.
Indemnification
---------------
Under Mead's indemnification, the Company must reimburse
----
a director for expenses and attorneys fees if he or she
prevails in the defense of a claim for an indemnifiable
event. In addition, the Company may reimburse a director
---
for expenses, attorneys' fees, settlement amounts, fines
and judgments (even if he or she does not prevail on the
claim), if Mead's Board, Mead's legal counsel, Mead's
shareholders or an appropriate court decides that the
director acted in good faith and in a manner he believed
was in, or not opposed to, Mead's best interests. In a
criminal matter the director must have had no reason to
believe his conduct was unlawful. Mead's Board may also
--- ----
indemnify a director (regardless of whether he or she
prevails in the defense of a claim), against expenses,
attorneys fees, fines, settlement amounts and judgments
if the Board decides such indemnification is in the best
interest of Mead.
Under Ohio law, Mead may not, however, indemnify a
director against fines, settlement amounts and judgments
in an action brought by Mead or in a derivative action
brought by a shareholder on behalf of Mead, if the
director is judged to be negligent or guilty of
misconduct. Mead does have insurance to protect a
director in such event.
Mead may advance expenses to a director, provided he or
she agrees to repay Mead if it is later determined that
indemnification is not available.
Insurance
---------
Mead carries insurance which provides two types of
coverage: indemnification coverage and "D&O" coverage.
Under the indemnification coverage, the insurance
carrier(s) reimburse Mead for amounts paid to indemnify
directors and officers. Under the D&O, the insurance
carrier pays amounts directly to the director or officer
involved in the claim for nonindemnifiable acts.
These coverages have a $100 million aggregate limit.
Defense costs are included within the limit. The
indemnification coverage has a $500,000 per incident
deductible. The D&O coverage has no deductible. Mead
currently pays $443,407 (August 1, 1999 - August 1, 2000)
for the coverage, and this premium is renegotiated
annually.
<PAGE>
The following matters, among others, are excluded from
coverage under the policies:
. Libel and slander.
. Gains attributable to personal profit to which a
director was not entitled.
. Insider trading liability.
. Active and deliberate dishonesty with actual
dishonest purpose and intent.
. Any claim related to or arising from pollution.
. Bodily injury to or sickness, disease or death of a person.
. Injury or destruction to tangible property.
. Illegal payments.
. Suit brought by a director or officer of Mead.
Mead's coverage does protect the directors for acts and
omissions related to takeover situations, subject to
policy exclusions.
Exhibit 10.5
THE MEAD CORPORATION
RESTRICTED STOCK PLAN
---------------------
COMPOSITE
---------
06/24/99
ARTICLE I. GENERAL PROVISIONS
- ---------- ------------------
Section 1. Purpose. The purpose of The Mead Corporation
---------- --------
Restricted Stock Plan (the "Plan") is to provide certain compensation to
eligible directors and employees in the form of Common Shares ("Shares")
of The Mead Corporation (the "Company") which are restricted in
accordance with the terms and conditions set forth below and to
encourage the continued high level of performance of such directors and
employees by increasing the identity of interests of such directors and
employees with the shareholders of the Company. The Plan is intended to
be an unfunded program established for the purpose of providing
compensation for eligible directors and a select group of management
employees and is exempt from Parts 1 through 4 of Title I of the
Employee Retirement Income Security Act of 1974, as amended.
Section 2. Definitions. For purposes of the Plan, the following
---------- ------------
terms shall have the following meanings:
(a) "Board of Directors" means the Board of Directors of the
Company.
