SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission File No. 1-2267
THE MEAD CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-0535759
(State of Incorporation) (I.R.S. Employer Identification No.)
MEAD WORLD HEADQUARTERS
COURTHOUSE PLAZA NORTHEAST
DAYTON, OHIO 45463
(Address of principal executive offices)
Registrant's telephone number, including area code: 937-495-6323
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ .
The number of Common Shares outstanding at July 4, 1999 was 102,341,053.
July 4, Dec. 31, 1999 1998 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 36.0 $ 102.0 Accounts receivable 568.7 414.7 Inventories 481.6 479.5 Other current assets 88.1 90.2 -------- -------- Total current assets 1,174.4 1,086.4 Investments and other assets: Investees 134.4 127.5 Other assets 581.3 555.6 -------- -------- 715.7 683.1 Property, plant and equipment 5,773.5 5,741.8 Less accumulated depreciation and amortization (2,473.8) (2,369.1) -------- -------- 3,299.7 3,372.7 -------- -------- Total assets $5,189.8 $5,142.2 ======== ======== LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Accounts payable $ 256.4 $ 275.9 Accrued liabilities 409.8 395.7 Current maturities of long-term debt 27.1 7.9 -------- -------- Total current liabilities 693.3 679.5 Long-term debt 1,346.1 1,367.4 Commitments and contingent liabilities Deferred items 854.7 843.3 Shareowners' equity: Common shares 152.7 151.9 Additional paid-in capital 108.3 66.3 Retained earnings 2,078.5 2,076.9 Other comprehensive loss (43.8) (43.1) -------- -------- 2,295.7 2,252.0 -------- -------- Total liabilities and shareowners' equity $5,189.8 $5,142.2 ======== ======== |
See notes to financial statements.
Second Quarter Ended First Half Ended --------------------- --------------------- July 4, June 28, July 4, June 28 1999 1998 1999 1998 -------- -------- -------- -------- Net sales $1,004.8 $1,050.9 $1,868.0 $1,889.9 Cost of products sold 823.7 853.4 1,528.2 1,514.4 -------- -------- -------- -------- Gross profit 181.1 197.5 339.8 375.5 Selling and administrative expenses 102.5 101.3 207.8 197.6 -------- -------- -------- -------- Earnings from operations 78.6 96.2 132.0 177.9 Other revenues 4.8 1.6 8.8 4.2 Interest and debt expense (25.1) (28.9) (51.8) (55.4) -------- -------- -------- -------- Earnings from continuing operations before income taxes 58.3 68.9 89.0 126.7 Income taxes 21.0 28.2 32.1 49.4 -------- -------- -------- -------- Earnings from continuing operations before equity in net earnings (loss) of investees 37.3 40.7 56.9 77.3 Equity in net earnings (loss) of investees 7.5 (.5) 10.8 (3.5) -------- -------- -------- -------- Earnings from continuing operations 44.8 40.2 67.7 73.8 Discontinued operations (25.0) (28.0) -------- -------- -------- -------- Net earnings $ 44.8 $ 15.2 $ 67.7 $ 45.8 ======== ======== ======== ======== Per common share - basic: Earnings from continuing operations $ .44 $ .39 $ .66 $ .71 Discontinued operations (.24) (.27) -------- -------- -------- -------- Net earnings $ .44 $ .15 $ .66 $ .44 ======== ======== ======== ======== Per common share - assuming dilution: Earnings from continuing operations $ .43 $ .38 $ .65 $ .70 Discontinued operations (.24) (.27) -------- -------- -------- -------- Net earnings $ .43 $ .14 $ .65 $ .43 ======== ======== ======== ======== Cash dividends per common share $ .16 $ .16 $ .32 $ .32 ======== ======== ======== ======== Weighted-average number of common shares outstanding - basic 102.2 103.9 101.9 103.9 ======== ======== ======== ======== Weighted-average number of common shares outstanding - assuming dilution 105.1 105.8 104.8 105.8 ======== ======== ======== ======== |
See notes to financial statements.
First Half Ended -------------------- July 4, June 28, 1999 1998 ------- ------- Cash flows from operating activities: Net earnings $ 67.7 $ 45.8 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and depletion of property, plant and equipment 135.6 125.7 Depreciation and amortization of other assets 20.3 20.9 Deferred income taxes (3.9) (6.5) Investees-earnings and dividends (2.8) 4.4 Discontinued operations 28.0 Other 14.0 14.4 Change in current assets and liabilities: Accounts receivable (159.8) (160.0) Inventories (9.4) (67.7) Other current assets 11.7 (12.7) Accounts payable and accrued liabilities (6.0) 90.1 Cash (used in) discontinued operations (22.8) ------ ------ Net cash provided by operating activities 67.4 59.6 ------ ------ Cash flows from investing activities: Capital expenditures (90.5) (192.1) Additions to equipment rented to others (13.6) (14.8) Proceeds from sale of assets 21.4 Payment for acquired business (13.6) Other (24.3) (21.8) ------ ------ Net cash (used in) investing activities (107.0) (242.3) ------ ------ Cash flows from financing activities: Additional borrowings 15.0 140.5 Payments on borrowings (18.1) (191.9) Notes payable 273.8 Cash dividends paid (32.7) (33.3) Common shares issued 45.1 12.7 Common shares purchased (35.7) (17.4) ------ ------ Net cash provided by (used in) financing activities (26.4) 184.4 ------ ------ Increase (decrease) in cash and cash equivalents (66.0) 1.7 Cash and cash equivalents at beginning of year 102.0 29.5 ------ ------ Cash and cash equivalents at end of half $ 36.0 $ 31.2 ====== ====== |
See notes to financial statements.
A - FINANCIAL STATEMENTS
The balance sheet at December 31, 1998, is condensed financial information taken from the audited balance sheet. The interim financial statements are unaudited. In the opinion of management, all adjustments (which consist only of normal recurring adjustments) necessary to present fairly the financial position and results of operations for the interim periods presented have been made.
B - ACCOUNTING POLICIES
On an interim basis, all costs subject to recurring year-end adjustments have been estimated and allocated ratably to the quarters. Income taxes have been provided based on the estimated tax rate for the respective years after excluding infrequently occurring items whose specific tax effect is reported during the same interim period as the related transaction.
C - INVENTORIES
The amount of inventories is (principally last-in, first-out method):
July 4, Dec. 31, 1999 1998 ------- ------- Finished and semi-finished products $304.5 $295.0 Raw materials 102.3 109.2 Stores and supplies 74.8 75.3 ------ ------ $481.6 $479.5 ====== ====== |
D - INVESTEES
The summarized operating data for all investees is presented in the following table:
Second Quarter Ended First Half Ended -------------------- ---------------------- July 4, June 28, July 4, June 28, 1999 1998 1999 1998 ------- ------- ------- ------- Revenues $196.1 $181.4 $369.1 $357.8 ====== ====== ====== ====== Gross profit $ 32.6 $ 11.1 $ 54.0 $ 12.7 ====== ====== ====== ====== Net earnings $ 21.1 $ 4.3 $ 32.4 $ 1.8 ====== ====== ====== ====== |
E - ASSET WRITEDOWNS AND EMPLOYEE TERMINATIONS
During the second quarter of 1999, the company recorded a pre- tax charge of $15.6 million for asset write-offs and severance costs related to the shutdown of four uncoated paper machines in its mill in Rumford, Maine. The charges were comprised of $7.9 million to write down fixed assets to be shutdown, $3.8 million in severance costs for salaried personnel notified during the quarter; $2.6 million to write off other assets; and $1.3 million to write down stores and supplies inventory associated exclusively with the four machines. Of the above charge, $14.2 million is included in cost of sales and $1.4 million is included in selling and administrative expenses.
The $3.8 million in severance costs relates to 52 salaried employees and includes medical, dental and other benefits, none of which were paid at the end of the second quarter. The shutdown is expected to be completed and all personnel
terminated by December 31, 1999, although some severance and benefit payments may be made thereafter.
In the third quarter of 1998, the company adopted a plan to make organizational changes and reduce its overall workforce, and recorded a charge for employee severance and related costs. The following is a summary of the remaining accrual at July 4, 1999 (in millions):
Balance at December 31, 1998 $9.9 Used for intended purpose (4.1) ---- Balance at July 4, 1999 $5.8 ==== |
F - SHAREOWNERS' EQUITY
During the second quarter of 1999, the company repurchased approximately 500,000 common shares on the open market. The company has outstanding authorization from the Board of Directors to repurchase up to ten million common shares, of which 9.8 million shares have been repurchased as of the end of the first half of 1999. Comprehensive earnings for the half years ended July 4, 1999 and June 28, 1998, were $67.0 million and $43.0 million. Comprehensive earnings for the quarters ended July 4, 1999 and June 28, 1998, were $41.9 million and $16.3 million.
G - ADDITIONAL INFORMATION ON CASH FLOWS
First Half Ended ------------------- July 4, June 28, 1999 1998 ------- ------- Cash paid for: Interest $ 51.1 $ 56.7 ====== ====== Income taxes $ 31.2 $ 20.0 ====== ====== |
H - SEGMENT INFORMATION
Second Quarter Ended First Half Ended -------------------- ------------------ July 4, June 28, July 4, June 28, 1999 1998 1999 1998 -------- -------- ------- ------- Net sales: Industry segments: Paper $ 433.8 $ 445.2 $ 887.7 $ 879.1 Packaging and Paperboard 403.7 408.5 751.4 751.4 School and Office Products 167.3 197.2 228.9 259.4 -------- -------- -------- -------- Total $1,004.8 $1,050.9 $1,868.0 $1,889.9 ======== ======== ======== ======== Earnings (loss) from Continuing Operations Before Income Taxes: Industry segments: Paper $ 15.2 $ 47.0 $ 61.3 $ 106.7 Packaging and Paperboard 59.3 37.8 83.9 67.2 School and Office Products 22.4 31.6 23.8 38.3 Corporate and Other (1) (38.6) (47.5) (80.0) (85.5) -------- -------- -------- -------- Total $ 58.3 $ 68.9 $ 89.0 $ 126.7 ======== ======== ======== ======== |
(1) Corporate and other includes the following: Other revenue $ 5.3 $ 1.5 $ 9.3 $ 4.5 Interest expense (25.1) (28.9) (51.8) (55.4) Other expense (18.8) (20.1) (37.5) (34.6) --------- --------- -------- --------- Total $ (38.6) $ (47.5) $ (80.0) $ (85.5) ========= ========= ======== ========= |
Identifiable assets have not changed significantly at July 4, 1999, compared to December 31, 1998.
Selling and administrative expenses of $102.5 million were up from $101.3 million in the second quarter of 1998. First half 1999 selling and administrative expenses of $207.8 million were up from $197.6 million for the same period of 1998 largely due to expenses related to the initial phase of implementation of the company's enterprise resource planning system and development of the company's financial services center.
