-----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, RBtymZXl2Gutq+nqDuzdyPsBXNssulMHuTuGh38sEfmX3spD07SIDw9hamb3+TEu 1XWKaqP+fpVenwYiiufAdQ== 0000950131-00-001640.txt : 20000309 0000950131-00-001640.hdr.sgml : 20000309 ACCESSION NUMBER: 0000950131-00-001640 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000308 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-K SEC ACT: SEC FILE NUMBER: 001-02267 FILM NUMBER: 563411 BUSINESS ADDRESS: STREET 1: MEAD WORLD HEADQUARTERS STREET 2: COURTHOUSE PLZ NORTHEAST CITY: DAYTON STATE: OH ZIP: 45463 BUSINESS PHONE: 9374954439 10-K 1 FORM 10-K ============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 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 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on which Registered ------------------- --------------------- Common Shares Without Par Value New York Stock Exchange and Common Share Purchase Rights Chicago Stock Exchange Pacific Exchange _________________________ 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 __. - _________________________ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] _________________________ As of January 25, 2000, the aggregate market value of the voting shares held by non-affiliates of the Registrant was approximately $3,820,778,508 determined by multiplying the highest selling price of a Common Share on the New York Stock Exchange--Composite Transactions Tape on such date, times the amount by which the total shares outstanding exceeded the shares beneficially owned by directors and executive officers of the Registrant. Such determination shall not, however, be deemed to be an admission that any person is an "affiliate" as defined in Rule 405 under the Securities Act of 1933. The number of Common Shares outstanding at March 1, 2000 was 102,791,099. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's Proxy Statement for the Annual Meeting of Shareholders scheduled to be held on April 27, 2000, are incorporated by reference in Part III; definitive copies of said Proxy Statement were filed with the Securities and Exchange Commission on March 8, 2000. ================================================================================ PART I Item 1. Business Mead manufactures and sells paper, pulp, paperboard, lumber and other wood products. Mead also manufactures and distributes consumer and office supplies. Mead was incorporated in 1930 under the laws of the state of Ohio as the outgrowth of a paper manufacturing business founded in 1846, and has its principal executive offices at Mead World Headquarters, Courthouse Plaza Northeast, Dayton, Ohio 45463, telephone (937) 495-6323. Except as otherwise indicated by the context, the terms "Company" or "Mead" as used herein refer to The Mead Corporation and its subsidiaries. Segment Information Segment information is also included in Note U on pages 47-49. Paper Mead's Paper division manufactures coated and uncoated papers for use by publishers of books, magazines, catalogs, and advertising brochures and by commercial printers; form bond and carbonless paper and papers for conversion by others into business forms; cut-size copier paper; and other uncoated papers for conversion by others into such products as greeting cards. The division sells papers nationwide, both on a direct basis to publishers, printers and converters and through paper merchants. The pulp mills adjacent to the paper mills of this division produce most of the pulp required for use in the paper mills. The division owns various timberlands in Kentucky, Maine, Michigan, New Hampshire and Ohio. The Gilbert Paper division manufactures premium cotton content business correspondence papers and premium text and cover papers for printed business use. The papers are specified by graphic designers and sold principally through wholesale paper merchants in the United States and internationally. Mead's Specialty Paper division manufactures and sells, primarily through its own sales force, decorative and overlay laminating papers. The division also manufactures and sells tape papers and specialty papers used in industrial applications. The division's principal customers include manufacturers that serve the building materials, automotive and furniture industries. The Mead Pulp Sales division sells market pulp manufactured by Great Lakes Pulp and Fibre, Inc. in Menominee, Michigan, and Mead Paper of Escanaba, Michigan and Rumford, Maine. Mead Pulp Sales also represents MODO Paper AB, of Sweden, for the sale of pulp in North America. Mead Pulp Sales also sells through its affiliates International Fibre Sales in Europe and Pulp Asia Ltd. in Japan, and through independent agents in all major pulp consuming areas of the world. Packaging and Paperboard The Mead Packaging division designs and produces multiple packaging and packaging systems primarily for the beverage take-home market. The division operates through a network of subsidiaries, affiliates and licensees in the United States, Canada, Europe, the Far East, Mexico and Latin America. Demand for most beverage packaging is seasonal with inventories being built from November to March for the peak soft drink and beer sales of April through October. Mead Coated Board, Inc., a wholly-owned subsidiary of Mead, operates a coated paperboard mill near Phenix City, Alabama, sawmills in Cottonton, Alabama 1 and Greenville, Georgia, and owns various timberlands in Alabama and Georgia. The subsidiary is engaged primarily in the manufacture of coated unbleached kraft paperboard products used by the beverage packaging industry and by manufacturers of folding cartons for consumer products such as soaps, food products, hardware and apparel. The entire output of the Phenix City mill is sold by Mead Coated Board, Inc. to the Mead Coated Board division. The division sells approximately 60% of the mill output to the Mead Packaging division. The remainder is sold to folding carton manufacturers in North America and Europe. The division's customers are most concerned about physical strength properties of the paperboard and its quality for reprographics. The Mead Containerboard division sells standard and special purpose corrugated shipping containers manufactured at eight converting plants located in the Midwestern and Southeastern regions of the United States from raw materials