-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O8cMGqtj2r2GcESjbHsuFIyF+QKNhy4ApkfyhP7ILMmWFRBjjMwkFM4XGpKL+ttO 2QELqFueAF+U5XnWU3ODAA== 0000064394-99-000005.txt : 19990513 0000064394-99-000005.hdr.sgml : 19990513 ACCESSION NUMBER: 0000064394-99-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990404 FILED AS OF DATE: 19990512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEAD CORP CENTRAL INDEX KEY: 0000064394 STANDARD INDUSTRIAL CLASSIFICATION: PAPERBOARD MILLS [2631] IRS NUMBER: 310535759 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02267 FILM NUMBER: 99618498 BUSINESS ADDRESS: STREET 1: MEAD WORLD HEADQUARTERS STREET 2: COURTHOUSE PLZ NORTHEAST CITY: DAYTON STATE: OH ZIP: 45463 BUSINESS PHONE: 5134956323 10-Q 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 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 April 4, 1999 was 101,500,735. ================================================================================ THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES -------------------------------------------------- QUARTERLY PERIOD ENDED APRIL 4, 1999 ------------------------------------ PART I - FINANCIAL INFORMATION ------------------------------ ITEM 1. FINANCIAL STATEMENTS -------------------- THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------- BALANCE SHEETS - -------------- (All dollar amounts in millions) Apr. 4, Dec. 31, 1999 1998 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 11.9 $ 102.0 Accounts receivable 441.2 414.7 Inventories 518.4 479.5 Other current assets 107.4 90.2 -------- -------- Total current assets 1,078.9 1,086.4 Investments and other assets: Investees 133.9 127.5 Other assets 564.5 555.6 -------- -------- 698.4 683.1 Property, plant and equipment - net 5,752.9 5,741.8 Less accumulated depreciation and amortization (2,419.1) (2,369.1) -------- -------- 3,333.8 3,372.7 -------- -------- Total assets $5,111.1 $5,142.2 ======== ======== LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Notes payable $ 45.5 $ Accounts payable 229.2 275.9 Accrued liabilities 362.1 395.7 Current maturities of long-term debt 27.1 7.9 -------- -------- Total current liabilities 663.9 679.5 Long-term debt 1,345.9 1,367.4 Commitments and contingent liabilities Deferred items 850.8 843.3 Shareowners' equity: Common shares 151.4 151.9 Additional paid-in capital 70.3 66.3 Retained earnings 2,069.7 2,076.9 Other comprehensive loss (40.9) (43.1) -------- -------- 2,250.5 2,252.0 -------- -------- Total liabilities and shareowners' equity $5,111.1 $5,142.2 ======== ======== See notes to financial statements. THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------- STATEMENTS OF EARNINGS - ---------------------- (All dollar amounts in millions, except per share amounts) First Quarter Ended -------------------- Apr. 4, Mar. 29, 1999 1998 ------- ------- Net sales $863.2 $839.0 Cost of products sold 704.5 661.0 ------- ------- Gross profit 158.7 178.0 Selling and administrative expenses 105.3 96.3 ------- ------- Earnings from operations 53.4 81.7 Other revenues - net 4.0 2.6 Interest and debt expense (26.7) (26.5) ------- ------- Earnings from continuing operations before income taxes 30.7 57.8 Income taxes 11.1 21.2 ------- ------- Earnings from continuing operations before equity in net earnings of investees 19.6 36.6 Equity in net earnings (loss) of investees 3.3 (3.0) ------- ------- Earnings from continuing operations 22.9 33.6 Discontinued operations (3.0) ------- ------- Net earnings $ 22.9 $ 30.6 ======= ======= Earnings per common share - basic and diluted $ .22 $ .32 Discontinued operations (.03) ------- ------- Net earnings $ .22 $ .29 ======= ======= Cash dividends per common share $ .16 $ .16 ======= ======= Weighted-average number of common shares outstanding (millions) - basic 101.7 103.9 ======= ======= Weighted-average number of common shares outstanding (millions) - assuming dilution 102.9 105.8 ======= ======= See notes to financial statements. THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------- STATEMENTS OF CASH FLOWS - ------------------------ (All dollar amounts in millions) First Quarter Ended -------------------- Apr. 4, Mar. 29, 1999 1998 ------- ------- Cash flows from operating activities: Net earnings $ 22.9 $30.6 Adjustments to reconcile net earnings to net cash (used in) operating activities: Depreciation and depletion of property, plant and equipment 67.6 61.8 Depreciation and amortization of other assets 10.3 10.6 Deferred income taxes 2.5 4.3 Investees - earnings and dividends (4.7) 2.2 Discontinued operations 3.0 Other 2.4 (.1) Change in current assets and liabilities: Accounts receivable (32.4) (14.9) Inventories (44.8) (86.0) Other current assets (19.3) (11.3) Accounts payable and accrued liabilities (77.2) (7.4) Cash (used in) discontinued operations (12.1) ------- ------- Net cash (used in) operating activities (72.7) (19.3) Cash flows from investing activities: Capital expenditures (45.6) (78.1) Additions to equipment rented to others (6.4) (6.1) Proceeds from sale of assets 13.6 Other 4.8 (31.2) ------- ------- Net cash (used in) investing activities (33.6) (115.4) Cash flows from financing activities: Additional borrowings 15.0 115.7 Payments on borrowings (17.8) (115.0) Notes payable 45.5 138.4 Cash dividends paid (16.3) (16.6) Common shares issued 4.7 10.1 Common shares purchased (14.9) (8.7) ------- ------- Net cash provided by financing activities 16.2 123.9 ------- ------- (Decrease) in cash and cash equivalents (90.1) (10.8) Cash and cash equivalents at beginning of year 102.0 29.5 ------- ------- Cash and cash equivalents at end of quarter $ 11.9 $18.7 ======= ======= See notes to financial statements. THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - ----------------------------- (All dollar amounts in millions) A - INTERIM FINANCIAL STATEMENTS The balance sheet at December 31, 1998, is condensed financial information taken from the audited balance sheet. Management believes the unaudited interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position and results of operations for the interim periods presented. 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): Apr. 4, Dec. 31, 1999 1998 ------- ------- Finished and semi-finished products $335.0 $295.0 Raw materials 107.4 109.2 Stores and supplies 76.0 75.3 ------- ------- $518.4 $479.5 ======= ======= D - INVESTEES The summarized operating data for all investees is presented in the following table: First Quarter Ended ------------------- April 4, March 29, 1999 1998 ------- ------- Revenues $ 173.0 $ 176.4 ======= ======= Gross profit $ 22.7 $ 1.6 ======= ======= Net earnings (loss) $ 12.5 $ (2.5) ======= ======= E - EMPLOYEE TERMINATION COSTS In 1998, the company adopted a plan to make organizational changes and reduce its workforce, and recorded a charge for employee severance and related costs. The following is a summary of the remaining accrual at April 4, 1999 (in millions): Balance at December 31, 1998 $ 9.9 Used for intended purpose (2.6) ------- Balance at April 4, 1999 $ 7.3 ======= F - SHAREOWNERS' EQUITY During the first 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 9.3 million shares have been repurchased as of the end of the first quarter of 1999. Comprehensive earnings for the quarters ended April 4, 1999 and March 29, 1998, were $25.1 million and $26.7 million. G - ADDITIONAL INFORMATION ON CASH FLOWS First Quarter Ended ------------------- April 4, March 29, 1999 1998 ------- ------- Cash paid for: Interest $ 42.5 $ 42.3 ======= ======= Income taxes $ 5.1 $ 7.5 ======= ======= H - SEGMENT INFORMATION First Quarter Ended ------------------- April 4, March 29, 1999 1998 ------- ------- Net sales: Industry segments: Paper $ 453.9 $ 433.9 Packaging and Paperboard 347.7 342.9 School & Office Products 61.6 62.2 ------- ------- Total $ 863.2 $ 839.0 ======= ======= Earnings (loss) from continuing operations before income taxes: Industry segments: Paper $ 46.1 $ 59.7 Packaging and Paperboard 24.6 29.4 School & Office Products 1.4 6.7 Corporate and other (1) (41.4) (38.0) ------- ------- Total $ 30.7 $ 57.8 ======= ======= (1) Corporate and other includes the following: Other revenue $ 4.0 $ 3.0 Interest expense (18.7) (14.5) Other expenses (26.7) (26.5) ------- ------- Total $ (41.4) $ (38.0) ======= ======= Identifiable assets have not changed significantly at April 4, 1999, compared to December 31, 1998. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- RESULTS OF OPERATIONS - --------------------- Net Sales - --------- First quarter 1999 net sales were $863.2 million, a 3% increase over $839.0 million in the first quarter of 1998. The increase in sales revenue was a result of higher sales volume for paper, corrugating medium and coated paperboard compared to the first quarter of 1998. There were six additional selling days for the company in the first quarter of 1999 compared to the first quarter of 1998. Average selling prices were lower for most paper and paperboard products compared to the same quarter a year ago. Operating Costs and Expenses - ---------------------------- Gross profit as a percent of sales decreased to 18.4% for the first quarter of 1999 from 21.2% in the first quarter of 1998 primarily as a result of lower selling prices for paper and paperboard. Selling and administrative expenses totaled $105.3 million in the first quarter of 1999, an increase of 9% from $96.3 million in the first quarter of 1998. As a percentage of net sales, these expenses were 12.2% in 1999 compared to 11.5% in 1998. The increase was primarily the result of expenses related to the initial phases of implementation of the company's enterprise resource planning system, development of the company's financial services center. Interest and Debt Expense - ------------------------- First quarter interest and debt expense was $26.7 million, up slightly from $26.5 million in the first quarter of 1998. Income Taxes - ------------ The effective tax rate was 36.2% for the first quarter of 1999 compared to 36.7% in the first quarter of 1998. Equity in Net Earnings of Investees - ----------------------------------- Mead's investees, consisting primarily of its 50% Northwood companies, had earnings of $3.3 million in the first quarter of 1999 compared to a loss of $3.0 million in the same quarter of 1998. Selling prices were higher for wood products, including lumber, oriented structural board (OSB) and plywood compared to the first quarter of 1998. Sales volume increased for OSB and plywood. Selling prices for pulp were low and relatively unchanged from the first quarter of 1998. Sales volume of pulp was lower. Contributing to the improved operating results were lower log costs and lower Canadian dollar exchange rates. During the quarter, Northwood reached a labor agreement at its pulp mill in Prince George, British Columbia, and it continued to take market-related downtime in lumber by curtailing sawmill production by 15% or 19 million board feet during the quarter. Net Earnings - ------------ Net earnings for the first quarter of 1999 were $22.9 million compared to $30.6 million in the first quarter of 1998. Earnings declined as a result of lower selling prices for coated and uncoated papers, corrugating medium and school and office products. Financial Data by Business - -------------------------- Paper segment First Quarter ---------------------------------- 1999 1998 % Change ---- ---- -------- (All dollar amounts in millions) Net sales (to unaffiliated customers) $453.9 $433.9 4.6% Segment earnings before taxes 46.1 59.7 (22.8)% Sales in the paper segment increased slightly as sales volume increased in coated, uncoated, carbonless and specialty papers compared to the first quarter of 1998. Earnings for the paper segment declined from the first quarter of 1998 as a result of lower selling prices primarily for coated papers. Prices for coated web grades declined 9% from the first quarter of 1998. Strong operating performance at the company's three coated paper mills and at its specialty paper mills partially offset the impact of price declines. As previously announced, the company took 25,000 tons of market-related downtime in coated paper production during the first quarter of 1999 and expects to continue to take downtime in the second quarter and in the second half of the year. The Specialty Paper division completed successful trials to produce overlay papers at its Potsdam, New York, mill, acquired in the first quarter of 1998. Packaging and Paperboard segment First Quarter ------------------------------------- 1999 1998 % Change ---- ---- -------- (All dollar amounts in millions) Net sales (to unaffiliated customers) $347.7 $342.9 1.4% Segment earnings before taxes 24.6 29.4 (16.3)% Sales for the Packaging and Paperboard segment in the first quarter of 1999 were slightly higher compared to the first quarter of 1998 as a result of increased sales volume of corrugating medium. Earnings for the segment declined on lower pricing for medium. Prices for corrugating medium were 22% below the level of first quarter of 1998. In the Containerboard division, production and shipments increased over the first quarter of 1998 as a result of the mill expansion completed mid-year 1998. During the quarter, operating problems affected production on the mill's paper machines. Continued operating issues with the new recovery and chemical conversion systems led to operating costs that were higher than the level of the fourth quarter of 1998, though below the level of the first quarter of 1998. Within the Coated Board System, which includes the Packaging and Coated Board divisions, sales increased to the beverage packaging industry, primarily in North America. The Mahrt coated paperboard mill increased shipments, improved production efficiency and enhanced its overall cost position compared to the first quarter of 1998. School and Office Products segment First Quarter ----------------------------- 1999 1998 % Change ---- ---- -------- (All dollar amounts in millions) Net sales (to unaffiliated customers) $61.6 $62.2 (1.0)% Segment earnings before taxes 1.4 6.7 (79.1)% Sales for the School and Office Products segment declined slightly in the first quarter of 1999 compared to the first quarter of 1998. Earnings declined compared to the first quarter of 1998 as higher unit sales volume was offset by reduced selling prices. Sales volume improved for value-added products compared to the first quarter of 1998, while volume and prices declined for paper-based products. The segment built inventory in preparation for the "back-to-school" selling season, which begins in the second quarter. