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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 April 2, 2000
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 April 2, 2000 was 102,792,999.
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THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
QUARTERLY PERIOD ENDED APRIL 2, 2000
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
BALANCE SHEETS
- --------------
(All dollar amounts in millions)
<TABLE>
<CAPTION>
April 2, Dec. 31,
2000 1999
---------- ----------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12.3 $ 56.4
Accounts receivable 498.7 547.7
Inventories 618.4 489.9
Other current assets 142.6 136.3
---------- ----------
Total current assets 1,272.0 1,230.3
Investments and other assets 1,084.8 1,074.0
Property, plant and equipment 5,910.3 5,904.4
Less accumulated depreciation and
amortization (2,597.2) (2,547.0)
---------- ----------
3,313.1 3,357.4
---------- ----------
Total assets $ 5,669.9 $ 5,661.7
========== ==========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Notes payable $ 291.4 $ 186.2
Accounts payable 246.8 266.1
Accrued liabilities 437.4 513.2
Current maturities of long-term debt 13.6 35.1
---------- ----------
Total current liabilities 989.2 1,000.6
Long-term debt 1,334.0 1,333.7
Deferred items 908.0 896.6
Shareowners' equity:
Common shares 153.3 153.0
Additional paid-in capital 127.8 121.6
Retained earnings 2,185.7 2,178.0
Other comprehensive loss (28.1) (21.8)
---------- ----------
2,438.7 2,430.8
---------- ----------
Total liabilities and
shareowners' equity $ 5,669.9 $ 5,661.7
========== ==========
</TABLE>
See notes to financial statements.
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THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
STATEMENTS OF EARNINGS (unaudited)
- ----------------------
(All dollar amounts in millions, except per share amounts)
<TABLE>
<CAPTION>
First Quarter Ended
------------------------------------
April 2, April 4,
2000 1999
---------- ----------
<S> <C> <C>
Net sales $ 915.6 $ 863.2
Costs and expenses:
Cost of sales 735.7 715.9
Selling and administrative expenses 118.6 93.9
---------- ----------
854.3 809.8
---------- ----------
Earnings from operations 61.3 53.4
Other revenues - net 1.5 4.0
Interest and debt expense (29.7) (26.7)
---------- ----------
Earnings before income taxes 33.1 30.7
Income taxes 12.0 11.1
---------- ----------
Earnings before equity in net
earnings of investees 21.1 19.6
Equity in net earnings of investees 4.0 3.3
---------- ----------
Net earnings $ 25.1 $ 22.9
Net earnings per common share - basic $ .24 $ .22
========== ==========
Net earnings per common share - diluted $ .24 $ .22
========== ==========
Cash dividends per common share $ .17 $ .16
========== ==========
Average common shares
outstanding (millions) - basic 102.7 101.7
========== ==========
Average common shares
outstanding (millions) - diluted 104.4 102.9
========== ==========
</TABLE>
See notes to financial statements.
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THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
STATEMENTS OF CASH FLOWS (audited)
- ------------------------
(All dollar amounts in millions)
<TABLE>
<CAPTION>
First Quarter Ended
----------------------------------
April 2, April 4,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 25.1 $ 22.9
Adjustments to reconcile net earnings to
net cash (used in) operating activities:
Depreciation and depletion of property, plant
and equipment 69.0 67.6
Depreciation and amortization of other assets 14.9 10.3
Deferred income taxes 18.4 2.5
Investees - earnings and dividends (4.2) (4.7)
Other (6.6) 2.4
Change in current assets and liabilities:
Accounts receivable 49.0 (32.4)
Inventories (128.5) (44.8)
Other current assets (10.0) (19.3)
Accounts payable and accrued liabilities (95.1) (77.2)
--------- ---------
Net cash (used in) operating activities (68.0) (72.7)
Cash flows from investing activities:
Capital expenditures (32.2) (45.6)
Additions to equipment rented to others (7.5) (6.4)
Proceeds from sale of assets 13.6
Other (9.0) 4.8
--------- ---------
Net cash (used in) investing activities (48.7) (33.6)
Cash flows from financing activities:
Additional borrowings 15.0
Payments on borrowings (21.7) (17.8)
Notes payable 105.2 45.5
Cash dividends paid (17.4) (16.3)
Common shares issued 6.5 4.7
Common shares purchased (14.9)
--------- ---------
Net cash provided by financing activities 72.6 16.2
--------- ---------
(Decrease) in cash and cash equivalents (44.1) (90.1)
Cash and cash equivalents at beginning of year 56.4 102.0
--------- ---------
Cash and cash equivalents at end of quarter $ 12.3 $ 11.9
========= =========
</TABLE>
See notes to financial statements.
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THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
(All dollar amounts in millions)
A - FINANCIAL STATEMENTS
The balance sheet at December 31, 1999, 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 of normal recurring
adjustments) necessary to present fairly the financial position and results of
operations for the interim periods presented have been made. These financial
statements should be read in conjunction with the company's Annual Report on
Form 10-K for the year ended December 31, 1999. The results of operations for
the first quarter ended April 2, 2000, are not necessarily indicative of the
results for the full year.
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):
April 2, Dec. 31,
2000 1999
-------------- -------------
Finished and semi-finished products $413.7 $297.1
Raw materials 126.3 113.7
Stores and supplies 78.4 79.1
-------------- -------------
$618.4 $489.9
============== =============
D - ASSET WRITE-DOWNS AND EMPLOYEE TERMINATION COSTS
During 1999, the company recorded a pretax charge of $18.9 million ($17.5
million in cost of sales and $1.4 million in selling and administrative
expenses) associated with the shutdown and disposal of four uncoated paper
machines at the Rumford, Maine, paper mill. The charge included asset
write-downs, contractual obligations for severance costs including medical,
dental and other benefits, impairment charge to adjust the carrying amount of
machinery and equipment and related spare parts included in stores and supplies
inventory to their estimated fair values, and a write off of an investment in a
joint venture as a result of the permanent decline in its value. The severance
costs related to 113 salaried and hourly employees, all of whom left the company
on or before the end of the first quarter of 2000. The balance related to
severance charges, which had not been paid at
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December 31, 1999, was $2.7 million, all of which was paid during the first
quarter.
E - SHAREOWNERS' EQUITY
The company has outstanding authorization from the Board of Directors to
repurchase up to ten million common shares; however, no shares were repurchased
during the first quarter of 2000.
Comprehensive earnings for the quarters ended April 2, 2000 and April 4, 1999,
were $18.8 million and $25.1 million. The difference between net earnings and
comprehensive earnings for the first quarter ended April 2, 2000 relates to the
change in foreign currency translation adjustment, unrealized loss on
available-for-sale securities and additional minimum pension liability.
F - ADDITIONAL INFORMATION ON CASH FLOWS
First Quarter Ended
--------------------------------
April 2, April 4,
2000 1999
--------------------------------
Cash paid for:
Interest $ 45.1 $ 42.5
============== =============
Income taxes $ 30.5 $ 5.1
============== =============
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G - SEGMENT INFORMATION
First Quarter Ended
-----------------------------
April 2, April 4,
2000 1999
--------- ---------
Net sales:
Industry segments:
Paper $ 454.9 $ 453.9
Packaging and Paperboard 369.2 347.7
Consumer & Office Products 91.5 61.6
--------- ---------
Total $ 915.6 $ 863.2
========= =========
Earnings (loss) from operations
before income taxes:
Industry segments:
Paper $ 51.4 $ 46.1
Packaging and Paperboard 42.2 24.6
Consumer & Office Products (11.9) 1.4
Corporate and other (1) (48.6) (41.4)
--------- ---------
Total $ 33.1 $ 30.7
========= =========
(1) Corporate and other includes the following:
Other revenues $ 2.0 $ 4.0
Interest expense (29.7) (26.7)
Other expenses (20.9) (18.7)
--------- ---------
Total $ (48.6) $ (41.4)
========= =========
Identifiable assets have not changed significantly at April 2, 2000, compared to
December 31, 1999.
H - RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with current year
presentation. In the first quarter, the company changed the presentation of its
income statement to include Cost of Sales and Selling and Administration
Expenses under the heading of Costs and Expenses, eliminating the Gross Margin
line. This change conforms the company's presentation to more closely compare
to that of other companies in its industry.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS
- ---------------------
Net Sales
- ---------
First quarter net sales were $915.6 million, a 6% increase over $863.2 million
in the first quarter of 1999. The increase in sales revenue was primarily from
higher selling prices for corrugating medium and coated paper and from the
addition of sales of AT-A-GLANCE which was acquired in the fourth quarter of
1999 as part of the Consumer and Office Products segment. Without AT-A-GLANCE,
sales would have increased 3%.
Costs and expenses
- ------------------
Costs of sales of $735.7 million increased 3% from $715.9 million in 1999
primarily as a result of the AT-A-GLANCE acquisition. Selling and administrative
expenses of $118.6 million increased 26% from $93.9 million in 1999. Without the
impact of AT-A-GLANCE, the increase would have been 4%. The increase includes
spending related to the implementation of the company's enterprise resource
planning system.
Interest and debt expense
- -------------------------
First quarter interest and debt expense of $29.7 million increased 11% from
$26.7 million in the first quarter of 1999. The increase reflected a higher
level of borrowing for three acquisitions in the second half of 1999 that
included: AT-A-GLANCE; the Devon Valley, England, specialty paper mill; and
Comercializadora ZAE, school products distribution business in Mexico.
Income taxes
- ------------
The effective income tax rate was 36.2%, essentially unchanged from the 1999
rate.
Equity in net earnings of investees
- -----------------------------------
Mead's share of earnings from investees was $4 million compared to $3.3 million
in the first quarter of 1999. Earnings in the first quarter of 2000 were
primarily from the oriented strand board facility (OSB) in Bemidji, Minnesota,
known as Northwood Panelboard. Earnings in the first quarter of 1999 included
the results of the pulp and lumber operations of Northwood Inc. that Mead sold
in the fourth quarter of 1999.
Net earnings
- ------------
Net earnings for the first quarter of 2000 of $25.1 million increased 10% from
the level of net earnings in the first quarter of 1999. The increase was a
result of higher selling prices for corrugating medium, slightly higher prices
for coated paper offset somewhat by the seasonal loss in the Consumer & Office
Products segment. The acquisition of AT-A-GLANCE, which occurred in the fourth
quarter of 1999, changed the historical pattern of seasonality of the
company's Consumer & Office Products segment which was set by the timing of the
back-to-school selling season of late spring and summer. Consumers generally
purchase AT-A-GLANCE products such as calendars, planners and time-management
products in the second half of the year, and the business incurs an operating
loss in the first quarter.
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Financial Data by Business
- --------------------------
Paper segment
First Quarter
-----------------------------------
2000 1999 % Change
-----------------------------------
(All dollar amounts in millions)
Net sales (to unaffiliated customers) $454.9 $453.9 --
Segment earnings before taxes 51.4 46.1 11%
Sales in the paper segment were essentially unchanged from last year's first
quarter. Earnings for the segment were 11% above prior year. The increase
reflected higher selling prices for coated paper. Shipments of coated and
carbonless paper were essentially unchanged from the first quarter levels of
1999, while sales of uncoated paper were lower as a result of the closure of
four uncoated paper machines at the Maine mill at the end of 1999. During the
quarter, the company made the decision to permanently shutdown an older paper
machine that produces base stock for carbonless paper at the Ohio mill. The
machine, which will be shut down in the second quarter, has the capacity to
produce approximately 115 tons per day. The decision was part of a plan to
consolidate production of carbonless paper on the mill's largest, most efficient
machine. In addition, the company has idled indefinitely another small uncoated
paper machine (70 tons per day) at the Ohio mill. Segment earnings were reduced
by approximately $3 million pretax as a result of a higher level of depreciation
related to the machine shutdown and an operating loss at the Devon Valley
industrial specialty paper mill which was acquired in the second half of 1999.
During the quarter, the company completed the conversion of a former uncoated
paper machine to a pulp dryer at the Maine mill enabling the sale of its excess
pulp.
Packaging and Paperboard segment
First Quarter
-------------------------------------
2000 1999 % Change
-------------------------------------
(All dollar amounts in millions)
Net sales (to unaffiliated customers) $369.2 $347.7 6%
Segment earnings before taxes 42.2 24.6 72%
Sales in the packaging and paperboard segment increased 6% from the first
quarter of 1999. Earnings increased 72% over the prior year as a result of
higher selling prices for corrugating medium and containers. Pricing for
corrugating medium increased over 50% from the first quarter of 1999. The
effect on earnings of improved pricing was partially offset by higher costs
of recycled fiber used in the production of corrugating medium and coated
paperboard. The Stevenson, Alabama, corrugating medium mill operated well
during the quarter. Production and shipment volume increased over the levels
of the first quarter of 1999. Results for Mead's Coated Board System, which
includes the Packaging and Coated Board divisions, were weaker
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in the first quarter of 2000 compared to the prior year. Weaker results were
based on the impact of higher raw material costs for the Coated Board
division's solid wood products business, lower sales volume in North America
and foreign currency exchange rates on European operations.