received from outside sources and from the division's Stevenson, Alabama corrugating medium mill. The division also sells corrugating medium from the Stevenson mill to unaffiliated manufacturers of containers. The division owns various timberlands in Alabama and Tennessee. Forest Products Affiliate Northwood Panelboard Company ("Panelboard"), a partnership owned 50% by Mead and 50% by Nexfor Inc., located in Bemidji, Minnesota, has the annual capacity to produce approximately 400 million square feet of oriented structural board ("OSB") (3/8-inch basis). All of the wood products produced by Panelboard are sold through a subsidiary of Nexfor Inc. in North America. Consumer and Office Products The Mead Consumer and Office Products division (formerly known as the School and Office Products division) manufactures and distributes a line of school supplies (including filler paper, wirebound notebooks, portfolios and looseleaf binders), a line of office supply products (including envelopes, filing supplies and vinyl folders and binders), and computer accessories (including paper based products for computer use, laptop computer cases and multi-media storage devices). The division also acquired AT-A-GLANCE, a producer and marketer of time management products including planners, organizers, calendars and posters, in late 1999. The division's products are distributed primarily through mass market retailers, office supply superstores, commercial stationers, and warehouse clubs. The school supply business is highly seasonal with inventories built in the winter and spring for shipment in late spring and summer, the calendar planners and time management products are shipped primarily in the second half of the year, while the home and office products and computer accessories portion of the business is generally less seasonal in nature. Manufacturing is done in ten facilities and distributed from eight distribution centers in the United States. Internationally, one manufacturing facility and distribution center is located in Canada and one manufacturing facility and distribution center is located in Mexico. Timberlands Mead obtains most of its wood requirements from private contractors or suppliers and from Company-owned timberlands. The annual wood requirement for Mead's wholly-owned operations and Northwood Panelboard Company in 1999 was approximately 10,600,000 tons, of which approximately 24% was obtained from timberlands owned or leased by Mead. The annual wood requirement for Mead's wholly-owned operations and for Northwood Panelboard Company expected in 2000 will be approximately the same. 2 As of December 31, 1999, Mead owned or controlled approximately 2,090,000 acres of timberlands in the United States. Approximately 107,000 acres of land are controlled by Mead under long-term agreements that expire at different times through 2027. International Sales and Operations Outside of the United States and Canada, Mead and its affiliates operate a paperboard sheeting facility and are engaged in the manufacture of multiple packaging systems and folding carton packaging in Europe, Asia and Latin America. Mead Specialty Paper also operates a decorative laminating and specialty paper mill in England. Mead also has sales subsidiaries, affiliates, agents or distributors in a number of countries in Europe, Asia, Australia and Latin America. Competition Mead competes on a worldwide basis in its product lines, and the markets in which Mead sells its products are highly competitive. Several factors affect Mead's competitive position, including quality, technology, product design, customer service, price and cost. The Paper division competes with numerous other major paper manufacturers both domestic and foreign. The Specialty Paper division competes primarily with North American and European based decorative laminating papermakers. The Gilbert Paper division competes with a number of other manufacturers of premium cotton, sulfite and recycled papers. The Coated Board division competes with other boxboard producers, including manufacturers of all types of coated recycled boxboard, coated solid bleached sulfate and folding boxboard. The Packaging division competes with a number of carton suppliers and machine manufacturers and other global systems-based multiple packaging suppliers, as well as suppliers of other non-boxboard packaging systems. The Containerboard division competes primarily with container producers, and corrugating and medium producers in several market areas in the United States. The Consumer and Office Products division competes with national and regional converters as well as foreign producers. Some of the competitors have broad product offerings and others are focused on narrow product segments. Employee and Labor Relations Mead employs approximately 14,000 persons within the United States and 2,300 persons outside the United States. Approximately 7,400 are production, maintenance and clerical employees represented by labor unions. Mead's 50% owned company, Northwood Panelboard, employs approximately 140 persons. Mead has approximately 26 labor agreements currently in force, of which approximately one-fifth are subject to renegotiation each year. Mead's employee relations policies are based on mutual confidence and trust. All Mead labor contract negotiations during 1999 were concluded without any strikes. Trademarks, Trade Names, Patents, and Franchises Mead has a large number of trademarks and trade names under which it conducts its business, including "Apex," "Appli," "Aria," "AT-A-GLANCE," "Blue Horse," "Bungee," "Cambridge," "Chief," "Clearfold," "Clip Note," "Cluster-Pak," "CNK," "Daydream," "DayMinder," "DEFENSA," "Duodozen," "Duoply," "Dura," "Duraline," "Esse," "Excel," "Fastrak," "Fill the Void," "First Gear," "Five Star," "FLIPDISC," "Gilbert," "Gilclear," "Gilcrest," "Gizmos," "Hilroy," "Hobbies & Ideas," "Hometown Graphics," "Info," "Jet-Tech," "Keith Clark," "Landmark," "Laserline," "Mailbox Collection," "Management Series," "Mead," "Mead Expression," "Mead Impressions," "Mead Mind Meld," "Mead Packaging," "Mead 3 Papers," "MEDIAZONE," "Montag," "Neatbook," "Neu-Tech," "Nite Writer," "OPAS," "OPTICA," "Organizer," "Oxford," "Pal-A-Round," "Paper Knowledge," "Prima," "Printloc," "Prism," "PTO," "Publishers