The levels of gross profit and selling and administrative expenses were
negatively affected by special items during the second
quarters of both 1999 and 1998. In 1999's second quarter, a
charge of $15.6 million was recorded for costs related to the
shutdown of four uncoated paper machines at the company's
Rumford, Maine, facility. The $15.6 million charge included:
$7.9 million to write-down fixed assets to be shutdown; $3.8
million in severance costs for salaried personnel notified
during the quarter; $2.6 million to write off other assets;
$1.3 million to write down stores and supplies inventory
associated exclusively with the four machines. In 1998, a
charge of $31.5 million for asset write downs was recorded to
reduce the carrying value of stores and supplies inventory,
assets of a Japanese packaging operation, certain equipment
replaced by new equipment and certain capitalized software
made obsolete by a decision to move to an enterprise resource
planning system.
million in 1999 compared to a loss of $3.5 million posted for 1998. The increase was primarily a result of higher shipments and prices for wood products at Mead's 50%-owned Northwood companies. Shipments and prices were higher for lumber, oriented structural board (OSB) and plywood. Shipments and prices were lower for pulp compared to the first half of 1998. During the first half, the pulp mill took 13 days of maintenance downtime.
Second Quarter First Half ------------------------ ------------------------ 1999 1998 % Change 1999 1998 % Change ---- ---- -------- ---- ---- -------- (All dollar amounts in millions) Net sales (to unaffiliated customers) $433.8 $445.2 (3)% $887.7 $879.1 1% Segment earnings before taxes 15.2 47.0 (68)% 61.3 106.7 (43)% |
First half net sales for the paper segment were slightly ahead of last year's levels, though sales for the second quarter were down. Earnings for the first half of 1999 were $61.3 million compared to $106.7 million in 1998. The weakness in selling prices sharply affected the first half results of the paper segment.
Earnings for the segment decreased from the second quarter of 1998 affected in part by charges of $15.6 million for special items related to the shutdown of four uncoated paper machines at the Rumford, Maine paper mill. Excluding special items, earnings were $30.8 million in the second quarter of 1999 compared to segment earnings before special items of $59.1 million in the second quarter of 1998. (In the second quarter of 1998, earnings of $47.0 million included $12.1 million in charges related to the write down of certain assets.) Earnings in the second quarter of 1999 were lower as a result of lower average selling prices for paper. For example, coated and uncoated paper prices were down more than 10% from the same quarter last year, carbonless paper prices were down 5% from prior year. In the second quarter of 1999, shipment volume increased for coated and uncoated paper. The mills generally operated well, taking some scheduled maintenance downtime in pulping operations. As previously announced, the company took 25,000 tons of market-related downtime in coated paper production during the quarter. Paper inventories declined from the levels of the prior quarter and were about even with the level of the second quarter of 1998.
Packaging and Paperboard segment
Second Quarter First Half ------------------------ ----------------------- 1999 1998 % Change 1999 1998 % Change ---- ---- -------- ---- ---- -------- (All dollar amounts in millions) Net sales (to unaffiliated customers) $403.7 $408.5 (1)% $751.4 $751.4 -- Segment earnings before taxes 59.3 37.8 57% 83.9 67.2 25% |
Net sales for the packaging and paperboard segment were even with last year although slightly down for the quarter. Earnings for the first half increased 25% to $83.9 million from $67.2 million for the same period in 1998. Segment earnings for the quarter of $59.3 million
improved 6% from $55.9 million in the second quarter of 1998, before $18.1 million in charges related to the write down of certain assets in 1998. The improvement in earnings in the first half of 1999 came primarily from higher shipments of corrugating medium from the company's expanded mill in Stevenson, Alabama. Shipments of medium increased 27% during the second quarter of 1999 from the second quarter of last year. Prices for medium recovered during the quarter bringing average selling prices to the level of last year's second quarter. Ongoing operational difficulties in the mill's new chemical recovery and conversion systems and production issues on the number two paper machine led to costs that, while below last year, were higher than expected. The company estimates this had a negative impact on earnings of approximately $5 million or $.03 per share during the quarter.
Within the Coated Board System, which includes the Packaging and Coated Board divisions, sales of beverage packaging were ahead for the first half and even with the second quarter of 1998. Shipments of coated paperboard to the company's packaging business and to open market customers declined slightly from the second quarter of 1998. Prices and shipments of wood products at the Coated Board division's two sawmills were higher than the same quarter last year. Production of coated paperboard at the Mahrt mill continued at very strong levels during the quarter, and the mill enhanced its cost position compared to the second quarter of 1998. In the third quarter of 1999, the mill plans to take approximately 25,000 tons of market-related downtime to help manage its inventory levels, which are higher than the level of the second quarter last year.
School and Office Products segment
Second Quarter First Half ------------------------ --------------------------- 1999 1998 % Change 1999 1998 % Change ---- ---- -------- ---- ---- -------- (All dollar amounts in millions) Net sales (to unaffiliated customers) $167.3 $197.2 (15)% $228.9 $259.4 (12)% Segment earnings before taxes 22.4 31.6 (29)% 23.8 38.3 (38)% |
Sales and earnings for the School and Office Products segment declined in the first half and second quarter of 1999 compared to the first half and second quarter of 1998 due to several factors affecting price and volume. These factors include lower selling prices for paper-based products compared to prior year. They also include shifts in the way mass retailers are managing inventories leading to an overall reduction in the inventory levels they hold; increased foreign competition in commodity-based and some value-added products; and a lack of strong new products for the back-to-school selling season. The company does not expect School and Office Products to make up its shortfall in sales and earnings by the end of 1999. The segment under the direction of new division management has begun to strengthen its efforts in new product development and sales growth for future years. During the quarter, the division's converting facilities operated well. The division shipped product to customers for the back-to- school selling season on a timely basis.
Borrowed capital (long-term debt) as a percentage of total capital (long-term debt plus shareowners' equity) was 37.0% on July 4, 1999, and was 37.8% on December 31, 1998.
Capital expenditures totaled $91 million in the first half of 1999 compared to $192 million in the first half of 1998. The company expects its full year 1999 capital expenditures to be in the range of $200 million to $225 million.
Proceeds for the sale of assets were $21.4 million in the first half of 1999, including $13.6 million in the first quarter and $7.8 million in the second quarter.
Under a Board of Directors authorization, Mead repurchased approximately 500,000 shares of its capital stock in the second quarter of 1999. The 10 million share repurchase authorization was 98% completed by the end of the second quarter 1999.
At the end of the second quarter, Mead paid a fixed rate or capped rate on 78% of its debt and paid a floating rate of interest on the remainder. A change of 1% in the floating rate, on an annual basis, would result in a $.02 change in earnings per share for the year. The estimated market value of long-term debt, excluding capital leases, was $23.5 million more than the book value at the end of the second quarter 1998.
OUTLOOK
Mead is making progress as it works through a five-step process in dealing with the Year 2000 issue: inventory; assessment; corrective action; testing; and implementation. With regard to its Information Technology (IT) systems corrective action is essentially completed for the company's corporate functions and its three business segments: Paper, Packaging and Paperboard, and School and Office Products. Testing and implementation are underway or have been completed in each of these areas. The company expects the risk to be low that its IT systems will be disrupted by Year the 2000 issue.
Non-IT systems include process control systems in manufacturing and converting facilities for monitoring and regulating power, production, emissions and safety equipment. At the end of the second quarter, approximately 88% of the company's process control systems were Year 2000 ready, 6% were being fixed or replaced and 6% were in the process of being reviewed. Mead has engaged a third-party consultant to assist in this process. More specifically, within Mead's business segments, corrective action and testing will be essentially complete in the Paper segment in the third quarter. Within the Packaging and Paperboard segment, corrective action and testing have been essentially completed for the Packaging division's domestic and international operations. Completion is expected in the second half for the Containerboard and Coated Board divisions, some during periods of normal maintenance downtime. In the School and Office Products segment, corrective action and testing of non-IT systems will be completed by year-end or by the first quarter of 2000. Year-end completion of corrective action and testing of non-IT systems is not as critical to School & Office Products given the seasonal nature of its business with most orders produced and shipped in the second and third quarters of the year. Mead fully expects to complete corrective action and testing of all critical non-IT systems within its three business segments in 1999. The company expects the risk to be low that its non-IT systems will be disrupted by the Year 2000 issue. Mead has initiated both internal and external reviews of non-IT systems to provide an independent assessment of its Y2K readiness.
The costs associated with the company's remediation of the Year 2000 issue include amounts for upgrading and replacing non-compliant software and hardware systems and the costs related to the use of third-party solution providers. Through the second quarter of 1999, the total cost of remediation was $21 million. This total includes approximately $12 million in repair costs and $9 million in replacement costs. The total cost Mead expects to incur between 1997 and 2000 related to the Year 2000 issue is $30 million to $35 million, a reduction from
original estimates of $35 million to $45 million. The majority of the remaining costs relate to replacement or modification of process control systems. These costs will be expensed as incurred, except for new systems that would be capitalized.
Mead has completed a detailed review of its critical suppliers of raw materials, energy, equipment, supplies and transportation to determine their level of Year 2000 readiness. Based on this review, the company expects there is a low level of risk related to Year 2000 readiness with over 90% of these suppliers and medium level of risk with remaining suppliers. The company is developing plans for alternative sources of supply where it believes it is necessary. Significant interruptions caused by suppliers could affect Mead's operations overall and its ability to deliver products and services to its customers.
The company has prepared contingency plans within each of its businesses for addressing the greatest areas of risk of noncompliance or threats to business operations or company assets related to the Year 2000 issue. The company expects to continue to refine these plans in the second half of 1999. The company believes that the greatest risk to company assets from Year 2000 issues would most likely come from the failure of third-parties, including government agencies, to deliver utilities or fuel to operate the boiler systems of the company's major paper and paperboard mills during a severe winter. The greatest risk of interruption to the manufacturing process would be the failure of suppliers to deliver raw materials for an extended period of time. The company could supply customers from finished inventory for a period of time. If customers were to experience Year 2000 interruptions in their own operations, it could result in reduced sales for Mead.
THE ESTIMATES AND CONCLUSIONS STATED HERE CONTAIN FORWARD- LOOKING STATEMENTS AND ARE BASED ON MANAGEMENT'S BEST ESTIMATES OF FUTURE EVENTS. RISKS ASSOCIATED WITH THE COMPLETION OF THE PLAN INCLUDE THE CONTINUED AVAILABILITY OF RESOURCES FROM SUPPLIERS AND THIRD-PARTY CONTRACTORS, THE ABILITY OF SUPPLIERS AND CUSTOMERS TO BE Y2K COMPLIANT, AND THE ABILITY TO IDENTIFY AND COMPLETE CONTINGENCY PLANS FOR SYSTEMATIC FAILURES NOT UNDER COMPANY CONTROL.
CERTAIN STATEMENTS IN THIS REPORT ARE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY DIFFER. CERTAIN FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER ARE DESCRIBED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31 1998 AND IN QUARTERLY REPORTS ON FORM 10-Q FILED IN 1999.
(b) Proxies were solicited for the meeting pursuant to Regulation 14A. There was no solicitation in opposition to management's nominees listed in the proxy statement, and John C. Bogle, John G. Breen, William E. Hoglund, James G. Kaiser, Robert J. Kohlhepp, John A. Krol, Susan J. Kropf, Charles S. Mechem, Jr., Lee J. Styslinger, Jr., Jerome F. Tatar and J. Lawrence Wilson were elected.