Consumer & Office Products segment
First Quarter
---------------------------------
2000 1999 % Change
---------------------------------
(All dollar amounts in millions)
Net sales (to unaffiliated customers) $91.5 $61.6 49%
Segment earnings (loss) before taxes (11.9) 1.4 NM
Sales in the Consumer & Office Products segment increased by 49% in the first
quarter of 2000 compared to the prior year primarily from the addition of
AT-A-GLANCE, which was acquired in the fourth quarter of 1999. The segment
reported a loss of $11.9 million compared to earnings of $1.4 million in the
first quarter of 1999. The results reflected a loss of approximately $15 million
pretax by AT-A-GLANCE due to the significant seasonality of the business. The
rest of the segment, which represents primarily school supplies, had improved
results compared to the prior year. The integration of the company's former
School and Office Products division with AT-A-GLANCE continued to proceed during
the quarter.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital on April 2, 2000 was $283 million compared to $230 million on
December 31, 1999. The current ratio was 1.3 at the end of the first quarter of
2000 compared to 1.2 at December 31, 1999. Inventories are generally higher in
the first quarter of the year as part of the seasonal build for the Consumer and
Office Products segment. Inventories of $618 million were up $100 million over
the first quarter of 1999. More than half of this increase was from the
acquisition of AT-A-GLANCE and the Devon Valley specialty paper mill. The
remainder of the increase reflected higher inventories of coated paper and
coated paperboard.
Borrowed capital (long-term debt) as a percentage of total capital (long-term
debt plus shareowner's equity) was 35.4% essentially unchanged from December
31,1999. Total debt to total capital at the end of the first quarter 2000 was
40.2% compared to 39% on December 31, 1999, reflecting the seasonality and
acquisition financing of Mead's Consumer and Office Products business.
Capital expenditures totaled $32.2 million for the first quarter of 2000
compared to $45.6 million for the first quarter of 1999.
At the end of the first quarter, Mead paid a fixed rate or capped rate on 63% of
its debt and paid a floating rate of interest on the remainder. A change of 1%
in the floating rate, on an annual basis, would result in a $.03 change in
earnings per share for the year. The estimated market
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value of long-term debt, excluding capital leases, was $37 million less than
the book value at the end of the first quarter of 1999.
OUTLOOK
- -------
During the quarter, Mead continued the multi-year implementation of an
enterprise resource planning ("ERP") software system across the company. Mead
expects to spend approximately $125 million to implement its ERP system between
1998 and 2002. In 2000 and 2001, Mead's Coated Board and Paper divisions are
scheduled to implement the ERP system with additional company divisions to
follow in 2001 and 2002.
While the impact of foreign currency fluctuations in European currencies is not
significant to the company's overall results, it can affect the results of
individual segments, primarily packaging and paperboard, as it did in the first
quarter of 2000.
Inflation in general is not expected to have a significant impact on the
company's results in 2000. However, costs for certain raw materials have
increased in 2000 and will affect the results of specific businesses. These
include costs for recycled fiber (primarily OCC) used in the production of
containerboard and coated paperboard, purchased pulp used in the company's
specialty paper businesses, and oil which impacts costs for transportation, fuel
oil and some petroleum-derived raw materials.
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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, 1999.
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
Reference is made to the first paragraph under "Item 3. Legal
Proceedings" in Mead's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 regarding Beazer East Inc. v. The Mead Corporation, C.A. No.
----------------------------------------
91-0408, filed in the United States District Court for the Western District of
Pennsylvania. In March, 2000, the District Court ruled on objections to the
report and recommendation of the magistrate judge, entering an allocation order
establishing Mead's share of recoverable costs at 67.5%. The District Court has
not yet determined the nature and scope of costs subject to recovery in the
proceeding. The allocation order is not subject to appeal at this time. A trial
regarding remaining issues will occur, if necessary, on an unspecified date
after January 21, 2001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
(10) Material Contracts:
(1) Corporate Annual Incentive Plan for 2000 in
which executive officers participate.
(2) Corporate Long Term Incentive Plan effective
2000 in which executive officers
participate.
(3) Restated Corporate Executive Capital
Accumulation Plan effective January 1, 2000
in which executive officers participate.
(4) Restated Directors Capital Accumulation Plan
effective January 1, 2000 in which directors
participate.
(27) Financial Data Schedule Quarter 1, 2000
(b) No current reports on Form 8-K were filed with the Commission
in the first quarter of 2000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 10, 2000
THE MEAD CORPORATION
- --------------------
(Registrant)
By: /s/ PETER H. VOGEL, JR.
-------------------------------------
Peter H. Vogel, Jr.
Vice President, Finance and Treasurer
(Chief Accounting Officer)
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<PAGE> 1
Exhibit 10(1)
THE MEAD CORPORATION
CORPORATE ANNUAL INCENTIVE PLAN
-------------------------------
2000
----
OBJECTIVE
- ---------
The objective of the Corporate Annual Incentive Plan is to recognize and reward
Mead's key executive officers and division leaders for achieving and sustaining
superior business financial results.
PARTICIPATION ELIGIBILITY
- -------------------------
All Officers of the Corporation are participants in this plan. In addition, the
formula of this plan provides funding for the annual incentives of all Corporate
Center employees.
PAYOUT ELIGIBILITY
- ------------------
Participants must be employees of the company, an affiliate or a subsidiary at
the end of the plan year to receive payout from this plan. An appropriate
proration of earned awards may be made in case of death, disability, retirement,
hire or transfer during the plan year. In such cases, the annual incentive
target will be pro-rated to reflect the months of service.
Provisions detailed in Attachment 1 and forming a part of this plan govern in
the event of a Change in Control of the company.
ANNUAL INCENTIVE TARGET
- -----------------------
The annual incentive target for each grade is the difference between Mead's
policy total cash compensation target and the midpoint. This target will be
adjusted annually, based on market total cash compensation data. The current
targets are shown in Attachment 2.
PAYOUT FUNDING
- --------------
The individual annual incentive target is multiplied by the Payout Factor under
this Plan. This Payout Factor is determined as:
Payout = Mead ROTC X Mead ROTC
----------------------- ------------
Factor Mead Cost of Capital FP Peers ROTC
where ROTC = (EAT + ((1 - Tax Rate) X Current Interest Expense)) X 100
---------------------------------------------------
(Average Equity + Average Long-Term Debt)
Mead's Forest Products peers (FP Peers) are comprised of those members of the
Paper Industry Compensation Association whose major business lines are similar
to the Mead business segments, and for which public financial reporting is
provided by Value Line Reports. For the 2000 plan year, these companies are
identified as:
Boise Cascade
Bowater
Georgia Pacific
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<PAGE> 2
International Paper
Potlatch
Smurfit-Stone
Temple-Inland
Westvaco
Weyerhaeuser
Willamette
The Compensation Committee may alter the membership of this FP Peer group as
corporate structures or market business lines of the indicated companies
changes.
The annual incentive payout is determined as:
Annual Incentive Payout = Annual Incentive Target X Payout Factor
While this formula determines an available pool of annual incentive dollars,
allocation of incentive awards to individuals is based solely on the criteria
for "Individual Payout Determination" defined in the following section.
INDIVIDUAL PAYOUT DETERMINATION
- -------------------------------
Payout under this Plan for all Participants will be determined by an assessment
of each individual's contribution to the business results for the performance
period. This assessment for each Participant shall be determined by that
participant's manager, subject to review of the CEO.
PAYOUT LIMITATIONS
- ------------------
Payout shall be limited on the basis of the following financial results of the
corporation:
1. There shall be no payout to any participant if any corporate earnings
are negative for the calendar year.
2. Maximum payout is 75% of target for any financial performance under
6.0% ROTC.
3. Payout is capped at 200% of target, for any level of performance.
ACCOUNTING FOR PAYOUT
- ---------------------
Payout will be estimated periodically and the required corporate accrual of
payout will be booked against earnings during the year. Approved incentive
payments will be prepared and expensed to earnings at the time of payout.
15
<PAGE> 3
RECOMMENDATIONS AND APPROVAL
- ----------------------------
The Compensation Committee approves this Plan, and reviews total funding and
individual payouts under the plan, and the amount, use and replenishment of any
reserve funds.
The CEO recommends all individual payouts to the Compensation Committee of the
Board of Directors for approval. Payouts for the CEO and the COO are recommended
to the Board of Directors by the Compensation Committee.
The Compensation Committee may also determine if payout will be in cash,
restricted stock, or replaced with stock options, or a combination thereof. The
Board of Directors may require a mandatory deferral of all or any portion of the
payout to ensure full deductibility of compensation to any executive.
ADMINISTRATION
- --------------
The Plan is administered by the Compensation Committee of the Board. The
Compensation Committee has delegated administration to the Corporate Vice
President, Human Resources.
RESERVED RIGHTS
- ---------------
The Mead Corporation reserves the right to alter, amend, suspend or terminate
any or all provisions of this Corporate Annual Incentive Plan, except such
actions shall neither inhibit nor hinder the rights of any individual with
respect to earned and credited awards which have been deferred. Designation of a
position as eligible for participation neither guarantees the individual a right
to an incentive payment nor a right to continued employment.
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Attachment 1
Effect of Change in Control
- ---------------------------
Notwithstanding any foregoing Plan provision to the contrary (and
notwithstanding any lack of satisfaction of any condition or requirement which
would otherwise apply to an award), immediately upon the occurrence of a Change
in Control (as defined in the next section hereof), (i) if the Change in Control
occurs after the completion of the performance period ending December 31, 1999
(the "Performance Period"), any award with respect to the Performance Period
which has already been determined, but has not yet been paid or deferred, shall
be immediately paid in full in cash to the respective Participant, (ii) if the
Change in Control occurs after the completion of the Performance Period, if no
awards have been determined with respect to the Performance Period, the amount
(if any) of each such award shall be immediately determined in accordance with
the provisions of the Plan and shall be immediately paid in full in cash to the
respective Participant, and (iii) if the Change in Control occurs during the
Performance Period (the `Change-in-Control Performance Period'), each
Participant shall immediately be paid a pro-rata award for the Performance
Period, the amount of which shall equal the product of multiplying the
Participant's individual incentive target by a fraction, the numerator of which
shall be the number of days in the Change-in-Control Performance Period which
have elapsed as of the date of the Change in Control, and the denominator of
which shall be the number of days in the Performance Period. Notwithstanding the
immediately preceding sentence, no amounts shall be paid pursuant thereto which
would, in the opinion of counsel selected by Mead'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 Mead, any person whose actions
result in a change in control of Mead or any person affiliated with Mead or such
person, would be subject to the tax imposed by Section 4999 of the Code.
Notwithstanding any provision to the contrary in the Plan, upon and after the
occurrence of a Change in Control, (i) the Compensation Committee shall have no
power to cause a Participant's award to be paid in any manner other than as a
cash lump sum, (ii) the Board of Directors shall have no power to require a
mandatory deferral of all or any portion of the award, and (iii) neither the
Compensation Committee, the Board of Directors nor any other person or entity
shall have the right to terminate or amend the Plan in any manner which would
adversely affect the rights or expectancies of a Participant with respect to
payment of an award pursuant to this section, as in effect immediately before
the Change in Control.
Definition of Change in Control
- -------------------------------
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 (as defined below), other than an offer
by Mead, if the offeror acquires Shares (as defined below) pursuant to such
Tender Offer; (ii) the date of approval by the shareholders of Mead of a
definitive agreement: (x) for the merger or consolidation of Mead or any direct
or indirect subsidiary of Mead into or with another corporation, other than (1)
a merger or consolidation which would result in the voting securities of Mead
17
<PAGE> 5
outstanding immediately prior thereto continuing to represent ((i) in the case
of a merger or consolidation of Mead, 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 Mead, either by remaining outstanding if Mead 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 Mead 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 Mead (or
similar transaction) in which no Person (as defined below) is or becomes the
Beneficial Owner (as defined below), directly or indirectly, of securities of
Mead (not including in the securities Beneficially Owned by such Person any
securities acquired directly from Mead or its Affiliates) representing 25% or
more of the combined voting power of Mead's then outstanding securities, or (y)
for the sale or disposition of all or substantially all of the assets of Mead,
other than a sale or disposition by Mead for all or substantially all of Mead'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 Mead
in substantially the same proportions as their ownership of Mead immediately
prior to such sale or disposition;
(iii) (x) any Person is or becomes the Beneficial Owner of 25% or more of the
voting power of the then outstanding securities of Mead (not including in the
securities beneficially owned by such Person any securities acquired directly or
indirectly from Mead 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 Mead 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 Mead) who were elected, or were nominated for election by Mead'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 Mead 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 Mead immediately
following such transaction or series of transactions.
`Affiliate' shall have the meaning set forth in Rule 12b-2 promulgated under
Section 12 of the Exchange Act.
18
<PAGE> 6
`Beneficial Owner' shall have the meaning defined in Rule 13d-3 under the
Exchange Act.
`Exchange Act' shall mean the Securities Exchange Act of 1934, as amended from
time to time.
`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) Mead or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of Mead 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 Mead in substantially the same proportions as
their ownership of stock of Mead.
`Shares' shall mean shares of common stock, without par value, of The Mead
Corporation.
`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.
19
<PAGE> 7
Attachment 2
CORPORATE ANNUAL INCENTIVE PLAN
-------------------------------
PAYOUT TARGETS
--------------
2000
----
2000 2000 Annual Policy
Grade Midpoint Incentive Target TCC Target
----- -------- ---------------- ----------
33 $843,108 $834,700 $1,677,808
32 735,876 692,700 1,428,576
31 640,932 571,200 1,212,132
30 559,344 471,000 1,030,344
29 487,728 385,900 873,628
28 424,860 316,800 741,660
27 369,804 260,400 630,204
26 321,492 214,800 536,292
25 279,072 178,300 457,372
24 243,372 150,200 393,572
23 213,132 128,200 341,332
22 190,176 109,570 299,746
21 167,724 91,160 258,884
20
<PAGE> 1
Exhibit 10(2)
THE MEAD CORPORATION
--------------------
THE CORPORATE LONG TERM INCENTIVE PLAN
--------------------------------------
2000
----
OBJECTIVE
- ---------
The objective of the Corporate Long Term Incentive Plan is to reward senior
executives for adding value to the Corporation by delivering shareholder value
that is that ranks high relative to shareholder value achieved by the S&P 500
index and by Mead's Forest Products peers.