Matte," "QuickNotes," "Realm," "Scottie," "Signature," "Smartbook," "Spiral," "Studio," "Studio Series," "Time Line," "Trans/Rite," "Trans/Tab," "Trans Ultra," "Trapper," "Trapper Keeper," "ULTRATECH," "Vision," "Voice," "Wallaroos," "Xpanz," "Zip Tote," and many others. Mead also has a great number and variety of patents, patent rights and licenses relating to its business. While, in the aggregate, the foregoing are of material importance to Mead's business, the loss of any one or any related group of such intellectual property rights would not have a material adverse effect on the business of Mead. Environmental Laws and Regulations Mead's operations are subject to extensive regulation by various federal, state, provincial and local environmental control statutes and regulations. These regulations impose effluent and emission limitations, waste disposal and other requirements upon the operations of Mead, and require Mead to obtain and operate in compliance with the conditions of permits and similar authorizations from the appropriate governmental authorities. Mead has obtained, has applications pending, or is making application for such permits and authorizations. Mead does not anticipate that compliance with such statutes and regulations will have a material adverse effect on its competitive position since its competitors are subject to the same statutes and regulations to a relatively similar degree. During the past three years (January 1, 1997 - December 31, 1999), Mead constructed air and water pollution control and other environmental facilities at a cost of approximately $87 million. Environmental expenditures in the future are anticipated to include long-term projects for maintenance and upgrade of wastewater treatment plants, process modifications and air emission controls. Due to changes in environmental laws and regulations, the application of such laws and regulations and changes in environmental control technology, it is not possible for Mead to predict with certainty the amount of capital expenditures to be incurred for environmental purposes. Taking these uncertainties into account, Mead estimates that in the next three years it may be required to incur expenditures of approximately $39 million. Various Great Lakes states, including Michigan and Ohio, have adopted water quality regulations consistent with the federal Great Lakes Initiative ("GLI"). These state regulations remain subject to United States Environmental Protection Agency ("USEPA") review and final approval. The regulations are subject to change. However, Mead does not expect that any significant additional capital expenditures beyond expenditures stated above will be necessary in the next three years at Mead's Escanaba facility to comply with the requirements of the Michigan GLI regulations as are likely to be finally adopted and approved by USEPA. The State of Ohio determined that it would not apply all GLI regulations to facilities discharging into the Ohio River Basin for the time being. Mead does not expect that any significant additional capital expenditures beyond expenditures stated above will be necessary in the next three years at Mead's Chillicothe facility to comply with any requirements of the Ohio GLI regulations as are likely to be finally adopted, approved by USEPA and made applicable to the Ohio River Basin. The USEPA has undertaken several initiatives to reduce ozone-causing pollutants from large utility and industrial sources in the Midwest. These initiatives follow claims by several "downwind" Northeastern states that emissions from the Midwestern sources impair their ability to meet national ozone standards. USEPA is seeking emission reductions through several techniques, including a call for states to adopt more stringent emission controls on all or some of the sources within their boundaries and the promulgation of new federal 4 emission standards that may be applied to specific identified sources in the affected states. Ohio and Michigan are among the states affected by these USEPA initiatives. Legal challenges to these initiatives have been filed or are threatened by one or more of the affected states and various private organizations. It is not certain what actions will be taken by the affected states to reduce emissions or what requirements, if any, will be imposed on individual facilities like Mead's Chillicothe, Ohio and Escanaba, Michigan mills. However, no new emission limitations or standards are expected to take effect before 2003. Mead believes that most of the earlier expenditures for environmental control have been beneficial. However, Mead and the trade associations of which Mead is a member have challenged and will continue to challenge in administrative and judicial proceedings, federal and state environmental control regulations which they do not believe are beneficial to the environment or the public. In some instances, Mead and those trade associations may also seek legislative remedies to correct unnecessary or impractical requirements of existing laws. Dioxin currently cannot be detected under normal operating conditions in treated effluents from Mead's three U.S. bleached paper mills. Taking into account current regulatory efforts and the process and control equipment installed at the Company's bleached paper mills, Mead does not expect that any required actions in response to dioxin concerns will have a material adverse effect on the Company. USEPA has announced its intention to emphasize review and enforcement of compliance with the major source air permitting program established under the Clean Air Act. The Agency has identified certain industries on which it will focus, including the pulp and paper industry. During 1999, USEPA issued Notices of Violation against seven companies with kraft pulp mills in Maryland, Pennsylvania, Virginia, and West Virginia, alleging various violations of the Clean Air Act dating back to the late 1970's and early 1980's. Mead has received requests for information (pursuant to Section 114 of the Clean Air Act) from USEPA concerning Mead's kraft pulp mills in Chillicothe, Ohio, Rumford, Maine, Phenix City, Alabama and Escanaba, Michigan. Mead has responded to three of the requests and is preparing its responses to the other request. Mead has not received any Notices of Violations or other claims. Mead has been notified by the USEPA or by