(c) The results of the election of directors are as follows:
Number of Votes --------------- Nominee For Withheld Abstentions Broker Non-Votes ------- --- -------- ----------- ---------------- John C. Bogle 91,501,198 548,216 -0- -0- John G. Breen 91,505,006 544,407 -0- -0- William E. Hoglund 91,508,647 540,767 -0- -0- James G. Kaiser 91,536,677 512,736 -0- -0- Robert J. Kohlhepp 90,832,949 1,216,464 -0- -0- John A. Krol 91,237,623 811,791 -0- -0- Susan J. Kropf 91,529,735 519,679 -0- -0- Charles S. Mechem, Jr. 91,497,454 551,960 -0- -0- Lee J. Styslinger, Jr. 91,525,531 523,882 -0- -0- Jerome F. Tatar 91,472,726 576,687 -0- -0- J. Lawrence Wilson 91,526,897 522,516 -0- -0- |
(10) Material Contracts:
(1) 1984 Stock Option Plan of the Registrant as amended through June 24, 1999.
(2) 1991 Stock Option Plan of the Registrant as amended through June 24, 1999.
(3) 1996 Stock Option Plan of the Registrant as amended through June 24, 1999.
(4) Form of Indemnification Agreement between Registrant and each of John C. Bogle, John G. Breen, Duane E. Collins, William E. Hoglund, James G. Kaiser, Robert J.
Kohlhepp, John A. Krol, Susan J. Kropf,
Charles S. Mechem, Jr., Heidi G. Miller,
Lee J. Styslinger, Jr., Jerome F. Tatar
and J. Lawrence Wilson.
(5) 1987 Restricted Stock Plan of the Registrant as amended through June 24, 1999.
(27) Financial Data Schedule Quarter 2, 1999.
(b) No current reports on Form 8-K were filed with the Commission in the second quarter of 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 10, 1999
(Chief Accounting Officer)
Exhibit 10.1
(a) "Acquisition Transaction" means a transaction of the type described in Section 8(b) (ii).
(b) "Affiliate" means a person controlling, controlled by or under common control with the Company.
(c) "Board of Directors" means the Board of Directors of the Company.
(d) "Change in Composition of the Board" means an event of the type described in Section 8(b) (iv).
(e) "Change in Control" means a transaction of the type described in Section 8(b) (iii).
(f) "Committee" means the committee referred to in Section 4.
(g) "Code" means the Internal Revenue Code of 1954, as amended.
(h) "Company" means The Mead Corporation; when used in the Plan with reference to employment, "Company" shall include any Subsidiary of the Company.
(i) "Designation of Beneficiary" means such person(s) or entity whom the Option Holder has designated by a transfer on death or other designation of beneficiary to receive the Holder's Option on the Holder's death in accordance with such procedures established from time to time by the Committee.
(j) "Fair Market Value" means the highest sale price of a Share on the date the value of a Share is to be determined, as reported on the New York Stock Exchange- Composite Transactions Tape or, if no sale is reported for such date, then on the next preceding date for which a sale is reported.
(k) "Grantee" means the employee who received the option from the Company.
(l) "Holder" means the person(s) or entity who owns the option, whether Grantee, Transferee, heir or other beneficiary.
(m) "Incentive Stock Option" means an option granted under the Plan which qualifies as an incentive stock option under Section 422 of the Internal Revenue Code of 1954, as amended.
(n) "Limited Right" means a right granted under Section 8 of the Plan.
(o) "Nonqualified Option" means an
option granted under the Plan which does not
qualify as an incentive stock option under
Section 422 of the Internal Revenue Code of
1954, as amended.
(p) "Share" or "Shares" means the Common Shares, without par value, of the Company.
(q) "Subsidiary" means any company 50% or more of the voting stock of which is owned or controlled, directly or indirectly, by the Company.
(r) "Tax Date" means the date as of which the amount of the withholding tax payment with respect to the exercise of a Nonqualified Option is calculated.
(s) "Tender Offer" means a tender offer
or a request or invitation for tenders or an
exchange offer subject to regulation under
Section 14(d) of the Securities Exchange Act
of 1934, as amended, and the rules and
regulations thereunder, as the same may be
amended, modified or superseded from time to
time.
(t) "Transferee" means the person who received the option from the Grantee during the Grantee's lifetime.
(b) The maximum number of Limited Rights which may be granted under the Plan is 1,700,000. Any Limited Rights granted under the Plan which for any reason terminate or expire or have been cancelled prior to being fully exercised may again be granted under the Plan.
The Committee shall have and exercise all the power and authority granted to it under the Plan. Subject to the provisions of the Plan, the Committee shall in its sole discretion determine the persons to whom, and the times at which, Incentive Stock Options, Nonqualified Options and Limited Rights shall be granted; the number of Shares to be subject to each option; the option price per Share; and the term of each option. In making such determinations, the Committee may take into consideration each employee's present and/or potential contribution to the success of the Company and its Subsidiaries and any other factors which the Committee may deem relevant and proper. Subject to the provisions of the Plan, the Board of Directors or the Committee shall also interpret the Plan; prescribe, amend and rescind rules and regulations relating to the Plan; correct defects, supply omissions and reconcile any inconsistencies in the Plan; and make all other determinations necessary or advisable for the administration of the Plan. Such determinations of the Board of Directors, or of the Committee (to the extent not reversed or modified by the Board of Directors), shall be conclusive. A majority of the Committee shall constitute a quorum for meetings of the Committee, and the act of a majority of the Committee at a meeting, or an act reduced to or approved in writing by all members of the Committee, shall be the act of the Committee.
(1) No option may be granted under the Plan at an option price per Share which is less than the Fair Market Value of a Share on the date of grant.
(2) No option may be exercised more than ten years after the date of grant.
(3) No option shall be exercisable within one year after the date of grant. At the time an option is granted, the Committee may provide that after such one year period, the option may be exercised with respect to all Shares subject thereto, or may be exercised with respect to only a specified number of Shares over a specified period or periods.
(4) Except as provided in Sections 6(b)
(5) and 6(b) (6), an option may be exercised only if the
Grantee thereof has been continuously employed by the
Company since the date of grant. Whether authorized leave
of absence or absence for military or governmental service
shall constitute a termination of employment shall be
determined by the Committee, after consideration of the
provisions of Section 1.421-7(h) of the regulations issued
under the Code, if appropriate.
(5) At the time an option is granted, or at such other time as the Committee may determine, the Committee may provide that, if the Grantee of the option ceases to be employed by the Company for any reason (including retirement or disability) other than death, the option will continue to be exercisable by the Holder (to the extent it was exercisable on the date the Holder ceased to be employed) for such additional period (not to exceed the remaining term of such option) after such termination of employment as the Committee may provide.
(6) At the time an option is granted,
the Committee may provide that, if the Grantee of the option
dies while employed by the Company or while entitled to the
benefits of any additional exercise period established by
the Committee with respect to such option in accordance with
Section 6 (b) (S), then the option will continue to be
exercisable (to the extent it was exercisable on the date of
death) by the person or persons (including the Holder's
estate) to whom the Holder's rights with respect to such
option shall have passed by will or by the laws
of descent and distribution (or in accordance with the
procedures set forth in Section 9 hereof) for such
additional period after death (not to exceed the remaining
term of such option) as the Committee may provide.
(7) At the time an option is granted, the Committee may provide for any restriction or limitation on the exercise of such option and/or for any restriction or limitation on the transferability of the Shares issuable upon the exercise of such option as it may deem appropriate.
(1) By its terms, an Incentive Stock Option granted prior to January 1, 1987 shall not be exercisable if the Holder thereof holds another outstanding option which was granted by the Company (or a Subsidiary or a parent corporation or predecessor corporation of the Company) at an earlier date and which is an Incentive Stock Option within the meaning of Section 422 of the Code. For purposes of this paragraph, an option which is an Incentive Stock Option shall be treated as outstanding until such option is exercised in full or expires by reason of lapse of time or expires as the result of the exercise of a related Limited Right.
(2) No Incentive Stock Option shall be granted to an officer or other employee who possesses directly or indirectly (within the meaning of Section 424(d) of the Code) at the time of grant more than 10% of the voting power of all classes of shares of the Company or of any parent corporation or any Subsidiary of the Company unless the option price is at least 110% of the Fair Market Value of the Shares subject to the option on the date the option is granted and the option is not exercisable after the expiration of five years from the date of grant.
(3) With respect to Incentive Stock Options granted on or after January 1, 1987, no Incentive Stock Option granted under the Plan and under all other plans of the Company and any parent corporation or any Subsidiary of the Company is exercisable for the first time by a Holder in an amount in excess of $100,000 (based on Fair Market Value at the time the option is granted) during any calendar year in accordance with Section 422(b) (7) of the Code, as added by the Tax Reform Act of 1986 and thereafter amended.
If a Grantee transfers a Nonqualified Option pursuant to Section 9, the Grantee is required to satisfy the applicable withholding taxes by paying cash or other property to the Company with respect to any income recognized by the Grantee on the exercise of such option by the Transferee. The Grantee's withholding obligations must be satisfied on the date that the Transferee exercises the option. If the Grantee does not satisfy the applicable withholding tax obligation, the Company shall retain from the Shares to be issued Shares having a Fair Market Value on the Tax Date equal to the mandatory withholding tax payable by the Grantee.
In connection with the exercise of an option or Limited Right, the Company has the right to require the Grantee to remit or otherwise make available to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for Shares (and prior to a cash payment in the case of a Limited Right) or to take whatever action it deems necessary to protect its interests with respect to tax liabilities in connection with the issuance of Shares or cash payment.
(i) during a period of 30 days following the date of expiration of a Tender Offer (other than an offer by the Company) for Shares, if the offeror acquires Shares pursuant to such Tender Offer;
(ii) during a period of 30 days following the date of approval by the shareholders of the Company of a definitive agreement: (x) for the merger or consolidation of the Company into or with
another corporation, if the Company will not be the surviving corporation or will become a Subsidiary of another corporation, or (y) for the sale of all or substantially all of the assets of the Company (each of the foregoing transactions is hereinafter referred to as an "Acquisition Transaction")
(iii) during a period of 30 days
following: (x) the date upon which the Company is provided
a copy of a Schedule 13D (filed pursuant to Section 13(d) of
the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder) indicating that any
person or group (as such terms are defined in Section 13(d)
(3) of such act) has become the Holder of 20% or more of the
outstanding voting shares of the Company, or (y) the date of
approval by the shareholders of the Company of a control
share acquisition (as such term is defined in Chapter 1701
of the Ohio Revised Code) (each of the foregoing
transactions is hereinafter referred to as a "Change of
Control"); and
(iv) during a period of 30 days following a change in the composition of the Board of Directors such that individuals who were members of the Board of Directors on the date two years prior to such change (or who were elected, or were nominated for election, by the Company's shareholders with the affirmative vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two year period) no longer constitute a majority of the Board of Directors (such a change in composition is hereinafter referred to as a "Change in Composition of the Board").
The "exercise value" of a Limited Right on the date of exercise shall be:
(i) in the case of an exercise during a period described in Section 8(b) (i), the highest price per Share paid pursuant to any Tender Offer which is in effect at any time during the 60-day period prior to the date on which the Limited Right is exercised;
(ii) in the case of an exercise during a period described in Section 8(b) (ii), the greater of: (x) the highest sale price of a Share during the 30-day period prior to the date of shareholder approval of the Acquisition Transaction, as reported on the New York Stock Exchange - Composite Transactions Tape, or (y) the highest fixed or formula per Share price payable pursuant to the Acquisition Transaction (if determinable on the date of exercise);
(iii) in the case of an exercise during
a period described in Section 8(b) (iii), the greater of:
(x) the highest sale price of a Share during the 30-day
period prior to the date the Company is provided with a copy
of the Schedule 13D, or the date of approval of the control
share acquisition, as reported on the New York Stock
Exchange - Composite Transactions Tape, or (y) the highest
acquisition price of a Share shown on such Schedule 13D or
to be paid in such control share acquisition; and
(iv) in the case of an exercise during a period described in Section 8 (b) (iv), the highest sale price of a Share during the 30-day period prior to the date of the Change in Composition of the Board, as reported on the New York Stock Exchange - Composite Transactions Tape.