TERM OF THE PLAN
- ----------------
This Corporate Long Term Incentive Plan is a two year plan spanning 1998 and
1999, with the performance period ending December 31, 2000. The next Long Term
Incentive Plan covers the period 2000 and 2001, with the performance period
ending December 31, 2001. All eligible executives are thus participants in two
plan cycles at any time.
Provisions detailed in Attachment 1 and forming a part of this plan govern in
the event of a Change in Control of the company.
PARTICIPATION ELIGIBILITY
- -------------------------
All Officers of the Corporation, Division Presidents and Executives of salary
grade 23 or above are participants in the plan.
PAYOUT ELIGIBILITY
- ------------------
Participants must be employees of the company, an affiliate or a subsidiary at
the end of the two-year plan performance period to receive payout from this
plan. An appropriate proration of earned awards may be made in case of death,
disability, retirement, hire or transfer during the second year of the
performance period. In such cases, the incentive target will be pro-rated to
reflect the months of service. There will be no such adjustment for death,
disability, or retirement during the first year of the performance period.
LONG TERM INCENTIVE TARGET
- --------------------------
The 2000 Long Term Incentive Target by grade is shown in Attachment 2. This
Target will be adjusted annually, based on competitive data.
TOTAL PAYOUT DETERMINATION
- --------------------------
This plan uses as the key performance measure, the 2-year Total Shareholder
Return - TSR - (stock price growth plus dividend reinvestment) of Mead relative
to two comparator groups:
1. The S&P 500 Index.
2. Mead's Forest Products peers (FP PEERS), comprising of those members
of the Paper Industry Compensation Association whose major business
lines are similar to the Mead business segments, and for which public
financial reporting is provided by Value Line Reports. For the plan
cycle ending December 31, 2000, these companies are identified as:
21
<PAGE> 2
Boise Cascade
Bowater
Georgia Pacific
International Paper
Potlatch
Smurfit/Stone Container
Temple-Inland
Westvaco
Weyerhaeuser
Willamette
For the current plan period, the TSR is measured on December 31, 1998 and
December 31, 2000.
A single matrix (Attachment 3) determines the Payout Factor on the basis of
Mead's TSR relative to the TSR of each of the above comparator groups.
The long term incentive payout is determined as:
L. T. Incentive Payout = L.T. Incentive Target X Payout Factor
INDIVIDUAL PAYOUT DETERMINATION
- -------------------------------
The above calculation will not normally be further adjusted for any Participant
on the basis of individual contribution, except by approval of the Compensation
Committee.
PAYOUT LIMITATIONS
- ------------------
Payout shall be limited on the basis of the following financial results for the
corporation:
1. The Committee may, but is not obligated to, determine a ZERO payout if
Mead TSR is negative, even if Mead TSR exceeds either or both
comparator groups.
2. There shall be no payout to any participant if corporate earnings are
negative in the final year of the performance period.
3. Payout is capped at 200% of target, for any level of performance.
ACCOUNTING FOR PAYOUT
- ---------------------
Payout will be estimated periodically and the required corporate accrual of
payout will be booked against earnings during the year. Approved incentive
awards will be prepared and expensed to earnings at the time of payout.
Restricted stock certificates will be issued by the Transfer Agent of the
corporation.
RECOMMENDATIONS AND APPROVAL
- ----------------------------
The Compensation Committee approves this Plan, and reviews total funding and
individual payouts under the plan, and the amount, use and replenishment of any
reserve funds.
22
<PAGE> 3
The CEO recommends all individual payouts to the Compensation Committee of the
Board of Directors for approval. Payouts for the CEO and the COO are approved by
the Board of Directors.
Form of payout will be determined by the Compensation Committee. The Committee
anticipates that the payout will normally be delivered to all participants as
25% restricted stock (with a 6-month vesting period), and the balance in either
cash or as restricted stock, as elected by each participant. The Board of
Directors may require a mandatory deferral of all or any portion of the payout
to ensure full deductibility of compensation to any executive.
ADMINISTRATION
- --------------
The Plan is administered by the Compensation Committee of the Board. The
Compensation Committee has delegated administration to the Corporate Vice
President, Human Resources.
RESERVED RIGHTS
- ---------------
The Mead Corporation reserves the right to alter, amend, suspend or terminate
any or all provisions of this Corporate Long Term Incentive Plan, except such
actions shall neither inhibit nor hinder the rights of any individual with
respect to earned and credited awards which have been deferred. Designation of a
position as eligible for participation neither guarantees the individual a right
to an incentive payment nor a right to continued employment.
23
<PAGE> 4
Attachment 1
Effect of Change in Control
- ---------------------------
Notwithstanding any foregoing Plan provision to the contrary (and
notwithstanding any lack of satisfaction of any condition or requirement which
would otherwise apply to an award), immediately upon the occurrence of a Change
in Control (as defined in the next section hereof), (i) if the Change in Control
occurs after the completion of the performance period ending December 31, 1999
(the "Performance Period"), any award with respect to the Performance Period
which has already been determined, but has not yet been paid or deferred, shall
be immediately paid in full in cash to the respective Participant, (ii) if the
Change in Control occurs after the completion of the Performance Period, if no
awards have been determined with respect to the Performance Period, the amount
(if any) of each such award shall be immediately determined in accordance with
the provisions of the Plan and shall be immediately paid in full in cash to the
respective Participant, and (iii) if the Change in Control occurs during the
Performance Period (the `Change-in-Control Performance Period'), each
Participant shall immediately be paid a pro-rata award for the Performance
Period, the amount of which shall equal the product of multiplying the
Participant's individual incentive target by a fraction, the numerator of which
shall be the number of days in the Change-in-Control Performance Period which
have elapsed as of the date of the Change in Control, and the denominator of
which shall be the number of days in the Performance Period. Notwithstanding the
immediately preceding sentence, no amounts shall be paid pursuant thereto which
would, in the opinion of counsel selected by Mead'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 Mead, any person whose actions
result in a change in control of Mead or any person affiliated with Mead or such
person, would be subject to the tax imposed by Section 4999 of the Code.
Notwithstanding any provision to the contrary in the Plan, upon and after the
occurrence of a Change in Control, (i) the Compensation Committee shall have no
power to cause a Participant's award to be paid in any manner other than as a
cash lump sum, (ii) the Board of Directors shall have no power to require a
mandatory deferral of all or any portion of the award, and (iii) neither the
Compensation Committee, the Board of Directors nor any other person or entity
shall have the right to terminate or amend the Plan in any manner which would
adversely affect the rights or expectancies of a Participant with respect to
payment of an award pursuant to this section, as in effect immediately before
the Change in Control.
Definition of Change in Control
- -------------------------------
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 (as defined below), other than an
offer by Mead, if the offeror acquires Shares (as defined below)
pursuant to such Tender Offer;
(ii) the date of approval by the shareholders of Mead of a definitive agreement:
(x) for the merger or consolidation of Mead or any direct or indirect subsidiary
of Mead into or with another corporation,
24
<PAGE> 5
other than (1) a merger or consolidation which would result in the voting
securities of Mead outstanding immediately prior thereto continuing to represent
((i) in the case of a merger or consolidation of Mead, 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 Mead, either by remaining outstanding if Mead
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 Mead 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 Mead (or similar transaction) in which no Person (as defined
below) is or becomes the Beneficial Owner (as defined below), directly or
indirectly, of securities of Mead (not including in the securities Beneficially
Owned by such Person any securities acquired directly from Mead or its
Affiliates) representing 25% or more of the combined voting power of Mead's then
outstanding securities, or (y) for the sale or disposition of all or
substantially all of the assets of Mead, other than a sale or disposition by
Mead for all or substantially all of Mead'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 Mead in substantially the same proportions as
their ownership of Mead immediately prior to such sale or disposition;
(iii) (x) any Person is or becomes the Beneficial Owner of 25% or more of the
voting power of the then outstanding securities of Mead (not including in the
securities beneficially owned by such Person any securities acquired directly or
indirectly from Mead 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 Mead 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 Mead) who were elected, or were nominated for election by Mead'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 Mead 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 Mead immediately
following such transaction or series of transactions.
`Affiliate' shall have the meaning set forth in Rule 12b-2 promulgated under
Section 12 of the Exchange Act.
25
<PAGE> 6
`Beneficial Owner' shall have the meaning defined in Rule 13d-3 under the
Exchange Act.
`Exchange Act' shall mean the Securities Exchange Act of 1934, as amended from
time to time.
`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) Mead or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of Mead 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 Mead in substantially the same proportions as
their ownership of stock of Mead.
`Shares' shall mean shares of common stock, without par value, of The Mead
Corporation.
`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.
26
<PAGE> 7
Attachment 2
THE CORPORATE LONG TERM INCENTIVE PLAN
--------------------------------------
PAYOUT TARGETS
--------------
2000
Grade Incentive Target
------- ----------------
33 $ 834,700
32 692,700
31 571,200
30 471,000
29 385,900
28 316,800
27 260,400
26 214,800
25 178,300
24 146,000
23 125,800
22 75,700
21 59,300
27
<PAGE> 8
Attachment 3
Mead Long Term Incentive Payout
-------------------------------
For 1999-2000 Performance Cycle
Payout - % of Target
--------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
+35% 1.70 0% 136% 153% 170% 187% 200% 200% 200% 200%
+30% 1.60 0% 128% 144% 160% 176% 192% 200% 200% 200%
+25% 1.50 0% 120% 135% 150% 165% 180% 195% 200% 200%
+20% 1.40 0% 112% 126% 140% 154% 168% 182% 196% 200%
+15% 1.30 0% 104% 117% 130% 143% 156% 169% 182% 200%
+10% 1.20 0% 96% 108% 120% 132% 144% 156% 168% 200%
Mead 2-Yr TSR +5% 1.10 0% 88% 99% 110% 121% 132% 143% 154% 187%
Relative to Average 1.00 0% 80% 90% 100% 110% 120% 130% 140% 170%
S&P 500 -5% 0.90 0% 72% 81% 90% 99% 108% 117% 126% 153%
-10% 0.80 0% 64% 72% 80% 88% 96% 104% 112% 136%
-15% 0.70 0% 56% 63% 70% 77% 84% 91% 98% 119%
-20% 0.60 0% 48% 54% 60% 66% 72% 78% 84% 102%
-25% 0.50 0% 40% 45% 50% 55% 60% 65% 70% 85%
-30% 0.40 0% 32% 36% 40% 44% 48% 52% 56% 68%
-35% 0.30 0% 24% 27% 30% 33% 36% 39% 42% 51%
-40% 0.20 0% 16% 18% 20% 22% 24% 26% 28% 34%
-45% 0.10 0% 8% 9% 10% 11% 12% 13% 14% 17%
-50% 0.00 0% 0% 0% 0% 0% 0% 0% 0% 0%
Multipliers 0 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.70
7-11 6 5 4 3 2 1 1
Median Top Top Top
Max Payout: 200% Mead vs. Forest Products
Ranking of 2-Year Total Shareholder Return (TSR)
</TABLE>
28
<PAGE> 1
Exhibit 10(3)
THE MEAD CORPORATION
EXECUTIVE CAPITAL ACCUMULATION PLAN
-----------------------------------
(As Amended and Restated Effective January 1, 2000)
29
<PAGE> 2
TABLE OF CONTENTS
SECTION 1 - GENERAL........................................................... 1
1.1 Purpose and Effective Date..................................... 1
1.2 Plan Funding and Administration................................ 1
1.3 Applicable Law................................................. 2
1.4 Gender and Number.............................................. 2
1.5 Assignment..................................................... 2
1.6 Plan Year...................................................... 2
1.7 Supplements.................................................... 2
1.8 Plan Elections................................................. 2
SECTION 2 - PARTICIPATION..................................................... 3
2.1 Participation Requirement...................................... 3
2.2 Continued Participation........................................ 3
2.3 Participation Not Contract of Employment....................... 3
SECTION 3 - DEFERRAL OF INCOME................................................ 4
3.1 Deferred Income Amount......................................... 4
3.2 Certain Conditions Relating to Income Deferral................. 4
3.3 Annual Election to Participate................................. 6
3.4 Additional Elections to Defer.................................. 6
SECTION 4 - PARTICIPANT ACCOUNTS.............................................. 7
SECTION 5 - ROLLOVERS......................................................... 7
5.1 ICEP Rollovers................................................. 7
5.2 SERP Rollovers................................................. 7
5.3 Excess Plan Rollovers.......................................... 7
5.4 415 Plan Rollovers............................................. 8
SECTION 6 - CREDITING OPTIONS................................................. 8
6.1 Establishment of Crediting Options............................. 8
6.2 Participant Change of Crediting Options........................ 9
SECTION 7 - ADJUSTMENT OF PARTICIPANT ACCOUNTS................................ 9
7.1 Adjustment of Participants' Participant Accounts............... 9
7.2 Matching Amount............................................... 10
7.3 Quarterly Statement of Participant Accounts Balances.......... 10
SECTION 8 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO PARTICIPANTS............. 11
8.1 Annual Distributions.......................................... 11
8.2 Interim Distributions......................................... 11
30
<PAGE> 3
8.3 Emergency Distributions....................................... 12
8.4 Elective Distributions........................................ 13
8.5 Change in Control Distributions............................... 13
8.6 Withholding................................................... 13
SECTION 9 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO BENEFICIARIES............ 13
9.1 Distribution to Beneficiary................................... 13
9.2 Beneficiary................................................... 14
SECTION 10 - DISTRIBUTIONS TO INCAPACITATED PERSONS.......................... 14
SECTION 11 - SECTION 162(m) LIMITATION ON DISTRIBUTIONS...................... 14
11.1 Tentative Section 162(m) Determination........................ 14
11.2 Tentative Determination Amount Not in Excess of 162(m) Limit.. 15
11.3 Tentative Determination Amount in Excess of 162(m) Limit...... 15
11.4 Change in Control............................................. 16
11.5 Certain Definitions........................................... 18
SECTION 12 - DISPUTE RESOLUTION.............................................. 19
12.1 Notice of Denial.............................................. 19
12.2 Notice of Appeal.............................................. 19
12.3 Decision on Appeal............................................ 19
SECTION 13 - AMENDMENT AND TERMINATION....................................... 20
EXHIBIT I - CREDITING OPTIONS
SUPPLEMENT A
31
<PAGE> 4
THE MEAD CORPORATION
EXECUTIVE CAPITAL ACCUMULATION PLAN
-----------------------------------
SECTION 1 - GENERAL
-------------------
1.1 Purpose and Effective Date. Effective January 1, 1995, The Mead
--------------------------
Corporation ("Mead"), an Ohio corporation, established The Mead Corporation
Executive Capital Accumulation Plan (the "Plan"). The Plan was subsequently
amended from time to time and the following provisions constitute a further
amendment, restatement and continuation of the Plan, effective January 1, 2000.