(b) A "Change in Control" shall be deemed to have occurred if an
event set forth in any one of the following paragraphs shall have
occurred:
(i) date of expiration of a Tender Offer (other than an
offer by the Company), if the offeror acquires Shares pursuant to such
Tender Offer;
(ii) the date of approval by the shareholders of the
Company of a definitive agreement: (x) for the merger or consolidation
of the Company or any direct or indirect subsidiary of the Company into
or with another corporation, other than (1) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent ((i) in the case of a
merger or consolidation of the Company, either by remaining outstanding
or by being converted into voting securities of the surviving entity or
any parent thereof, or (ii) in the case of a merger or consolidation of
any direct or indirect subsidiary of the Company, either by remaining
outstanding if the Company continues as a parent of the merged or
consolidated subsidiary or by being converted into voting securities of
the surviving entity or any parent thereof) at least 51% of the combined
voting power of the voting securities of the Company or such surviving
or parent entity outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the securities Beneficially
Owned by such Person any securities acquired directly from the Company
or its Affiliates) representing 25% or more of the combined voting power
of the Company's then outstanding securities, or (y) for the sale or
disposition of all or substantially all of the assets of the Company,
other than a sale or disposition by the Company of all or substantially
all of the Company's assets to an entity, at least 51% of the combined
voting power of the voting securities of which are owned (directly or
indirectly) by shareholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior to such
sale or disposition;
<PAGE>
(iii) (x) any Person is or becomes the Beneficial Owner of 25% or
more of the voting power of the then outstanding securities of the
Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its
affiliates), excluding any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (x)(1) of paragraph
(ii) above or (y) the date of authorization, by both a majority of the
voting power of the Company and a majority of the portion of such voting
power excluding the voting power of interested Shares, of a control
share acquisition (as such term is defined in Chapter 1701 of the Ohio
Revised Code); and
(iv) a change in the composition of the Board of Directors
such that individuals who were members of the Board of Directors on the
date two years prior to such change (and any new directors (other than a
director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company) who were elected, or were nominated for election, by the
Company's shareholders with the affirmative vote of at least two-thirds
of the directors then still in office who either were directors at the
beginning of such two year period or whose election or nomination for
election was previously so approved) no longer constitute a majority of
the Board of Directors.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed
to have occurred by virtue of the consummation of any transaction or
series of integrated transactions immediately following which the record
holders of the common stock of the Company immediately prior to such
transaction or series of transactions continue to have substantially the
same proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately following
such transaction or series of transactions.
(c) "Committee" means the Compensation Committee of the Board of
Directors.
(d) "Company" means The Mead Corporation; however, when used
with reference to employment, "Company" also includes any corporation,
partnership or other person or entity at least 10% of the voting or
equity interest of which is owned or controlled, directly or indirectly,
by the Company.
(e) "Eligible Director" means any director of the Company who is
not also an employee of the Company.
(f) "Eligible Employee" means any employee of the Company
selected by the Committee.
(g) "Grant Date" means the date on which Restricted Shares are
to be granted pursuant to Article II, Section 1.
(h) "Market Value" means the average of the highest sale price
and the lowest sale price of a Share on the date the value of a Share is
to be determined, as reported on the New York Stock Exchange - Composite
Transactions Tape (or other similar source) or, if no sale is reported
for such date, then on the next preceding date for which a sale is
reported.
(i) "Participant" means any individual who holds Restricted
Shares granted under the Plan.
(j) "Restriction Period" means (i) in the case of Restricted
Shares granted pursuant to Article II. Section 1 (a), (b) or Section 2,
the period of six months from the date the Restricted Shares are
granted, (ii) in
<PAGE>
the case of Restricted Shares granted pursuant to Article II. Section
1(c), the date the grantee becomes age 55 or six months from the date
the Restricted Shares are granted, whichever is later, and (iii) in the
case of Restricted Shares granted pursuant to Article III, the period of
six months or longer (as determined by the Committee) from the date
Restricted Shares are granted.
(k) "Restricted Shares" means any Shares issued or delivered
pursuant to the Plan which remain subject to the restrictions set forth
in Article I, Section 5 of the Plan.
(l) "Shares" means the Common Shares, without par value, of the
Company.
(m) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(n) "Beneficial Owner" shall have the meaning defined in Rule
13d-3 under the Exchange Act.
(o) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(p) "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (i) the Company or any
of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily holding securities pursuant
to an offering of such securities, or (iv) a corporation owned, directly
or indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company.
(q) "Tender Offer" shall mean a tender offer or a request or
invitation for tenders or an exchange offer subject to regulation under
Section 14(d) of the Exchange Act and the rules and regulations
thereunder, as the same may be amended, modified or superseded from time
to time.
Section 3. Administration.