Notwithstanding the foregoing, in no event shall the exercise value of a Limited Right issued in connection with an Incentive Stock Option exceed the maximum permissible exercise value for such a right under the Code and the regulations and interpretations issued pursuant thereto. Any securities or property which form part or all of the consideration paid for Shares pursuant to a Tender Offer or Acquisition Transaction shall be valued at the higher of (1) the valuation placed on such securities or property by the person making such Tender Offer or the other party to such Acquisition Transaction, or (2) the value placed on such securities or property by the Committee.
Upon the death of an Option Holder, outstanding Options held by such Holder may be exercised only by Designation of Beneficiary, or, if none, then by the executor or administrator of the Holder's estate or by a person who shall have acquired the right to such exercise by will or by the laws of descent and distribution.
Subject to such conditions as the Committee may prescribe, during an option Grantee's lifetime, the Committee may permit the transfer or assignment of an outstanding option by such Grantee; provided, that such transfer or assignment shall not apply to (y) an option which is an Incentive Stock Option (but only if nontransferability is necessary in order for the option to qualify as an Incentive Stock Option), and (z) an option granted to a person subject to Section 16 of the 1934 Act (but only if nontransferability is necessary in order for the option to qualify for the exemption under Rule 16b-3 of the 1934 Act).
(i) materially increase the benefits accruing to participants under the Plan;
(ii) materially increase the aggregate number of Shares which may be issued and/or delivered under the Plan and/or the number of Shares which may be issued and/or delivered to any individual under the Plan; or
(iii) materially modify the requirements as to eligibility for participation in the Plan.
(2) Approved by the shareholders of the Company on April 24, 1986.
(3) Amendment to Section 6(b) (5) adopted by the Board of Directors of the Company on November 01, 1986.
(4) Amendment to Section 2, 6(4), (5) and (6), 7 and 9 by the Board of Directors of the Company on November 09, 1996 to permit the transfer of stock options and to allow for the designation of a beneficiary of the stock option grant.
(5) Administrative Amendment to Section 7(d) as adopted by the Compensation Committee of the Board of
Directors on June 24, 1999.
Exhibit 10.2
(a) "Acquisition Transaction" means a transaction of the type described in Section 8 (b) (ii).
(b) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the 1934 Act.
(c) "Board of Directors" means the Board of Directors of the Company.
(d) "Change in Composition of the Board" means an event of the type described in Section 8 (b) (iv).
(e) "Change in Control" means a transaction of the type described in Section 8 (b) (iii).
(f) "Committee" means the committee referred to in
Section 4.
(h) "Company" means The Mead Corporation; when used in the Plan with reference to employment, "Company" shall include any Subsidiary of the Company.
(i) "Designation of Beneficiary" means such person(s) or entity whom the option Holder has designated by a transfer on death or other designation of beneficiary to receive the Holder's option on the Holder's death in accordance with such procedures established from time to time by the Committee.
(j) "Fair Market Value" means the average of the highest sale price and the lowest sale price of a Share on the date the value of a Share is to be determined, as reported on the New York Stock Exchange - Composite Transactions Tape or, if no sale is reported for such date, then on the next preceding date for which a sale is reported.
(k) "Grantee" means the employee who received the option from the Company.
(l) "Holder" means the person(s) or entity who owns the option, whether Grantee, Transferee, heir or other beneficiary.
(m) "Incentive Stock Option" means an option granted under the Plan which qualifies as an incentive stock option under Section 422 of the Code.
(n) "Limited Right" means a right granted under
Section 8 of the Plan.
(o) "Nonqualified Option" means an option granted under the Plan which does not qualify as an incentive stock option under Section 422 of the Code.
(p) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(q) "Share" or "Shares" means the Common Shares, without par value, of the Company.
(r) "Subsidiary" means any corporation, partnership or other person or entity at least 10% of the voting or equity interest of which is owned or controlled, directly or indirectly, by the Company.
(s) "Tender Offer" means a tender offer or a request or invitation for tenders or an exchange offer subject to regulation under Section 14 (d) of the 1934 Act and the rules and regulations thereunder, as the same may be amended, modified or superseded from time to time.
(t) "Tax Date" means the date as of which the amount of the withholding tax payment with respect to the exercise of a Nonqualified Option is calculated.
(u) "Transferee" means the person who received the option from the Grantee during the Grantee's lifetime.
(v) "Person" shall have the meaning given in Section
3(a)(9) of the 1934 Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not
include (i) the Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or
(iv) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
(b) The maximum number of Limited Rights which may be granted under the Plan is 8,000,000. Any Limited Rights granted under the Plan which for any reason terminate or expire or have been cancelled prior to being fully exercised may again be granted under the Plan.
a disinterested person with respect to the Plan under Rule 16b-3 (or any successor provision) under the 1934 Act.
The Committee shall have and exercise all the power and authority granted to it under the Plan. Subject to the provisions of the Plan, the Committee shall in its sole discretion determine the persons to whom, and the times at which, Incentive Stock Options, Nonqualified Options and Limited Rights shall be granted; the number of Shares to be subject to each option; the option price per Share; and the term of each option. In making such determinations, the Committee may take into consideration each employee's present and/or potential contribution to the success of the Company and its Subsidiaries and any other factors which the Committee may deem relevant and proper. Subject to the provisions of the Plan, the Board of Directors or the Committee shall also interpret the Plan; prescribe, amend and rescind rules and regulations relating to the Plan; correct defects, supply omissions and reconcile any inconsistencies in the Plan; and make all other determinations necessary or advisable for the administration of the Plan. The Committee or its designee may in its discretion change the terms of any Limited Right granted hereunder in connection with an Incentive Stock Option to permit the Limited Right to be exercisable even though the Fair Market Value of a Share on the date of exercise does not exceed the exercise price of the related option. Such determinations of the Board of Directors, or of the Committee (to the extent not reversed or modified by the Board of Directors), shall be conclusive. A majority of the Committee shall constitute a quorum for meetings of the Committee, and the act of a majority of the Committee at a meeting, or an act reduced to or approved in writing by all members of the Committee, shall be the act of the Committee.
(1) No option may be granted under the Plan at an option price per Share which is less than the Fair Market Value of a Share on the date of grant.
(2) No option may be exercised more than ten years after the date of grant.
(3) No option shall be exercisable within one year after the date of grant. At the time an option is granted, the Committee may provide that after such one-year period, the option may be exercised with respect to all Shares subject thereto, or may be exercised with respect to only a specified number of Shares over a specified period or periods.
(4) Except as provided in Sections 6(b) (5) and
6(b) (6), an option may be exercised only if the Grantee
thereof has been continuously employed by the Company since
the date of grant. Whether authorized leave of absence or
absence for military or governmental service shall
constitute a
termination of employment shall be determined by the Committee, after consideration of the provisions of Section 1.421-7(h) of the regulations issued under the Code, if appropriate.
(5) At the time an option is granted, or at such other time as the Committee may determine, the Committee may provide that, if the Grantee of the option ceases to be employed by the Company for any reason (including retirement or disability) other than death, the option will continue to be exercisable by the Grantee for such additional period (not to exceed the remaining term of such option) after such termination of employment as the Committee may provide.
(6) At the time an option is granted, the
Committee may provide that, if the Grantee of the option
dies while employed by the Company or while entitled to the
benefits of any additional exercise period established by
the Committee with respect to such option in accordance with
Section 6 (b) (5), then the option will continue to be
exercisable by the person or persons (including the Holder's
estate) to whom the Holder's rights with respect to such
option shall have passed by will or by the laws of descent
and distribution (or in accordance with the procedures set
forth in Section 9 hereof) for such additional period after
death (not to exceed the remaining term of such option) as
the Committee may provide.
(7) At the time an option is granted, the Committee may provide for any restriction or limitation on the exercise of such option and/or for any restriction or limitation on the transferability of the Shares issuable upon the exercise of such option as it may deem appropriate.
(1) No Incentive Stock Option shall be granted to an officer or other employee who possesses directly or indirectly (within the meaning of Section 424 (d) of the Code) at the time of grant more than 10% of the voting power of all classes of shares of the Company or of any parent corporation or any corporation, 50% or more of the voting stock of which is owned or controlled, directly or indirectly, by the Company, unless the option price is at least 110% of the Fair Market Value of the Shares subject to the option on the date the option is granted and the option is not exercisable after the expiration of five years from the date of grant.
(2) The aggregate Fair Market Value (determined on the date an Incentive Stock Option is granted) of Shares with respect to which Incentive Stock Options are exercisable for the first time by any individual in any calendar year (under the Plan and all of the plans of the Company and any Subsidiary and any parent corporation) shall not exceed $100,000, or such other maximum amount permitted by the Code.
this Section 6(e)), all outstanding options granted hereunder shall become fully vested and exercisable. As used in the immediately preceding sentence, "immediately prior" to the Acceleration shall mean sufficiently in advance of the Acceleration to permit the grantee to take all steps reasonably necessary to exercise the option fully and to deal with the Shares purchased under the option so that those Shares may be treated in the same manner in connection with the Acceleration as the Shares of other shareholders. For purposes of this Section 6(e), an "Acceleration" shall mean any of the following: (i) the date of the first purchase of Shares pursuant to a Tender Offer (other than an offer by the Company), (ii) the date of shareholder approval of an Acquisition Transaction, (iii) the date of filing of the Schedule 13D or shareholder authorization of the control share acquisition giving rise in either case to a Change in Control, or (iv) the date of a Change in Composition of the Board.
If a Grantee transfers a Nonqualified Option pursuant to Section 9, the Grantee is required to satisfy the applicable withholding taxes by paying cash or other property to the Company with respect to any income recognized by the Grantee on the exercise of such option by the Transferee. The Grantee's withholding obligations must be satisfied on the date that the Transferee exercises the option. If the Grantee does not satisfy the applicable withholding tax obligation, the Company shall retain from the Shares to be issued Shares having a Fair Market Value on the Tax Date equal to the mandatory withholding tax payable by the Grantee.
In connection with the exercise of an option or Limited Right, the Company has the right to require the Grantee to remit or otherwise make available to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for Shares (and prior to a cash payment in the case of a Limited Right) or to take whatever action it deems necessary to protect its interests with respect to tax liabilities in connection with the issuance of Shares or cash payment.