various state or local governments that it may be liable under federal environmental laws or under applicable state or local laws with respect to the cleanup of hazardous substances at six sites currently operated or used by Mead. Mead is also currently named as a potentially responsible party ("PRP"), or has received third party requests for contribution under federal, state or local laws with respect to at least 20 sites sold by Mead over many years or owned by contractors used by Mead for disposal purposes. Some of these proceedings are described in more detail in Part I, Item 3, "Legal Proceedings." There are other former Mead facilities and those of contractors which may contain contamination or which may have contributed to potential superfund sites but for which Mead has not received any notice or claim. Mead's potential liability for all these sites will depend upon several factors, including the extent of contamination, the method of remediation, insurance coverage and contribution by other PRPs. Although the costs that Mead may be required to pay for remediation of all these owned and unowned sites are not certain at this time, Mead has established reserves of approximately $40 million relating to current environmental litigation and proceedings which it believes are probable and reasonably estimable. These reserves were established after considering the number of other PRPs, their ability to pay their portion of the costs, the volumetric amount, if any, of Mead's contribution, and other factors. Expenses to be charged to this reserve are not included in the anticipated capital expenditures for the next three years stated above. Mead believes that it is reasonably possible that costs associated with these owned and unowned sites may exceed current reserves by amounts that 5 may prove insignificant or by as much as approximately $40 million. This estimate of the range of reasonably possible additional costs is less certain than the estimate upon which reserves are based. Item 2. Properties Mead considers that its facilities are suitable and adequate for the operations involved. With the exception of certain warehouses, general offices and timberlands which are leased, Mead owns all of the properties described herein. For additional information regarding leases see Note Q on page 46. For additional information concerning Mead's timberlands and properties of affiliates, see Part 1, Item 1. "Business". Mead's corporate headquarters are in Dayton, Ohio and its principal facilities are at the locations listed:
Business Unit Facility Locations Principal Use - ------------------ --------------------------- --------------------------------- Paper Chillicothe, Ohio Pulp mill, coated, uncoated and carbonless paper mill Escanaba, Michigan Pulp mill, coated paper mill Indianapolis, Indiana Carbonless coating facility Rumford, Maine Pulp mill, coated, uncoated and specialty paper mill Gilbert Paper Menasha, Wisconsin Cotton and recycled content and specialty paper mill Appleton, Wisconsin Converting and distribution center Specialty Paper South Lee, Massachusetts Decorative laminating and Potsdam, New York specialty paper mills County Devon, England Packaging Lanett, Alabama Paperboard packaging, multiple Atlanta, Georgia packaging systems for beverage Buena Park, California and food, packaging machinery Chicago, Illinois manufacturing or repair Ajax, Ontario, Canada facilities Chateauroux, France Trento, Italy Roosendaal, The Netherlands Trier-Ehrang, Germany Bristol, England Shimada, Japan Bilbao, Spain Containerboard 8 plants within the United Corrugated container States in midwest and manufacturing facilities southern regions Stevenson, Alabama Corrugating medium mill Coated Board Phenix City, Alabama Coated paperboard mill, sheeting Venlo, The Netherlands facilities and sawmills Cottonton, Alabama Greenville, Georgia
6
Business Unit Facility Locations Principal Use - ------------- ------------------ ----------------------------- Consumer and 10 manufacturing and 8 Home, office, consumer and Office Products distribution locations school products manufacturing throughout the United and distribution facilities States, one manufacturing and distribution location in Toronto, Ontario, Canada, one manufacturing location in Nuevo Laredo, Mexico, and one distribution location in Mexico City, Mexico
Item 3. Legal Proceedings In March 1991, Mead was served with a complaint entitled Beazer East Inc. ---------------- v. The Mead Corporation, C.A. No. 91-0408, filed in the United States District - ----------------------- Court for the Western District of Pennsylvania. The complaint alleges that Mead is liable to Beazer for contribution for past and future environmental remediation costs to be incurred by Beazer as a result of any corrective measures required at the Woodward Facility located in Dolomite, Alabama. Mead acquired the Woodward Facility by merger in 1968, and in 1974 sold it to Koppers, Inc., which was later acquired by Beazer. In May, 1997, the magistrate judge in the proceeding held a hearing to determine the appropriate equitable factors to be applied in an allocation of liability among the parties. In November, 1999, the magistrate judge issued a report and recommendation to the District Court concluding that Mead should be allocated approximately 74% of the liability. In December, 1999, Mead filed objections to the report and recommendation, which are pending before the District Court. Although the extent of contamination and the method of remediation to be required are not known at this time, based on information currently available to Mead, after considering established reserves, rights to contribution and potential insurance coverage, Mead does not expect this proceeding will have a material adverse effect on the financial condition, liquidity or results of operations of the Company. The Tennessee Department of Environment and Conservation ("TDEC") advised Mead in September 1991 that a closed coke manufacturing facility located in Chattanooga, Tennessee (the "Coke Plant Site") is a hazardous substance site within the meaning of the Tennessee Hazardous Waste Management Act, and that Mead may be a potentially responsible or liable party. In 1994 Mead undertook a removal action at the closed coke plant site, consisting of demolition of structures, removal