The purpose of the Plan continues to be to provide recurring annual
opportunities for the deferment of payment of certain amounts otherwise
currently payable to its "Eligible Employees" (as defined below) and those of
any "Affiliate" (as defined below) who meet the requirements to become a
"Participant" set forth in subsection 2.1. Mead and such Affiliates are
sometimes referred to below, individually, as an "Employer" and, collectively,
as the "Employers". The term "Eligible Employee" means any employee of an
Employer:
(a) who is employed in the United States of America or to whom
the Plan has been extended by the Compensation Committee of
the Board of Directors of Mead (the "Committee") or its
delegate; and
(b) who either:
(i) is compensated by his Employer at a salary grade at
least equivalent to Mead's salary grade 19; or
(ii) has compensation that exceeds an amount equal to the
amount taken into account for purposes of section 415
of the Internal Revenue Service Code of 1986 (the
"Code") and who is designated by the Committee or its
delegate as an Eligible Employee, but only for such
period as the Committee or its delegate shall decide.
The term "Affiliate" means any entity during the period that it is, along with
Mead, a member of a controlled group of corporations, a controlled group of
trades and businesses, an affiliated service group or any other entity
designated by the Secretary of the Treasury (as described in sections 414(b),
414(c), 414(m), and 414(o), respectively, of the Code.
1.2 Plan Funding and Administration. The benefits payable under the
-------------------------------
Plan are unfunded and are payable, when due, from the general assets of Mead;
provided, however, that Mead, in its
32
<PAGE> 5
discretion, may establish or maintain a trust to pay such amounts, which trust
shall be subject to the claims of Mead's unsecured general creditors in the
event of Mead's bankruptcy or insolvency; and provided, further, that Mead shall
remain responsible for the payment of any such amounts which are not so paid by
any such trust. The Plan shall be administered by a "Plan Administrator" who is
appointed by, and serves at the pleasure of, the Committee and who has the
rights, powers and duties with respect to the Plan that are hereinafter set
forth and such other rights, powers and duties as are reasonably necessary for
the administration of the Plan. As of the effective date, the Plan Administrator
is the Vice President-Human Resources of Mead except as to distributions and
dispute resolution matters relating to him.
1.3 Applicable Law. The Plan will be construed and administered in
--------------
accordance with the laws of the State of Ohio to the extent that those laws are
not preempted by the laws of the United States of America.
1.4 Gender and Number. Where the context admits, words in any gender
-----------------
will include any other gender, words in the singular will include the plural and
the plural will include the singular.
1.5 Assignment. No Plan right or interest of any Participant or
----------
Beneficiary shall be assignable or transferable, in whole or in part, either
directly or otherwise, including without limitation thereto, by execution, levy,
attachment, garnishment, pledge or in any other manner, but excluding transfers
by death or mental incompetency; no attempted assignment or transfer thereof
shall be effective; and no such right or interest shall be liable for, or
subject to, any obligation or liability of any Participant or Beneficiary;
except that a Participant may direct that payments be made during his lifetime,
when due, to a trust established by him and evidenced to his Employer to be a
trust treated as a grantor trust within the meaning of section 671 of the Code.
1.6 Plan Year. The term "Plan Year" means the calendar year.
---------
1.7 Supplements. The provisions of the Plan, as applied to all or
-----------
any group of Participants, may be modified or supplemented by "Supplements" to
the Plan. Any such Supplement shall form a part of the Plan as of its effective
date and be attached thereto. Effective as of January 1, 2000 a Supplement A
forms a part of the Plan. Supplement A modifies certain investment, accounting
and distribution provisions of the Plan as it applies to "Supplement A
Individuals" (as defined in Supplement A).
1.8 Plan Elections. Except as otherwise specifically provided, any
--------------
election required or permitted to be made under the
33
<PAGE> 6
Plan will be deemed to have been properly made and filed with the Plan
Administrator if made by such method as the Plan Administrator may require.
SECTION 2 - PARTICIPATION
- -------------------------
2.1 Participation Requirement. An employee of the Employers who is
-------------------------
a Participant in the Plan on December 31, 1999 will continue as such, subject to
the terms and conditions of the Plan. Each other employee of the Employers will
become a Participant in the Plan as of January 1, 2000, or on any subsequent
January 1, if on such January 1 he:
(a) is an Eligible Employee;
(b) has executed an Annual Participation Election form (as
described in subsection 3.3); and
(c) has executed such forms as the Plan Administrator may
determine necessary to permit Mead (at its discretion
and expense) to maintain a policy of insurance on his
life under the terms of which Mead shall be the
policyholder, owner and beneficiary.
Each employee of the Employers who becomes an Eligible Employee on or after
January 1, 2000 will become a Participant in the Plan (on a prospective basis)
on the earlier of the date on which the Plan Administrator has received his
executed Annual Participation Election form if that date is within 30 days of
the date he becomes an Eligible Employee or on any subsequent January 1 if he
then meets the requirements set forth in paragraphs (a) through (c) above.
2.2 Continued Participation. Until distribution of the entire
-----------------------
balances of a Participant's "Participant Accounts" (as described in Section 4)
has been made, a Participant or, in the event of his death, any "Beneficiary"
(as defined in subsection 9.2) of any of the Participant's undistributed
Participant Accounts, as the case may be, will be considered and treated as a
Participant for all purposes of the Plan, except that any additional
compensation (other than severance benefits) deferral or "401(k) Top-Up
Contribution" (each as described in subsection 3.1) shall cease:
(a) as of the first day of the month next following the
date on which he is no longer an Eligible Employee; and
(b) for any period during which his right to make
"Before-tax Contributions" under The Mead 401(k) Plan
(the "401(k) Plan") is suspended by reason of
34
<PAGE> 7
a Financial Hardship distribution made to him under the
terms of that plan.
2.3 Participation Not Contract of Employment. The Plan does not
----------------------------------------
constitute a contract of employment and participation in the Plan does not give
any employee the right to be retained in the employ of the Employers nor give
any person any right or claim to any benefit under the terms of the Plan unless
such right or claim has specifically accrued under the terms of the Plan.
SECTION 3 - DEFERRAL OF INCOME
- ------------------------------
3.1. Deferred Income Amount. Subject to the provisions of
----------------------
subsection 3.2, by entering into a written Annual Election to Participate as
provided by subsection 2.1, a Participant may elect:
(a) to defer a portion of the amount of the base salary,
the annual incentive pay (which, for purposes of the
Plan, shall include any spot bonus) and the cash
portion of the long-term incentive pay that would
otherwise be payable to him for services performed
during the period that the Annual Election to
Participate is effective;
(b) whether or not he has made an election pursuant to
paragraph (a) above, a Participant who has elected to
make the maximum Before-tax Contribution that he is
permitted under the 401(k) Plan for the period for
which the Annual Election to Participate is effective
may elect to make a 401(k) Top-Up Contribution for
that period; and
(c) to defer a retention bonus or a severance benefit.
The term "401(k) Top-Up Contribution" means an
additional deferral amount which begins in the month
that the maximum Before-tax contribution allowed
under the 401(k) Plan is reached. The monthly amount
of the additional deferral is calculated by
multiplying the deferral percentage elected under the
401(k) Plan by the salary and incentive compensation
that would be eligible for Before-tax Contributions
to the 401(k) Plan (but for section 402(g) of the
Code and any 401(k) Plan limitations) for the month
and subtracting from such product the amount, if any,
of Before-tax Contributions to the 401(k) Plan for
such month. The deferral percentage used for purposes
of the 401(k) Top-Up Contribution is the percentage
currently elected under the 401(k) Plan for
Before-tax Contributions. Subject to the
35
<PAGE> 8
provisions of paragraph 7.1(d), a Participant's
401(k) Top-Up Contribution and a portion of his other
additional deferral during any month shall be
credited with a "Matching Amount" (as described in
subsection 7.2).
3.2 Certain Conditions Relating to Income Deferral. Deferrals of income
----------------------------------------------
permitted by subsection 3.1 are subject to the following:
(a) The amount of a Participant's annual base salary
deferral:
(i) shall not exceed 80 percent of the amount of
that salary, determined as of the last day
of the month during which the election is
made;
(ii) shall, at a Participant's election made on
his written Annual Election to Participate,
be automatically increased by an amount
equal to all or any part of the amount of
the income realized by the Participant on
the exercise of non-qualified stock options
and the exercise of incentive stock options
immediately followed by the sale of the
underlying shares, subject to the
limitations of paragraph (i) next above and
to the following:
(A) the amount of increased deferral
shall:
(1) not exceed an amount equal
to the Participant's
remaining unpaid annual
base salary for the year
of exercise;
(2) be made in equal monthly
increments, beginning with
the calendar month next
following the month of
exercise of the stock
option and continuing for
the remainder of the
calendar year;
(B) a Participant may not elect an
increased deferral with respect to
income realized on account of his
exercise of a stock option during
the month of December of any
calendar year; and
(C) if a Participant is subject to stock
ownership guidelines established by
Mead, the increased deferral
36
<PAGE> 9
contemplated by this paragraph
3.2(a) is conditioned on the
Participant's conformance with those
guidelines.
(b) a Participant may defer up to 80 percent of the
amount of his annual incentive pay and of any spot
bonus paid in lieu of incentive pay;
(c) a Participant may defer up to 100 percent of the
amount of the cash portion of his long-term incentive
pay, spot bonuses (other than spot bonuses paid in
lieu of incentive pay), retention bonuses and
severance benefits;
(d) all deferrals shall be expressed in multiples of 1
percent; and
(e) in no event shall any portion of the amount of any
excess Before-tax Contribution returned to a
Participant in accordance with the terms of the
401(k) Plan be subject to deferral under this Plan.
3.3 Annual Election to Participate. The term "Annual Election to
------------------------------
Participate" means a written agreement, in a form furnished by the Plan
Administrator, entered into by and between a Participant and his Employer with
respect to a calendar year and setting forth:
(a) the deferral percentages elected by the Participant
in accordance with paragraphs 3.1(a) and (b) for that
calendar year;
(b) the percentage of his total deferral that is
allocated to each of the "Crediting Options" (as
described in subsection 6.1) selected by him;
(c) the "Distribution Period" (as defined below) that he
elects to be applicable with respect to the amounts
deferred pursuant to that Annual Election to
Participate and, if applicable, the "Interim
Distribution" amount or percentage that he elects to
have applicable to such amounts as permitted by
subsection 8.2; and
(d) subject to the provisions of paragraph 8.1(b), the
calendar year in which the Distribution Period is to
commence.
Each Annual Election to Participate shall be irrevocable by the Participant
after the last day of the calendar month preceding its effective date. The term
"Distribution Period" means, with
37
<PAGE> 10
respect to any Participant Account, a period of 5, 10, 15 or 20 calendar years
as elected by the Participant for whom the Account is maintained.
3.4 Additional Elections to Defer. A written agreement, in a form
-----------------------------
furnished by the Plan Administrator, can be entered into by and between a
Participant and his Employer to defer amounts listed in paragraph 3.1(c). The
election to defer any such amount must be made by one of the following dates
that is applicable:
(a) with respect to retention bonuses, within 30 days
after the employee is notified that he is eligible
for such bonus, but before such amount becomes
payable; and
(b) with respect to a severance benefit, before such
benefit has been agreed.
SECTION 4 - PARTICIPANT ACCOUNTS
- --------------------------------
For each calendar year, the Plan Administrator shall cause a
Participant Account to be established and maintained by Mead in the name of each
Participant to reflect the amount of any deferrals that are the subject of the
Participant's Annual Election to Participate for that calendar year and of any
Matching Amounts attributable thereto. A Participant's Participant Accounts
shall be periodically adjusted as provided in subsection 7.1 and shall be
distributed to a Participant in accordance with the provisions of Section 8 or,
in the event of the Participant's death, to his Beneficiary in accordance with
the provisions of Section 9.