(i) during a period of 30 days following the date of expiration of a Tender Offer (other than an offer by the Company), if the offeror acquires Shares pursuant to such Tender Offer;
(ii) during a period of 30 days following the date of approval by the shareholders of the Company of a definitive agreement: (x) for the merger or consolidation of the Company into or with another corporation, if the Company will not be the surviving corporation or will become a subsidiary of another corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) at least 80% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately after such merger or consolidation, (y) for the merger or consolidation of the Company with another corporation, if the Company will be the surviving corporation and will not become a subsidiary of another corporation, or for the merger or consolidation of any direct or indirect subsidiary of the Company into or with another corporation, other than (in either case) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent ((i) in the case of a merger or consolidation of the Company, either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof, or (ii) in the case of a merger or consolidation of any direct or indirect subsidiary of the Company, either by remaining outstanding if the Company continues as a parent of the merged or consolidated subsidiary or by being converted into voting securities of the surviving entity or any parent thereof) at least 51% of the combined voting power of the voting securities of the Company or surviving or parent entity outstanding immediately after such merger or consolidation, or (z) for the sale or disposition of all or substantially all of the assets of the Company (each of the foregoing transactions is hereinafter referred to as an "Acquisition Transaction");
(iii) during a period of 30 days following:
(x) the date upon which the Company is provided a copy of a
Schedule 13D (filed pursuant to Section 13 (d) of the 1934
Act and the rules and regulations promulgated thereunder)
indicating that any person or group (as such terms are
defined in Section 13 (d)(3) of the 1934 Act) has become the
beneficial owner (as defined in Rule 13d-3 of the Exchange
Act) of 20% or more of the outstanding voting shares of the
Company or (y) the date of authorization, by both a majority
of the voting power of the Company and a majority of the
portion of such voting power excluding the voting power of
interested Shares, of a control share acquisition (as such
term is defined in Chapter 1701 of the Ohio Revised Code)
(each of the foregoing transactions is hereinafter referred
to as a "Change in Control"); and
(iv) during a period of 30 days following a change in the composition of the Board of Directors such that individuals who were members of the Board of Directors on the date two years prior to such change (and any new directors (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) who were elected, or were nominated for election, by the Company's shareholders with the affirmative vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such two year period or whose election or nomination for election was previously so approved) no longer constitute a majority of the Board of Directors (such a change in composition is hereinafter referred to as a "Change in Composition of the Board").
The "exercise value" of a Limited Right on the date of exercise shall be:
(i) in the case of an exercise during a period described in Section 8 (b) (i), the highest price per Share paid pursuant to any Tender Offer which is in effect at any time during the 60-day period prior to the date on which the Limited Right is exercised;
(ii) in the case of an exercise during a period described in Section 8 (b) (ii), the greater of: (x) the highest sale price of a Share during the 30-day period prior to the date of shareholder approval of the
Acquisition Transaction, as reported on the New York Stock Exchange - Composite Transaction Tape, or (y) the highest fixed or formula per Share price payable pursuant to the Acquisition Transaction (if determinable on the date of exercise);
(iii) in the case of an exercise during a
period described in Section 8 (b) (iii), the greater of:
(x) the highest sale price of a Share during the 30-day
period prior to the date the Company is provided with a copy
of the Schedule 13D, or the date of authorization of the
control share acquisition, as reported on the New York Stock
Exchange - Composite Transactions Tape, or (y) the highest
acquisition price of a Share shown on such Schedule 13D or
to be paid in such control share acquisition; and
(iv) in the case of an exercise during a period described in Section 8 (b) (iv), the highest sale price of a Share during the 30-day period prior to the date of the Change in Composition of the Board, as reported on the New York Stock Exchange - Composite Transactions Tape.
Notwithstanding the foregoing, in no event shall the exercise value of a Limited Right issued in connection with an Incentive Stock Option exceed the maximum permissible exercise value for such a right under the Code and the regulations and interpretations issued pursuant thereto. Any securities or property which form part or all of the consideration paid for Shares pursuant to a Tender Offer or Acquisition Transaction shall be valued at the higher of (1) the valuation placed on such securities or property by the person making such Tender Offer or the other party to such Acquisition Transaction, or (2) the value placed on such securities or property by the Committee.
Upon the death of an option Holder, outstanding options held by such Holder may be exercised only by Designation of Beneficiary, or, if none, then by the executor or administrator of the Holder's estate or by a person who shall have acquired the right to such exercise by will or by the laws of descent and distribution.
Subject to such conditions as the Committee may prescribe, during an option Grantee's lifetime, the Committee may permit the transfer or assignment of an outstanding option by such Grantee; provided, that such transfer or assignment shall not apply to (y) an option which is an Incentive Stock Option (but only if nontransferability is necessary in order for the option to qualify as an Incentive Stock Option), and (z) an option granted to a person subject to Section 16 of the 1934 Act (but only if nontransferability is necessary in order for the option to qualify for the exemption under Rule 16b-3 of the 1934 Act).
exchange of shares, or the like, the maximum number of Shares subject to option during the existence of the Plan, the number of Limited Rights which may be granted under the Plan, the number of Shares subject to, and the option price of, each outstanding option, the number of Limited Rights outstanding, the Fair Market Value of a Share on the date a Limited Right is granted, and the like shall be appropriately adjusted by the Committee (disregarding any fractional Shares resulting therefrom), whose determination in each case shall be conclusive.
(2) Amendments to Sections 2, 7 (a), (b), (c), and 9 adopted by the Board of Directors of the Company on November 09, 1996 to permit the transfer of stock options and to allow for the designation of a beneficiary of the stock option grant.
(3) Amendments to Sections 2(b) with addition of
Section 2(w); Section 6(e); Section 8(b) with addition of
subsections (i), (ii), (iii), (iv) as adopted by the Board
of Directors on June 24, 1998.
(4) Administrative Amendment to Section 7(d) as adopted by the Compensation Committee of the Board of Directors on June 24, 1999.
(a) "Acquisition Transaction" means a transaction of the type described in Section 9(b) (ii).
(b) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the 1934 Act.
(c) "Board of Directors" or "Board" means the Board of Directors of the Company.
(d) "Change in Composition of the Board," means an event of the type described in Section 9(b) (iv).
(e) "Change in Control," means a transaction of the type described in Section 9 (b) (iii).
(f) "Committee" means the committee referred to in Section 4.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Company" means The Mead Corporation, an Ohio corporation; when used in the Plan with reference to employment, "Company" shall include any Subsidiary of the Company.
(i) "Designation of Beneficiary" means such person(s) or entity whom the Option Holder has designated by a transfer on death or other designation of beneficiary to receive the Holder's Option on the Holder's death in accordance with such procedures established from time to time by the Committee.
(j) "Fair Market Value" means the average of the highest sale price and the lowest sale price of a Share on the date the value of a Share is to be determined, as reported on the New York Stock Exchange - Composite Transactions Tape or, if no sale is reported for such date, then on the next preceding date for which a sale is reported.
(k) "Grantee" means the employee who received the option from the Company.
(l) "Holder" means the person(s) or entity who owns the option, whether Grantee, Transferee, heir or other beneficiary.
(m) "Incentive Stock Option" means an option granted under
the Plan which qualifies as an Incentive Stock Option under
Section 422 of the Code.
(n) "Initial Director" means a person who is a Non- Employee Director at the date of requisite approval of this Plan by the shareholders of the Company.
(o) "Limited Right" means a right granted under Section 9 of the Plan.
(p) "Non-Employee Director" means a member of the Board who is not also an employee of the Company.
(q) "Nonqualified Option" means an option granted under
the Plan which does not qualify as an Incentive Stock Option under
Section 422 of the Code.
(r) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(s) "Reload Option" means a Nonqualified Option granted under Section 6(d) of the Plan.
(t) "Share" or "Shares" means shares of common stock, without par value, of the Company.
(u) "Subsequent Director" means a person who becomes a Non-Employee Director subsequent to the date of requisite approval of this Plan by the shareholders of the Company.
(v) "Subsidiary" means any corporation, partnership or other person or entity at least 10% of the voting or equity interest of which is owned or controlled, directly or indirectly, by the Company.
(w) "Tender Offer" means a tender offer or a request or invitation for tenders or an exchange offer subject to regulation under Section 14(d) of the 1934 Act and the rules and regulations thereunder, as the same may be amended, modified or superseded from time to time.
(x) "Tax Date" means the date as of which the amount of the withholding tax payment with respect to the exercise of a Nonqualified Option is calculated.
(y) "Transferee" means the person who received the option from the Grantee during the Grantee's lifetime.
(z) "Person" shall have the meaning given in Section
3(a)(9) of the 1934 Act, as modified and used in Sections 13(d)
and 14(d) thereof, except that such term shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or
(iv) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions
as their ownership of stock of the Company.
(b) Subject to adjustment as provided in Section 11, the maximum number of Limited Rights which may be granted under the Plan is 8,000,000. Subject to adjustment as provided in Section 11, the maximum number of Limited Rights that may be granted under the Plan to any individual over the term of the Plan shall not exceed 800,000. Any Limited Rights granted under the Plan which for any reason terminate or expire or have been cancelled prior to being fully exercised may again be granted under the Plan.
The Committee shall have and exercise all the power and authority granted to it under the Plan. Subject to the provisions of the Plan, the Committee shall in its sole discretion determine the persons to whom, and the times at which, Incentive Stock Options, Nonqualified Options, Reload Options and Limited Rights shall be granted; the number of Shares to be subject to each option; the option price per Share; and the term of each option. In making such determinations, the Committee may take into consideration each participant's present and/or potential contribution to the success of the Company and any other factors which the Committee may deem relevant and proper. Subject to the provisions of the Plan, the Committee shall also interpret the Plan; prescribe, amend and rescind rules and regulations relating to the Plan; correct defects, supply omissions and reconcile any inconsistencies in the Plan; and make all other determinations necessary or advisable for the administration of the Plan. The Committee may in its discretion change the terms of any Limited Right granted hereunder in connection with an Incentive Stock Option to permit the Limited Right to be exercisable even though the Fair Market Value of a Share on the date of exercise does not exceed the exercise price of the related option. Such determinations of the Committee shall be conclusive. A majority of the Committee shall constitute a quorum for meetings of the Committee, and the act of a majority of the Committee at a meeting, or an act reduced to or approved in writing by all members of the Committee, shall be the act of the Committee.
(1) No option may be granted under the Plan at an option price per Share which is less than the Fair Market Value of a share on the date of grant.
(2) No option may be exercised more than ten years after the date of grant.
(3) No option shall be exercisable within one year after the date of grant. At the time an option is granted, the Committee may provide that after such one year period, the option may be exercised with respect to all Shares subject thereto, or may be exercised with respect to only a specified number of Shares over a specified period or periods.
(4) Except as provided in Sections 6 (b) (5) and 6
(b) (6), an option may be exercised only if the Grantee of such
option has been continuously employed by the Company since the
date of grant. Whether authorized leave of absence or absence for
military or governmental service shall constitute a termination of
employment shall be determined by the Committee in its sole
discretion.
(5) At the time an option is granted, or at such other time as the Committee may determine, the Committee may provide that, if the Grantee of the Option ceases to be employed by the Company for any reason (including retirement or disability) other than death, the option will continue to be exercisable by the Holder (including a Transferee under Section 10 hereof) for such additional period (not to exceed the remaining term of such option) after such termination of employment as the Committee may provide.
(6) At the time an option is granted, the Committee
may provide that, if the Grantee of such option dies while
employed by the Company or while entitled to the benefits of any
additional exercise period established by the Committee with
respect to such option in accordance with Section 6(b) (5), then
the option will continue to be exercisable by the person or
persons to whom the Grantee's rights with respect to such option
shall have passed by will or by the laws of descent and
distribution (or in accordance with the procedures set forth in
Section 10 hereof) for such additional period after death (not to
exceed the remaining term of such option) as the Committee may
provide.