of asbestos, control of surface water ponding and repairs to fencing. Mead has been engaged in discussions with TDEC concerning the scope of any additional remedial actions that may be required for the site, although no significant progress in the negotiations can be reported through the end of 1999. The coke plant was owned by the Defense Plant Corporation during World War II and sold by the War Assets Administration in 1946. Woodward Iron Company, which subsequently became a division of Mead, acquired the coke plant in 1964, and Mead sold the coke plant site to third parties in 1974. Although the extent of contamination and the possible methods of remediation are not known at this time, based on information currently available to Mead, after considering established reserves, rights to contribution and potential insurance coverage, Mead does not expect this proceeding will have a material adverse effect on the financial condition, liquidity or results of operations of the Company. In June 1996, USEPA announced plans to undertake an interim removal action involving the excavation and treatment/disposal of bulk tar deposits located in or near the Chattanooga Creek and certain waste piles located near the Coke Plant Site. Costs of the proposed removal action were estimated by USEPA at the time to be approximately $5.1 million. In July 1996, several PRPs, including Mead and the U.S. Department of Defense, received special notice letters from USEPA advising them of their potential liability for the removal action. In December 1996, USEPA issued Unilateral Administrative Orders under Section 106 of CERCLA to Mead and two other private parties. In January 1997, Mead indicated its intent to not comply with the 106 Order. Preliminary analyses by USEPA have indicated that dumping in Chattanooga Creek occurred when the coke plant was doubled in size to meet World War II government requirements. A party who, without sufficient cause, refuses to comply with an order issued under Section 106 of CERCLA may be subject to fines of up to $27,500 per day and punitive 7 damages in an amount up to three times the costs incurred by the USEPA as a result of the failure to comply with such order. Mead believes, based on its review of the facts and the law applicable to the matter, including the absence of findings by the USEPA, that it had sufficient cause for its decision not to comply with the 106 Order. However, if the USEPA decides to bring an enforcement action against Mead as a result of its failure to comply with the 106 Order, there can be no assurance as to the outcome of such action. USEPA completed the removal action in November, 1998, and issued a Final Action Report in 1999. More contamination than expected was discovered and excavated. In January 2000, USEPA sent a letter to the PRPs, including Mead, indicating the cost of the removal action was approximately $13 million and the Agency was preparing to engage in negotiations with the PRPs for recovery of these costs. The letter did not address future remediation costs; however, USEPA issued a draft Feasibility Study in 1999 that estimated future costs to complete the remediation of Chattanooga Creek in the range of $6.3 million to $12.6 million. Based on information currently available to Mead, after considering established reserves, rights to contribution and potential insurance coverage, Mead does not expect this proceeding will have a material adverse effect on the financial condition, liquidity or results of operations of the Company. Mead filed a Complaint in the Circuit Court for Jefferson County, Alabama (Case No. CV9705117) against a number of insurance companies who had provided insurance to the Woodward Iron Company and/or Mead facilities operated under the former Industrial Products division. The Complaint seeks a declaratory judgment and damages for the insurers' failure to provide a defense and coverage for claims in Beazer East Inc., the Coke Plant Site and Chattanooga Creek proceedings. A patent infringement proceeding entitled Riverwood International ----------------------- Corporation v. The Mead Corporation was brought against Mead in the United - ----------------------------------- States District Court for the Northern District of Georgia (Civil Action No. 1- 94-CV-90 CAM) by Riverwood International Corporation. On March 9, 1998 a Special Master's decision was entered in the proceeding which held that Riverwood's '806 patent was invalid. Riverwood filed objections to the Special Master's Order on the issue of invalidity. The District Court heard the objections on October 27, 1998 and reversed the Special Master's conclusion of invalidity on January 13, 1999. The order of the District Court was appealed to the Court of Appeals for the Federal Circuit (Appeal No. 99-1274). A second patent infringement proceeding against Mead filed by Riverwood with the same title and in the same court (Civil Action No. 97-CV-2767) has been stayed pending the outcome of the case involving the '806 patent. The second proceeding involves Riverwood's '789 and '361 patents. Mead expects these proceedings will not have a material adverse effect on the financial condition, liquidity or results of operation of the Company. Additional information is included in Part I, Item 1, "Business-- Environmental Laws and Regulations," and Note R on pages 46-47. Mead is involved in various other litigation and administrative proceedings arising in the normal course of business, which, in the opinion of management, after considering established reserves, will not have a material adverse effect on the financial condition, liquidity or results of operations of Mead. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. 