---------- --------------
(a) The Plan shall be administered by the Committee. Subject to
the express provisions of the Plan, the Committee and the Board of
Directors shall each have authority to construe and interpret the Plan,
to prescribe, amend, and rescind rules and regulations relating to the
Plan, and to make all other determinations necessary or advisable for
administering the Plan. The Committee or the Board of Directors may
correct any defect or supply any omission or reconcile any inconsistency
in the Plan in the manner and to the extent it shall deem expedient to
carry it into effect. The determination of the Committee or the Board
of Directors on any matters within the scope of this section shall be
conclusive. A majority of the Committee shall constitute a quorum for
meetings of the Committee, and the act of a majority of the Committee at
a meeting, or an act reduced to or approved in writing by all members of
the Committee, shall be the act of the Committee.
In the case of Restricted Shares granted pursuant to Article III,
the Committee may in its discretion impose additional conditions or
restrictions as to the attainment of specified performance goals during
the Restriction Period for all or a portion of the shares or all or a
portion of the years in the Restriction Period.
(b) The Committee may waive or modify at any time any condition
or restriction (including, without limitation, any of the restrictions
set
<PAGE
forth in Article I, Section 5) with respect to any Restricted Shares
issued pursuant to Article III.
Section 4. Shares Subject to the Plan. Subject to adjustment as
---------- ---------------------------
provided in Section 1 of Article IV, the maximum number of Shares which
may be granted as Restricted Shares under the Plan is 1,000,000; the
maximum number of shares which may be granted as Restricted Shares to
any individual pursuant to Section 2 of Article II is 40,000; and, the
maximum number of Shares which may be granted as Restricted Shares to
any eligible employee pursuant to Article III is 300,000. Shares
granted as Restricted Shares under the Plan may be authorized and
unissued Shares or Shares held in the Company's treasury. Any Shares
which are granted as Restricted Shares under the Plan and which are
thereafter forfeited by the participant may again be granted under the
Plan as Restricted Shares.
Section 5. Terms and Conditions of Restricted Shares.
---------- ------------------------------------------
(a) Subject to the provisions of paragraph (b) of this Section
5, Restricted Shares issued pursuant to the Plan shall be subject to the
following restrictions:
(i) the Participant shall not be entitled to receive
delivery of the certificate for such Restricted Shares until the
expiration of the Restriction Period;
(ii) such Restricted Shares shall not be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of during the
Restriction Period; and
(iii) all such Restricted Shares shall be forfeited and all
right of the Participant to such Restricted Shares shall terminate
without further obligations on the part of the Company if the
Participant ceases to be a director of the Company (in the case of a
Participant who received Restricted Shares as an Eligible Director) or
an employee of the Company (in the case of a Participant who received
Restricted Shares as an Eligible Employee) prior to the end of the
Restriction Period.
Upon the forfeiture of Restricted Shares, such Shares shall be
returned to the status of authorized and unissued Shares or treasury
Shares, as determined by the Committee.
(b) Notwithstanding the provisions of paragraph (a) of this
Section 5, in the event a Participant ceases to be a director of the
Company (in the case of a Participant who received Restricted Shares as
an Eligible Director) or an employee of the Company (in the case of a
Participant who received Restricted Shares as an Eligible Employee)
prior to the end of a Restriction Period as a result of such
Participant's death, disability or normal retirement in accordance with
the Company's policies, then the restrictions set forth in paragraph (a)
of this Section 5 shall immediately cease to apply to (and all rights of
the Participant shall immediately vest with respect to) all of the
Restricted Shares.
In any event, all such Restricted Shares shall be forfeited and
all rights of the Participant to such Restricted Shares shall terminate
without further obligations on the part of the Company if the
Participant, directly or indirectly, individually or as an agent,
officer, director, employee, shareholder (excluding being the holder of
any stock which represents less than 1% interest in a corporation),
partner or in any other capacity whatsoever engages prior to the time
such restrictions cease to apply in any activity competitive with or
adverse to the Company's business or in
<PAGE>
the sale, distribution, production or attempted sale or distribution of
any goods, products or services then sold or being developed by the
Company.