(7) At the time an option is granted, the Committee may provide for any restriction or limitation on the exercise of such option and/or for any restriction or limitation on the transferability of the Shares issuable upon the exercise of such option as it may deem appropriate.
(1) No Incentive Stock Option shall be granted to an officer or other employee who possesses directly or indirectly (within the meaning of Section 424(d) of the Code) at the time of grant more than 10% of the voting power of all classes of Shares of the Company or of any parent corporation or any corporation, 50% or more of the voting stock of which is owned or controlled, directly or indirectly, by the Company, unless the option price is at least 110% of the Fair Market Value of the Shares subject to the option on the date the option is granted and the option is not exercisable after the expiration of five years from the date of grant.
(2) The aggregate Fair Market Value (determined on the date an Incentive Stock Option is granted) of Shares with respect to which Incentive Stock Options are exercisable for the first time by any individual in any calendar year (under the Plan and all of the plans of the Company and any Subsidiary and any parent corporation) shall not exceed $100,000, or such other maximum amount permitted by the Code.
(3) Any Stock Option granted under the Plan may contain a feature providing for, upon the exercise thereof, the grant of a Reload Option subject to and in accordance with the terms and conditions set forth in Section 6 (d) below.
Shares covered thereby on the third anniversary of the Reload Date, subject to Section 6 (f) hereof.
Employee Retirement Income Security Act of 1974, as amended, or the rules promulgated thereunder.
notice of exercise to the Committee or its designee; provided, however, that an option may not be exercised for a fraction of a Share. No Holder of an option nor such Holder's legal representatives, legatees, Transferees, distributees or Designation of Beneficiary will be, or will be deemed to be, a Holder of any Shares covered by such option unless and until the option shall have been exercised in accordance with the Plan.
If a Grantee transfers a Nonqualified Option pursuant to
Section 10, the Grantee is required to satisfy the applicable
withholding taxes by paying cash or other property to the Company
with respect to any income recognized by the Grantee on the
exercise of such option by the Transferee. The Grantee's
withholding obligations must be satisfied on the date that the
Transferee exercises the option. If the Grantee does not satisfy
the applicable withholding tax obligation, the Company shall
retain from the Shares to be issued Shares having a Fair Market
Value on the Tax Date equal to the mandatory withholding tax
payable by the Grantee.
In connection with the exercise of an option or Limited Right, the Company has the right to require the Grantee to remit or otherwise make available to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for Shares (and prior to a cash payment in the case of a Limited Right) or to take whatever action it deems necessary to protect its interests with respect to tax liabilities in connection with the issuance of Shares or cash payment.
(i) during a period of 30 days following the date of expiration of a Tender Offer (other than an offer by the Company), if the offeror acquires Shares pursuant to such Tender Offer;
(ii) during a period of 30 days following the date of approval by the shareholders of the Company of a definitive agreement: (x) for the merger or consolidation of the Company into or with another corporation, if the Company will not be the surviving corporation or will become a subsidiary of another corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) at least 80% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately after such merger or consolidation, (y) for the merger or consolidation of the Company with another corporation, if the Company will be the surviving corporation and will not become a subsidiary of another corporation, or for the merger or consolidation of any direct or indirect subsidiary of the Company into or with another corporation, other than (in either case) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent ((i) in the case of a merger or consolidation of the Company, either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof, or (ii) in the case of a merger or consolidation of any direct or indirect subsidiary of the Company, either by remaining outstanding if the
Company continues as a parent of the merged or consolidated subsidiary or by being converted into voting securities of the surviving entity or any parent thereof) at least 51% of the combined voting power of the voting securities of the Company or surviving or parent entity outstanding immediately after such merger or consolidation, or (z) for the sale or disposition of all or substantially all of the assets of the Company (each of the foregoing transactions is hereinafter referred to as an "Acquisition Transaction");
(iii) during a period of 30 days following: (x) the date upon which the Company is provided a copy of a Schedule 13D (filed pursuant to Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder) indicating that any person or group (as such terms are defined in Section 13(d)(3) of the 1934 Act) has become the beneficial owner (as defined in Rule 13d-3 of the Exchange Act) of 20% or more of the outstanding voting Shares of the Company or (y) the date of authorization, by both a majority of the voting power of the Company and a majority of the portion of such voting power excluding the voting power of interested Shares, of a control share acquisition (as such term is defined in Chapter 1701 of the Ohio Revised Code) (each of the foregoing transactions is hereinafter referred to as a "Change in Control"); and
(iv) during a period of 30 days following a change in the composition of the Board of Directors such that individuals who were members of the Board of Directors on the date two years prior to such change (and any new directors (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) who were elected, or were nominated for election, by the Company's shareholders with the affirmative vote of at least two- thirds of the directors then still in office who either were directors at the beginning of such two year period or whose election or nomination for election was previously so approved) no longer constitute a majority of the Board of Directors (such a change in composition is hereinafter referred to as a "Change in Composition of the Board").
The "exercise value" of a Limited Right on the date of exercise shall be:
(i) in the case of an exercise during a period described in Section 9 (b) (i), the highest price per Share paid pursuant to any Tender Offer which is in effect at any time during the 60-day period prior to the date on which the Limited Right is exercised;
(ii) in the case of an exercise during a period described in Section 9(b) (ii), the greater of: (x) the highest sale price of a Share during the 30-day period prior to the date of shareholder approval of the Acquisition Transaction, as reported on the New York Stock
Exchange -Composite Transactions Tape, or (y) the highest fixed or formula per Share price payable pursuant to the Acquisition Transaction (if determinable on the date of exercise);
(iii) in the case of an exercise during a period described in Section 9(b) (iii), the greater of: (x) the highest sale price of a Share during the 30-day period prior to the date the Company is provided with a copy of the Schedule 13D, or the date of authorization of the control Share acquisition, as reported on the New York Stock Exchange -Composite Transactions Tape, or (y) the highest acquisition price of a Share shown on such schedule 13D or to be paid in such control Share acquisition; and
(iv) in the case of an exercise during a period described in Section 9 (b) (iv), the highest sale price of a Share during the 30-day period prior to the date of the change in Composition of the Board, as reported on the New York Stock Exchange - Composite Transactions Tape. Notwithstanding the foregoing, in no event shall the exercise value of a Limited Right issued in connection with an Incentive Stock Option exceed the maximum permissible exercise value for such a right for purposes of Section 422 of the Code and the regulations and interpretations issued pursuant thereto. Any securities or property which form part or all of the consideration paid for Shares pursuant to a Tender Offer or Acquisition Transaction shall be valued at the higher of (1) the valuation placed on such securities or property by the person making such Tender Offer or the other party to such Acquisition Transaction, or (2) the value placed on such securities or property by the Committee.
Upon the death of an Option Holder, outstanding Options held by such Holder may be exercised only by Designation of Beneficiary, or, if none, then by the executor or administrator of the Holder's estate or by a person who shall have acquired the right to such exercise by will or by the laws of descent and distribution.
Subject to such conditions as the Committee may prescribe, during an option Grantee's lifetime, the Committee may permit the transfer or assignment of an outstanding option by such Grantee; provided, that such transfer or assignment shall not apply to (y) an option which is an Incentive Stock Option (but only if nontransferability is necessary in order for the option to qualify as an Incentive Stock Option) and (z) an option granted to a person subject to Section 16 of the 1934 Act (but only if nontransferability is necessary in order for the option to qualify for the exemption under Rule 16b-3 of the 1934 Act)
set forth in the records of the Company. Anyone to whom a notice may be given under this Plan may designate a new address by written notice to the party to that effect.
(2) Amendments to Sections 2, 6 (b) and (e), 8 (a) and (d), 10 and 14 to allow for the designation of a beneficiary of the stock option grant.
(3) Amendments to Section 2(b), with an addition of subsection (z);
Section 6(a), (f); Section 9(b) with addition of subsections (i),
(ii), (iii), (iv) as adopted by the Board of Directors on June 24,
1998.
(4) Administrative Amendment to Section 8(d) as adopted by the
Compensation Committee of the Board of Directors on June 24, 1999.
AGREEMENT between The Mead Corporation, an Ohio corporation (the "Company"), and Duane E. Collins (the "Indemnitee").
WHEREAS, it is essential to the Company to retain and attract as directors the most capable persons available;
WHEREAS, Indemnitee is a director of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors of public companies in today's environment;
WHEREAS, basic protection against undue risk of personal liability of directors heretofore has been provided through insurance coverage providing reasonable protection at reasonable cost, and Indemnitee has relied on the availability of such coverage; but as a result of substantial changes in the marketplace for such insurance it has become increasingly more difficult to obtain such insurance on terms providing reasonable protection at reasonable cost;
WHEREAS, the Regulations of the Company and the Ohio General Corporation Law each provide that the indemnification provided therein shall not be exclusive;
WHEREAS, in recognition of Indemnitee's need for substantial protection against personal liability in order to enhance Indemnitee's continued service to the Company in an effective manner, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the full extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Company's directors' and officers' liability insurance policies;
NOW, THEREFORE, in consideration of the premises and of Indemnitee continuing to serve the Company directly or, at its request, with another enterprise, and intending to be legally bound, the Company and Indemnitee hereby agree as follows:
(i) date of expiration of a Tender Offer
(other than an offer by the Company), if the
offeror acquires Shares pursuant to such Tender
Offer;
(ii) the date of approval by the shareholders
of the Company of a definitive agreement: (x) for
the merger or consolidation of the Company or any
direct or indirect subsidiary of the Company into
or with another corporation, other than (1) a
merger or consolidation which would result in the
voting securities of the Company outstanding
immediately prior thereto continuing to represent
((i) in the case of a merger or consolidation of
the Company, either by remaining outstanding or by
being converted into voting securities of the
surviving entity or any parent thereof, or (ii) in
the case of a merger or consolidation of any
direct or indirect subsidiary of the Company,
either by remaining
outstanding if the Company continues as a parent of the merged or consolidated subsidiary or by being converted into voting securities of the surviving entity or any parent thereof) at least 51% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately after such merger or consolidation, or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 20% or more of the combined voting power of the Company's then outstanding securities, or (y) for the sale or disposition of all or substantially all of the assets of the Company, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least 51% of the combined voting power of the voting securities of which are owned (directly or indirectly) by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale or disposition;
(iii) (x) any Person is or becomes the Beneficial Owner of 20% or more of the voting power of the then outstanding securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates), excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (x) (1) of paragraph (ii) above or (y) the date of authorization, by both a majority of the voting power of the Company and a majority of the portion of such voting power excluding the voting power of interested Shares, of a control share acquisition (as such term in defined in Chapter 1701 of the Ohio Revised Code); and
(iv) a change in the composition of the Board of Directors such that individuals who were members of the Board of Directors on the date two years prior to such change (and any new directors (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) who were elected, or were nominated for election, by the Company's shareholders with the affirmative vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such two year period or whose election or nomination for election was previously so approved) no longer constitute a majority of the Board of Directors.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.
For purposes of this paragraph, the following terms shall have the following meanings:
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the 1934 Act.
"Beneficial Owner" shall have the meaning defined in Rule 13d-3 under the 1934 Act.