8 Executive Officers of the Company The Executive Officers of Mead as of February 1, 2000, their ages, positions and offices with Mead, and the principal occupation (unless otherwise stated, position is with Mead) of such Executive Officers during the past five years are as follows: Name Age Position and Offices ---- --- -------------------- Elias M. Karter 59 Executive Vice President since April, 1996; prior to that Vice President, Operating Officer since July, 1994. Raymond W. Lane 51 Executive Vice President since April, 1996; prior to that Vice President, Operating Officer since July, 1994. Sue K. McDonnell 51 Vice President, General Counsel and Secretary since June, 1999; prior to that Vice President, Deputy General Counsel since 1996; prior to that Deputy General Counsel since 1995. Timothy R. McLevish 45 Vice President and Chief Financial Officer since December, 1999; prior to that Vice President, Finance and Treasurer since 1998; prior to that President of the Specialty Paper Division. Wallace O. Nugent 61 Vice President, Purchasing and Logistics. William B. Plummer 41 Vice President, Strategy and Planning since July, 1998; prior to that Treasurer since February, 1997; prior to that Vice President, Equity Capital Group since May, 1995 with General Electric Company; prior to that Business Analyst, Corporate Financial Planning since February, 1994 with General Electric Company. A. Robert Rosenberger 55 Vice President, Human Resources since June, 1997; prior to that Vice President of Human Resources of Mead Packaging Division since August, 1994. Jerome F. Tatar 53 Director; Chairman of the Board, Chief Executive Officer and President since November, 1997; prior to that President and Chief Operating Officer since April, 1996; prior to that Vice President, Operating Officer since July, 1994. 9 Name Age Position and Offices ---- --- -------------------- Peter H. Vogel, Jr. 46 Vice President, Finance and Treasurer since December, 1999; prior to that Vice President - Business Affairs since February, 1999; prior to that President of the Zellerbach Division since January, 1997; prior to that President of the Gilbert Paper Division since March, 1993. All Executive Officers of Mead are elected annually by the Board of Directors. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters Mead's Common Shares are listed on the New York, Chicago and Pacific Stock Exchanges, trading under the symbol "MEA." Information on market prices and dividends is set forth below: MARKET PRICES PER COMMON SHARE - ------------------------------ 1999 1998 ---- ---- High Low High Low ---- --- ---- --- First quarter $33.312 $28.312 $37.312 $27.062 Second quarter 44.750 32.562 37.125 28.437 Third quarter 46.312 33.000 33.563 25.938 Fourth quarter 43.625 32.375 33.500 27.000 DIVIDENDS PAID PER COMMON SHARE - ------------------------------- 1999 1998 ---- ---- First quarter $.16 $.16 Second quarter .16 .16 Third quarter .16 .16 Fourth quarter .17 .16 ---- ---- Year $.65 $.64 ==== ==== The number of Common shareowners of record as of March 1, 2000, was 53,412. See Note I on pages 35-36 for information regarding the amount of retained earnings available for dividends. 10 Item 6. Selected Financial Data Five-Year Data on Operations, Liquidity, Financial Condition and Capital Resources (All dollar amounts in millions, except per share amounts)
- ---------------------------------------------------------------------------------------------------- Year Ended December 31 1999 1998 1997 1996 1995 - ---------------------------------------------------------------------------------------------------- Operations: Net sales $3,799.5 $3,772.2 $3,745.8 $3,303.9 $3,402.8 Earnings from continuing operations 208.1 140.1 163.0 183.8 333.9 Earnings per common share from continuing operations - assuming dilution 1.99 1.34 1.53 1.73 3.02 Liquidity: Working capital 229.7 406.9 312.7 280.1 401.2 Current ratio 1.2 1.6 1.5 1.4 1.5 Assets: Property, plant and equipment-net 3,357.4 3,372.7 3,273.8 3,084.6 2,328.3 Total assets 5,661.7 5,142.2 5,152.4 4,905.9 4,284.0 Capital: Borrowed capital - long-term debt 1,333.7 1,367.4 1,428.0 1,239.7 694.8 Equity capital 2,430.8 2,252.0 2,288.5 2,246.4 2,160.2 ---------------------------------------------------- Total capital $3,764.5 $3,619.4 $3,716.5 $3,486.1 $2,855.0 Borrowed capital as a percent of total capital 35.4% 37.8% 38.4% 35.6% 24.3% Cash dividends per common share $ .65 $ .64 $ .61 $ .59 $ .55
11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations REVIEW OF OPERATIONS -------------------- OVERVIEW OF 1999 Sales revenue of $3.80 billion in 1999 was essentially unchanged from the level of $3.77 billion in 1998 as higher shipments of paper and paperboard offset lower selling prices for many paper products. Prices for paper declined in the second half of 1998 and for much of 1999. Average selling prices in 1999 were lower than in 1998 for coated paper, carbonless paper and uncoated paper. Earnings from continuing operations were $208.1 million in 1999 compared to $140.1 million in 1998. The increase in 1999 was largely a result of a $52.7 million after-tax gain on the sale of Mead's 50% ownership in Northwood Inc. Earnings from continuing operations before special items increased 2% in 1999 compared to 1998. Within Mead's Paper segment, sales volume increased from 1998 levels for coated, uncoated, carbonless and specialty papers as a result of strong demand. Paper segment earnings were lower as selling prices in the marketplace for many paper products, especially coated paper, continued the decline that began in the second half of 1998. Prices stabilized in the second half of 1999 and a price increase was announced near year-end. Inventory levels at year-end 1999 were lower than at year-end 1998 in coated paper as a result of market-related downtime and increased sales volume. Sales volume growth continued in industrial specialty papers with the purchase of a small specialty paper mill in the third quarter. In the Packaging and Paperboard segment, sales and earnings improved on higher sales volume and higher selling prices for corrugating medium. Sales volume of coated paperboard increased to Mead's integrated packaging business and to open market folding carton customers. Production increased at the expanded Stevenson, Alabama, containerboard mill and at the Mahrt coated paperboard mill in Phenix City, Alabama. Mead Packaging division's sales were lower, primarily as the result of the sale of two small business units in 1998. Packaging's earnings declined on reduced margins and weaker foreign currencies primarily in Europe. For the Consumer and Office Products segment, sales revenue in 1999 increased over 1998 as a result of the acquisition of AT-A-GLANCE, a producer of time- management products. Without the acquisition, sales and earnings would have been lower than in 1998, as a result of lower selling prices and lower unit volume for school and office supplies.