(c) Notwithstanding any other provision of the Plan, immediately
prior to the occurrence of a "Change in Control", all of the
restrictions set forth in this Section 5 shall immediately cease to
apply to all Restricted Shares issued pursuant to the Plan, except to
the extent that the lapse of such restrictions would, in the opinion of
counsel selected by the Company's independent auditors, constitute
"parachute payments" within the meaning of Section 280G(b)(2)(A) of the
Internal Revenue Code (the "Code") and, when added to any other
"parachute payments" which would be received by the Participant pursuant
to the terms of any other plan, arrangement or agreement with the
Company, any person whose actions result in a change in control of the
Company or any person affiliated with the Company or such person, would
be subject to the tax imposed by Section 4999 of the Code. As used in
the immediately preceding sentence, "immediately prior" to the Change in
Control shall mean sufficiently in advance of the Change in Control to
permit the Participant to deal with the Shares so that those Shares may
be treated in the same manner in connection with the Change in Control
as the Shares of other shareholders.
(d) At the end of the Restriction Period, or at such earlier
time as it is provided for in Paragraphs (b) or (c) of this Section 5,
the restrictions applicable to the Restricted Shares pursuant to this
Section 5 shall cease and a share certificate for the number of
Restricted Shares with respect to which the restrictions have ceased
shall be delivered, free of all such restrictions and all restrictive
legends, to the Participant or the Participant's beneficiary or estate,
as the case may be.
(e) If required by the Committee, each grant of Restricted
Shares shall be evidenced by a written agreement between the Company and
the Participant.
(f) In the event that the restrictions set forth in Paragraph
(a) of this Section 5 shall cease to apply to any Restricted Shares
granted to Eligible Employees subject to Section 16 of the Act prior to
the date which is six months after the date of grant of such Restricted
Shares, then, notwithstanding any provision to the contrary in this
Section 5, the restrictions set forth in paragraphs (a) (i) and (a) (ii)
of this Section 5 shall continue in effect until the date which is six
months after the date of such grant.
(g) Notwithstanding any provision to the contrary in this
Section 5, but subject nonetheless to Paragraph (c) of this Section 5,
in the case of Restricted Shares granted pursuant to Article III, if the
Participant fails to attain specified performance goals set forth with
respect to such Restricted Shares during the Restriction Period, the
Participant will forfeit such Restricted Shares to the extent specified
in the grant of such Restricted Shares and the right of the Participant
to such Restricted Shares shall terminate to the extent specified in the
grant of such Restricted Shares without any further obligations on the
part of the Company.
Section 6. Rights as a Shareholder.
---------- ------------------------
(a) Upon the grant of Restricted Shares pursuant to Article II
or Article III of the Plan, the Company shall issue a share registered
in the name of the Participant bearing the following legend and any
other legend required by any federal or state securities laws:
"The transferability of this certificate and the Common Shares
represented hereby are subject to the restrictions, terms and conditions
<PAGE>
(including forfeiture and restrictions against sale, assignment,
transfer, pledge, hypothecation and other disposition) set forth in The
Mead Corporation Restricted Stock Plan. Copies of such Plan will be
mailed to any shareholder without charge within five days after receipt
of written request therefor address to Secretary, The Mead Corporation,
Mead World Headquarters, Courthouse Plaza Northeast, Dayton, OH 45463."
Each such share shall be retained by the Company until the
restrictions set forth in Article I, Section 5(a) cease to apply to the
Shares.
(b) Upon the issuance of Restricted Shares pursuant to paragraph
(a) of this Section 6, the Participant shall, subject to all of the
terms, conditions and restrictions set forth in the Plan, have all of
the rights of a holder of Shares, including the right to vote and to
receive dividends and other distributions with respect thereto.
ARTICLE II. RESTRICTED SHARES FOR ELIGIBLE DIRECTORS
- ----------- ----------------------------------------
Section 1. Grant of Restricted Shares to Eligible
---------- ---------------------------------------
Directors.
----------
(a) On the third business day of January, 1998 and on each
annual anniversary of such date during the term of the Plan, (each such
date is hereinafter referred to as a "Grant Date"), the Company shall
grant a number of Restricted Shares to each then Eligible Director
determined by dividing $7,500 by the Market Value of a Share on the
Grant Date (rounded to the nearest whole shares).