"Person" shall have the meaning given in
Section 3(a)(9) of the 1934 Act, as modified and
used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company
or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an
employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly
or indirectly, by the shareholders of the Company
in substantially the same proportions as their
ownership of stock of the Company.
under applicable law, Indemnitee shall have the right to commence litigation in any court in the state of Ohio having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, and the Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee.
(a) The fullest benefits provided by the Company's Regulations in effect on the date hereof, a copy of the relevant portions of which are attached hereto as Exhibit II;
(b) The fullest benefits provided by the Articles of Incorporation, Regulations, or Bylaws or their equivalent of
the Company in effect at the time the Indemnifiable Event occurs or at the time Expenses are incurred by Indemnitee;
(c) The fullest benefits allowable under Ohio law in effect at the date hereof, a copy of the relevant portions of which are attached hereto as Exhibit III, or as the same may be amended to the extent that such benefits are increased thereby;
(d) The fullest benefits allowable under the law of the jurisdiction under which the Company exists at the time the Indemnifiable Event occurs or at the time Expenses are incurred by the Indemnitee; and
(e) Such other benefits as are or may be otherwise available to Indemnitee pursuant to this Agreement, any other agreement or otherwise.
The parties intend that combination of two or more of the benefits referred to in (a) through (e) shall be available to Indemnitee to the extent that the document or law providing for such benefits does not require that the benefits provided therein be exclusive of other benefits. The Company hereby undertakes to use its best efforts to assist Indemnitee, in all proper and legal ways, to obtain all such benefits to which Indemnitee is entitled.
of TEN MILLION DOLLARS ($10,000,000) by depositing assets or bank letters of credit in escrow or reserving lines of credit that may be drawn down by an escrow agent in said amount (the "Escrow Reserve"). The Company shall promptly, following establishment of the Escrow Reserve, provide Indemnitee with a true and complete copy of the agreement relating to the establishment and operation of the Escrow Reserve, together with such additional documentation or information with respect to the Escrow Reserve as Indemnitee may from time to time reasonably request. The Company shall promptly, following establishment of the Escrow Reserve, deliver an executed copy of this Agreement to the escrow agent for the Escrow Reserve to evidence to that agent that Indemnitee is a beneficiary of the Escrow Reserve and shall deliver to Indemnitee the escrow agent's signed receipt evidencing that delivery. Notwithstanding anything to the contrary contained in this Section 8, any assets deposited by the Company in the Escrow Reserve shall at all times be and remain subject to the claims of the general creditors of the Company.
Executed and effective this 24th day of June, 1999.
JEROME F. TATAR
By ________________________
Jerome F. Tatar
Chairman of the Board
Exhibit I
Special, Independent, Counsel
Taft, Stettinius & Hollister LLP Kirkland & Ellis 1800 Firstar Tower 200 East Randolph Dr. 425 Walnut Center Chicago, IL 60601 Cincinnati, Ohio 45202-3957 (312) 861-2000 (513) 381-2838 Baker & Hostetler Vorys, Sater, Seymour and Pease 3200 National City Center 52 East Gay Street 1900 East Ninth Street P.O. Box 1008 Cleveland, Ohio 44114 Columbus, OH 43216-1008 (216) 621-0200 (614) 464-6400 |
Exhibit IV EXECUTIVE SUMMARY Director & Officer |
Indemnification & Insurance
Mead provides two methods of protecting its directors:
indemnification and insurance.
Under Ohio law, Mead may not, however, indemnify a director against fines, settlement amounts and judgments in an action brought by Mead or in a derivative action brought by a shareholder on behalf of Mead, if the director is judged to be negligent or guilty of misconduct. Mead does have insurance to protect a director in such event.
Mead may advance expenses to a director, provided he or she agrees to repay Mead if it is later determined that indemnification is not available.
These coverages have a $100 million aggregate limit. Defense costs are included within the limit. The indemnification coverage has a $500,000 per incident deductible. The D&O coverage has no deductible. Mead currently pays $443,407 (August 1, 1999 - August 1, 2000) for the coverage, and this premium is renegotiated annually.
The following matters, among others, are excluded from coverage under the policies:
. Libel and slander.
. Gains attributable to personal profit to which a
director was not entitled.
. Insider trading liability.
. Active and deliberate dishonesty with actual
dishonest purpose and intent.
. Any claim related to or arising from pollution.
. Bodily injury to or sickness, disease or death of a person.
. Injury or destruction to tangible property.
. Illegal payments.
. Suit brought by a director or officer of Mead.
Mead's coverage does protect the directors for acts and omissions related to takeover situations, subject to
policy exclusions.
Exhibit 10.5
(a) "Board of Directors" means the Board of Directors of the Company.
(b) A "Change in Control" shall be deemed to have occurred if an
event set forth in any one of the following paragraphs shall have
occurred:
(i) date of expiration of a Tender Offer (other than an
offer by the Company), if the offeror acquires Shares pursuant to such
Tender Offer;
(ii) the date of approval by the shareholders of the Company of a definitive agreement: (x) for the merger or consolidation of the Company or any direct or indirect subsidiary of the Company into or with another corporation, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent ((i) in the case of a merger or consolidation of the Company, either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof, or (ii) in the case of a merger or consolidation of any direct or indirect subsidiary of the Company, either by remaining outstanding if the Company continues as a parent of the merged or consolidated subsidiary or by being converted into voting securities of the surviving entity or any parent thereof) at least 51% of the combined voting power of the voting securities of the Company or such surviving or parent entity outstanding immediately after such merger or consolidation, or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 25% or more of the combined voting power of the Company's then outstanding securities, or (y) for the sale or disposition of all or substantially all of the assets of the Company, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least 51% of the combined voting power of the voting securities of which are owned (directly or indirectly) by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale or disposition;
(iii) (x) any Person is or becomes the Beneficial Owner of 25% or
more of the voting power of the then outstanding securities of the
Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its
affiliates), excluding any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (x)(1) of paragraph
(ii) above or (y) the date of authorization, by both a majority of the
voting power of the Company and a majority of the portion of such voting
power excluding the voting power of interested Shares, of a control
share acquisition (as such term is defined in Chapter 1701 of the Ohio
Revised Code); and
(iv) a change in the composition of the Board of Directors such that individuals who were members of the Board of Directors on the date two years prior to such change (and any new directors (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) who were elected, or were nominated for election, by the Company's shareholders with the affirmative vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such two year period or whose election or nomination for election was previously so approved) no longer constitute a majority of the Board of Directors.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.
(c) "Committee" means the Compensation Committee of the Board of Directors.
(d) "Company" means The Mead Corporation; however, when used with reference to employment, "Company" also includes any corporation, partnership or other person or entity at least 10% of the voting or equity interest of which is owned or controlled, directly or indirectly, by the Company.
(e) "Eligible Director" means any director of the Company who is not also an employee of the Company.
(f) "Eligible Employee" means any employee of the Company selected by the Committee.
(g) "Grant Date" means the date on which Restricted Shares are to be granted pursuant to Article II, Section 1.
(h) "Market Value" means the average of the highest sale price and the lowest sale price of a Share on the date the value of a Share is to be determined, as reported on the New York Stock Exchange - Composite Transactions Tape (or other similar source) or, if no sale is reported for such date, then on the next preceding date for which a sale is reported.
(i) "Participant" means any individual who holds Restricted Shares granted under the Plan.
(j) "Restriction Period" means (i) in the case of Restricted Shares granted pursuant to Article II. Section 1 (a), (b) or Section 2, the period of six months from the date the Restricted Shares are granted, (ii) in
the case of Restricted Shares granted pursuant to Article II. Section
1(c), the date the grantee becomes age 55 or six months from the date
the Restricted Shares are granted, whichever is later, and (iii) in the
case of Restricted Shares granted pursuant to Article III, the period of
six months or longer (as determined by the Committee) from the date
Restricted Shares are granted.
(k) "Restricted Shares" means any Shares issued or delivered pursuant to the Plan which remain subject to the restrictions set forth in Article I, Section 5 of the Plan.
(l) "Shares" means the Common Shares, without par value, of the Company.
(m) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.
(n) "Beneficial Owner" shall have the meaning defined in Rule 13d-3 under the Exchange Act.
(o) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.
(p) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company.
(q) "Tender Offer" shall mean a tender offer or a request or
invitation for tenders or an exchange offer subject to regulation under
Section 14(d) of the Exchange Act and the rules and regulations
thereunder, as the same may be amended, modified or superseded from time
to time.
In the case of Restricted Shares granted pursuant to Article III, the Committee may in its discretion impose additional conditions or restrictions as to the attainment of specified performance goals during the Restriction Period for all or a portion of the shares or all or a portion of the years in the Restriction Period.
(b) The Committee may waive or modify at any time any condition or restriction (including, without limitation, any of the restrictions set
<PAGE
forth in Article I, Section 5) with respect to any Restricted Shares issued pursuant to Article III.
(i) the Participant shall not be entitled to receive delivery of the certificate for such Restricted Shares until the expiration of the Restriction Period;
(ii) such Restricted Shares shall not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restriction Period; and
(iii) all such Restricted Shares shall be forfeited and all right of the Participant to such Restricted Shares shall terminate without further obligations on the part of the Company if the Participant ceases to be a director of the Company (in the case of a Participant who received Restricted Shares as an Eligible Director) or an employee of the Company (in the case of a Participant who received Restricted Shares as an Eligible Employee) prior to the end of the Restriction Period.
Upon the forfeiture of Restricted Shares, such Shares shall be returned to the status of authorized and unissued Shares or treasury Shares, as determined by the Committee.
(b) Notwithstanding the provisions of paragraph (a) of this
Section 5, in the event a Participant ceases to be a director of the
Company (in the case of a Participant who received Restricted Shares as
an Eligible Director) or an employee of the Company (in the case of a
Participant who received Restricted Shares as an Eligible Employee)
prior to the end of a Restriction Period as a result of such
Participant's death, disability or normal retirement in accordance with
the Company's policies, then the restrictions set forth in paragraph (a)
of this Section 5 shall immediately cease to apply to (and all rights of
the Participant shall immediately vest with respect to) all of the
Restricted Shares.
In any event, all such Restricted Shares shall be forfeited and all rights of the Participant to such Restricted Shares shall terminate without further obligations on the part of the Company if the Participant, directly or indirectly, individually or as an agent, officer, director, employee, shareholder (excluding being the holder of any stock which represents less than 1% interest in a corporation), partner or in any other capacity whatsoever engages prior to the time such restrictions cease to apply in any activity competitive with or adverse to the Company's business or in
the sale, distribution, production or attempted sale or distribution of any goods, products or services then sold or being developed by the Company.
(c) Notwithstanding any other provision of the Plan, immediately prior to the occurrence of a "Change in Control", all of the restrictions set forth in this Section 5 shall immediately cease to apply to all Restricted Shares issued pursuant to the Plan, except to the extent that the lapse of such restrictions would, in the opinion of counsel selected by the Company's independent auditors, constitute "parachute payments" within the meaning of Section 280G(b)(2)(A) of the Internal Revenue Code (the "Code") and, when added to any other "parachute payments" which would be received by the Participant pursuant to the terms of any other plan, arrangement or agreement with the Company, any person whose actions result in a change in control of the Company or any person affiliated with the Company or such person, would be subject to the tax imposed by Section 4999 of the Code. As used in the immediately preceding sentence, "immediately prior" to the Change in Control shall mean sufficiently in advance of the Change in Control to permit the Participant to deal with the Shares so that those Shares may be treated in the same manner in connection with the Change in Control as the Shares of other shareholders.