SECTION 5 - ROLLOVERS
- ---------------------
5.1 ICEP Rollovers. Notwithstanding any provision of the Plan to the
--------------
contrary, a Participant for whose benefit a balance is maintained under the
Incentive Compensation Election Plan (the "ICEP") may elect, during December,
1994, to have that balance transferred to the Plan and credited to a separate
Participant Account (to be identified as his "ICEP Participant Account")
established hereunder as of January 1, 1995, subject to the following:
(a) In no event may a Participant elect to transfer to
this Plan any amount credited under the Supplement to
the ICEP.
(b) No ICEP rollover to the Plan shall be permitted after
January 1, 1995.
38
<PAGE> 11
(c) A Participant's Distribution Period with respect to
his ICEP Participant Account shall commence on the
date on which payment of his balance under the ICEP
would have commenced.
5.2 SERP Rollovers. Notwithstanding any provision of the Plan to the
--------------
contrary, if a Participant who is also a participant under The Mead Corporation
Supplemental Executive Retirement Plan (the "SERP") has elected, at the time and
in the manner permitted by the SERP, to have any amount otherwise payable to him
under the terms of the SERP transferred to this Plan and credited to a separate
Participant Account then such an Account (to be identified as his "SERP
Participant Account"), will be established hereunder as of the date payment
would have been made to him under the provisions of the SERP, subject to the
Participant's entering into an agreement setting forth the matters described in
paragraphs 3.3(b) through (d) of this Plan.
5.3 Excess Plan Rollovers. Notwithstanding any provision of the Plan to
---------------------
the contrary, if a Participant who is also a participant under The Mead
Corporation Excess Earnings Benefit Plan (the "Excess Plan") has elected, at the
time and in the manner permitted by the Excess Plan, to have any amount
otherwise payable to him under the terms of the Excess Plan transferred to this
Plan and credited to a separate Participant Account then such an Account (to be
identified as his "Excess Plan Participant Account") will be established
hereunder as of the date payment would have been made to him under the
provisions of the Excess Plan, subject to the Participant's entering into an
agreement setting forth the matters described in paragraphs 3.3(b) through (d)
of this Plan.
5.4 415 Plan Rollovers. Notwithstanding any provision of the Plan to
------------------
the contrary, if a Participant who is also a participant under The Mead
Corporation Section 415 Excess Benefit Plan (the "415 Plan") has elected, at the
time and in the manner permitted by the 415 Plan, to have any amount otherwise
payable to him under the terms of the 415 Plan transferred to this Plan and
credited to a separate Participant Account then such an Account (to be
identified as his "415 Plan Participant Account") will be established hereunder
as of the date payment would have been made to him under the provisions of the
415 Plan, subject to the Participant's entering into an agreement setting forth
the matters described in paragraphs 3.3(b) through (d) of this Plan.
SECTION 6 - CREDITING OPTIONS
- -----------------------------
6.1 Establishment of Crediting Options. The Committee shall designate
----------------------------------
"Crediting Options" (in such number and of such asset character as it shall
decide), the investment experience of which shall be applied in adjusting
Participants' Participant Accounts, as provided in subsection 7.1. The Crediting
Options
39
<PAGE> 12
available as of January 1, 2000 are set forth on Exhibit I of the Plan. On
advance written notice to the Participants, the Committee may cause any
Crediting Option to be prospectively deleted and may designate other Crediting
Options. In no event shall the assets of a Crediting Option be constituted of
securities of any Employer or Affiliate. Should any Employer determine to invest
any of its funds in the asset or assets constituting a Crediting Option, amounts
representing such investment shall be the sole property of that Employer and
shall be subject to the claims of its general creditors. No Participant or
Beneficiary shall have any claim or right with respect to any such amounts.
Notwithstanding the foregoing provisions of this subsection 6.1, upon and after
the occurrence of a "Change in Control" (as described in subsection 11.4), the
Committee shall have no power to eliminate any Crediting Option which was
available immediately prior to the Change in Control and, if any Crediting
Option shall be eliminated through circumstances beyond the control of the
Committee, the Committee shall immediately add a Crediting Option which will
provide an investment return equal to one-hundred-twenty percent (120%) of the
long-term Federal interest rate determined monthly under section 1274(d) of the
Code, compounded semi-annually.
6.2 Participant Change of Crediting Options. A Participant may elect:
---------------------------------------
(a) with respect to amounts to be credited to any
Participant Account on and after that day pursuant to
subsection 3.1, the portion (expressed as a multiple
of 1 percent) thereof that is to be adjusted pursuant
to subsection 7.1 to reflect the investment
experience of any Crediting Option (referred to below
as an "Adjustment Portion"); and
(b) that all or a portion (expressed as a multiple of 1
percent) of the amount of the aggregate balances of
the Participant Accounts then maintained for his
benefit that constitutes an Adjustment Portion be
changed to another Adjustment Portion.
SECTION 7 - ADJUSTMENT OF PARTICIPANT ACCOUNTS
- ----------------------------------------------
7.1 Adjustment of Participants' Participant Accounts. As of each
------------------------------------------------
"Accounting Date" (as defined below), the Plan Administrator shall cause each
Participant Accounts to be adjusted as follows:
(a) first, by charging to the proper Participant Accounts
-----
of each Participant the amount of any distribution
made to, or on account of, the Participant from the
Account since the last
40
<PAGE> 13
preceding Accounting Date and with the amount of any
forfeiture resulting from an Elective Distribution
made to him pursuant to the provisions of subsection
8.4, which charges shall be made, pro rata, according
to the Adjustment Portions of that Participant
Account;
(b) next, by adjusting each Participant Account
----
maintained on behalf of a Participant, upward or
downward, as the case may be, so that the balance of
the Participant Accounts equals the aggregate
investment experience for the accounting period ended
on that Accounting Date of the Adjustment Portions
elected by him and applicable to that Participant
Account as of that date;
(c) next, if the Accounting Date is the last day of a
----
calendar month, by crediting the last Participant
Account established on behalf of each Participant
with the amount of any deferrals made by him during
the month ending on that date, and with any Matching
Amount to be credited for that month, which amounts
shall be credited, pro rata, according to Adjustment
Portions elected by the Participant;
(d) next, if the Accounting Date is December 31 and if
----
the Participant has not made Before-Tax Contributions
under the 401(k) Plan for the calendar year ended on
that date equal to the lesser of the amount permitted
under section 402(g) of the Code for that year or the
amount permitted by the terms of the 401(k) Plan for
that year, by debiting the Participant Account
established on behalf of the Participant for the
calendar year ending on that December 31 with an
amount equal to the Matching Amount previously
credited to that Account, plus any increment
attributable thereto; and
(e) finally, by executing the Adjustment Portion change
-------
elections made pursuant to the provisions of
subsection 6.2 that are to be effective as of the
opening of business as of the next business day.
The term "Accounting Date" means each business day.
7.2 Matching Amount. A portion of the amount deferred, including the
---------------
401(k) Top-Up Contributions, is eligible for a "Matching Amount." Subject to the
provisions of paragraph 7.1(d), the Matching Amount is made monthly with respect
to a
41
<PAGE> 14
deferred amount which is equal to the product obtained by multiplying the
deferral percentage elected under the 401(k) Plan by the gross salary and other
cash compensation (except for long term incentive compensation and severance
benefits) payable during a month and subtracting from such product the portion
of the Before-tax Contribution transferred to the 401(k) Plan for such month and
that is eligible for a Matching Contribution thereunder. The deferral percentage
used for purposes of calculating the Matching Amount is the monthly percentage
in effect under the 401(k) Plan for Before-tax Contributions and for months
after the maximum contribution to the 401(k) Plan is reached, the deferral
percentage currently elected under the 401(k) Plan for the month that the
maximum contribution is reached, provided that the deferral percentage cannot
-------------
exceed the maximum percentage eligible for Matching Contributions pursuant to
the 401(k) Plan. The term "Matching Amount" means a credit with respect to the
deferral amount, as determined pursuant to this subsection 7.2. The Matching
Amount is equal to the Matching Contribution that would have been made on the
eligible deferred amount as described in this subsection 7.2 had such deferral
been made under the 401(k) Plan.
7.3 Quarterly Statement of Participant Accounts Balances. As soon
----------------------------------------------------
as practicable, but not more than 30 days after the last day of each calendar
quarter, the Plan Administrator shall provide each Participant with a statement
of the balances of his Participant Accounts as of that day.
SECTION 8 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO PARTICIPANTS
- ----------------------------------------------------------------
8.1 Annual Distributions. Except as otherwise provided in this
--------------------
Section 8, if a Participant's employment with the Employers and Affiliates is
terminated for any reason other than his death, and on the June 30 preceding his
initial "Distribution Payment Date" (as defined below) the aggregate balances of
his Participant Accounts equal at least $50,000, each of the Participant's
Participant Accounts will be distributed to him in annual "Installment
Distributions" (in the annual amount determined as provided below), made on or
about each Distribution Payment Date, beginning:
(a) in the case of a Participant whose employment
terminates at any age on account of "disability" (as
determined by the Plan Administrator) or for any
reason at or after reaching age 55 years, on or about
the Distribution Payment Date of the calendar year
elected by him; and
(b) in all other cases, and notwithstanding any previous
election, on or about the Distribution Payment Date
of the calendar year next following
42
<PAGE> 15
the calendar year during which his termination of
employment occurs;
and continuing for the number of calendar years constituting the Distribution
Period he has irrevocably elected with respect to that Participant Account. If
on the June 30 preceding his initial Distribution Payment Date the aggregate
balances of a Participant's Participant Accounts is an amount that is less than
$50,000, those balances shall be distributed to him on or about his initial
Distribution Payment Date in a single lump sum. The amount of the annual
"Installment Distribution" from a Participant Account for a calendar year shall
be equal to the balance of that Participant Account as of June 30 of that year,
divided by the number of calendar years remaining in the Distribution Period
elected by the Participant with respect to that Account. Notwithstanding any of
the foregoing to the contrary, if a Participant with respect to whom a
Participant Account has been established for calendar year 1995 or 1996 has
elected a Distribution Period that is less than 10 calendar years, then, at any
time, but at least one year prior to his initial Distribution Payment Date, he
may elect to have his Distribution Period with respect to any such Participant
Account occur over a period of 10 or more years commencing on the previously
elected initial Distribution Payment Date. The term "Distribution Payment Date"
means July 20 of each year.
8.2 Interim Distributions. Subject to the following provisions of
---------------------
this subsection 8.2, at the time that a Participant enters into an Annual
Participation Election form, he may elect to receive, as of any Distribution
Payment Date occurring at least 7 years after the effective date of that
Agreement, an Interim Distribution of any portion of the balance of the
Participant Account established by that Agreement, determined as of the June 30
immediately preceding that Distribution Payment Date. If a Participant becomes
entitled to receive an Interim Distribution from a Participant Account on or
after the initial Distribution Payment Date applicable to that Account, no
Interim Distribution shall be made to him and his Installment Distributions
being made pursuant to subsection 8.1 shall continue. A Participant shall
express his election of an Interim Distribution as a flat dollar amount or as a
percentage of the balance of his Participant Account, determined as of the June
30 immediately preceding the date as of which the Interim Distribution is to be
made. Any Interim Distribution election made by a Participant shall be
automatically cancelled on the date of his death. Notwithstanding any of the
foregoing to the contrary, if a Participant has elected to receive an Interim
Distribution with respect to a Participant Account established for calendar
years 1995 and 1996, then, at any time, but at least one year prior to such
Interim Distribution, he may elect to reduce such Interim Distribution payment.
43
<PAGE> 16
8.3 Emergency Distributions. If, on written application of a
-----------------------
Participant, it is determined (as provided below) that the Participant has
experienced an "Unforeseeable Emergency" (as defined below), then, as of the
first day of any calendar month, the Participant may elect to receive an
Emergency Distribution from one or more of his Participant Accounts, provided
that the aggregate amount of any such distribution shall not exceed the amount
reasonably needed to satisfy the Participant's emergency need. The term
"Unforeseeable Emergency" means severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
of a "dependent" (as defined in section 152(a) of the Code) of the Participant,
loss of the Participant's property due to a casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant. In determining whether an Emergency
Distribution should be made to a Participant consideration may be given to the
extent to which his Unforeseeable Emergency can be relieved:
(a) through reimbursement or compensation by insurance or
otherwise;
(b) by liquidation of the Participant's assets, to the
extent the liquidation of such assets would not
itself cause severe financial hardship;
(c) by cessation of deferrals under the Plan; or
(d) other distributions to be made to the Participant
from the Plan.
A determination with respect to whether a Participant has experienced an
Unforeseeable Emergency shall be made:
(a) in the case of a Participant employed, or last
employed, by an Employer at a salary grade below
salary grade 24 (exclusive of an elected officer of
an Employer) and his Beneficiary, the Plan
Administrator; and
(b) in the case of a Participant employed, or last
employed, by an Employer at salary grade 24 or above
or as an elected officer of an Employer and their
Beneficiaries, the Committee.
The provisions of Section 12 of the Plan shall not be applicable with respect to
any determination made pursuant to this subsection 8.3.
8.4 Elective Distributions. As of the first day of any calendar month a
----------------------
Participant may elect, by writing filed with the
44
<PAGE> 17
Plan Administrator, to receive an Elective Distribution from one or more of his
Participant Accounts, provided, however, that if a Participant receives an
Elective Distribution he shall forfeit an amount equal to 20 percent of the
amount of that Elective Distribution, which amount shall be charged to his
Participant Accounts as provided in paragraph 7.1(a).
8.5 Change in Control Distributions. In connection with, but prior
-------------------------------
to, a Change in Control, the Committee, in its sole discretion, may authorize a
Participant's Participant Accounts to be distributed to him in a single lump
sum.