(b) If during the term of the Plan any person becomes an
Eligible Director on a date other than a Grant Date, the Company shall
grant such person a number of Restricted Shares determined by dividing
$7,500 by the Market Value of a Share (rounded to the nearest whole
share) on the date of such person's election to the Board of Directors.
(c) Each Eligible Director shall automatically receive a grant
of a number of Restricted Shares of the Company equal to the quotient
obtained by dividing (i) 5,000, by (ii) the Market Value per Share on
the date the Plan, as amended, is approved by the Shareholders (the
"Initial Grant"). Thereafter, on the third business day of January,
1997 and on each annual anniversary of such date during the term of the
Plan, the Company shall grant and each Eligible Director shall
automatically receive a number of Restricted Shares which shall equal
the product obtained by multiplying the Initial Grant by an adjustment
factor (the "Factor"). The Factor shall equal the quotient obtained by
dividing (y) the base line number for average total compensation paid to
directors by companies with annual sales in excess of $4 billion, as
published in the Hay Consulting Group's "Directors Compensation Report"
(or comparable successor report) in the calendar year immediately
preceding the year in which such grant is made, which report covers
compensation paid in the year ending immediately prior to the year of
publication, by (z) 36,246. In the event that such Directors
Compensation Report (or comparable successor report) is not published
with respect to any year, the Factor shall equal one (1).
Section 2. Election to Receive Compensation as Restricted Shares.
---------- ------------------------------------------------------
(a) Not later than June 1 of each year during the term of the
Plan, the Committee shall cause each Eligible Director to be furnished
with an appropriate form which enables the director to elect to receive
payment in Restricted Shares of a minimum of 20% up to a maximum of 100%
(in increments of 10%) of the annual retainer fee to be earned by such
director for service on the Board of Directors during the following
calendar year which is paid on
<PAGE>
or after the first day of such calendar year. In order to be effective,
the election form must be signed by the director and must be returned to
the Committee or its delegate not later than July 1 of the year prior to
the year with respect to which the election is being made. All such
elections are irrevocable.
(b) A new Eligible Director may, by filing the prescribed
election form, elect to receive the annual retainer fee as Restricted
Shares as provided in paragraph (a) of this Section 2 only if the
election form is signed and filed at least six months prior to the date
of payment of the annual retainer fee to such director.
(c) If an Eligible Director has elected to receive all or a
portion of the annual retainer fee as Restricted Shares as provided in
this Section 2, then on the date such fee would otherwise be payable,
the Company shall grant to such director a number of Restricted Shares
determined by dividing the compensation so to be received by the Market
Value of a Share on such date such other compensation would otherwise be
payable (rounded to the nearest whole share).
ARTICLE III. RESTRICTED SHARES FOR ELIGIBLE EMPLOYEES
- ------------ ----------------------------------------
Section 1. Grant of Restricted Shares to Eligible Employees.
---------- -------------------------------------------------
From time to time during the term of the Plan, the Committee may
determine that Restricted Shares shall be granted to Eligible Employees
either as payment for all or a portion of the compensation to be paid to
any Eligible Employee pursuant to the Company's incentive compensation
plans, or for any other reason consistent with the purposes of the Plan.
Restricted Shares to be granted as payment for all or a portion of
incentive compensation shall be granted on the date the compensation is
awarded, and the number of Restricted Shares so granted shall be
determined by dividing the amount of such compensation by the Market
Value of a Share on the date the compensation is awarded (rounded to the
nearest whole Share).
ARTICLE IV. MISCELLANEOUS
- ----------- -------------
Section 1. Adjustments Upon Changes in Capitalization.
---------- -------------------------------------------
Upon any change in the outstanding Shares by virtue of a share dividend
or split, recapitalization, merger, consolidation, combination or
exchange of shares or other similar change, the number of Restricted
Shares which may be granted under the Plan (or the class of shares which
may be granted as Restricted Shares) shall be adjusted appropriately by
the Committee, whose determination with respect to such adjustment shall
be conclusive. Unless the Committee shall otherwise determine, any
securities and other property received by a Participant in connection
with or as a result of any such change with respect to Restricted Shares
(excluding dividends paid in cash) shall be subject to the restrictions
then applicable to Restricted Shares under the Plan (including
forfeiture), and shall be deposited promptly with the Company to be held
in custody until the restrictions cease to apply to the Restricted
Shares to which such securities or other property relates.