(d) At the end of the Restriction Period, or at such earlier
time as it is provided for in Paragraphs (b) or (c) of this Section 5,
the restrictions applicable to the Restricted Shares pursuant to this
Section 5 shall cease and a share certificate for the number of
Restricted Shares with respect to which the restrictions have ceased
shall be delivered, free of all such restrictions and all restrictive
legends, to the Participant or the Participant's beneficiary or estate,
as the case may be.
(e) If required by the Committee, each grant of Restricted Shares shall be evidenced by a written agreement between the Company and the Participant.
(f) In the event that the restrictions set forth in Paragraph
(a) of this Section 5 shall cease to apply to any Restricted Shares
granted to Eligible Employees subject to Section 16 of the Act prior to
the date which is six months after the date of grant of such Restricted
Shares, then, notwithstanding any provision to the contrary in this
Section 5, the restrictions set forth in paragraphs (a) (i) and (a) (ii)
of this Section 5 shall continue in effect until the date which is six
months after the date of such grant.
(g) Notwithstanding any provision to the contrary in this
Section 5, but subject nonetheless to Paragraph (c) of this Section 5,
in the case of Restricted Shares granted pursuant to Article III, if the
Participant fails to attain specified performance goals set forth with
respect to such Restricted Shares during the Restriction Period, the
Participant will forfeit such Restricted Shares to the extent specified
in the grant of such Restricted Shares and the right of the Participant
to such Restricted Shares shall terminate to the extent specified in the
grant of such Restricted Shares without any further obligations on the
part of the Company.
"The transferability of this certificate and the Common Shares represented hereby are subject to the restrictions, terms and conditions
(including forfeiture and restrictions against sale, assignment, transfer, pledge, hypothecation and other disposition) set forth in The Mead Corporation Restricted Stock Plan. Copies of such Plan will be mailed to any shareholder without charge within five days after receipt of written request therefor address to Secretary, The Mead Corporation, Mead World Headquarters, Courthouse Plaza Northeast, Dayton, OH 45463."
Each such share shall be retained by the Company until the restrictions set forth in Article I, Section 5(a) cease to apply to the Shares.
(b) Upon the issuance of Restricted Shares pursuant to paragraph
(a) of this Section 6, the Participant shall, subject to all of the
terms, conditions and restrictions set forth in the Plan, have all of
the rights of a holder of Shares, including the right to vote and to
receive dividends and other distributions with respect thereto.
(b) If during the term of the Plan any person becomes an Eligible Director on a date other than a Grant Date, the Company shall grant such person a number of Restricted Shares determined by dividing $7,500 by the Market Value of a Share (rounded to the nearest whole share) on the date of such person's election to the Board of Directors.
(c) Each Eligible Director shall automatically receive a grant of a number of Restricted Shares of the Company equal to the quotient obtained by dividing (i) 5,000, by (ii) the Market Value per Share on the date the Plan, as amended, is approved by the Shareholders (the "Initial Grant"). Thereafter, on the third business day of January, 1997 and on each annual anniversary of such date during the term of the Plan, the Company shall grant and each Eligible Director shall automatically receive a number of Restricted Shares which shall equal the product obtained by multiplying the Initial Grant by an adjustment factor (the "Factor"). The Factor shall equal the quotient obtained by dividing (y) the base line number for average total compensation paid to directors by companies with annual sales in excess of $4 billion, as published in the Hay Consulting Group's "Directors Compensation Report" (or comparable successor report) in the calendar year immediately preceding the year in which such grant is made, which report covers compensation paid in the year ending immediately prior to the year of publication, by (z) 36,246. In the event that such Directors Compensation Report (or comparable successor report) is not published with respect to any year, the Factor shall equal one (1).
or after the first day of such calendar year. In order to be effective, the election form must be signed by the director and must be returned to the Committee or its delegate not later than July 1 of the year prior to the year with respect to which the election is being made. All such elections are irrevocable.
(b) A new Eligible Director may, by filing the prescribed election form, elect to receive the annual retainer fee as Restricted Shares as provided in paragraph (a) of this Section 2 only if the election form is signed and filed at least six months prior to the date of payment of the annual retainer fee to such director.
(c) If an Eligible Director has elected to receive all or a portion of the annual retainer fee as Restricted Shares as provided in this Section 2, then on the date such fee would otherwise be payable, the Company shall grant to such director a number of Restricted Shares determined by dividing the compensation so to be received by the Market Value of a Share on such date such other compensation would otherwise be payable (rounded to the nearest whole share).
Notwithstanding the foregoing, however, in the event any rights to purchase Shares are issued pursuant to the Company's Shareholder Rights Plan (or any successor plan) with respect to Restricted Shares, such rights shall cease to be subject to the restrictions applicable to the underlying Restricted Shares at such time, if any, as such rights become exercisable.
regulations (including, without limitation, the provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder), any securities exchange upon which the Shares may be listed and any other law or regulation applicable thereto, and the Company shall not be obligated to issue or deliver any Shares pursuant to the Plan if such issuance or delivery would violate any such requirements. The foregoing shall not, however, be deemed to require the Company to effect any registration of Shares under any such law or regulation.
(i) materially increase the benefits accruing to participants under the Plan;
(ii) materially increase the aggregate number of Shares which may be issued and/or delivered or the number of Shares which may be granted to any individual under the Plan;
(iii) materially modify the requirements as to eligibility for participation in the Plan.
(b) The Plan shall terminate and no additional Restricted Shares shall be granted under the Plan after September 30, 2005; provided, however, that the Board of Directors may earlier terminate the Plan at any time.
(c) No amendment to or termination or expiration of the Plan shall adversely affect any Restricted Shares previously granted under the Plan without the consent of the holder thereof.
(d) Notwithstanding paragraph (a) of this Section 3, the provisions of Section 1 of Article II may not be amended more than once every six months other than to comport with changes in the Code, ERISA or the rules thereunder.
(b) On any date on or after January 1, 1994 that restrictions applicable to Restricted Shares granted (or to be granted) hereunder shall have ceased pursuant to Article I, Section 5 (the "Lapse Date"), and with respect to persons subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "1934 Act") on any date thereafter through the end of the next following period (the "Window Period") specified in Rule 16b-3(e)(3) (or any successor rule) under the 1934 Act, the Participant to whom such Restricted Shares were granted may elect to have the Company retain, from the Restricted Shares to be delivered at the end of the Restriction Period, Shares having a Market Value on the date of delivery equal to all or any part of the required minimum federal, state and local withholding tax payments to be made by the Participant with respect to ceasing of the restrictions in lieu of making such payments in cash; provided that such election may also be made in advance of the Lapse Date and will be effective on the date specified in the notice of election (subject, as applicable, to Section 16 of the 1934 Act), and further provided that, with respect to a Lapse Date that has occurred or will occur between January 1, 1994 and October 28, 1994, the election may be made by persons subject to and in accordance with Section 16 of the 1934 Act through the end of the first Window Period which commences on, includes or follows October 28, 1994. The Committee may establish from time to time rules or limitations with respect to the right of a Participant to elect to have the Company retain Restricted Shares in satisfaction of withholding payments; provided, however, that, in any event, any such rules or limitations must be in accordance with Section 16 of the 1934 Act and any applicable rules established under such Section.
(2) Approved by the shareholders of the Company on April 28, 1988.
(3) Addition of Article II, Section 2, subsection (d) adopted by the Board of Directors of the Company on December 15, 1989 (deleted February 28, 1991).
(4) Amendment to Article I, Section 2, subsection (h) adopted by the Board of Directors of the Company on January 25, 1990.
(5) Amendments to Article I, Section 2, subsections (d) and (j); Article I, Section 3, subsection (a); and Article III, Section 1; and addition of Article 2, Section 5, subsection (g), adopted by the Board of Directors of the Company on January 24, 1991, and approved by the shareholders of the Company on April 25, 1991.
(6) Amendments to Article II, Section 2, subsections (a) and
(b); and addition of Article I, Section 5, subsection (f) and Article
IV, Section 3, subsection (d) adopted by the Board of Directors of the
Company on February 28, 1991.
(7) Amendments to Article I, Section 5, subsection (b); and addition of Article I, Section 5, subsection (b) (iii), adopted by the Board of Directors of the Company on July 23, 1992.
(8) Amendment to Article IV, Section 6, subsection (b) adopted by the Board of Directors of the Company on April 28, 1994.
(9) Amendments to Article I, Section 2(j), Section 4, Section
5(b) (i), Section 6, Article II, Section 1(c), Article IV, Section 3(b)
adopted by the Board of Directors of the Company on October 28, 1995,
and approved by the shareholders of the Company on April 25, 1996.
(10) Amendments to Article I, Section 2(j) and 5(b); Article II,
Section 1(a) and (b) adopted by the Board of Directors of the Company on
November 09, 1996.
(11) Amendments to Article I, Section 2(b), and addition of subsection (i), (ii), (iii), (iv) with addition of a paragraph at the end; addition of (m), (n), (o), (p), (q) and Article I, Section 5(c) of the Plan adopted by the Board of Directors of the Company on June 24, 1998.
(12) Administrative Amendment to Article IV, Section 6(b) adopted by the Compensation Committee of the Board of Directors of the Company
on June 24, 1999.
ARTICLE 5 |
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY REPORT ON FORM 10-Q OF THE MEAD CORPORATION FOR THE QUARTERLY PERIOD ENDED JULY 4, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THIS SCHEDULE SHALL NOT BE DEEMED TO BE FILED FOR PURPOSES OF SECTION 11 OF THE SECURITIES ACT OF 1933, SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 323 OF THE TRUST INDENTURE ACT OF 1939, OR OTHERWISE SUBJECT TO THE LIABILITIES OF SUCH SECTIONS, NOR SHALL IT BE DEEMED A PART OF ANY REGISTRATION STATEMENT TO WHICH IT RELATES. |
PERIOD TYPE | 6 MOS |
FISCAL YEAR END | DEC 31 1998 |
PERIOD END | JUL 04 1999 |
CASH | 36 |
SECURITIES | 0 |
RECEIVABLES | 569 |
ALLOWANCES | 0 |
INVENTORY | 482 |
CURRENT ASSETS | 1,174 |
PP&E | 5,772 |
DEPRECIATION | 2,472 |
TOTAL ASSETS | 5,190 |
CURRENT LIABILITIES | 693 |
BONDS | 1,346 |
PREFERRED MANDATORY | 0 |
PREFERRED | 0 |
COMMON | 153 |
OTHER SE | 2,143 |
TOTAL LIABILITY AND EQUITY | 5,190 |
SALES | 1,868 |
TOTAL REVENUES | 1,868 |
CGS | 1,528 |
TOTAL COSTS | 1,528 |
OTHER EXPENSES | 0 |
LOSS PROVISION | 0 |
INTEREST EXPENSE | 52 |
INCOME PRETAX | 89 |
INCOME TAX | 32 |
INCOME CONTINUING | 68 |
DISCONTINUED | 0 |
EXTRAORDINARY | 0 |
CHANGES | 0 |
NET INCOME | 68 |
EPS BASIC | .66 |
EPS DILUTED | .65 |