8.6 Withholding. A Participant's Employer shall withhold from the
-----------
non-deferred portion of his compensation for any period all Social Security
Taxes as required by sections 3101, 3102 and 3121(v) of the Code to be paid with
respect to the amount of his deferrals under the Plan for that period. The Plan
Administrator shall cause to be withheld from any distribution made pursuant to
the terms of the Plan any other amount required to be withheld by federal, state
or local law.
SECTION 9 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO BENEFICIARIES
- -----------------------------------------------------------------
9.1 Distribution to Beneficiary. If a Participant dies (either prior
---------------------------
to or following his termination of employment with the Employers and Affiliates)
the undistributed balance of each of his Participant Accounts will:
(a) if distribution has commenced prior to his death,
continue to be distributed in annual Installment
Distributions, to the deceased Participant's
Beneficiary with respect to the Participant Account
during the remainder of the Distribution Period
applicable to that Account as if the deceased
Participant had lived; and
(b) if distribution has not commenced prior to his death,
be distributed in annual Installment Distributions
commencing on the Distribution Payment Date and over
the Distribution Period elected by the deceased
Participant with respect to that Participant Account.
9.2 Beneficiary. The term "Beneficiary" means, with respect to any
-----------
Participant (or a Participant's Beneficiary), such natural or legal person or
persons as may be designated by him (who may be designated contingently or
successively) to receive the remaining aggregate balance of his Participant
Accounts if he dies before a total distribution of the balance is made to him. A
Beneficiary designation will be effective only when a signed and dated
Beneficiary designation form is filed with the Plan Administrator while the
Participant is alive, which form will
45
<PAGE> 18
cancel any Beneficiary designation form signed and filed earlier. The same also
applies to a Beneficiary designation filed by a Beneficiary. If a Beneficiary
survives a Participant and such Beneficiary dies before a total distribution of
the aggregate balances of the Participant's Accounts (without a contingent or
successive Beneficiary designated by a Participant), the balance will be paid to
any person designated by such Beneficiary. If a Participant (or his Beneficiary)
is not survived by any Beneficiary, the Plan Administrator shall distribute the
aggregate amount of the balances of that Participant's Accounts to the legal
representative or representatives of the estate of the Participant (or his
Beneficiary). Notwithstanding any provision of the Plan to the contrary, if a
Participant or Beneficiary under the Plan as of December 31, 1999 elects to
change a Beneficiary designation to be effective on or after January 1, 2000, he
must designate a common Beneficiary or Beneficiaries to receive the remaining
aggregate balance of his Participant's Accounts if he dies before a total
distribution of the balance is made to him. Until such time as a change in
Beneficiary is made with respect to any of the Participant Accounts maintained
for a Participant or Beneficiary under the Plan on December 31, 1999, such
multiple designations shall continue.
SECTION 10 - DISTRIBUTIONS TO INCAPACITATED PERSONS
- ---------------------------------------------------
Notwithstanding any other provision of the Plan, if a Participant or
other person entitled to a distribution under the Plan is determined by a court
of competent jurisdiction to be physically, mentally or legally incapacitated
and unable to manage his financial affairs and claim is made by a conservator or
other person legally charged by such court with the care of his person, the Plan
Administrator shall make distributions to such conservator or other person. Any
distribution made in accordance with this Section shall fully acquit and
discharge all persons from all further liability on account thereof.
SECTION 11 - SECTION 162(m) LIMITATION ON DISTRIBUTIONS.
- -------------------------------------------------------
11.1 Tentative Section 162(M) Determination.
--------------------------------------
Notwithstanding any other provision of the Plan to the contrary, prior to a
Participant's Distribution Payment Date for any calendar year, the Chairperson
of the Committee may, in the Chairperson's discretion, make a tentative
determination as to whether the sum of:
(a) amounts otherwise distributable to the Participant
under the Plan as of that Distribution Payment Date;
and
46
<PAGE> 19
(b) all other compensation expected to be payable to the
Participant and deductible by the Employers for that
calendar year;
will exceed the maximum deductible amount permitted with respect to the
Participant for that calendar year by section 162(m) of the Code. Based on the
Chairperson's tentative decision, the provisions of subsection 11.2 or 11.3, as
the case may be, shall become applicable with respect to the Participant.
Notwithstanding the foregoing, the provisions of this Section shall not be
applicable with respect to any distribution payable from the Plan during any
calendar year following the calendar year in which a "Change in Control" (as
defined in subsection 11.4) occurs.
11.2 Tentative Determination Amount Not in Excess of 162(m) Limit. If
------------------------------------------------------------
the Chairperson of the Committee tentatively determines that the sum of the
amounts described in paragraphs 11.1(a) and (b) payable to a Participant for a
calendar year will be fully deductible by the Employers for that year,
distribution from his Participant Accounts shall be made to the Participant in
accordance with the provisions of Section 8 of the Plan as of his Distribution
Payment Date. However, during the month of December of that calendar year, the
Chairperson of the Committee shall make a final determination with respect to
whether the amounts described in paragraphs 11.1(a) and (b) are fully deductible
by the Employers, within the limitation of section 162(m) of the Code. If he
determines that they are not, any amount distributed from a Participant's
Participant Accounts during the calendar year that is not deductible by the
Employers shall constitute a loan to the Participant and shall be repaid to the
Employers, with interest (at the rate provided by section 1274(d) of the Code),
on or before the last day of that calendar year. Any such repaid amount shall be
credited to the Participant's Participant Account from which it was distributed
as of the Accounting Date coincident with or next following the date on which it
is repaid.
11.3 Tentative Determination Amount in Excess of 162(m) Limit. If the
--------------------------------------------------------
Chairperson of the Committee tentatively determines that the sum of the amounts
described in paragraphs 11.1(a) and (b) payable to a Participant for a calendar
year will not be fully deductible by the Employers for that year, the
Chairperson of the Committee may direct that all or any portion of the balances
of the Participant's Participant Accounts otherwise distributable as of his
Distribution Payment Date for that calendar year be retained under the terms of
the Plan. However, during the month of December of that calendar year, the
Chairperson of the Committee shall make a final determination with respect to
whether any portion of such retained amount will be fully deductible to the
Employer for that calendar year if distributed to the Participant and such
portion that is fully deductible, if any, shall be distributed to the
Participant on or
47
<PAGE> 20
before that last day of that calendar year. Any such distribution shall be
charged to the Participant's Participant Account from which it was distributed
as of the Accounting Date coincident with or next following the date of
distribution.
11.4 Change in Control. 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:
(a) date of expiration of a Tender Offer (other than an
offer by Mead), if the offeror acquires Shares
pursuant to such Tender Offer;
(b) the date of approval by the shareholders of Mead of a
definitive agreement:
(i) for the merger or consolidation of Mead or
any direct or indirect subsidiary of Mead
into or with another corporation, other
than:
(A) a merger or consolidation which
would result in the voting
securities of Mead outstanding
immediately prior thereto
continuing to represent,
(I) in the case of a merger
or consolidation of
Mead, 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 Mead,
either by remaining
outstanding if Mead
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 percent of the combined voting power
of the voting securities of Mead or such surviving
or parent entity outstanding immediately after
such merger or consolidation, or
(B) a merger or consolidation effected
to implement a recapitalization of
Mead (or similar transaction) in
which no
48
<PAGE> 21
Person (as defined below) is or
becomes the Beneficial Owner (as
defined below) directly or
indirectly, of securities of Mead
(not including in the securities
Beneficially Owned by such Person
any securities acquired directly
from Mead or its Affiliates)
representing 25 percent or more of
the combined voting power or Mead's
then outstanding securities, or
(ii) for the sale or disposition of all or
substantially all of the assets of Mead,
other than a sale or disposition by Mead
of all or substantially all of Mead's
assets to an entity, at least 51 percent
of the combined voting power of the
voting securities of which are owned
(directly or indirectly) by shareholders
of Mead in substantially the same
proportions as their ownership of Mead
immediately prior to such sale or
disposition;
(c) any Person is or becomes the Beneficial Owner of 25
percent or more of the voting power of the then
outstanding securities of Mead (not including in the
securities beneficially owned by such Person any
securities acquired directly from Mead or its
affiliates), excluding any Person who becomes such a
Beneficial Owner in connection with a transaction
described in subparagraph (b)(i)(A) or the date of
authorization, by both a majority of the voting power
of Mead 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
(d) 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 Mead) who
were elected, or were nominated for election, by
Mead'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
49
<PAGE> 22
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 Mead 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 Mead immediately
following such transaction or series of transactions.
11.5 Certain Definitions. The following definitions shall be applicable
-------------------
with respect to subsection 11.4:
(a) Affiliate shall have the meaning set forth in Rule
---------
12b-2 promulgated under Section 12 of the Exchange
Act.
(b) Beneficial Owner shall have the meaning defined in
----------------
Rule 13d-3 under the Exchange Act.
(c) Exchange Act shall mean the Securities Exchange Act
------------
of 1934, as amended from time to time.
(d) 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) Mead or any of its subsidiaries,
(ii) a trustee or other fiduciary holding
securities under an employee benefit plan of
Mead 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 Mead in substantially
the same proportions as their ownership of
stock of Mead.
(e) Shares shall mean shares of common stock, without par
------
value, of The Mead Corporation.
(f) Tender Offer shall mean a tender offer or a request
------------
or invitation for tenders or an exchange
50
<PAGE> 23
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 12 - DISPUTE RESOLUTION
- -------------------------------
12.1 Notice of Denial. If any dispute arises with respect to a
----------------
Participant or Beneficiary (a "Claimant") under the Plan, Mead will provide the
Claimant with a written notice of its resolution of the dispute setting forth:
(a) the provisions of the Plan upon which the resolution
was based; and
(b) an explanation of this claims procedure.
If Mead rejects a Claimant's application for failure to furnish certain
necessary materials or information, the written notice to the Claimant will
explain what additional material is needed and why, and advise the Claimant that
he may refile a proper application. In the event that Mead fails to take any
action on the Claimant's initial application within 90 days after receipt, the
application will be deemed denied, and the Claimant's appeal rights under
subsection 11.2 will be in effect as of the end of such period.
12.2 Notice of Appeal. Within 60 days after the receipt of Mead's
----------------
notice of resolution, the Claimant may file a written notice of appeal of the
resolution with the "Claims Reviewer" (as defined below). In addition, within
such appeal period, the Claimant may review pertinent documents at such
reasonable times and places as the Claims Reviewer may specify and may submit
any additional written material pertinent to the appeal not set forth in the
notice of appeal. The appeal shall be determined by the Claims Reviewer, and the
Claimant shall be entitled to appear before the Claims Reviewer to present his
claim. The term "Claims Reviewer" means:
(a) in the case of a Participant employed, or last
employed, by an Employer at a salary grade below
salary grade 24 (exclusive of an elected officer of
an Employer) and of his Beneficiary, a panel of 3
persons appointed by the Plan Administrator; and
(b) in the case of a Participant employed, or last
employed by an Employer at salary grade 24 or above
or as an elected officer of an Employer and their
Beneficiaries, the Chairperson of the Committee.
51
<PAGE> 24
12.3 Decision on Appeal. The panel referred to in paragraph 12.2(a)
------------------
or the Chairperson, as the case may be, will make a written decision on the
appeal not later than 60 days after its receipt of the notice of appeal unless
special circumstances require an extension of time, in which case a decision
will be given as soon as possible, but not later that 120 days after receipt of
the notice of appeal. The decision on the appeal will be in writing and shall
include specific reasons for the decision, making specific reference to the
provision of the Plan upon which the decision was based.
SECTION 13 - AMENDMENT AND TERMINATION
- --------------------------------------
The Committee reserves the right to amend the Plan at any time,
except that no amendment shall reduce a Participant's Participant Account
balances to less than the amounts that he would have been entitled to receive on
the later of the effective date of the amendment or the date on which the
amendment is adopted. The Plan will terminate on the date on which it is
terminated by the Committee, provided, however, that:
(a) at least two Crediting Options shall be maintained
until the aggregate balances of all Participant
Accounts have been distributed; and
(b) distributions from the Plan shall continue to be made
under Section 8 or Section 9, as the case may be,
pursuant to elections previously made by Participants
or as otherwise provided under Section 8 or 9.
52
<PAGE> 25
EXHIBIT I
TO
THE MEAD CORPORATION
EXECUTIVE CAPITAL ACCUMULATION PLAN
-----------------------------------
The Crediting Options available under the Plan as of January 1,
2000 are:
Type Fund Managed By
--------- ----------
(1) Money Market PacMutual
(2) Managed Bond PIMCO
(3) Multi Strategy J.P. Morgan
(4) Equity Income J.P. Morgan
(5) Equity Index Bankers Trust
(6) Small Cap Stock Cap Guardian Trust
Equity Fund
(7) Growth L.T. Janus Capital
(8) International Morgan Stanley
53
<PAGE> 26
SUPPLEMENT A
TO
THE MEAD CORPORATION EXECUTIVE CAPITAL ACCUMULATION PLAN
--------------------------------------------------------
A-1 Purpose. The purpose of this Supplement A is to modify certain
-------
provisions of the Plan as they apply to:
(1) Participants in the Plan as of December 31, 1999; and
(2) Beneficiaries of deceased Participants who are eligible to
receive distributions from the Plan as of January 1, 2000.
("Supplement A Individuals").
A-2 Effective Date. This Supplement A shall be effective as of January 1,
--------------
2000.