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital on April 4, 1999 was $415 million compared to $407 million on December 31, 1998. The current ratio was 1.6 at the end of the first quarter of 1999 and on December 31, 1998. Inventories are generally higher in the first quarter of the year in preparation for the School and Office Products segment's "back-to-school" selling season. Inventories increased slightly over the levels of the first quarter of 1998. Inventories were higher in coated paper and in coated paperboard. The Paper segment, which took market-related downtime in coated paper in the first quarter of 1999, is expected to continue taking downtime in the second quarter and second half of 1999. Borrowed capital (long-term debt) as a percentage of total capital (long-term debt plus shareowner's equity) was 37.4% on April 4, 1999, down slightly from 37.9% on December 31, 1998. Capital expenditures totaled $45.6 million for the first quarter of 1999, a decrease from $78.1 million in the first quarter of 1998 when the company was in the process of completing the expansion of the Stevenson containerboard mill. During the first quarter of 1999, the company had proceeds from the sale of assets totaling $13.6 million. The company sold the merchandising business of its Packaging division and a sawmill which was part of its Paper segment. Proceeds from the sale of these assets were approximately the same as the carrying amount and therefore had no impact on earnings during the quarter. Under a Board of Directors authorization, Mead repurchased 500,000 shares of its capital stock in the first quarter of 1999. The 10 million-share repurchase program was 93% completed by the end of the first quarter 1999. At the end of the first quarter, Mead paid a fixed rate or capped rate on 75% 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 $66.6 million more than the book value at the end of the first quarter of 1999. OUTLOOK - ------- Year 2000 Readiness Disclosure - ------------------------------ The Year 2000 issue concerns the inability of computerized information and process control systems to properly recognize and process date-sensitive information as the year 2000 approaches. Mead expects costs associated with the Year 2000 issue will not have a material adverse impact on results of operations, liquidity or capital resources. Mead is making progress as it works through a five-step process in dealing with the Year 2000 issue: inventory; assessment; corrective action; testing; and implementation. With regard to its Information Technology (IT) systems within corporate functions, the Paper and the Packaging and Paperboard segments, the inventory and assessment phases have been completed; corrective action is nearing completion; testing and implementation are in process and expected to be completed in the third quarter of 1999. For the School and Office Products segment, inventory and assessment have been completed, corrective action is underway and testing and implementation are scheduled for second half of the year. The company expects the risk to be low that its IT systems will be disrupted by the Year 2000 issue. Non-IT systems include process control systems in manufacturing and converting facilities for monitoring and regulating power, production, emissions and safety equipment. Inventory and assessment of non-IT systems in the Paper and the Packaging and Paperboard segments have been essentially completed with corrective action, testing and implementation underway. Mead has engaged a third-party consultant to assist in this process. By the end of the first quarter, approximately 60% of the process control systems were Y2K ready, 10% were being fixed or replaced and 30% were in the process of being addressed. The company expects corrective action and testing on non-IT systems to be completed in the second and third quarters of 1999 for the Paper and Packaging and Paperboard segments. Some of the corrective action and testing will be completed during periods of normal maintenance downtime. In the School and Office Products segment, corrective action and testing on non-IT systems will be completed by yearend or by the first quarter of 2000. Yearend completion of corrective action and testing of non-IT systems is not as critical to School and 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. 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 first quarter of 1999, the total cost of remediation was $16 million. This total includes approximately $10 million in repair costs and $6 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 $40 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 in accordance with generally accepted accounting principles. 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 most of these suppliers and with a few suppliers a medium level of risk. 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 is in the process of preparing contingency plans within each of its businesses for addressing the greatest areas of risk of noncompliance or threats to business operations related to the Year 2000 issue. The company expects to finalize these plans by the end of the second quarter of 1999. THE ESTIMATES AND CONCLUSIONS STATED HERE CONTAIN FORWARD-LOOKING STATEMENTS AND ARE BASED ON MANAGEMENT'S BEST ESTIMATES OF FUTURE EVENTS. RISKS TO COMPLETING THE PLAN INCLUDE THE CONTINUED AVAILABILITY OF RESOURCES FROM SUPPLIERS AND THIRD-PARTY CONTRACTORS, THE ABILITY OF SUPPLIERS AND CUSTOMERS TO BE YEAR 2000 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- No material changes occurred to information previously provided in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. PART II - OTHER INFORMATION --------------------------- ITEM 1. LEGAL PROCEEDINGS ----------------- In February 1999, Mead received notice from the Rock-Tenn Company of a demand from the Michigan Department of Environmental Quality ("MDEQ") concerning Rock-Tenn's Otsego, MI mill property. In the notice to Rock-Tenn, MDEQ referred to potential liability under federal and state environmental laws for certain discharges to the Kalamazoo River, including discharges of polychlorinated biphenyls ("PCBs"), and for environmental response actions that have been or may be undertaken at the Allied Paper, Inc./Portage Creek/Kalamazoo River Superfund Site or the Otsgeo mill property because of the presence of PCBs. In 1987, Mead transferred the Otsego mill and other assets to Rock-Tenn pursuant to an Asset Purchase Agreement. Rock-Tenn alleges Mead is legally responsible for the presence of PCBs at the Otsego mill and that Rock-Tenn is entitled to indemnification from Mead for all costs and liabilities associated with the presence or discharge of PCBs. Mead disputes Rock-Tenn's allegations and legal conclusions concerning responsibility, based in part on Rock-Tenn's operations at the Otsego mill since 1987. The extent of Rock-Tenn's potential liability for contamination in the Kalamazoo River or at the Otsego mill are not known at this time. The costs associated with this proceeding are not reasonably estimable at this time. In February 1999, Mead received notice from the Maine Department of Environmental Protection ("MDEP") that it was considering requiring Mead to do an investigation and possibly remediate certain solid waste management areas at Mead's Rumford, Maine mill, including areas that may be a source of mercury contamination. Prior to Mead's acquisition of the mill in November 1996 a chlor-alkali facility using mercury operated on portions of the property. Mead is in discussions with the MDEP concerning the need for and scope of any investigation and/or remediation. The costs associated with this proceeding are not reasonably estimable at this time. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits (10) Material Contracts: (1) Corporate Annual Incentive Plan for 1999 in which executive officers participate. (2) Corporate Long Term Incentive Plan effective 1999 in which executive officers participate. (3) Restated Corporate Executive Capital Accumulation Plan effective January 1, 1999 in which executive officers participate. (4) Restated Directors Capital Accumulation Plan effective January 1, 1999 in which directors participate. (27) Financial Data Schedule Quarter 1, 1999 (b) No current reports on Form 8-K were filed with the Commission in the first 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: May 12, 1999 THE MEAD CORPORATION - -------------------- (Registrant) By: TIMOTHY R. MCLEVISH _________________________ T. R. McLevish Vice President, Finance (Chief Accounting Officer) EX-1 2 THE MEAD CORPORATION CORPORATE ANNUAL INCENTIVE PLAN ------------------------------- 1999 ---- OBJECTIVE - --------- The objective of the Corporate Annual Incentive Plan is to recognize and reward Mead's key executive officers and division leaders for achieving and sustaining superior business financial results. PARTICIPATION ELIGIBILITY - ------------------------- All Officers of the Corporation are participants in this plan. In addition, the formula of this plan provides funding for the annual incentives of all Corporate Center employees. PAYOUT ELIGIBILITY - ------------------ Participants must be employees of the company, an affiliate or a subsidiary at the end of the plan year to receive payout from this plan. An appropriate proration of earned awards may be made in case of death, disability, retirement, hire or transfer during the plan year. In such cases, the annual incentive target will be pro-rated to reflect the months of service. Provisions detailed in Attachment 1 and forming a part of this plan govern in the event of a Change in Control of the company. ANNUAL INCENTIVE TARGET - ----------------------- The annual incentive target for each grade is the difference between Mead's policy total cash compensation target and the midpoint. This target will be adjusted annually, based on market total cash compensation data. The current targets are shown in Attachment 2. PAYOUT FUNDING - -------------- The individual annual incentive target is multiplied by the Payout Factor under this Plan. This Payout Factor is determined as: Payout = Mead ROTC X Mead ROTC -------------------- ------------- Factor Mead Cost of Capital FP Peers ROTC where ROTC = (EAT + ((1 - Tax Rate) X Current Interest Expense)) X 100 --------------------------------------------------- (Average Equity + Average Long-Term Debt) Mead's Forest Products peers (FP Peers) are comprised of those members of the Paper Industry Compensation Association whose major business lines are similar to the Mead business segments, and for which public financial reporting is provided by Value Line Reports. For the 1998 plan year, these companies are identified as: Boise Cascade Bowater Champion International Consolidated Paper Georgia Pacific International Paper Potlatch Temple-Inland Westvaco Weyerhaeuser Willamette The Compensation Committee may alter the membership of this FP Peer group as corporate structures or market business lines of the indicated companies changes. The annual incentive payout is determined as: Annual Incentive Payout = Annual Incentive Target X Payout Factor While this formula determines an available pool of annual incentive dollars, allocation of incentive awards to individuals is based solely on the criteria for "Individual Payout Determination" defined in the following section. INDIVIDUAL PAYOUT DETERMINATION - ------------------------------- Payout under this Plan for all Participants will be determined by an assessment of each individual's contribution to the business results for the performance period. This assessment for each Participant shall be determined by that participant's manager, subject to review of the CEO. PAYOUT LIMITATIONS - ------------------ Payout shall be limited on the basis of the following financial results of the corporation: 1. There shall be no payout to any participant if any corporate earnings are negative for the calendar year 2. Maximum payout is 75% of target for any financial performance under 6.0% ROTC 3. Payout is capped at 200% of target, for any level of performance ACCOUNTING FOR PAYOUT - --------------------- Payout will be estimated periodically and the required corporate accrual of payout will be booked against earnings during the year. Approved incentive payments will be prepared and expensed to earnings at the time of payout. RECOMMENDATIONS AND APPROVAL - ---------------------------- The Compensation Committee approves this Plan, and reviews total funding and individual payouts under the plan, and the amount, use and replenishment of any reserve funds. The CEO recommends all individual payouts to the Compensation Committee of the Board of Directors for approval. Payouts for the CEO and the COO are recommended to the Board of Directors by the Compensation Committee. The Compensation Committee may also determine if payout will be in cash, restricted stock, or replaced with stock options, or a combination thereof. The Board of Directors may require a mandatory deferral of all or any portion of the payout to ensure full deductibility of compensation to any executive. ADMINISTRATION - -------------- The Plan is administered by the Compensation Committee of the Board. The Compensation Committee has delegated administration to the Corporate Vice President, Human Resources. RESERVED RIGHTS - --------------- The Mead Corporation reserves the right to alter, amend, suspend or terminate any or all provisions of this Corporate Annual Incentive Plan, except such actions shall neither inhibit nor hinder the rights of any individual with respect to earned and credited awards which have been deferred. Designation of a position as eligible for participation neither guarantees the individual a right to an incentive payment nor a right to continued employment. Attachment 1 Effect of Change in Control - --------------------------- Notwithstanding any foregoing Plan provision to the contrary (and notwithstanding any lack of satisfaction of any condition or requirement which would otherwise apply to an award), immediately upon the occurrence of a Change in Control (as defined in the next section hereof), (i) if the Change in Control occurs after the completion of the performance period ending December 31, 1999 (the "Performance Period"), any award with respect to the Performance Period which has already been determined, but has not yet been paid or deferred, shall be immediately paid in full in cash to the respective Participant, (ii) if the Change in Control occurs after the completion of the Performance Period, if no awards have been determined with respect to the Performance Period, the amount (if any) of each such award shall be immediately determined in accordance with the provisions of the Plan and shall be immediately paid in full in cash to the respective Participant, and (iii) if the Change in Control occurs during the Performance Period (the "Change-in-Control Performance Period"), each Participant shall immediately be paid a pro-rata award for the Performance Period, the amount of which shall equal the product of multiplying the Participant's individual incentive target by a fraction, the numerator of which shall be the number of days in the Change-in-Control Performance Period which have elapsed as of the date of the Change in Control, and the denominator of which shall be the number of days in the Performance Period. Notwithstanding the immediately preceding sentence, no amounts shall be paid pursuant thereto which would, in the opinion of counsel selected by Mead's independent auditors, constitute "parachute payments" within the meaning of Section 280G(b)(2)(A) of the Internal Revenue Code (the "Code") and, when added to any other "parachute payments" which would be received by the Participant pursuant to the terms of any other plan, arrangement or agreement with Mead,any person whose actions result in a change in control of Mead or any person affiliated with Mead or such person, would be subject to the tax imposed by Section 4999 of the Code. Notwithstanding any provision to the contrary in the Plan, upon and after the occurrence of a Change in Control, (i) the Compensation Committee shall have no power to cause a Participant's award to be paid in any manner other than as a cash lump sum, (ii) the Board of Directors shall have no power to require a mandatory deferral of all or any portion of the award, and (iii) neither the Compensation Committee, the Board of Directors nor any other person or entity shall have the right to terminate or amend the Plan in any manner which would adversely affect the rights or expectancies of a Participant with respect to payment of an award pursuant to this section, as in effect immediately before the Change in Control. Definition of Change in Control - ------------------------------- A "Change in Control" shall be deemed to have occurred if an event set forth in any one of the following paragraphs shall have occurred: (i) date of expiration of a Tender Offer (as defined below), other than an offer by Mead,if the offeror acquires Shares (as defined below) pursuant to such Tender Offer; (ii) the date of approval by the shareholders of Mead of a definitive agreement: (x) for the merger or consolidation of Mead or any direct or indirect subsidiary of Mead into or with another corporation, other than (1) a merger or consolidation which would result in the voting securities of Mead outstanding immediately prior thereto continuing to represent ((i) in the case of a merger or consolidation of Mead, either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof, or (ii) in the case of a merger or consolidation of any direct or indirect subsidiary of Mead, either by remaining outstanding if Mead continues as a parent of the merged or consolidated subsidiary or by being converted into voting securities of the surviving entity or any parent thereof) at least 51% of the combined voting power of the voting securities of Mead or such surviving or parent entity outstanding immediately after such merger or consolidation, or (2) a merger or consolidation effected to implement a recapitalization of Mead (or similar transaction) in which no Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of Mead (not including in the securities Beneficially Owned by such Person any securities acquired directly from Mead or its Affiliates) representing 25% or more of the combined voting power of Mead's then outstanding securities, or (y) for the sale or disposition of all or substantially all of the assets of Mead, other than a sale or disposition by Mead for all or substantially all of Mead's assets to an entity, at least 51% of the combined voting power of the voting securities of which are owned (directly or indirectly) by shareholders of Mead in substantially the same proportions as their ownership of Mead immediately prior to such sale or disposition. (iii) (x) any Person is or becomes the Beneficial Owner of 25% or more of the voting power of the then outstanding securities of Mead (not including in the securities beneficially owned by such Person any securities acquired directly or indirectly from Mead or its affiliates), excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (x)(1) of paragraph (ii) above or (y) the date of authorization, by both a majority of the voting power of Mead and a majority of the portion of such voting power excluding the voting power of interested Shares, of a control share acquisition (as such term is defined in Chapter 1701 of the Ohio Revised Code); and (iv) a change in the composition of the Board of Directors such that individuals who were members of the Board of Directors on the date two years prior to such change (and any new directors (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of Mead) who were elected, or were nominated for election by Mead's shareholders with the affirmative vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such two year period or whose election or nomination for election was previously so approved) no longer constitute a majority of the Board of Directors. Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of Mead immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of Mead immediately following such transaction or series of transactions. "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. "Beneficial Owner" shall have the meaning defined in Rule 13d-3 under the Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) Mead or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of Mead or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities , or (iv) a corporation owned, directly or indirectly, by the shareholders of Mead in substantially the same proportions as their ownership of stock of Mead. "Shares" shall mean shares of common stock, without par value, of The Mead Corporation "Tender Offer" shall mean a tender offer or a request or invitation for tenders or an exchange offer subject to regulation under Section 14(d) of the Exchange Act and the rules and regulations thereunder, as the same may be amended, modified or superseded from time to time. Attachment 2 CORPORATE ANNUAL INCENTIVE PLAN ------------------------------- PAYOUT TARGETS -------------- 1999 ----- 1999 1999 Annual Policy Grade Midpoint Incentive Target TCC Target - ----- -------- ---------------- ---------- 33 $809,928 $823,600 $1,633,528 32 712,524 683,600 1,396,124 31 621,720 563,400 1,185,120 30 544,032 461,800 1,005,832 29 475,632 378,100 853,732 28 415,584 310,000 725,584 27 363,084 255,300 618,384 26 317,196 210,100 527,296 25 277,236 173,900 451,136 24 241,992 146,100 387,992 23 211,020 125,800 336,820 22 187,476 108,160 295,636 21 164,448 91,160 255,608 EX-2 3 THE MEAD CORPORATION THE CORPORATE LONG TERM INCENTIVE PLAN -------------------------------------- 1999 ---- OBJECTIVE - --------- The objective of the Corporate Long Term Incentive Plan is to reward senior executives for adding value to the Corporation by delivering shareholder value that is that ranks high relative to shareholder value achieved by the S&P 500 index and by Mead's Forest Products peers. TERM OF THE PLAN - ---------------- This Corporate Long Term Incentive Plan is a two year plan spanning 1998 and 1999, with the performance period ending December 31, 1999. The next Long Term Incentive Plan covers the period 1999 and 2000, with the performance period ending December 31, 2000. All eligible executives are thus participants in two plan cycles at any time. Provisions detailed in Attachment 1 and forming a part of this plan govern in the event of a Change in Control of the company. PARTICIPATION ELIGIBILITY - ------------------------- All Officers of the Corporation, Division Presidents and Executives of salary grade 23 or above are participants in the plan. PAYOUT ELIGIBILITY - ------------------ Participants must be employees of the company, an affiliate or a subsidiary at the end of the two-year plan performance period to receive payout from this plan. An appropriate proration of earned awards may be made in case of death, disability, retirement, hire or transfer during the second year of the performance period. In such cases, the incentive target will be pro-rated to reflect the months of service. There will be no such adjustment for death, disability, or retirement during the first year of the performance period. LONG TERM INCENTIVE TARGET - -------------------------- The 1999 Long Term Incentive Target by grade is shown in Attachment 2. This Target will be adjusted annually, based on competitive data. TOTAL PAYOUT DETERMINATION - -------------------------- This plan uses as the key performance measure, the 2-year Total Shareholder Return - TSR - (stock price growth plus dividend reinvestment) of Mead relative to two comparator groups: 1. The S&P 500 Index 2. Mead's Forest Products peers (FP Peers), comprising of those members of the Paper Industry Compensation Association whose major business lines are similar to the Mead business segments, and for which public financial reporting is provided by Value Line Reports. For the plan cycle ending December 31, 1999, these companies are identified as: Boise Cascade Bowater Champion International Consolidated Paper Georgia Pacific International Paper Potlatch Smurfit/Stone Container Temple-Inland Westvaco Weyerhaeuser Willamette For the current plan period, the TSR is measured on December 31, 1997 and December 31, 1999. A single matrix (Attachment 3) determines the Payout Factor on the basis of Mead's TSR relative to the TSR of each of the above comparator groups. The long term incentive payout is determined as: L. T. Incentive Payout = L.T. Incentive Target X Payout Factor INDIVIDUAL PAYOUT DETERMINATION - ------------------------------- The above calculation will not normally be further adjusted for any Participant on the basis of individual contribution, except by approval of the Compensation Committee. PAYOUT LIMITATIONS - ------------------ Payout shall be limited on the basis of the following financial results for the corporation: 1. The Committee may, but is not obligated to, determine a ZERO payout if Mead TSR is negative, even if Mead TSR exceeds either or both comparator groups 2. There shall be no payout to any participant if corporate earnings are negative in the final year of the performance period 3. Payout is capped at 200% of target, for any level of performance ACCOUNTING FOR PAYOUT - --------------------- Payout will be estimated periodically and the required corporate accrual of payout will be booked against earnings during the year. Approved incentive awards will be prepared and expensed to earnings at the time of payout. Restricted stock certificates will be issued by the Transfer Agent of the corporation. RECOMMENDATIONS AND APPROVAL - ---------------------------- The Compensation Committee approves this Plan, and reviews total funding and individual payouts under the plan, and the amount, use and replenishment of any reserve funds. The CEO recommends all individual payouts to the Compensation Committee of the Board of Directors for approval. Payouts for the CEO and the COO are approved by the Board of Directors. Form of payout will be determined by the Compensation Committee. Payout will normally be delivered to all participants as 100% restricted stock (with a 6-month vesting period). The Board of Directors may require a mandatory deferral of all or any portion of the payout to ensure full deductibility of compensation to any executive. ADMINISTRATION - -------------- The Plan is administered by the Compensation Committee of the Board. The Compensation Committee has delegated administration to the Corporate Vice President, Human Resources. RESERVED RIGHTS - --------------- The Mead Corporation reserves the right to alter, amend, suspend or terminate any or all provisions of this Corporate Long Term Incentive Plan, except such actions shall neither inhibit nor hinder the rights of any individual with respect to earned and credited awards which have been deferred. Designation of a position as eligible for participation neither guarantees the individual a right to an incentive payment nor a right to continued employment. Attachment 1 Effect of Change in Control - --------------------------- Notwithstanding any foregoing Plan provision to the contrary (and notwithstanding any lack of satisfaction of any condition or requirement which would otherwise apply to an award), immediately upon the occurrence of a Change in Control (as defined in the next section hereof), (i) if the Change in Control occurs after the completion of the performance period ending December 31, 1999 (the "Performance Period"), any award with respect to the Performance Period which has already been determined, but has not yet been paid or deferred, shall be immediately paid in full in cash to the respective Participant, (ii) if the Change in Control occurs after the completion of the Performance Period, if no awards have been determined with respect to the Performance Period, the amount (if any) of each such award shall be immediately determined in accordance with the provisions of the Plan and shall be immediately paid in full in cash to the respective Participant, and (iii) if the Change in Control occurs during the Performance Period (the "Change-in-Control Performance Period"), each Participant shall immediately be paid a pro-rata award for the Performance Period, the amount of which shall equal the product of multiplying the Participant's individual incentive target by a fraction, the numerator of which shall be the number of days in the Change-in-Control Performance Period which have elapsed as of the date of the Change in Control, and the denominator of which shall be the number of days in the Performance Period. Notwithstanding the immediately preceding sentence, no amounts shall be paid pursuant thereto which would, in the opinion of counsel selected by Mead's independent auditors, constitute "parachute payments" within the meaning of Section 280G(b)(2)(A) of the Internal Revenue Code (the "Code") and, when added to any other "parachute payments" which would be received by the Participant pursuant to the terms of any other plan, arrangement or agreement with Mead, any person whose actions result in a change in control of Mead or any person affiliated with Mead or such person, would be subject to the tax imposed by Section 4999 of the Code. Notwithstanding any provision to the contrary in the Plan, upon and after the occurrence of a Change in Control, (i) the Compensation Committee shall have no power to cause a Participant's award to be paid in any manner other than as a cash lump sum, (ii) the Board of Directors shall have no power to require a mandatory deferral of all or any portion of the award, and (iii) neither the Compensation Committee, the Board of Directors nor any other person or entity shall have the right to terminate or amend the Plan in any manner which would adversely affect the rights or expectancies of a Participant with respect to payment of an award pursuant to this section, as in effect immediately before the Change in Control. Definition of Change in Control - ------------------------------- A "Change in Control" shall be deemed to have occurred if an event set forth in any one of the following paragraphs shall have occurred: (i) date of expiration of a Tender Offer (as defined below), other than an offer by Mead, if the offeror acquires Shares (as defined below) pursuant to such Tender Offer; (ii) the date of approval by the shareholders of Mead of a definitive agreement: (x) for the merger or consolidation of Mead or any direct or indirect subsidiary of Mead into or with another corporation, other than (1) a merger or consolidation which would result in the voting securities of Mead outstanding immediately prior thereto continuing to represent ((i) in the case of a merger or consolidation of Mead, either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof, or (ii) in the case of a merger or consolidation of any direct or indirect subsidiary of Mead, either by remaining outstanding if Mead continues as a parent of the merged or consolidated subsidiary or by being converted into voting securities of the surviving entity or any parent thereof) at least 51% of the combined voting power of the voting securities of Mead or such surviving or parent entity outstanding immediately after such merger or consolidation, or (2) a merger or consolidation effected to implement a recapitalization of Mead (or similar transaction) in which no Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of Mead (not including in the securities Beneficially Owned by such Person any securities acquired directly from Mead or its Affiliates) representing 25% or more of the combined voting power of Mead's then outstanding securities, or (y) for the sale or disposition of all or substantially all of the assets of Mead, other than a sale or disposition by Mead for all or substantially all of Mead's assets to an entity, at least 51% of the combined voting power of the voting securities of which are owned (directly or indirectly) by shareholders of Mead in substantially the same proportions as their ownership of Mead immediately prior to such sale or disposition. (iii) (x) any Person is or becomes the Beneficial Owner of 25% or more of the voting power of the then outstanding securities of Mead (not including in the securities beneficially owned by such Person any securities acquired directly or indirectly from Mead or its affiliates), excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (x)(1) of paragraph (ii) above or (y) the date of authorization, by both a majority of the voting power of Mead and a majority of the portion of such voting power excluding the voting power of interested Shares, of a control share acquisition (as such term is defined in Chapter 1701 of the Ohio Revised Code); and (iv) a change in the composition of the Board of Directors such that individuals who were members of the Board of Directors on the date two years prior to such change (and any new directors (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of Mead) who were elected, or were nominated for election by Mead's shareholders with the affirmative vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such two year period or whose election or nomination for election was previously so approved) no longer constitute a majority of the Board of Directors. Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of Mead immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of Mead immediately following such transaction or series of transactions. "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. "Beneficial Owner" shall have the meaning defined in Rule 13d-3 under the Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) Mead or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of Mead or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities , or (iv) a corporation owned, directly or indirectly, by the shareholders of Mead in substantially the same proportions as their ownership of stock of Mead. "Shares" shall mean shares of common stock, without par value, of The Mead Corporation "Tender Offer" shall mean a tender offer or a request or invitation for tenders or an exchange offer subject to regulation under Section 14(d) of the Exchange Act and the rules and regulations thereunder, as the same may be amended, modified or superseded from time to time. Attachment 2 THE CORPORATE LONG TERM INCENTIVE PLAN -------------------------------------- PAYOUT TARGETS -------------- 1999 Grade Incentive Target ----- ----------------- 33 $ 823,600 32 683,600 31 563,400 30 461,800 29 378,100 28 310,000 27 255,300 26 210,100 25 173,900 24 146,000 23 125,800 22 75,700 21 59,300 Mead Long Term Incentive Payout ------------------------------ Restricted Stock Grant (% of Target) Mead 2-Yr +35% 1.70 0% 170% 187% 200% 200% 200% 200% 200% TSR +30% 1.60 0% 160% 176% 192% 200% 200% 200% 200% Relative +25% 1.50 0% 150% 165% 180% 195% 200% 200% 200% to S&P 500 +20% 1.40 0% 140% 154% 168% 182% 196% 200% 200% +15% 1.30 0% 130% 143% 156% 169% 182% 195% 200% +10% 1.20 0% 120% 132% 144% 156% 168% 180% 192% +5% 1.10 0% 110% 121% 132% 143% 154% 165% 176% Average 1.00 0% 100% 110% 120% 130% 140% 150% 160% -5% 0.90 0% 90% 99% 108% 117% 126% 135% 144% -10% 0.80 0% 80% 88% 96% 104% 112% 120% 128% -15% 0.70 0% 70% 77% 84% 91% 98% 105% 112% -20% 0.60 0% 60% 66% 72% 78% 84% 90% 96% -25% 0.50 0% 50% 55% 60% 65% 70% 75% 80% -30% 0.40 0% 40% 44% 48% 52% 56% 60% 64% -35% 0.30 0% 30% 33% 36% 39% 42% 45% 48% -40% 0.20 0% 20% 22% 24% 26% 28% 30% 32% -45% 0.10 0% 10% 11% 12% 13% 14% 15% 16% -50 0.00 0% 0% 0% 0% 0% 0% 0% 0% Multipliers 0 1.00 1.10 1.20 1.30 1.40 1.50 1.60 8-13 7 6 5 4 3 2 1 Median Top