Review of Operations Earnings Per Share Analysis ---------------------------------------------------------------------- 1999 1998 1997 ---------------------------------------------------------------------- Continuing operations before special items $1.58 $1.55 $1.53 Special items .41 (.21) ----- ----- ----- Continuing operations 1.99 1.34 1.53 Discontinued operations (.20) (.12) ----- ----- ----- Net earnings (assuming dilution) $1.99 $1.14 $1.41 ----------------------------------------------------------------------
SPECIAL ITEMS AND DISCONTINUED OPERATIONS - ----------------------------------------- During 1999, Mead sold several non-strategic assets including its 50% ownership in its principal investee, Northwood Inc. of Prince George, British Columbia, Canada, for $240 million (Canadian) in cash and convertible debentures of $77.5 million (Canadian). The assets of Northwood Inc. included a pulp mill and lumber 12 and plywood facilities. Mead recorded an after-tax gain of 50 cents per share ($52.7 million) related to this sale. Earnings from investees in 1999 totaled $34.7 million, compared to a loss of $1.8 million in 1998. In addition, in 1999 Mead completed the sale of the merchandising unit of its packaging business and a sawmill that was part of its Paper segment. Proceeds from the sale of these assets were approximately the same as the asset value and therefore had no impact on earnings. Mead purchased a small specialty paper mill in County Devon, England in the third quarter of 1999. In the fourth quarter, Mead purchased the AT-A-GLANCE group of Cullman Ventures, Inc. for approximately $540 million, which has become a part of Mead's Consumer and Office Products segment. Special items in 1999 also included a total pretax charge of $18.9 million ($11.9 million after tax) or 11 cents per share for asset write-offs and severance costs related to the shutdown of four uncoated paper machines at the company's mill in Rumford, Maine. The charges (see Note K to the Financial Statements) were taken during the second and fourth quarters of 1999. In the third quarter of 1998, Mead recorded a pretax charge of $22 million or 13 cents per share, for an organizational change and workforce reduction program that included plans for eliminating 318 positions. As a result of refinements in the program, 291 positions were eliminated and actual costs related to the program, which included costs for severance and outplacement benefits, were reduced. As a result of lower costs, the company reversed $2.7 million (pretax), or two cents per share, of the original charge to selling and administrative expenses in the third quarter of 1999. During 1998, Mead undertook a number of initiatives that included the sale of its Distribution segment and related real estate for $288 million which resulted in an after tax charge of $20.4 million or 20 cents per share (see Note N to the Financial Statements). Special items in 1998 included asset write-downs, asset sales, organizational changes and related workforce reductions. For asset write- downs and employee termination costs, the company recorded a pretax charge of $37.7 million ($26.8 million after tax) or 25 cents per share. Asset sales in the fourth quarter of 1998 resulted in pretax gains of $28.3 million ($17.8 million after tax) or 17 cents per share. Paper Segment
--------------------------------------------------------- 1999 1998 1997 --------------------------------------------------------- Sales $1,783.3 $1,795.6 $1,797.8 Earnings before income taxes and special items 165.0 222.7 195.6 Special items (17.4) (16.4) -------- -------- -------- Earnings before income taxes $ 147.6 $ 206.3 $ 195.6 ---------------------------------------------------------
Sales revenue in the Paper segment was essentially unchanged from 1998. Earnings before special items decreased 26% from 1998 primarily as a result of lower selling prices for all major grades of paper. Demand in the U.S. for coated paper strengthened in 1997 and selling prices began to strengthen by the second half of the year. Prices continued to improve into the first quarter of 1998. In the second quarter of 1998, as markets weakened in 13 Asia Pacific, the flow of imports of coated paper into the U.S. increased, primarily from Europe. Increased supply from imports led to a decline in selling prices for coated paper by the second half of 1998. Prices continued to decline through the first half of 1999. Prices stabilized in the second half of the year and improved slightly in the fourth quarter. For the year, Mead's average selling prices for coated paper declined 7%. Mead took market-related downtime of 40,000 tons in coated paper in the second half of 1998 and continued to take market-related downtime in the first three quarters of 1999, which totaled 67,000 tons. Average selling prices were also lower in 1999 than 1998 for uncoated and carbonless paper. In 1998, sales revenue in the Paper segment was essentially unchanged from 1997. Earnings before special items increased 14% over 1997 primarily as a result of improved operating performance. Paper - ----- Mead Paper manufactures and sells coated paper for use by book and magazine publishers and by catalog and commercial printers, carbonless copy paper for use in multi-part business forms and uncoated paper. The division operates three mills located in Ohio, Maine and Michigan. Division sales revenue was essentially unchanged from 1998 levels as higher shipping volume was offset by lower selling prices for all grades of paper. Earnings were lower as a result of lower prices, partially offset by higher volume and improvements in productivity that led to lower unit cost. The mills operated well, although productivity improvement was constrained by market- related downtime taken in coated paper. As a result of market-related downtime, production of coated paper declined slightly from the level of 1998. The division's inventory of coated paper declined during 1999 as a result of lower production and higher selling volume. Sales volume of carbonless paper increased slightly from the level of 1998 returning to the level of 1997, despite an overall decline in the market for multi-part business forms. During the year, the division announced plans to permanently shut down four older paper machines at its Maine mill at year-end 1999. The machines produced uncoated paper, which is not a strategic business for Mead. The division also continued to improve manufacturing efficiencies across its three mills, rationalizing product grade lines and moving the production of grades to machines and mills within its system where the grades can be produced most efficiently. In 1998, division sales revenue was essentially unchanged from 1997 as lower shipping volume was offset by higher selling prices. Earnings increased in 1998 over 1997 as a result of higher selling prices and improvement in productivity and cost control. Specialty Paper - --------------- Mead Specialty Paper division manufactures a variety of decorative and overlay papers for laminates used in furniture, flooring, countertops and cabinets. It also produces specialty grades including tape papers and filter and friction papers for industrial and automotive applications. The division has a total of four mills located in South Lee, Massachusetts; Potsdam, New York; and County Devon, England. Division sales increased over 1998 as a result of higher shipments of several specialty grades including wear-resistant overlay papers, filter and friction papers and tape papers. Earnings were slightly higher in 1999 than in 1998 as a result of higher shipments. Demand for wear-resistant overlay continued to grow in North America, Europe and Asia Pacific. The division's shipments for this grade increased over 1998 and 1997 levels. Shipment volume of tape papers also increased in 1999. 