A-3 Plan Modifications. Notwithstanding any other provision of the Plan,
------------------
the Plan, as applied to a Supplement A Individual, is modified as
follows:
(1) his Crediting Options shall continue to be changed by writing
filed with the Plan Administrator on or before the last
business day of February, May, August or November and will be
effective as of the first day of the following calendar
quarter;
(2) his Crediting Option election shall apply separately to each
of his Accounts;
(3) his Accounts shall be adjusted monthly; and
(4) the term "Accounting Date" means the last business day of each
calendar quarter.
In all other respects the foregoing provisions of the Plan shall be
applicable to Supplement A Individuals.
A-4 Change Of Status. A Supplement A Individual's status as such shall be
----------------
irrevocably revoked:
(1) automatically, effective as of the effective date of any
election to change an Adjustment Portion in accordance with
paragraph 6.2(b) of the Plan; or
(2) effective as of the date the Supplement A Individual elects to
revoke his status as such in accordance with rules, if any,
established by the Plan Administrator.
54
<PAGE> 1
Exhibit 10(4)
THE MEAD CORPORATION
DIRECTORS CAPITAL ACCUMULATION PLAN
-----------------------------------
(As Amended and Restated Effective January 1, 2000)
55
<PAGE> 2
TABLE OF CONTENTS
SECTION 1 - GENERAL........................................................... 1
1.1 Purpose and Effective Date..................................... 1
1.2 Plan Funding and Administration................................ 1
1.3 Applicable Law................................................. 1
1.4 Gender and Number.............................................. 1
1.5 Assignment..................................................... 1
1.6 Plan Year...................................................... 2
1.7 Supplements.................................................... 2
1.8 Plan Elections................................................. 2
SECTION 2 - PARTICIPATION..................................................... 2
2.1 Participation Requirement...................................... 2
2.2 Continued Participation........................................ 2
SECTION 3 - DEFERRAL OF INCOME................................................ 3
3.1 Deferred Income Amount......................................... 3
3.2 Annual Election to Participate................................. 3
SECTION 4 - PARTICIPANT ACCOUNTS.............................................. 3
SECTION 5 - DCPD ROLLOVERS.................................................... 4
SECTION 6 - CREDITING OPTIONS................................................. 4
6.1 Establishment of Crediting Options............................. 4
6.2 Participant Change of Crediting Options........................ 5
SECTION 7 - ADJUSTMENT OF PARTICIPANT ACCOUNTS................................ 5
7.1 Adjustment of Participants' Participant Accounts............... 5
7.2 Quarterly Statement of Participant Accounts Balances........... 6
SECTION 8 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO PARTICIPANTS.............. 6
8.1 Annual Distributions........................................... 6
8.2 Emergency Distributions........................................ 7
SECTION 9 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO BENEFICIARIES............. 7
9.1 Distribution to Beneficiary.................................... 7
9.2 Beneficiary.................................................... 8
SECTION 10 - DISTRIBUTIONS TO INCAPACITATED PERSONS........................... 8
56
<PAGE> 3
SECTION 11 - CHANGE IN CONTROL................................................ 9
11.1 In General..................................................... 9
11.2 Certain Definitions........................................... 11
SECTION 12 - AMENDMENT AND TERMINATION....................................... 11
EXHIBIT I - CREDITING OPTIONS
SUPPLEMENT A
57
<PAGE> 4
THE MEAD CORPORATION
DIRECTORS CAPITAL ACCUMULATION PLAN
-----------------------------------
SECTION 1 - GENERAL
-------------------
1.1 Purpose and Effective Date. Effective January 1, 1995, The Mead
--------------------------
Corporation ("Mead"), an Ohio corporation, established The Mead Corporation
Directors Capital Accumulation Plan (the "Plan"). The Plan was subsequently
amended from time to time and the following provisions constitute a further
amendment, restatement and continuation of the Plan, effective January 1, 2000.
The purpose of the Plan continues to be to provide recurring annual
opportunities for the deferment of payment of certain amounts otherwise
currently payable to its "Eligible Directors" (as defined below) who meet the
requirements to become a "Participant" set forth in subsection 2.1. The term
"Eligible Director" means any member of the Board of Directors of Mead who is
not employed by it.
1.2 Plan Funding and Administration. The benefits payable under the
-------------------------------
Plan are unfunded and are payable, when due, from the general assets of Mead;
provided, however, that Mead, in its discretion, may establish or maintain a
trust to pay such amounts, which trust shall be subject to the claims of Mead's
unsecured general creditors in the event of Mead's bankruptcy or insolvency; and
provided, further, that Mead shall remain responsible for the payment of any
such amounts which are not so paid by any such trust. The Plan shall be
administered by a "Plan Administrator" who is appointed by, and serves at the
pleasure of, the Compensation Committee of the Board of Directors of Mead (the
"Committee") and who has the rights, powers and duties with respect to the Plan
that are hereinafter set forth and such other rights, powers and duties as are
reasonably necessary for the administration of the Plan. As of the effective
date, the Plan Administrator is the Vice President-Human Resources of Mead.
1.3 Applicable Law. The Plan will be construed and administered in
--------------
accordance with the laws of the State of Ohio to the extent that those laws are
not preempted by the laws of the United States of America.
1.4 Gender and Number. Where the context admits, words in any gender
-----------------
will include any other gender, words in the singular will include the plural and
the plural will include the singular.
1.5 Assignment. No Plan right or interest of any Participant or
----------
Beneficiary shall be assignable or transferable, in whole or in part, either
directly or otherwise, including without limitation thereto, by execution, levy,
attachment, garnishment, pledge or in any other manner, but excluding
58
<PAGE> 5
transfers by death or mental incompetency; no attempted assignment or transfer
thereof shall be effective; and no such right or interest shall be liable for,
or subject to, any obligation or liability of any Participant or Beneficiary;
except that a Participant may direct that payments be made during his lifetime,
when due, to a trust established by him and evidenced to his Employer to be a
trust treated as a grantor trust within the meaning of section 671 of the Code.
1.6 Plan Year. The term "Plan Year" means the calendar year.
---------
1.7 Supplements. The provisions of the Plan, as applied to all or any
-----------
group of Participants, may be modified or supplemented by "Supplements" to the
Plan. Any such Supplement shall form a part of the Plan as of its effective date
and be attached thereto. Effective as of January 1, 2000 a Supplement A forms a
part of the Plan. Supplement A modifies certain investment, accounting and
distribution provisions of the Plan as it applies to "Supplement A Individuals"
(as defined in Supplement A).
1.8 Plan Elections. Except as otherwise specifically provided, any
--------------
election required or permitted to be made under the Plan will be deemed to have
been properly made and filed with the Plan Administrator if made by such method
as the Plan Administrator may require.
SECTION 2 - PARTICIPATION
- -------------------------
2.1 Participation Requirement. A Director of Mead who is a Participant
-------------------------
in the Plan on December 31, 1999 will continue as such, subject to the terms and
conditions of the Plan. Each other Director of Mead will become a Participant in
the Plan as of January 1, 2000, or on any subsequent January 1, if on such
January 1 he:
(a) is an Eligible Director;
(b) has executed an Annual Participation Election form
(as described in subsection 3.3); and
(c) has executed such forms as the Plan Administrator may
determine necessary to permit Mead (at its discretion
and expense) to maintain a policy of insurance on his
life under the terms of which Mead shall be the
policyholder, owner and beneficiary.
Each individual who becomes an Eligible Director on or after January 1, 2000
will become a Participant in the Plan (on a prospective basis) on the earlier of
the date on which the Plan Administrator has received his executed Annual
Participation
59
<PAGE> 6
Election form if that date is within 30 days of the date he becomes an Eligible
Director or on any subsequent January 1 if he then meets the requirements set
forth in paragraphs (a) through (c) above.
2.2 Continued Participation. Until distribution of the entire balances
-----------------------
of a Participant's "Participant Accounts" (as described in Section 4) has been
made, a Participant or, in the event of his death, any "Beneficiary" (as defined
in subsection 9.2) of any of the Participant's undistributed Participant
Accounts, as the case may be, will be considered and treated as a Participant
for all purposes of the Plan, except that any additional compensation (as
described in subsection 3.1) shall cease as of the first day of the month next
following the date on which he is no longer an Eligible Director.
SECTION 3 - DEFERRAL OF INCOME
- ------------------------------
3.1 Deferred Income Amount. Subject to the provisions of subsection
----------------------
3.2, by entering into a written Annual Election to Participate as provided by
subsection 2.1, a Participant may elect to defer any portion or all of the
amount of the meeting fees and of the cash portion of the retainer fee that
would otherwise be payable to him for services performed during the period that
the Annual Election to Participate is effective.
3.2 Annual Election to Participate. The term "Annual Election to
------------------------------
Participate" means a written agreement, in a form furnished by the Plan
Administrator, entered into by and between a Participant and Mead with respect
to a calendar year and setting forth:
(a) the deferral percentages elected by the Participant
in accordance with subsection 3.1 for that calendar
year;
(b) the percentage of his total deferral that is
allocated to each of the "Crediting Options" (as
described in subsection 6.1) selected by him;
(c) the "Distribution Period" (as defined below) that he
elects to be applicable with respect to the amounts
deferred pursuant to that Annual Election to
Participate; and
(d) subject to the provisions of paragraph 8.1(b), the
calendar year in which the Distribution Period is to
commence.
Each Annual Election to Participate shall be irrevocable by the Participant
after the last day of the calendar month preceding its effective date. The term
"Distribution Period" means, with
60
<PAGE> 7
respect to any Participant Account, a period of 5, 10, 15 or 20 calendar years
as elected by the Participant for whom the Account is maintained.
SECTION 4 - PARTICIPANT ACCOUNTS
- --------------------------------
For each calendar year, the Plan Administrator shall cause a
Participant Account to be established and maintained by Mead in the name of each
Participant to reflect the amount of any deferrals that are the subject of the
Participant's Annual Election to Participate for that calendar year. A
Participant's Participant Accounts shall be periodically adjusted as provided in
subsection 7.1 and shall be distributed to a Participant in accordance with the
provisions of Section 8 or, in the event of the Participant's death, to his
Beneficiary in accordance with the provisions of Section 9.
SECTION 5 - DCPD ROLLOVERS
- --------------------------
Notwithstanding any provision of the Plan to the contrary, a
Participant for whose benefit a balance is maintained under the Deferred
Compensation Plan for Directors (the "DCPD") may elect, during December, 1994,
to have that balance transferred to the Plan and credited to a separate
Participant Account (to be identified as his "DCPD Participant Account")
established hereunder as of January 1, 1995, subject to the following:
(a) In no event may a Participant elect to transfer to
this Plan any amount credited under the Supplement to
the DCPD.
(b) No DCPD rollover to the Plan shall be permitted after
January 1, 1995.
(c) A Participant's Distribution Period with respect to
his DCPD Participant Account shall commence on the
date on which payment of his balance under the DCPD
would have commenced.
(d) To the extent necessary for self-employment tax
purposes, the Committee shall maintain a
Participant's DCPD Participant Account in the form of
sub-accounts.
SECTION 6 - CREDITING OPTIONS
- -----------------------------
6.1 Establishment of Crediting Options. The Committee shall designate
----------------------------------
"Crediting Options" (in such number and of such asset character as it shall
decide), the investment experience of which shall be applied in adjusting
Participants' Participant Accounts, as provided in subsection 7.1. The Crediting
Options available as of January 1, 2000 are set forth on Exhibit I of the
61
<PAGE> 8
Plan. On advance written notice to the Participants, the Committee may cause any
Crediting Option to be prospectively deleted and may designate other Crediting
Options. In no event shall the assets of a Crediting Option be constituted of
securities of any Employer or Affiliate. Should Mead determine to invest any of
its funds in the asset or assets constituting a Crediting Option, amounts
representing such investment shall be the sole property of Mead and shall be
subject to the claims of its general creditors. No Participant or Beneficiary
shall have any claim or right with respect to any such amounts. Notwithstanding
the foregoing provisions of this subsection 6.1, upon and after the occurrence
of a "Change in Control" (as described in subsection 11.1), the Committee shall
have no power to eliminate any Crediting Option which was available immediately
prior to the Change in Control and, if any Crediting Option shall be eliminated
through circumstances beyond the control of the Committee, the Committee shall
immediately add a Crediting Option which will provide an investment return equal
to one-hundred-twenty percent (120%) of the long-term Federal interest rate
determined monthly under section 1274(d) of the Code, compounded semi-annually.
6.2 Participant Change of Crediting Options. A Participant may elect:
----------------------------------------
(a) with respect to amounts to be credited to any
Participant Account on and after that day pursuant to
subsection 3.1, the portion (expressed as a multiple
of 1 percent) thereof that is to be adjusted pursuant
to subsection 7.1 to reflect the investment
experience of any Crediting Option (referred to below
as an "Adjustment Portion"); and
(b) that all or a portion (expressed as a multiple of 1
percent) of the amount of the aggregate balances of
the Participant Accounts then maintained for his
benefit that constitutes an Adjustment Portion be
changed to another Adjustment Portion.
SECTION 7 - ADJUSTMENT OF PARTICIPANT ACCOUNTS
- ----------------------------------------------
7.1 Adjustment of Participants' Participant Accounts. As of each
------------------------------------------------
"Accounting Date" (as defined below), the Plan Administrator shall cause each
Participant Accounts to be adjusted as follows:
(a) FIRST, by charging to the proper Participant Accounts
of each Participant the amount of any distribution
made to, or on account of, the Participant from the
Account since the last preceding Accounting Date
which charge shall be
62
<PAGE> 9
made, pro rata, according to the Adjustment Portions
of that Participant Account;
(b) next, by adjusting each Participant Account
----
maintained on behalf of a Participant, upward or
downward, as the case may be, so that the balance of
the Participant Accounts equals the aggregate
investment experience for the accounting period ended
on that Accounting Date of the Adjustment Portions
elected by him and applicable to that Participant
Account as of that date;
(c) next, if the Accounting Date is the last day of a
----
calendar month, by crediting the last Participant
Account established on behalf of each Participant
with the amount of any deferrals made by him during
the month ending on that date, which amount shall be
credited, pro rata, according to Adjustment Portions
elected by the Participant;
(d) finally, by executing the Adjustment Portion change
-------
elections made pursuant to the provisions of
subsection 6.2 that are to be effective as of the
opening of business as of the next business day.