Max Payout: 200% Mead vs. Forest Products Ranking of 2-Year Total Shareholder Return (TSR) EX-3 4 THE MEAD CORPORATION EXECUTIVE CAPITAL ACCUMULATION PLAN ----------------------------------- (As Amended and Restated Effective January 1, 1999) TABLE OF CONTENTS SECTION 1 - GENERAL . . . . . . . . . . . . . . . . . . . . . .1 1.1 Purpose and Effective Date . . . . . . . . . . . . .1 1.2 Plan Funding and Administration. . . . . . . . . . .1 1.3 Applicable Law . . . . . . . . . . . . . . . . . . .2 1.4 Gender and Number. . . . . . . . . . . . . . . . . .2 1.5 Assignment . . . . . . . . . . . . . . . . . . . . .2 1.6 Plan Year. . . . . . . . . . . . . . . . . . . . . .2 SECTION 2 - PARTICIPATION . . . . . . . . . . . . . . . . . . .2 2.1 Participation Requirement . . . . . . . . . . . . .2 2.2 Continued Participation . . . . . . . . . . . . . .3 2.3 Participation Not Contract of Employment. . . . . .3 SECTION 3 - DEFERRAL OF INCOME. . . . . . . . . . . . . . . . .3 3.1 Deferred Income Amount. . . . . . . . . . . . . . .3 3.2 Certain Conditions Relating to Income Deferral. . .5 3.3 Annual Election to Participate. . . . . . . . . . .6 SECTION 4 - PARTICIPANT ACCOUNTS. . . . . . . . . . . . . . . .7 SECTION 5 - ROLLOVERS . . . . . . . . . . . . . . . . . . . . .7 5.1 ICEP Rollovers. . . . . . . . . . . . . . . . . . .7 5.2 SERP Rollovers. . . . . . . . . . . . . . . . . . .7 5.3 Excess Plan Rollovers . . . . . . . . . . . . . . .7 5.4 415 Plan Rollovers. . . . . . . . . . . . . . . . .8 SECTION 6 - CREDITING OPTIONS . . . . . . . . . . . . . . . . .8 6.1 Establishment of Crediting Options. . . . . . . . .8 6.2 Participant Change of Crediting Options . . . . . .9 SECTION 7 - ADJUSTMENT OF PARTICIPANT ACCOUNTS. . . . . . . . .9 7.1 Adjustment of Participants' Participant Accounts. .9 7.2 Matching Amount . . . . . . . . . . . . . . . . . 10 7.3 Quarterly Statement of Participant Accounts 11 Balances SECTION 8 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO PARTICIPANTS. . . . . . . . . . . . . . . . . . . .11 8.1 Annual Distributions . . . . . . . . . . . . . . . .11 8.2 Interim Distributions. . . . . . . . . . . . . . . .12 8.3 Emergency Distributions. . . . . . . . . . . . . . .12 8.4 Elective Distributions . . . . . . . . . . . . . . .13 8.5 Change in Control Distributions 13 8.6 Withholding. . . . . . . . . . . . . . . . . . . . .13 SECTION 9 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO BENEFICIARIES . . . . . . . . . . . . . . . . . . .14 9.1 Distribution to Beneficiary. . . . . . . . . . . . .14 9.2 Beneficiary. . . . . . . . . . . . . . . . . . . . .14 SECTION 10 - DISTRIBUTIONS TO INCAPACITATED PERSONS . . . . . .14 SECTION 11 - SECTION 162(m) LIMITATION ON DISTRIBUTIONS . . . .15 11.1 Tentative Section 162(m) Determination . . . . . . 15 11.2 Tentative Determination Amount Not in Excess of 162(m) Limit . . . . . . . . . . . . . . . . . . . 15 11.3 Tentative Determination Amount in Excess of 162(m) Limit . . . . . . . . . . . . . . . . . . . . . . .16 11.4 Change in Control. . . . . . . . . . . . . . . . . 16 11.5 Certain Definitions. . . . . . . . . . . . . . . . 18 SECTION 12 - DISPUTE RESOLUTION . . . . . . . . . . . . . . . 19 12.1 Notice of Denial . . . . . . . . . . . . . . . . . 19 12.2 Notice of Appeal . . . . . . . . . . . . . . . . . .19 12.3 Decision on Appeal . . . . . . . . . . . . . . . . .20 SECTION 13 - AMENDMENT AND TERMINATION. . . . . . . . . . . . 20 EXHIBIT I - CREDITING OPTIONS THE MEAD CORPORATION EXECUTIVE CAPITAL ACCUMULATION PLAN ----------------------------------- SECTION 1 - GENERAL - ------------------- 1.1 Purpose and Effective Date. Effective -------------------------- January 1, 1995, The Mead Corporation ("Mead"), an Ohio Corporation, established The Mead Corporation Executive Capital Accumulation Plan (the "Plan"). The Plan was subsequently amended from time to time and the following provisions constitute a further amendment, restatement and continuation of the Plan, effective January 1, 1999. The purpose of the Plan continues to be to provide recurring annual opportunities for the deferment of payment of certain amounts otherwise currently payable to its "Eligible Employees" (as defined below) and those of any "Affiliate" (as defined below) who meet the requirements to become a "Participant" set forth in subsection 2.1. Mead and such Affiliates are sometimes referred to below, individually, as an "Employer" and, collectively, as the "Employers". The term "Eligible Employee" means any employee of an Employer: (a) who is employed in the United States of America or to whom the Plan has been extended by the Compensation Committee of the Board of Directors of Mead (the "Committee") or its delegate; and (b) who either: (i) is compensated by his Employer at a salary grade at least equivalent to Mead's salary grade 19; or (ii) has compensation that exceeds an amount equal to the amount taken into account for purposes ofsection 415 of the Internal Revenue Service Code of 1986 (the "Code") and who is designated by the Committee or its delegate as an Eligible Employee, but only for such period as the Committee or its delegate shall decide. The term "Affiliate" means any entity during the period that it is, along with Mead, a member of a controlled group of corporations, a controlled group of trades and businesses, an affiliated service group or any other entity designated by the Secretary of the Treasury (as described in sections 414(b), 414(c), 414(m), and 414(o), respectively, of the Code. 1.2 Plan Funding and Administration. The ------------------------------- benefits payable under the Plan are unfunded and are payable, when due, from the general assets of Mead; provided, however, that Mead, in its discretion, may establish or maintain a trust to pay such amounts, which trust shall be subject to the claims of Mead's unsecured general creditors in the event of Mead's bankruptcy or insolvency; and provided, further, that Mead shall remain responsible for the payment of any such amounts which are not so paid by any such trust. The Plan shall be administered by a "Plan Administrator" who is appointed by, and serves at the pleasure of, the Committee and who has the rights, powers and duties with respect to the Plan that are hereinafter set forth and such other rights, powers and duties as are reasonably necessary for the administration of the Plan. As of the effective date, the Plan Administrator is the Vice President-Human Resources of Mead except as to distributions and dispute resolution matters relating to him. 1.3 Applicable Law. The Plan will be construed -------------- and administered in accordance with the laws of the State of Ohio to the extent that those laws are not preempted by the laws of the United States of America. 1.4 Gender and Number. Where the context admits, ----------------- words in any gender will include any other gender, words in the singular will include the plural and the plural will include the singular. 1.5 Assignment. No Plan right or interest of any ---------- Participant or Beneficiary shall be assignable or transferable, in whole or in part, either directly or otherwise, including without limitation thereto, by execution, levy, attachment, garnishment, pledge or in any other manner, but excluding transfers by death or mental incompetency; no attempted assignment or transfer thereof shall be effective; and no such right or interest shall be liable for, or subject to, any obligation or liability of any Participant or Beneficiary; except that a Participant may direct that payments be made during his lifetime, when due, to a trust established by him and evidenced to his Employer to be a trust treated as a grantor trust within the meaning of section 671 of the Code. 1.6 Plan Year. The term "Plan Year" means the --------- calendar year. SECTION 2 - PARTICIPATION - ------------------------- 2.1 Participation Requirement. An ------------------------- employee of the Employers who is a Participant in the Plan on January 1, 1999 will continue as such, subject to the terms and conditions of the Plan. Each other employee of the Employers will become a Participant in the Plan as of January 1, 1999, or on any subsequent January 1, if on such January 1 he: (a) is an Eligible Employee; (b) has executed an Annual Participation Election form (as described in subsection 3.3); and (c) has executed such forms as the Plan Administrator may determine necessary to permit Mead (at its discretion and expense) to maintain a policy of insurance on his life under the terms of which Mead shall be the policyholder, owner and beneficiary. Each employee of the Employers who becomes an Eligible Employee on or after January 1, 1999 will become a Participant in the Plan (on a prospective basis) on the earlier of the date on which the Plan Administrator has received his executed Annual Participation Election form if that date is within 30 days of the date he becomes an Eligible Employee or on any subsequent January 1 if he then meets the requirements set forth in paragraphs (a) through (c) above. 2.2 Continued Participation. Until ----------------------- distribution of the entire balances of a Participant's "Participant Accounts" (as described in Section 4) has been made, a Participant or, in the event of his death, any "Beneficiary" (as defined in subsection 9.2) of any of the Participant's undistributed Participant Accounts, as the case may be, will be considered and treated as a Participant for all purposes of the Plan, except that any additional compensation (other than severance benefits) deferral or "401(k) Top-Up Contribution" (each as described in subsection 3.1) shall cease: (a) as of the first day of the month next following the date on which he is no longer an Eligible Employee; and (b) for any period during which his right to make "Before-tax Contributions" under The Mead 401(k) Plan (the"401(k) Plan") is suspended by reason of a Financial Hardship distribution made to him under the terms of that plan. 2.3 Participation Not Contract of ----------------------------- Employment. The Plan does not constitute acontract of employment - ----------- and participation in the Plan does not give any employee the right to be retained in the employ of the Employers nor give any person any right or claim to any benefit under the terms of the Plan unless such right or claim has specifically accrued under the terms of the Plan. SECTION 3 - DEFERRAL OF INCOME - ------------------------------ 3.1 Deferred Income Amount. Subject to ---------------------- the provisions of subsection 3.2, by entering into a written Annual Election to Participate as provided by subsection 2.1, a Participant may elect: (a) to defer a portion of the amount of the base salary, the annual incentive pay (which, for purposes of the Plan, shall include any spot bonus) and the cash portion of the long-term incentive pay, that would otherwise be payable to him for services performed during the period that the Annual Election to Participate is effective; (b) whether or not he has made an election pursuant to paragraph (a) above, a Participant who has elected to make the maximum Before-tax Contribution that he is permitted under the 401(k) Plan for the period for which the Annual Election to Participate is effective may elect to make a 401(k) Top-Up Contribution for that period; and (c) to defer a retention bonus or a severance benefit. The term "401(k) Top-Up Contribution" means an additional deferral amount which begins in the month that the maximum Before-tax contribution allowed under the 401(k) Plan is reached. The monthly amount of the additional deferral is calculated by multiplying the deferral percentage elected under the 401(k) Plan by the salary and incentive compensation that would be eligible for Before-tax Contributions to the 401(k) Plan (but for section 402(g) of the Code and any 401(k) Plan limitations) for the month and subtracting from such product the amount, if any, of Before-tax Contributions to the 401(k) Plan for such month. The deferral percentage used for purposes of the 401(k) Top-Up Contribution is the percentage currently elected under the 401(k) Plan for Before-tax Contributions. Subject to the provisions of paragraph 7.1(d), a Participant's 401(k) Top-Up Contribution and a portion of his other additional deferral during any month shall be credited with a "Matching Amount" (as described in subsection 7.2). 3.2 Certain Conditions Relating to ------------------------------- Income Deferral. Deferrals of income permitted by subsection - --------------- 3.1 are subject to the following: (a) The amount of a Participant's annual base salary deferral: (i) shall not exceed 80 percent of the amount of that salary, determined as of the last day of the month during which the election is made; (ii) shall, at a Participant's election made on his Annual Written Election to Participate, be automatically increased by an amount equal to all or any part of the amount of the income realized by the Participant on the exercise of non-qualified stock options granted to him by an Employer and held by him for at least 5 years, subject to the limitations of paragraph (i) next above and to the following: (A) the amount of increased deferral shall: (1) not exceed an amount equal to the Participant's remaining unpaid annual base salary for the year of exercise; (2) be made in equal monthly increments, beginning with the calendar month next following the month of exercise of the non-qualified stock option and continuing for the remainder of the calendar year; (B) a Participant may not elect an increased deferral with respect to income realized on account of his exercise of a non-qualified stock option during the month of December of any calendar year; and (C) if a Participant is subject to stock ownership guidelines established by Mead, the increased deferral contemplated by this paragraph 3.2(a) is conditioned on the Participant's conformance with those guidelines. (b) a Participant may defer up to 80 percent of the amount of his annual incentive pay and of any spot bonus paid in lieu of incentive pay; (c) a Participant may defer up to 100 percent of the amount of the cash portion of his long-term incentive pay, spot bonuses (other than spot bonuses paid in lieu of incentive pay), retention bonuses and severance benefits; (d) all deferrals shall be expressed in multiples of 1 percent; and (e) in no event shall any portion of the amount of any excess Before-tax Contribution returned to a Participant in accordance with the terms of the 401(k) Plan be subject to deferral under this Plan. 3.3 Annual Election to Participate. ------------------------------ The term "Annual Election to Participate" means a written agreement, in a form furnished by the Plan Administrator, entered into by and between a Participant and his Employer with respect to a calendar year and setting forth: (a) the deferral percentages elected by the Participant in accordance with paragraphs 3.1(a) and (b) for that calendar year; (b) the percentage of his total deferral that is allocated to each of the "Crediting Options" (as described in subsection 6.1) selected by him; (c) the "Distribution Period" (as defined below) that he elects to be applicable with respect to the amounts deferred pursuant to that Annual Election to Participate and, if applicable, the "Interim Distribution" amount or percentage that he elects to have applicable to such amounts as permitted by subsection 8.2; (d) subject to the provisions of paragraph 8.1(b), the calendar year in which the Distribution Period is to commence; and (e) the Beneficiary who is to receive the remaining balance of the Participant Accounts established for the Participant by reason of that Annual Election to Participate in the event of the Participant's death prior to distribution of the entire balance of that Account to him. Each Annual Election to Participate shall be irrevocable by the Participant after the last day of the calendar month preceding its effective date. The term "Distribution Period" means, with respect to any Participant Account, a period of 5, 10, 15 or 20 calendar years as elected by the Participant for whom the Account is maintained. 