Notwithstanding the foregoing, however, in the event any rights to
purchase Shares are issued pursuant to the Company's Shareholder Rights
Plan (or any successor plan) with respect to Restricted Shares, such
rights shall cease to be subject to the restrictions applicable to the
underlying Restricted Shares at such time, if any, as such rights become
exercisable.
Section 2. Compliance with Laws. The issuance or delivery of
---------- ---------------------
Shares pursuant to the Plan shall be subject to, and shall comply with,
any applicable requirements of federal and state securities laws, rules
and
<PAGE>
regulations (including, without limitation, the provisions of the
Securities Act of 1933, the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder), any securities exchange
upon which the Shares may be listed and any other law or regulation
applicable thereto, and the Company shall not be obligated to issue or
deliver any Shares pursuant to the Plan if such issuance or delivery
would violate any such requirements. The foregoing shall not, however,
be deemed to require the Company to effect any registration of Shares
under any such law or regulation.
Section 3. Amendment and Termination.
---------- --------------------------
(a) The Board of Directors may from time to time amend the Plan,
or any provision thereof, in such respects as the Board of Directors may
deem advisable; provided, however, that any such amendment must be
approved by the holders of Shares entitling them to exercise a majority
of the voting power of the Company if such amendment would:
(i) materially increase the benefits accruing to
participants under the Plan;
(ii) materially increase the aggregate number of Shares
which may be issued and/or delivered or the number of Shares which may
be granted to any individual under the Plan;
(iii) materially modify the requirements as to eligibility
for participation in the Plan.
(b) The Plan shall terminate and no additional Restricted Shares
shall be granted under the Plan after September 30, 2005; provided,
however, that the Board of Directors may earlier terminate the Plan at
any time.
(c) No amendment to or termination or expiration of the Plan
shall adversely affect any Restricted Shares previously granted under
the Plan without the consent of the holder thereof.
(d) Notwithstanding paragraph (a) of this Section 3, the
provisions of Section 1 of Article II may not be amended more than once
every six months other than to comport with changes in the Code, ERISA
or the rules thereunder.
Section 4. Notices. Each notice relating to the Plan shall be in
---------- --------
writing and delivered in person or by mail to the proper address. Each
notice shall be deemed to have been given on the date it is delivered or
mailed except that an election to receive compensation as Restricted
Shares pursuant to Article II, Section 2 shall be deemed to have been
given on the date it is received by the Committee. Each notice to the
Committee shall be addressed as follows: The Mead Corporation, Mead
World Headquarters, Courthouse Plaza Northeast, Dayton, Ohio 45463,
Attention: Secretary. Each notice to a Participant shall be addressed
to the Participant's address as set forth in the records of the Company.
Anyone to whom a notice may be given under this Plan may designate a new
address by written notice to the Company or to the Participants, as the
case may be.
Section 5. Benefits of Plan. The Plan shall inure to the benefit
---------- -----------------
of, and shall be binding upon, each successor and assign of the Company.
All rights and obligations imposed upon a Participant and all rights
granted to the Company under this Plan shall be binding upon such
Participant's heirs, legal representatives and successors. Nothing in
the Plan shall be deemed to create any obligation on the part of the
Company to nominate any director for re-election or to continue the
employment of any employee.
<PAGE>
Section 6. Taxes.
---------- ------
(a) The Company shall have the right to require, prior to the
issuance or delivery of any Restricted Shares, payment by the
Participant of any taxes required by law with respect to the issuance or
delivery of such Restricted Shares.