The term "Accounting Date" means each business day.
7.2 Quarterly Statement of Participant Accounts Balances. As soon as
----------------------------------------------------
practicable, but not more than 30 days after the last day of each calendar
quarter, the Plan Administrator shall provide each Participant with a statement
of the balances of his Participant Accounts as of that day.
SECTION 8 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO PARTICIPANTS
- ----------------------------------------------------------------
8.1 Annual Distributions. Except as otherwise provided in this Section
--------------------
8, if a Participant's service as a Director of Mead is terminated for any reason
other than his death, and on the June 30 preceding his initial "Distribution
Payment Date" (as defined below) the aggregate balances of his Participant
Accounts equal at least $50,000, each of the Participant's Participant Accounts
will be distributed to him in annual "Installment Distributions" (in the annual
amount determined as provided below), made on or about each Distribution Payment
Date, beginning:
(a) in the case of a Participant whose service as a
Director terminates at any age on account of
"disability" (as determined by the Plan
Administrator) or for any reason at or after
63
<PAGE> 10
reaching age 55 years, on or about the Distribution
Payment Date of the calendar year elected by him; and
(b) in all other cases, and notwithstanding any previous
election, on or about the Distribution Payment Date
of the calendar year next following the calendar year
during which his termination of service as a Director
occurs;
and continuing for the number of calendar years constituting the Distribution
Period he has irrevocably elected with respect to that Participant Account. If
on the June 30 preceding his initial Distribution Payment Date the aggregate
balances of a Participant's Participant Accounts is an amount that is less than
$50,000, those balances shall be distributed to him on or about his initial
Distribution Payment Date in a single lump sum. The amount of the annual
"Installment Distribution" from a Participant Account for a calendar year shall
be equal to the balance of that Participant Account as of June 30 of that year,
divided by the number of calendar years remaining in the Distribution Period
elected by the Participant with respect to that Account. Notwithstanding any of
the foregoing to the contrary, if a Participant with respect to whom a
Participant Account has been established for calendar year 1995 or 1996 has
elected a Distribution Period that is less than 10 calendar years, then, at any
time, but at least one year prior to his initial Distribution Payment Date, he
may elect to have his Distribution Period with respect to any such Participant
Account occur over a period of 10 or more years commencing on the previously
elected initial Distribution Payment Date. The term "Distribution Payment Date"
means July 20 of each year.
8.2 Emergency Distributions. If, on written application of a
-----------------------
Participant, it is determined (as provided below) that the Participant has
experienced an "Unforeseeable Emergency" (as defined below), then, as of the
first day of any calendar month, the Participant may elect to receive an
Emergency Distribution from one or more of his Participant Accounts, provided
that the aggregate amount of any such distribution shall not exceed the amount
reasonably needed to satisfy the Participant's emergency need. The term
"Unforeseeable Emergency" means severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
of a "dependent" (as defined in section 152(a) of the Code) of the Participant,
loss of the Participant's property due to a casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant. In determining whether an Emergency
Distribution should be made to a Participant consideration may be given to the
extent to which his Unforeseeable Emergency can be relieved:
64
<PAGE> 11
(a) through reimbursement or compensation by insurance or
otherwise;
(b) by liquidation of the Participant's assets, to the
extent the liquidation of such assets would not
itself cause severe financial hardship;
(c) by cessation of deferrals under the Plan; or
(d) other distributions to be made to the Participant
from the Plan.
A determination with respect to whether a Participant has experienced an
Unforeseeable Emergency shall be made by the Committee.
SECTION 9 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO BENEFICIARIES
- -----------------------------------------------------------------
9.1 Distribution to Beneficiary. If a Participant dies (either prior to
---------------------------
or following his termination of employment with the Employers and Affiliates)
the undistributed balance of each of his Participant Accounts will:
(a) if distribution has commenced prior to his death,
continue to be distributed in annual Installment
Distributions, to the deceased Participant's
Beneficiary with respect to the Participant Account
during the remainder of the Distribution Period
applicable to that Account as if the deceased
Participant had lived; and
(b) if distribution has not commenced prior to his death,
be distributed in annual Installment Distributions
commencing on the Distribution Payment Date and over
the Distribution Period elected by the deceased
Participant with respect to that Participant Account.
9.2 Beneficiary. The term "Beneficiary" means, with respect to any
-----------
Participant (or a Participant's Beneficiary), such natural or legal person or
persons as may be designated by him (who may be designated contingently or
successively) to receive the remaining aggregate balance of his Participant
Accounts if he dies before a total distribution of the balance is made to him. A
Beneficiary designation will be effective only when a signed and dated
Beneficiary designation form is filed with the Plan Administrator while the
Participant is alive, which form will cancel any Beneficiary designation form
signed and filed earlier. The same also applies to a Beneficiary designation
filed by a Beneficiary. If a Beneficiary survives a Participant and such
Beneficiary dies before a total distribution of the aggregate balances of the
Participant's Accounts (without a contingent or
65
<PAGE> 12
successive Beneficiary designated by a Participant), the balance will be paid to
any person designated by such Beneficiary. If a Participant (or his Beneficiary)
is not survived by any Beneficiary, the Plan Administrator shall distribute the
aggregate amount of the balances of that Participant's Accounts to the legal
representative or representatives of the estate of the Participant (or his
Beneficiary). Notwithstanding any provision of the Plan to the contrary, if a
Participant or Beneficiary under the Plan as of December 31, 1999 elects to
change a Beneficiary designation to be effective on or after January 1, 2000, he
must designate a common Beneficiary or Beneficiaries to receive the remaining
aggregate balance of his Participant's Accounts if he dies before a total
distribution of the balance is made to him. Until such time as a change in
Beneficiary is made with respect to any of the Participant Accounts maintained
for a Participant or Beneficiary under the Plan on December 31, 1999, such
multiple designations shall continue.
SECTION 10 - DISTRIBUTIONS TO INCAPACITATED PERSONS
- ---------------------------------------------------
Notwithstanding any other provision of the Plan, if a Participant or
other person entitled to a distribution under the Plan is determined by a court
of competent jurisdiction to be physically, mentally or legally incapacitated
and unable to manage his financial affairs and claim is made by a conservator or
other person legally charged by such court with the care of his person, the Plan
Administrator shall make distributions to such conservator or other person. Any
distribution made in accordance with this Section shall fully acquit and
discharge all persons from all further liability on account thereof.
SECTION 11 - CHANGE IN CONTROL
- ------------------------------
11.1 In General. 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:
(a) date of expiration of a Tender Offer (other than an
offer by Mead), if the offeror acquires Shares
pursuant to such Tender Offer;
(b) the date of approval by the shareholders of Mead of a
definitive agreement:
(i) for the merger or consolidation of Mead or
any direct or indirect subsidiary of Mead
into or with another corporation, other
than:
(A) a merger or consolidation which
would result in the voting
securities of
66
<PAGE> 13
Mead outstanding immediately
prior thereto continuing to
represent,
(I) in the case of a merger
or consolidation of
Mead, 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 Mead,
either by remaining
outstanding if Mead
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 percent of the combined voting power of
the voting securities of Mead or such surviving or
parent entity outstanding immediately after such
merger or consolidation, or
(B) a merger or consolidation effected
to implement a recapitalization of
Mead (or similar transaction) in
which no Person (as defined below)
is or becomes the Beneficial Owner
(as defined below) directly or
indirectly, of securities of Mead
(not including in the securities
Beneficially Owned by such Person
any securities acquired directly
from Mead or its Affiliates)
representing 25 percent or more of
the combined voting power or Mead's
then outstanding securities, or
(ii) for the sale or disposition of all or
substantially all of the assets of Mead,
other than a sale or disposition by Mead of
all or substantially all of Mead's assets to
an entity, at least 51 percent of the
combined voting power of the voting
securities of which are owned (directly or
indirectly) by shareholders of Mead in
substantially the same proportions as their
ownership of Mead immediately prior to such
sale or disposition;
67
<PAGE> 14
(c) any Person is or becomes the Beneficial Owner of 25
percent or more of the voting power of the then
outstanding securities of Mead (not including in the
securities beneficially owned by such Person any
securities acquired directly from Mead or its
affiliates), excluding any Person who becomes such a
Beneficial Owner in connection with a transaction
described in subparagraph (b)(i)(A) or the date of
authorization, by both a majority of the voting power
of Mead 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
(d) 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 Mead) who
were elected, or were nominated for election, by
Mead'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 Mead 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 Mead immediately
following such transaction or series of transactions.
11.2 Certain Definitions. The following definitions shall be applicable
-------------------
with respect to subsection 11.1:
(a) Affiliate shall have the meaning set forth
---------
in Rule 12b-2 promulgated under Section 12
of the Exchange Act.
68
<PAGE> 15
(b) Beneficial Owner shall have the meaning
----------------
defined in Rule 13d-3 under the Exchange
Act.
(c) Exchange Act shall mean the Securities
------------
Exchange Act of 1934, as amended from time
to time.
(d) 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) Mead or any of its subsidiaries,
(ii) a trustee or other fiduciary holding
securities under an employee benefit
plan of Mead 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
Mead in substantially the same
proportions as their ownership of
stock of Mead.
(e) Shares shall mean shares of common stock,
------
without par value, of The Mead Corporation.
(f) 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 12 - AMENDMENT AND TERMINATION
- --------------------------------------
The Committee reserves the right to amend the Plan at any time,
except that no amendment shall reduce a Participant's Participant Account
balances to less than the amounts that he would have been entitled to receive on
the later of the effective date of the amendment or the date on which the
amendment is adopted. The Plan will terminate on the date on which it is
terminated by the Committee, provided, however, that:
(a) at least two Crediting Options shall be
maintained until the aggregate balances of
all Participant Accounts have been
distributed; and
69
<PAGE> 16
(b) distributions from the Plan shall continue
to be made under Section 8 or Section 9, as
the case may be, pursuant to elections
previously made by Participants or as
otherwise provided under Section 8 or 9.
70
<PAGE> 17
EXHIBIT I
TO
THE MEAD CORPORATION
DIRECTORS CAPITAL ACCUMULATION PLAN
-----------------------------------
The Crediting Options available under the Plan as of January 1,
2000 are:
Type Fund Managed By
--------- ----------
(1) Money Market PacMutual
(2) Managed Bond PIMCO
(3) Multi Strategy J.P. Morgan
(4) Equity Income J.P. Morgan
(5) Equity Index Bankers Trust
(6) Small Cap Stock Cap Guardian Trust
Equity Fund
(7) Growth L.T. Janus Capital
(8) International Morgan Stanley
71
<PAGE> 18
SUPPLEMENT A
TO
THE MEAD CORPORATION DIRECTORS CAPITAL ACCUMULATION PLAN
--------------------------------------------------------
A-1 Purpose. The purpose of this Supplement A is to modify certain
-------
provisions of the Plan as they apply to:
(1) Participants in the Plan as of December 31, 1999; and
(2) Beneficiaries of deceased Participants who are eligible to
receive distributions from the Plan as of January 1, 2000.
("Supplement A Individuals").
A-2 Effective Date. This Supplement A shall be effective as of January 1,
--------------
2000.
A-3 Plan Modifications. Notwithstanding any other provision of the Plan,
------------------
the Plan, as applied to a Supplement A Individual, is modified as
follows:
(1) his Crediting Options shall continue to be changed by writing
filed with the Plan Administrator on or before the last
business day of February, May, August or November and will be
effective as of the first day of the following calendar
quarter;
(2) his Crediting Option election shall apply separately to each
of his Accounts;
(3) his Accounts shall be adjusted monthly; and
(4) the term "Accounting Date" means the last business day of each
calendar quarter.
In all other respects the foregoing provisions of the Plan shall be
applicable to Supplement A Individuals.
A-4 Change of Status. A Supplement A Individual's status as such shall be
----------------
irrevocably revoked:
(1) automatically, effective as of the effective date of any
election to change an Adjustment Portion in accordance with
paragraph 6.2(b) of the Plan; or
(2) effective as of the date the Supplement A Individual elects to
revoke his status as such in accordance with rules, if any,
established by the Plan Administrator.
72
<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 APRIL 2, 2000 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>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> APR-02-2000
<CASH> 12
<SECURITIES> 0
<RECEIVABLES> 499
<ALLOWANCES> 0
<INVENTORY> 618
<CURRENT-ASSETS> 1,272
<PP&E> 5,910
<DEPRECIATION> 2,597
<TOTAL-ASSETS> 5,670
<CURRENT-LIABILITIES> 989
<BONDS> 1,334
0
0
<COMMON> 153
<OTHER-SE> 2,286
<TOTAL-LIABILITY-AND-EQUITY> 5,670
<SALES> 916
<TOTAL-REVENUES> 916
<CGS> 736
<TOTAL-COSTS> 736
<OTHER-EXPENSES> 117
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> 33
<INCOME-TAX> 12
<INCOME-CONTINUING> 25
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25
<EPS-BASIC> .24
<EPS-DILUTED> .24
</TABLE>