3.4 Additional Elections to Defer. A ----------------------------- written agreement, in a form furnished by the Plan Administrator, can be entered into by and between a Participant and his Employer to defer amounts listed in paragraph 3.1(c). The election to defer any such amount must be made by one of the following dates that is applicable: (a) with respect to retention bonuses, within 30 days after the employee is notified that he is eligible for such bonus, but before such amount becomes payable; and (b) with respect to a severance benefit, before such benefit has been agreed. SECTION 4 - PARTICIPANT ACCOUNTS - -------------------------------- For each calendar year, the Plan Administrator shall cause a Participant Account to be established and maintained by Mead in the name of each Participant to reflect the amount of any deferrals that are the subject of the Participant's Annual Election to Participate for that calendar year and of any Matching Amounts attributable thereto. A Participant's Participant Accounts shall be adjusted monthly as provided in subsection 7.1 and shall be distributed to a Participant in accordance with the provisions of Section 8 or, in the event of the Participant's death, to his Beneficiary in accordance with the provisions of Section 9. SECTION 5 - ROLLOVERS - --------------------- 5.1 ICEP Rollovers. Notwithstanding any -------------- provision of the Plan to the contrary, a Participant for whose benefit a balance is maintained under the Incentive Compensation Election Plan (the "ICEP") may elect, during December, 1994, to have that balance transferred to the Plan and credited to a separate Participant Account (to be identified as his "ICEP Participant Account") established hereunder as of January 1, 1995, subject to the following: (a) In no event may a Participant elect to transfer to this Plan any amount credited under the Supplement to the ICEP. (b) No ICEP rollover to the Plan shall be permitted after January 1, 1995. (c) A Participant's Distribution Period with respect to his ICEP Participant Account shall commence on the date on which payment of his balance under the ICEP would have commenced. 5.2 SERP Rollovers. Notwithstanding any -------------- provision of the Plan to the contrary, if a Participant who is also a Participant under The Mead Corporation Supplemental Executive Retirement Plan (the "SERP") has elected, at the time and in the manner permitted by the SERP, to have any amount otherwise payable to him under the terms of the SERP transferred to this Plan and credited to a separate Participant Account then such an Account (to be identified as his "SERP Participant Account"), will be established hereunder as of the date payment would have been made to him under the provisions of the SERP, subject to the Participant's entering into an agreement setting forth the matters described in paragraphs 3.3(b) through (e) of this Plan. 5.3 Excess Plan Rollovers. Notwithstanding any --------------------- provision of the Plan to the contrary, if a Participant who is also a Participant under The Mead Corporation Excess Earnings Benefit Plan (the "Excess Plan") has elected, at the time and in the manner permitted by the Excess Plan, to have any amount otherwise payable to him under the terms of the Excess Plan transferred to this Plan and credited to a separate Participant Account then such an Account (to be identified as his "Excess Plan Participant Account") will be established hereunder as of the date payment would have been made to him under the provisions of the Excess Plan, subject to the Participant's entering into an agreement setting forth the matters described in paragraphs 3.3(b) through (e) of this Plan. 5.4 415 Plan Rollovers. Notwithstanding any ------------------ provision of the Plan to the contrary, if a Participant who is also a Participant under The Mead Corporation Section 415 Excess Benefit Plan (the "415 Plan") has elected, at the time and in the manner permitted by the 415 Plan, to have any amount otherwise payable to him under the terms of the 415 Plan transferred to this Plan and credited to a separate Participant Account then such an Account (to be identified as his "415 Plan Participant Account") will be established hereunder as of the date payment would have been made to him under the provisions of the 415 Plan, subject to the Participant's entering into an agreement setting forth the matters described in paragraphs 3.3(b) through (e) of this Plan. SECTION 6 - CREDITING OPTIONS - ----------------------------- 6.1 Establishment of Crediting Options. ---------------------------------- The Committee shall designate "Crediting Options" (in such number and of such asset character as it shall decide), the investment experience of which shall be applied in adjusting Participants' Participant Accounts, as provided in subsection 7.1. The Crediting Options available as of January 1, 1999 are set forth on Exhibit I of the Plan. On advance written notice to the Participants, the Committee may cause any Crediting Option to be prospectively deleted and may designate other Crediting Options. In no event shall the assets of a Crediting Option be constituted of securities of any Employer or Affiliate. Should any Employer determine to invest any of its funds in the asset or assets constituting a Crediting Option, amounts representing such investment shall be the sole property of that Employer and shall be subject to the claims of its general creditors. No Participant or Beneficiary shall have any claim or right with respect to any such amounts. Notwithstanding the foregoing provisions of this subsection 6.1, upon and after the occurrence of a Change in Control, the Committee shall have no power to eliminate any Crediting Option which was available immediately prior to the Change in Control and, if any Crediting Option shall be eliminated through circumstances beyond the control of the Committee, the Committee shall immediately add a Crediting Option which will provide an investment return equal to one-hundred-twenty percent (120%) of the long-term Federal interest rate determined monthly under section 1274(d) of the Code, compounded semi-annually. 6.2 Participant Change of Crediting ------------------------------- Options. By writing filed with the Plan Administrator on or - ------- before the last business day of February, May, August or November to be effective as of the first day of the following calendar quarter, a Participant may elect: (a) with respect to amounts to be credited to any Participant Account on and after that day pursuant to subsection 3.1, the portion (expressed as a multiple of 1 percent) thereof that is to be adjusted pursuant to subsection 7.1 to reflect the investment experience of any Crediting Option (referred to below as an "Adjustment Portion"); and (b) that all or a portion (expressed as a multiple of 1 percent) of the balance of any Participant Accounts then maintained for his benefit that constitutes an Adjustment Portion be changed to another Adjustment Portion. SECTION 7 - ADJUSTMENT OF PARTICIPANT ACCOUNTS - ---------------------------------------------- 7.1 Adjustment of Participants' --------------------------- Participant Accounts. As of each "Accounting Date" (as defined - -------------------- below), the Plan Administrator shall cause each Participant Accounts to be adjusted as follows: (a) first, by charging to the ----- proper Participant Accounts of each Participant the amount of any distribution made to, or on account of, the Participant from the Account since the last preceding Accounting Date and with the amount of any forfeiture resulting from an Elective Distribution made to him pursuant to the provisions of subsection 8.4, which charges shall be made, pro rata, according to the Adjustment Portions of that Participant Accounts; (b) next, by adjusting each ---- Participant Account maintained on behalf of a Participant, upward or downward, as the case may be, so that the balance of the Participant Accounts equals the aggregate investment experience for the month ended on that Accounting Date of the Adjustment Portions elected by him and applicable to that Participant Account as of that date; (c) next, by crediting the last ---- Participant Account established on behalf of each Participant with the amount of any deferrals made by him during the month ending on that date, and with any Matching Amount to be credited for that month, which amounts shall be credited, pro rata, according to Adjustment Portions elected by the Participant under that Participant Account; (d) next, if the Accounting Date is December 31 and if the Participant hasnot made Before-Tax Contributions under the 401(k) Plan for the calendar year ended on that date equal to the lesser of the amount permitted under section 402(g) of the Code for that year or the amount permitted by the terms of the 401(k) Plan for that year, by debiting the Participant Account established on behalf of the Participant for the calendar year ending on that December 31 with an amount equal to the Matching Amount previously credited to that Account, plus any increment attributable thereto; (e) next, if the Accounting Date ---- is December 31, by charging the Participant Account established on behalf of each Participant for the calendar year ending on that December 31 with an annual administrative fee of $100, which administrative fee shall be charged, pro rata, according to the Adjustment Portions of that Participant Account; and (f) finally, if the Accounting ------- Date is the last day of a calendar quarter, by executing the Adjustment Portion change elections made pursuant to the provisions of subsection 6.2 that are to be effective as of first day the next following calendar quarter. The term "Accounting Date" means the last business day of each calendar month. 7.2 Matching Amount. A portion of the --------------- amount deferred, including the 401(k) Top-Up Contributions, is eligible for a "Matching Amount." Subject to the provisions of paragraph 7.1(d), the Matching Amount is made monthly with respect to a deferred amount which is equal to the product obtained by multiplying the deferral percentage elected under the 401(k) Plan by the gross salary and other cash compensation (except for long term incentive compensation and severance benefits) payable during a month and subtracting from such product the portion of the Before-tax Contribution transferred to the 401(k) Plan for such month and that is eligible for a Matching Contribution thereunder. The deferral percentage used for purposes of calculating the Matching Amount is the monthly percentage in effect under the 401(k) Plan for Before-tax Contributions and for months after the maximum contribution to the 401(k) Plan is reached, the deferral percentage currently elected under the 401(k) Plan for the month that the maximum contribution is reached, provided that the deferral percentage ------------- cannot exceed the maximum percentage eligible for Matching Contributions pursuant to the 401(k) Plan. The term "Matching Amount" means a credit with respect to the deferral amount, as determined pursuant to this subsection 7.2. The Matching Amount is equal to the Matching Contribution that would have been made on the eligible deferred amount as described in this subsection 7.2 had such deferral been made under the 401(k) Plan. 7.3 Quarterly Statement of Participant ---------------------------------- Accounts Balances. As soon as practicable, but not more than 30 - ----------------- days after the last day of each calendar quarter, the Plan Administrator shall provide each Participant with a statement of the balances of his Participant Accounts as of that day. SECTION 8 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO PARTICIPANTS - ---------------------------------------------------------------- 8.1 Annual Distributions. Except as -------------------- otherwise provided in this Section 8, if a Participant's employment with the Employers and Affiliates is terminated for any reason other than his death, and on the June 30 preceding his initial "Distribution Payment Date" (as defined below) the aggregate balances of his Participant Accounts equal at least $50,000, each of the Participant's Participant Accounts will be distributed to him in annual "Installment Distributions" (in the annual amount determined as provided below), made on or about each Distribution Payment Date, beginning: (a) in the case of a Participant whose employment terminates at any age on account of "disability" (as determined by the Plan Administrator) or for any reason at or after reaching age 55 years, on or about the Distribution Payment Date of the calendar year elected by him; and (b) in all other cases, and notwithstanding any previous election, on or about the Distribution Payment Date of the calendar year next following the calendar year during which his termination of employment occurs; and continuing for the number of calendar years constituting the Distribution Period he has irrevocably elected with respect to that Participant Account. If on the June 30 preceding his initial Distribution Payment Date the aggregate balances of a Participant's Participant Accounts is an amount that is less than $50,000, those balances shall be distributed to him on or about his initial Distribution Payment Date in a single lump sum. The amount of the annual "Installment Distribution" from a Participant Account for a calendar year shall be equal to the balance of that Participant Account as of June 30 of that year, divided by the number of calendar years remaining in the Distribution Period elected by the Participant with respect to that Account. Notwithstanding any of the foregoing to the contrary, if a Participant with respect to whom a Participant Account has been established for calendar year 1995 or 1996 has elected a Distribution Period that is less than 10 calendar years, then, at any time, but at least one year prior to his initial Distribution Payment Date, he may elect to have his Distribution Period with respect to any such Participant Account occur over a period of 10 or more years commencing on the previously elected initial Distribution Payment Date. The term "Distribution Payment Date" means July 20 of each year. 8.2 Interim Distributions. Subject to --------------------- the following provisions of this subsection 8.2, at the time that a Participant enters into an Annual Participation Election form, he may elect to receive, as of any Distribution Payment Date occurring at least 7 years after the effective date of that Agreement, an Interim Distribution of any portion of the balance of the Participant Account established by that Agreement, determined as of the June 30 immediately preceding that Distribution Payment Date. If a Participant becomes entitled to receive an Interim Distribution from a Participant Account on or after the initial Distribution Payment Date applicable to that Account, no Interim Distribution shall be made to him and his Installment Distributions being made pursuant to subsection 8.1 shall continue. A Participant shall express his election of an Interim Distribution as a flat dollar amount or as a percentage of the balance of his Participant Account, determined as of the June 30 immediately preceding the date as of which the Interim Distribution is to be made. Any Interim Distribution election made by a Participant shall be automatically cancelled on the date of his death. Notwithstanding any of the foregoing to the contrary, if a Participant has elected to receive an Interim Distribution with respect to a Participant Account established for calendar years 1995 and 1996, then, at any time, but at least one year prior to such Interim Distribution, he may elect to reduce such Interim Distribution payable. 