(b) On any date on or after January 1, 1994 that restrictions
applicable to Restricted Shares granted (or to be granted) hereunder
shall have ceased pursuant to Article I, Section 5 (the "Lapse Date"),
and with respect to persons subject to Section 16 of the Securities
Exchange Act of 1934, as amended (the "1934 Act") on any date thereafter
through the end of the next following period (the "Window Period")
specified in Rule 16b-3(e)(3) (or any successor rule) under the 1934
Act, the Participant to whom such Restricted Shares were granted may
elect to have the Company retain, from the Restricted Shares to be
delivered at the end of the Restriction Period, Shares having a Market
Value on the date of delivery equal to all or any part of the required
minimum federal, state and local withholding tax payments to be made by
the Participant with respect to ceasing of the restrictions in lieu of
making such payments in cash; provided that such election may also be
made in advance of the Lapse Date and will be effective on the date
specified in the notice of election (subject, as applicable, to Section
16 of the 1934 Act), and further provided that, with respect to a Lapse
Date that has occurred or will occur between January 1, 1994 and October
28, 1994, the election may be made by persons subject to and in
accordance with Section 16 of the 1934 Act through the end of the first
Window Period which commences on, includes or follows October 28, 1994.
The Committee may establish from time to time rules or limitations with
respect to the right of a Participant to elect to have the Company
retain Restricted Shares in satisfaction of withholding payments;
provided, however, that, in any event, any such rules or limitations
must be in accordance with Section 16 of the 1934 Act and any applicable
rules established under such Section.
Section 7. Governing Law. All grants of Restricted Shares shall
---------- --------------
be made and accepted in the State of Ohio. The laws of the State of
Ohio shall control the interpretation and performance of the provisions
of the Plan.
Section 8. Effective Date of the Plan. The effective date of the
---------- ---------------------------
Plan shall be December 10, 1987; provided, however, that if the Plan is
not approved at the 1988 Annual Meeting of Shareholders by the holders
of at least a majority of the outstanding voting power of the Company,
the Plan shall immediately terminate. No dividends shall be paid prior
to the 1988 Annual Meeting of Shareholders with respect to any
Restricted Shares granted prior to such meeting. If the Plan is not
approved at such meeting, all Restricted Shares granted prior thereto
shall be retained by the Company, and the Company shall pay to the
Participant in whose name such Restricted Shares were registered an
amount equal to the Market Value on the date of grant of a number of
Shares equal to such number of Restricted Shares.
___________________________________________
NOTES:
- ------
(1) Adopted by the Board of Directors of the Company on December
11, 1987.
(2) Approved by the shareholders of the Company on April 28,
1988.
<PAGE>
(3) Addition of Article II, Section 2, subsection (d) adopted by
the Board of Directors of the Company on December 15, 1989 (deleted
February 28, 1991).
(4) Amendment to Article I, Section 2, subsection (h) adopted by
the Board of Directors of the Company on January 25, 1990.
(5) Amendments to Article I, Section 2, subsections (d) and (j);
Article I, Section 3, subsection (a); and Article III, Section 1; and
addition of Article 2, Section 5, subsection (g), adopted by the Board
of Directors of the Company on January 24, 1991, and approved by the
shareholders of the Company on April 25, 1991.
(6) Amendments to Article II, Section 2, subsections (a) and
(b); and addition of Article I, Section 5, subsection (f) and Article
IV, Section 3, subsection (d) adopted by the Board of Directors of the
Company on February 28, 1991.
(7) Amendments to Article I, Section 5, subsection (b); and
addition of Article I, Section 5, subsection (b) (iii), adopted by the
Board of Directors of the Company on July 23, 1992.
(8) Amendment to Article IV, Section 6, subsection (b) adopted
by the Board of Directors of the Company on April 28, 1994.
(9) Amendments to Article I, Section 2(j), Section 4, Section
5(b) (i), Section 6, Article II, Section 1(c), Article IV, Section 3(b)
adopted by the Board of Directors of the Company on October 28, 1995,
and approved by the shareholders of the Company on April 25, 1996.
(10) Amendments to Article I, Section 2(j) and 5(b); Article II,
Section 1(a) and (b) adopted by the Board of Directors of the Company on
November 09, 1996.
(11) Amendments to Article I, Section 2(b), and addition of
subsection (i), (ii), (iii), (iv) with addition of a paragraph at the
end; addition of (m), (n), (o), (p), (q) and Article I, Section 5(c) of
the Plan adopted by the Board of Directors of the Company on June 24,
1998.
(12) Administrative Amendment to Article IV, Section 6(b) adopted
by the Compensation Committee of the Board of Directors of the Company
on June 24, 1999.
<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 JULY 4, 1999 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>
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<PERIOD-END> JUL-04-1999
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0
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