8.3 Emergency Distributions. If, on ----------------------- written application of a Participant, it is determined (as provided below) that the Participant has experienced an "Unforeseeable Emergency" (as defined below), then, as of the first day of any calendar month, the Participant may elect to receive an Emergency Distribution from one or more of his Participant Accounts, provided that the aggregate amount of any such distribution shall not exceed the amount reasonably needed to satisfy the Participant's emergency need. The term "Unforeseeable Emergency" means severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a "dependent" (as defined in section 152(a) of the Code) of the Participant, loss of the Participant's property due to a casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. In determining whether an Emergency Distribution should be made to a Participant consideration may be given to the extent to which his Unforeseeable Emergency can be relieved: (a) through reimbursement or compensation by insurance or otherwise; (b) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; (c) by cessation of deferrals under the Plan; or (d) other distributions to be made to the Participant from the Plan. A determination with respect to whether a Participant has experienced an Unforeseeable Emergency shall be made: (a) in the case of a Participant employed, or last employed, by an Employer at a salary grade below salary grade 24 (exclusive of an elected officer of an Employer) and his Beneficiary, the Plan Administrator; and (b) in the case of a Participant employed, or last employed, by an Employer at salary grade 24 or above or as an elected officer of an Employer and their Beneficiaries, the Committee. The provisions of Section 12 of the Plan shall not be applicable with respect to any determination made pursuant to this subsection 8.3. 8.4 Elective Distributions. As of the first day ---------------------- of any calendar month a Participant may elect, by writing filed with the Plan Administrator, to receive an Elective Distribution from one or more of his Participant Accounts, provided, however, that if a Participant receives an Elective Distribution he shall forfeit an amount equal to 20 percent of the amount of that Elective Distribution, which amount shall be charged to his Participant Accounts as provided in paragraph 7.1(a). 8.5 Change in Control Distributions. ------------------------------- In connection with, but prior to, a "Change in Control" (as defined in subsection 11.4), the Committee, in its sole discretion, may authorize a Participant's Participant Accounts to be distributed to him in a single lump sum. 8.6 Withholding. A Participant's ----------- Employer shall withhold from the non-deferred portion of his compensation for any period all Social Security Taxes as required by sections 3101, 3102 and 3121(v) of the Code to be paid with respect to the amount of his deferrals under the Plan for that period. The Plan Administrator shall cause to be withheld from any distribution made pursuant to the terms of the Plan any other amount required to be withheld by federal, state or local law. SECTION 9 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO BENEFICIARIES - ----------------------------------------------------------------- 9.1 Distribution to Beneficiary. If a --------------------------- Participant dies (either prior to or following his termination of employment with the Employers and Affiliates) the undistributed balance of each of his Participant Accounts will: (a) if distribution has commenced prior to his death, continue to be distributed in annual Installment Distributions, to the deceased Participant's Beneficiary with respect to the Participant Account during the remainder of the Distribution Period applicable to that Account as if the deceased Participant had lived; and (b) if distribution has not commenced prior to his death, be distributed in annual Installment Distributions commencing on the Distribution Payment Date and over the Distribution Period elected by the deceased Participant with respect to that Participant Account. 9.2 Beneficiary. The term ----------- "Beneficiary" means, with respect to any Participant (or a Participant's Beneficiary), such natural or legal person or persons as may be designated by him (who may be designated contingently or successively) to receive the remaining balance of one or more of his Participant Accounts if he dies before a total distribution of the balance is made to him. A Beneficiary designation will be effective with respect to a Participant Account only when a signed and dated Beneficiary designation form applicable to that Account is filed with the Plan Administrator while the Participant is alive, which form will cancel any Beneficiary designation form relating to that Participant Account signed and filed earlier. The same also applies to a Beneficiary designation filed by a Beneficiary. If a Beneficiary survives a Participant and such Beneficiary dies before a total distribution of his Participant Accounts (without a contingent or successive Beneficiary designated by a Participant), the balance of such Account will be made to any person designated by such Beneficiary. If a Participant (or his Beneficiary) is not survived by any Beneficiary of a Participant Account, the Plan Administrator shall distribute the balance of that Participant Account to the legal representative or representatives of the estate of the Participant (or his Beneficiary). SECTION 10 - DISTRIBUTIONS TO INCAPACITATED PERSONS - --------------------------------------------------- Notwithstanding any other provision of the Plan, if a Participant or other person entitled to a distribution under the Plan is determined by a court of competent jurisdiction to be physically, mentally or legally incapacitated and unable to manage his financial affairs and claim is made by a conservator or other person legally charged by such court with the care of his person, the Plan Administrator shall make distributions to such conservator or other person. Any distribution made in accordance with this Section shall fully acquit and discharge all persons from all further liability on account thereof. SECTION 11 - SECTION 162(m) LIMITATION ON DISTRIBUTIONS. - ------------------------------------------------------- 11.1 Tentative Section 162(m) ---------------------- Determination. Notwithstanding any other provision of the Plan - ------------- to the contrary, prior to a Participant's Distribution Payment Date for any calendar year, the Chairperson of the Committee may, in the Chairperson's discretion, make a tentative determination as to whether the sum of: (a) amounts otherwise distributable to the Participant under the Plan as of that Distribution Payment Date; and (b) all other compensation expected to be payable to the Participant and deductible by the Employers for that calendar year; will exceed the maximum deductible amount permitted with respect to the Participant for that calendar year by section 162(m) of the Code. Based on the Chairperson's tentative decision, the provisions of subsection 11.2 or 11.3, as the case may be, shall become applicable with respect to the Participant. Notwithstanding the foregoing, the provisions of this Section shall not be applicable with respect to any distribution payable from the Plan during any calendar year following the calendar year in which a "Change in Control" (as defined in subsection 11.4) occurs. 11.2 Tentative Determination Amount Not in Excess --------------------------------------------- of 162(m) Limit. If the Chairperson of the Committee tentatively - --------------- determines that the sum of the amounts described in paragraphs 11.1(a) and (b) payable to a Participant for a calendar year will be fully deductible by the Employers for that year, distribution from his Participant Accounts shall be made to the Participant in accordance with the provisions of Section 8 of the Plan as of his Distribution Payment Date. However, during the month of December of that calendar year, the Chairperson of the Committee shall make a final determination with respect to whether the amounts described in paragraphs 11.1(a) and (b) are fully deductible by the Employers, within the limitation of section 162(m) of the Code. If he determines that they are not, any amount distributed from a Participant's Participant Accounts during the calendar year that is not deductible by the Employers shall constitute a loan to the Participant and shall be repaid to the Employers, with interest (at the rate provided by section 1274(d) of the Code), on or before the last day of that calendar year. Any such repaid amount shall be credited to the Participant's Participant Account from which it was distributed as of the Accounting Date coincident with or next following the date on which it is repaid. 11.3 Tentative Determination Amount in Excess of ------------------------------------------- 162(m) Limit. If the Chairperson of the Committee tentatively - ------------ determines that the sum of the amounts described in paragraphs 11.1(a) and (b) payable to a Participant for a calendar year will not be fully deductible by the Employers for that year, the Chairperson of the Committee may direct that all or any portion of the balances of the Participant's Participant Accounts otherwise distributable as of his Distribution Payment Date for that calendar year be retained under the terms of the Plan. However, during the month of December of that calendar year, the Chairperson of the Committee shall make a final determination with respect to whether any portion of such retained amount will be fully deductible to the Employer for that calendar year if distributed to the Participant and such portion that is fully deductible, if any, shall be distributed to the Participant on or before that last day of that calendar year. Any such distribution shall be charged to the Participant's Participant Account from which it was distributed as of the Accounting Date coincident with or next following the date of distribution. 11.4 Change in Control. A "Change in Control" ----------------- shall be deemed to have occurred if an event set forth in any one of the following paragraphs shall have occurred: (a) date of expiration of a Tender Offer (other than an offer by Mead), if the offeror acquires Shares pursuant to such Tender Offer; (b) the date of approval by the shareholders of Mead of a definitive agreement: (i) for the merger or consolidation of Mead or any direct or indirect subsidiary of Mead into or with another corporation, other than: (A) a merger or consolidation which would result in the voting securities of Mead outstanding immediately prior thereto continuing to represent, (I) in the case of a merger or consolidation of Mead, either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof, or (II) in the case of a merger or consolidation of any direct or indirect subsidiary of Mead, either by remaining outstanding if Mead continues as a parent of the merged or consolidated subsidiary or by being converted into voting securities of the surviving entity or any parent thereof; at least 51 percent of the combined voting power of the voting securities of Mead or such surviving or parent entity outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of Mead (or similar transaction) in which no Person (as defined below) is or becomes the Beneficial Owner (as defined below) directly or indirectly, of securities of Mead (not including in the securities Beneficially Owned by such Person any securities acquired directly from Mead or its Affiliates) representing 25 percent or more of the combined voting power or Mead's then outstanding securities, or (ii) for the sale or disposition of all or substantially all of the assets of Mead, other than a sale or disposition by Mead of all or substantially all of Mead's assets to an entity, at least 51 percent of the combined voting power of the voting securities of which are owned (directly or indirectly) by shareholders of Mead in substantially the same proportions as their ownership of Mead immediately prior to such sale or disposition; (c) any Person is or becomes the Beneficial Owner of 25 percent or more of the voting power of the then outstanding securities of Mead (not including in the securities beneficially owned by such Person any securities acquired directly from Mead or its affiliates), excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in subparagraph (b)(i)(A) or the date of authorization, by both a majority of the voting power of Mead and a majority of the portion of such voting power excluding the voting power of interested Shares, of a control share acquisition (as such term is defined in Chapter 1701 of the Ohio Revised Code); and (d) a change in the composition of the Board of Directors such that individuals who were members of the Board of Directors on the date two years prior to such change (and any new directors (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of Mead) who were elected, or were nominated for election, by Mead's shareholders with the affirmative vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such two year period or whose election or nomination for election was previously so approved) no longer constitute a majority of the Board of Directors. Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of Mead immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of Mead immediately following such transaction or series of transactions. 11.5 Certain Definitions. The ------------------- following definitions shall be applicable with respect to subsection 11.4: (a) Affiliate shall have the meaning --------- set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (b) Beneficial Owner shall have the ---------------- meaning defined in Rule 13d-3 under the Exchange Act. (c) Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to time. (d) Person shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include: (i) Mead or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of Mead or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of Mead in substantially the same proportions as their ownership of stock of Mead. (e) Shares shall mean shares of common ------ stock, without par value, of The Mead Corporation. (f) Tender Offer shall mean a tender ------------ offer or a request or invitation for tenders or an exchange offer subject to regulation under Section 14(d) of the Exchange Act and the rules and regulations thereunder, as the same may be amended, modified or superseded from time to time. SECTION 12 - DISPUTE RESOLUTION - ------------------------------- 12.1 Notice of Denial. If any dispute arises ---------------- with respect to a Participant or Beneficiary (a "Claimant") under the Plan, Mead will provide the Claimant with a written notice of its resolution of the dispute setting forth: (a) the provisions of the Plan upon which the resolution was based; and (b) an explanation of this claims procedure. If Mead rejects a Claimant's application for failure to furnish certain necessary materials or information, the written notice to the Claimant will explain what additional material is needed and why, and advise the Claimant that he may refile a proper application. In the event that Mead fails to take any action on the Claimant's initial application within 90 days after receipt, the application will be deemed denied, and the Claimant's appeal rights under subsection 11.2 will be in effect as of the end of such period. 12.2 Notice of Appeal. Within 60 days after ---------------- the receipt of Mead's notice ofresolution, the Claimant may file a written notice of appeal of the resolution with the "Claims Reviewer" (as defined below). In addition, within such appeal period, the Claimant may review pertinent documents at such reasonable times and places as the Claims Reviewer may specify and may submit any additional written material pertinent to the appeal not set forth in the notice of appeal. The appeal shall be determined by the Claims Reviewer, and the Claimant shall be entitled to appear before the Claims Reviewer to present his claim. The term "Claims Reviewer" means: (a) in the case of a Participant employed, or last employed, by an Employer at a salary grade below salary grade 24 (exclusive of an elected officer of an Employer) and of his Beneficiary, a panel of 3 persons appointed by the Plan Administrator; and (b) in the case of a Participant employed, or last employed, by an Employer at salary grade 24 or above or as an elected officer of an Employer their Beneficiaries, the Chairperson of the Committee. 12.3 Decision on Appeal. The panel referred ------------------ to in paragraph 12.2(a) or the Chairperson, as the case may be, will make a written decision on the appeal not later than 60 days after its receipt of the notice of appeal unless special circumstances require an extension of time, in which case a decision will be given as soon as possible, but not later that 120 days after receipt of the notice of appeal. The decision on the appeal will be in writing and shall include specific reasons for the decision, making specific reference to the provision of the Plan upon which the decision was based. SECTION 13 - AMENDMENT AND TERMINATION - -------------------------------------- The Committee reserves the right to amend the Plan at any time, except that no amendment shall reduce a Participant's Participant Account balances to less than the amounts that he would have been entitled to receive on the later of the effective date of the amendment or the date on which the amendment is adopted. The Plan will terminate on the date on which it is terminated by the Committee, provided, however, that: (a) at least two Crediting Options shall be maintained until the aggregate balances of all Participant Accounts have been distributed; and (b) distributions from the Plan shall continue to be made under Section 8 or Section 9, as the case may be, pursuant to elections previously made by Participants or as otherwise provided under Section 8 or 9. EXHIBIT I TO THE MEAD CORPORATION EXECUTIVE CAPITAL ACCUMULATION PLAN ----------------------------------- The Crediting Options available under the Plan as of January 1, 1999 are: Type Fund Managed By --------- ---------- (1) Money Market PacMutual (2) Managed Bond PIMCO (3) Multi Strategy J.P. Morgan (4) Equity Income J.P. Morgan (5) Equity Index Bankers Trust (6) Growth Cap Guardian Trust (7) Growth L.T. Janus Capital (8) International Morgan Stanley EX-4 5 THE MEAD CORPORATION DIRECTORS CAPITAL ACCUMULATION PLAN ----------------------------------- (As Amended and Restated Effective January 1, 1999) TABLE OF CONTENTS SECTION 1 - GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.1 Purpose and Effective Date . . . . . . . . . . . . . . . . . . . 1 1.2 Plan Funding and Administration. . . . . . . . . . . . . . . . . 1 1.3 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 Gender and Number. . . . . . . . . . . . . . . . . . . . . . . . 1 1.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.6 Plan Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 2 - PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . .2 2.1 Participation Requirement. . . . . . . . . . . . . . . . . . . . 2 2.2 Continued Participation. . . . . . . . . . . . . . . . . . . . . 2 SECTION 3 - DEFERRAL OF INCOME. . . . . . . . . . . . . . . . . . . . . . . .3 3.1 Deferred Income Amount . . . . . . . . . . . . . . . . . . . . . 3 3.2 Annual Election to Participate . . . . . . . . . . . . . . . . . 3 SECTION 4 - PARTICIPANT ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . .3 SECTION 5 - DCPD ROLLOVERS. . . . . . . . . . . . . . . . . . . . . . . . . .4 SECTION 6 - CREDITING OPTIONS . . . . . . . . . . . . . . . . . . . . . . . .4 6.1 Establishment of Crediting Options . . . . . . . . . . . . . . . 4 6.2 Participant Change of Crediting Options. . . . . . . . . . . . . 5 SECTION 7 - ADJUSTMENT OF PARTICIPANT ACCOUNTS. . . . . . . . . . . . . . . .5 7.1 Adjustment of Participants' Participant Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 7.2 Quarterly Statement of Participant Accounts. . . . . . . . . . . 6 Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 8 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 6 8.1 Annual Distributions . . . . . . . . . . . . . . . . . . . . . . 6 8.2 Emergency Distributions. . . . . . . . . . . . . . . . . . . . . 7 SECTION 9 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO BENEFICIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . 8 9.1 Distribution to Beneficiary. . . . . . . . . . . . . . . . . . . 8 9.2 Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 10 - DISTRIBUTIONS TO INCAPACITATED PERSONS . . . . . . . . . . . . .9 SECTION 11 - CHANGE IN CONTROL. . . . . . . . . . . . . . . . . . . . . . . .9 11.1 In General. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 11.2 Certain Definitions . . . . . . . . . . . . . . . . . . . . . .11 SECTION 12 - AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . .12 EXHIBIT I - CREDITING OPTIONS THE MEAD CORPORATION DIRECTORS CAPITAL ACCUMULATION PLAN ----------------------------------- SECTION 1 - GENERAL - ------------------- 1.1 Purpose and Effective Date. Effective January 1, -------------------------- 1995, The Mead Corporation ("Mead"), an Ohio Corporation, established The Mead Corporation Directors Capital Accumulation Plan (the "Plan"). The Plan was subsequently amended from time to time and the following provisions constitute a further amendment, restatement and continuation of the Plan, effective January 1, 1999. The purpose of the Plan continues to be to provide recurring annual opportunities for the deferment of payment of certain amounts otherwise currently payable to its "Eligible Directors" (as defined below) who meet the requirements to become a "Participant" set forth in subsection 2.1. The term "Eligible Director" means any member of the Board of Directors of Mead who is not employed by it. 1.2 Plan Funding and Administration. The benefits ------------------------------- payable under the Plan are unfunded and are payable, when due, from the general assets of Mead, or, in the sole discretion of the "Committee" (as described below) from the assets of a benefit trust established and maintained by Mead, which trust shall be subject to the claims of Mead's unsecured general creditors in the event of Mead's bankruptcy or insolvency; and provided, further, that Mead shall remain responsible for the payment of any such amounts which are not so paid by any such trust. The Plan shall be administered by a "Plan Administrator" who is appointed by, and serves at the pleasure of, the Compensation Committee of Mead's Board of Directors (the "Committee") and who has the rights, powers and duties with respect to the Plan that are hereinafter set forth and such other rights, powers and duties as are reasonably necessary for the administration of the Plan. As of the effective date, the Plan Administrator is the Vice President - Human Resources of Mead. 1.3 Applicable Law. The Plan will be construed and -------------- administered in accordance with the laws of the State of Ohio to the extent that those laws are not preempted by the laws of the United States of America. 1.4 Gender and Number. Where the context admits, ----------------- words in any gender will include any other gender, words in the singular will include the plural and the plural will include the singular. 1.5 Assignment. No Plan right or interest of any ---------- Participant or Beneficiary shall be assignable or transferable, in whole or in part, either directly or otherwise, including without limitation thereto, by execution, levy, attachment, garnishment, pledge or in any other manner, but excluding transfers by death or mental incompetency; no attempted assignment or transfer thereof shall be effective; and no such right or interest shall be liable for, or subject to, any obligation or liability of any Participant or Beneficiary; except that a Participant may direct that payments be made during his lifetime, when due, to a trust established by him and evidenced to the Plan Administrator to be a trust treated as a grantor trust within the meaning of section 671 of the Internal Revenue Code of 1986, as amended (the "Code"). 1.6 Plan Year. The term "Plan Year" means the --------- calendar year. SECTION 2 - PARTICIPATION - ------------------------- 2.1 Participation Requirement. A Director of Mead who ------------------------- is a Participant in the Plan on January 1, 1999 will continue as such, subject to the terms and conditions of the Plan. Each other Director of Mead will become a Participant in the Plan as of January 1, 1999, or on any subsequent January 1, if on such January 1 he: (a) is an Eligible Director; (b) has executed an Annual Participation Election form (as described in subsection 3.2); and (c) has executed such forms as the Plan Administrator may determine necessary to permit Mead (at its discretion and expense) to maintain a policy of insurance on his life under the terms of which Mead shall be the policyholder, owner and beneficiary. Each individual who becomes an Eligible Director on or after January 1, 1999 will become a Participant in the Plan (on a prospective basis) on the earlier of the date on which the Plan Administrator has received his executed Annual Participation Election form if that date is within 30 days of the date he becomes an Eligible Director or on any subsequent January 1 if he then meets the requirements set forth in paragraphs (a) through (c) above. 2.2 Continued Participation. Until distribution of ----------------------- the entire balances of a Participant's "Participant Accounts" (as described in Section 4) has been made, a Participant or, in the event of his death, any "Beneficiary" (as defined in subsection 9.2) of any of the Participant's undistributed Participant Accounts, as the case may be, will be considered and treated as a Participant for all purposes of the Plan, except that any additional compensation deferral (as described in subsection 3.1) shall cease as of the first day of the month next following the date on which he is no longer an Eligible Director. SECTION 3 - DEFERRAL OF INCOME - ------------------------------ 3.1 Deferred Income Amount. Subject to the provisions ---------------------- of subsection 3.2, by entering into a written Annual Election to Participate as provided by subsection 2.1, a Participant may elect to defer any portion or all of the amount of the meeting fees and of the cash portion of the retainer fee that would otherwise be payable to him for services performed during the period that the Annual Election to Participate is effective. 3.2 Annual Election to Participate. The term "Annual ------------------------------ Election to Participate" means a written agreement, in a form furnished by the Plan Administrator, entered into by and between a Participant and Mead with respect to a calendar year and setting forth: (a) the deferral percentages elected by the Participant in accordance with subsection 3.1 for that calendar year; (b) the percentage of his total deferral that is allocated to each of the "Crediting Options" (as described in subsection 6.1) selected by him; (c) the "Distribution Period" (as defined below) that he elects to be applicable with respect to the amounts deferred pursuant to that Annual Election to Participate; (d) subject to the provisions of paragraph 8.1(b), the calendar year in which the Distribution Period is to commence; and (e) the Beneficiary who is to receive the remaining balance of the Participant Accounts established for the Participant by reason of that Annual Election to Participate in the event of the Participant's death prior to distribution of the entire balance of that Account to him. Each Annual Election to Participate shall be irrevocable by the Participant after the last day of the calendar month preceding its effective date. The term "Distribution Period" means, with respect to any Participant Account, a period of 5, 10, 15 or 20 calendar years as elected by the Participant for whom the Account is maintained. SECTION 4 - PARTICIPANT ACCOUNTS - -------------------------------- For each calendar year, the Plan Administrator shall cause a Participant Account to be established and maintained by Mead in the name of each Participant to reflect the amount of any deferrals that are the subject of the Participant's Annual Election to Participate for that calendar year. A Participant's Participant Accounts shall be adjusted monthly as provided in subsection 7.1 and shall be distributed to a Participant in accordance with the provisions of Section 8 or, in the event of the Participant's death, to his Beneficiary in accordance with the provisions of Section 9. SECTION 5 - DCPD ROLLOVERS - -------------------------- Notwithstanding any provision of the Plan to the contrary, a Participant for whose benefit a balance is maintained under the Deferred Compensation Plan for Directors (the "DCPD") may elect, during December, 1994, to have that balance transferred to the Plan and credited to a separate Participant Account (to be identified as his "DCPD Participant Account") established hereunder as of January 1, 1995, subject to the following: (a) In no event may a Participant elect to transfer to this Plan any amount credited under the Supplement to the DCPD. (b) No DCPD rollover to the Plan shall be permitted after January 1, 1995. (c) A Participant's Distribution Period with respect to his DCPD Participant Account shall commence on the date on which payment of his balance under the DCPD would have commenced. (d) To the extent necessary for self-employment tax purposes, the Committee shall maintain a Participant's DCPD Participant Account in the form of sub-accounts. SECTION 6 - CREDITING OPTIONS - ----------------------------- 6.1 Establishment of Crediting Options. The Committee ---------------------------------- shall designate "Crediting Options" (in such number and of such asset character as it shall decide), the investment experience of which shall be applied in adjusting Participants' Participant Accounts, as provided in subsection 7.1. The Crediting Options available as of January 1, 1999 are set forth on Exhibit I of the Plan. On advance written notice to the Participants, the Committee may cause any Crediting Option to be prospectively deleted and may designate other Crediting Options. In no event shall the assets of a Crediting Option be constituted of securities of Mead. Should Mead determine to invest any of its funds in the asset or assets constituting a Crediting Option, amounts representing such investment shall be the sole property of Mead and shall be subject to the claims of its general creditors. No Participant or Beneficiary shall have any claim or right with respect to any such amounts. Notwithstanding the foregoing provisions of this subsection 6.1, upon and after the occurrence of a Change in Control, (as defined in Section 11), the Committee shall have no power to eliminate any Crediting Option which was available immediately prior to the Change in Control and, if any Crediting Option shall be eliminated through circumstances beyond the control of the Committee, the Committee shall immediately add a Crediting Option which will provide an investment return equal to one-hundred-twenty percent (120%) of the long-term Federal interest rate determined monthly under section 1274(d) of the Code, compounded semi-annually. 6.2 Participant Change of Crediting Options. By --------------------------------------- writing filed with the Plan Administrator on or before the last business day of February, May, August or November to be effective as of the first day of the following calendar quarter, a Participant may elect: (a) with respect to amounts to be credited to any Participant Account on and after that day pursuant to subsection 3.1, the portion (expressed as a multiple of 1 percent) thereof that is to be adjusted pursuant to subsection 7.1 to reflect the investment experience of any Crediting Option (referred to below as an "Adjustment Portion"); and (b) that all or a portion (expressed as a multiple of 1 percent) of the balance of any Participant Accounts then maintained for his benefit that constitutes an Adjustment Portion be changed to another Adjustment Portion. SECTION 7 - ADJUSTMENT OF PARTICIPANT ACCOUNTS - ---------------------------------------------- 7.1 Adjustment of Participants' Participant Accounts. ------------------------------------------------ As of each "Accounting Date" (as defined below), the Plan Administrator shall cause each Participant Accounts to be adjusted as follows: (a) first, by charging to the proper Participant ----- Accounts of each Participant the amount of any distribution made to, or on account of, the Participant from the Account since the last preceding Accounting Date, which charges shall be made, pro rata, according to the Adjustment Portions of that Participant Accounts; (b) next, by adjusting each Participant Account ---- maintained on behalf of a Participant, upward or downward, as the case may be, so that the balance of the Participant Accounts equals the aggregate investment experience for the month ended on that Accounting Date of the Adjustment Portions elected by him and applicable to that Participant Account as of that date; (c) next, by crediting the last Participant ---- Account established on behalf of each Participant with the amount of any deferrals made by him during the month ending on that date, which amount shall be credited, pro rata, according to Adjustment Portions elected by the Participant under that Participant Account; (d) next, if the Accounting Date is December 31, ---- by charging the Participant Account established on behalf of each Participant for the calendar year ending on that December 31 with an annual administrative fee of $100, which administrative fee shall be charged, pro rata, according to the Adjustment Portions of that Participant Account; and (e) finally, if the Accounting Date is the last ------- day of a calendar quarter, by executing the Adjustment Portion change elections made pursuant to the provisions of subsection 6.2 that are to be effective as of first day the next following calendar quarter. The term "Accounting Date" means the last business day of each calendar month. 7.2 Quarterly Statement of Participant Accounts -------------------------------------------- Balances. - -------- As soon as practicable, but not more than 30 days after the last day of each calendar quarter, the Plan Administrator shall provide each Participant with a statement of the balances of his Participant Accounts as of that day. SECTION 8 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO - --------------------------------------------------- PARTICIPANTS - ------------ 8.1 Annual Distributions. Except as otherwise -------------------- provided in this Section 8, if a Participant's service as a Director of Mead is terminated for any reason other than his death, and on the June 30 preceding his initial "Distribution Payment Date" (as defined below) the aggregate balances of his Participant Accounts equal at least $50,000, each of the Participant's Participant Accounts will be distributed to him in annual "Installment Distributions" (in the annual amount determined as provided below), made on or about each Distribution Payment Date, beginning: (a) in the case of a Participant whose service as a Director terminates at any age on account of "disability" (as determined by the Committee) or for any reason at or after reaching age 55 years, on or about the Distribution Payment Date of the calendar year elected by him; and (b) in all other cases, and notwithstanding any previous election, on or about the Distribution Payment Date of the calendar year next following the calendar year during which his termination of service as a Director occurs; and continuing for the number of calendar years constituting the Distribution Period he has irrevocably elected with respect to that Participant Account. If on the June 30 preceding his initial Distribution Payment Date the aggregate balances of a Participant's Participant Accounts is an amount that is less than $50,000, those balances shall be distributed to him on or about his initial Distribution Payment Date in a single lump sum. The amount of the annual "Installment Distribution" from a Participant Account for a calendar year shall be equal to the balance of that Participant Account as of June 30 of that year, divided by the number of calendar years remaining in the Distribution Period elected by the Participant with respect to that Account. Notwithstanding any of the foregoing to the contrary, if a Participant with respect to whom a Participant Account has been established for calendar year 1995 or 1996 has elected a Distribution Period that is less than 10 calendar years, then, at any time, but at least one year prior to his initial Distribution Payment Date, he may elect to have his Distribution Period with respect to any such Participant Account occur over a period of 10 or more years commencing on the previously elected initial Distribution Payment Date. The term "Distribution Payment Date" means July 20 of each year. 8.2 Emergency Distributions. If, on written ----------------------- application of a Participant, it is determined (as provided below) that the Participant has experienced an "Unforeseeable Emergency" (as defined below), then, as of the first day of any calendar month, the Participant may elect to receive an Emergency Distribution from one or more of his Participant Accounts, provided that the aggregate amount of any such distribution shall not exceed the amount reasonably needed to satisfy the Participant's emergency need. The term "Unforeseeable Emergency" means severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a "dependent" (as defined in section 152(a) of the Code) of the Participant, loss of the Participant's property due to a casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. In determining whether an Emergency Distribution should be made to a Participant consideration may be given to the extent to which his Unforeseeable Emergency can be relieved: (a) through reimbursement or compensation by insurance or otherwise; (b) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; (c) by cessation of deferrals under the Plan; or (d) other distributions to be made to the Participant from the Plan. A determination with respect to whether a Participant has experienced an Unforeseeable Emergency shall be made by the Committee. SECTION 9 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO - --------------------------------------------------- BENEFICIARIES - ------------- 9.1 Distribution to Beneficiary. If a Participant --------------------------- dies (either prior to or following his termination of service as a Director) the undistributed balance of each of his Participant Accounts will: (a) if distribution has commenced prior to his death, continue to be distributed in annual Installment Distributions, to the deceased Participant's Beneficiary with respect to the Participant Account during the remainder of the Distribution Period applicable to that Account as if the deceased Participant had lived; and (b) if distribution has not commenced prior to his death, be distributed in annual Installment Distributions to the deceased Participant's Beneficiary commencing on the Distribution Payment Date and over the Distribution Period elected by the deceased Participant with respect to that Participant Account. 9.2 Beneficiary. The term "Beneficiary" means, with ----------- respect to any Participant (or a Participant's Beneficiary), such natural or legal person or persons as may be designated by him (who may be designated contingently or successively) to receive the remaining balance of one or more of his Participant Accounts if he dies before a total distribution of the balance is made to him. A Beneficiary designation will be effective with respect to a Participant Account only when a signed and dated Beneficiary designation form applicable to that Account is filed with the Plan Administrator while the Participant is alive, which form will cancel any Beneficiary designation form relating to that Participant Account signed and filed earlier. The same also applies to a Beneficiary designation filed by a Beneficiary. If a Beneficiary survives a Participant and such Beneficiary dies before a total distribution of his Participant Accounts (without a contingent or successive Beneficiary designated by a Participant), the balance of such Account will be made to any person designated by such Beneficiary. If a Participant (or his Beneficiary) is not survived by any Beneficiary of a Participant Account, the Plan Administrator shall distribute the balance of that Participant Account to the legal representative or representatives of the estate of the Participant (or his Beneficiary). SECTION 10 - DISTRIBUTIONS TO INCAPACITATED PERSONS - --------------------------------------------------- Notwithstanding any other provision of the Plan, if a Participant or other person entitled to a distribution under the Plan is determined by a court of competent jurisdiction to be physically, mentally or legally incapacitated and unable to manage his financial affairs and claim is made by a conservator or other person legally charged by such court with the care of his person, the Plan Administrator shall make distributions to such conservator or other person. Any distribution made in accordance with this Section shall fully acquit and discharge all persons from all further liability on account thereof. SECTION 11 - CHANGE IN CONTROL - ------------------------------ 11.1 In General. A "Change in Control" shall be deemed ---------- to have occurred if an event set forth in any one of the following paragraphs shall have occurred: (a) date of expiration of a Tender Offer (other than an offer by Mead), if the offeror acquires Shares pursuant to such Tender Offer; (b) the date of approval by the shareholders of Mead of a definitive agreement; (i) for the merger of consolidation of Mead or any direct or indirect subsidiary of Mead into or with another corporation, other than: (A) a merger or consolidation which would result in the voting securities of Mead outstanding immediately prior thereto continuing to represent, (I) in the case of a merger or consolidation of Mead, either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof, or (II) in the case of a merger or consolidation of any direct or indirect subsidiary of Mead, either by remaining outstanding if Mead continues as a parent of the merged or consolidated subsidiary or by being converted into voting securities of the surviving entity or any parent thereof; at least 51 percent of the combined voting power of the voting securities of Mead or such surviving or parent entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of Mead (or similar transaction) in which no Person (as defined below) is or becomes the Beneficial Owner (as defined below) directly or indirectly, of securities of Mead (not including in the securities Beneficially Owned by such Person any securities acquired directly from Mead or its Affiliates) representing 25 percent or more of the combined voting power or Mead's then outstanding securities, or (ii) for the sale or disposition of all or substantially all of the assets of Mead, other than a sale or disposition by Mead of all or substantially all of Mead's assets to an entity, at least 51 percent of the combined voting power of the voting securities of which are owned (directly or indirectly) by shareholders of Mead in substantially the same proportions as their ownership of Mead immediately prior to such sale or disposition; (c) any Person is or becomes the Beneficial Owner of 25 percent or more of the voting power of the then outstanding securities of Mead (not including in the securities beneficially owned by such Person any securities acquired directly from Mead or its affiliates), excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in subparagraph (b) (i) (A) or the date of authorization, by both a majority of the voting power of Mead and a majority of the portion of such voting power excluding the voting power of interested Shares, of a control share acquisition (as such term is defined in Chapter 1701 of the Ohio Revised Code); and (d) a change in the composition of the Board of Directors such that individuals who were members of the Board of Directors on the date two years prior to such change (and any new directors (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of Mead) who were elected, or were nominated for election, by Mead's shareholders with the affirmative vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such two year 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 of series of integrated transactions immediately following which the record holders of the common stock of Mead immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of Mead immediately following such transaction or series of transactions. 11.2 Certain Definitions. The following definitions ------------------- shall be applicable with respect to subsection 11.1: (a) Affiliate shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (b) Beneficial Owner shall have the meaning defined in Rule 13d-3 under the Exchange Act. (c) Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to time. (d) Person shall have the meaning given in Section 3(a) (9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include: (i) Mead or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of Mead or any of its Affiliates. (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of Mead in substantially the same proportions as their ownership of stock of Mead. (e) Shares shall mean shares of common stock, without par value, of Mead Corporation. (f) Tender Offer shall mean a tender offer or a request or invitation for tenders or an exchange offer subject to regulation under Section 14(d) of the Exchange Act and the rules and regulations thereunder, as the same may be amended, modified or superseded from time to time. SECTION 12 - AMENDMENT AND TERMINATION - -------------------------------------- The Committee reserves the right to amend the Plan at any time, except that no amendment shall reduce a Participant's Participant Account balances to less than the amounts that he would have been entitled to receive on the later of the effective date of the amendment or the date on which the amendment is adopted. The Plan will terminate on the date on which it is terminated by the Committee, provided, however, that: (a) at least two Crediting Options shall be maintained until the aggregate balances of all Participant Accounts have been distributed; and (b) distributions from the Plan shall continue to be made under Section 8 or Section 9, as the case may be, pursuant to elections previously made by Participants or as otherwise provided under Section 8 or 9. EXHIBIT I TO THE MEAD CORPORATION EXECUTIVE CAPITAL ACCUMULATION PLAN ----------------------------------- The Crediting Options available under the Plan as of January 1, 1999 are: Type Fund Managed By --------- ---------- (1) Money Market PacMutual (2) Managed Bond PIMCO (3) Multi Strategy J.P. Morgan (4) Equity Income J.P. Morgan (5) Equity Index Bankers Trust (6) Growth Cap Guardian Trust (7) Growth L.T. Janus Capital (8) International Morgan Stanley EX-27 6
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 APRIL 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 3-MOS DEC-31-1998 APR-04-1999 12 0 441 0 518 1,079 5,753 2,419 5,111 664 1,346 0 0 151 2,099 5,111 0 863 0 705 0 0 27 31 11 23 0 0 0 23 .22 .22
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