14 In the second half of 1999, the division acquired a specialty paper mill in County Devon, England, which produces decorative papers as well as papers for automotive filter products, food packaging and vacuum bags. The Potsdam mill completed a capital project initiated in 1998 to upgrade its product mix to include the production of overlay papers. In 1998, the division's sales and earnings increased over 1997. The increase was driven by the addition of shipments from the Potsdam mill acquired in the second quarter of 1998 and from productivity improvements at its South Lee mills. Gilbert Paper - ------------- Gilbert Paper division produces premium cotton-content business correspondence papers and premium text and cover papers at its mill in Menasha, Wisconsin. Division sales revenue declined in 1999 from the levels of 1998 and 1997. The decline was a result of lower shipments due to weaker market conditions and a strategic decision to reduce production and sale of lower-margin products. Despite lower sales revenue, earnings in 1999 improved over the level of 1998 as a result of a more profitable sales mix, a reduction of fixed and variable costs and improved operating efficiencies. The reduction in costs was partially offset by higher costs for purchased pulp in the second half of the year. Division shipments increased through its primary channel of merchant distribution; direct sales decreased, while export and retail sales remained stable. In 1998, the division's operating results decreased from 1997 levels as a result of lower sales volume reflecting weak markets. Packaging and Paperboard Segment
-------------------------------------------------------- 1999 1998 1997 -------------------------------------------------------- Sales $1,506.9 $1,494.2 $1,431.8 Earnings before income taxes and special items 169.2 153.8 129.6 Special items .8 (11.3) -------- -------- -------- Earnings before income taxes $ 170.0 $ 142.5 $ 129.6 --------------------------------------------------------
Sales revenue for the Packaging and Paperboard segment was essentially unchanged in 1999 as higher sales volume and selling prices for corrugating medium offset lower sales revenue in coated paperboard and packaging. Earnings before special items increased 10% over 1998, primarily as a result of improved pricing for medium. Prices for corrugating medium strengthened beginning in the second quarter of 1999 after declining throughout 1998. Mead's average selling prices increased approximately 10% over 1998. The improvement in 1999 came as a result of continued strengthening in demand and a reduction in containerboard supply in domestic markets. Supply declined in 1998 and 1999 as a result of the closure of industry containerboard capacity, as reported by the American Forest and Paper Association. Prices for corrugated containers also averaged approximately 5% higher in 1999 than in 1998. Mead's average selling prices of coated paperboard sold to folding carton manufacturers were slightly lower than in 1998. In 1998, sales revenue in the segment increased on higher sales volume of coated paperboard, corrugating medium and beverage packaging. Earnings before special 15 items increased 19% over 1997, primarily as a result of continued growth in multiple beverage packaging. Containerboard - -------------- Mead Containerboard produces corrugating medium at its mill in Stevenson, Alabama. It also produces shipping containers at eight corrugated container plants. Division sales revenue increased in 1999 over 1998 as shipment volume of corrugating medium continued to increase following the completion of the mill expansion in mid-year 1998. Earnings improved significantly over 1998 and 1997 as a result of higher shipments of medium and higher selling prices for medium and containers. Costs for purchased recycled fiber used in the production of medium were higher in 1999 than in 1998. Production costs were higher than in 1998 at the Stevenson mill as a result of operating difficulties with the chemical recovery and conversion systems installed in 1998. In addition, the mill encountered interruptions in production on the newer paper machine that was expanded last year. By year-end, these operating difficulties were substantially resolved. For the full year, production volume at the mill increased over 1998 and 1997 including production of lightweight medium for this growing segment of Containerboard. In 1998, sales revenue increased over the level of 1997 as shipment volume of corrugating medium increased following expansion of the mill. Operating results improved slightly over 1997, primarily as a result of increased volume. In 1998, the division completed an expansion of the mill and reorganized its operations in an effort to reduce selling and administrative costs and improve operating efficiency. Coated Board - ------------ Mead Coated Board manufactures coated unbleached kraft paperboard for use in multiple beverage packaging and folding cartons. The coated paperboard is produced at the Mahrt mill near Phenix City, Alabama. Approximately 60% of the paperboard production is used by Mead Packaging division's worldwide beverage packaging business. The remainder is sold to folding carton manufacturers in North America and Europe. Sales volume of coated paperboard increased to Mead's integrated packaging business. Sales volume to external customers was slightly higher as sales to open market customers increased in North America, but declined in international markets. Earnings for the division increased slightly from 1998 on higher sales volume of paperboard and higher selling prices for lumber at the division's sawmill operations, partially offset by lower selling prices for coated paperboard. Production at the Mahrt mill increased during 1999, despite 20,000 tons of market-related downtime taken during the year. Finished inventory levels were down slightly from year-end 1998 as a result of higher shipment volume and production downtime. Operating costs were unchanged from 1998. In 1998, sales revenue from external customers was slightly lower than in 1997. Shipments to Mead Packaging increased for multiple beverage packaging applications over the levels of 1997. Earnings for the division in 1998 were unchanged from 1997 as increased overall sales volume of coated paperboard and improved mill productivity were offset by weaker results from the division's sawmill operations. Packaging - --------- Mead Packaging is a leading worldwide supplier of multiple beverage packaging and packaging systems. It also provides multiple packaging for food and other products. Customers include large and small brewers, soft drink bottlers, and 16 food and other consumer products companies. The division has packaging plants in North America, Europe and Japan and packaging licensees in several international markets. Division sales revenue declined slightly from 1998 as a result of the sale of two small business units and weaker foreign currencies. Sales volume of cartons increased in 1999 over 1998. Earnings decreased in 1999 from 1998 as a result of a weaker sales mix, costs for outsourcing some manufacturing, the impact of currency exchange rates primarily from the weakening of the euro versus the U.S. dollar, and costs associated with reducing the number of employees in its European operations. Carton volume increased in Japan, Australia and Latin America, reflecting continued growth in regional demand. Carton volume was essentially unchanged in North America and Europe, reflecting lower sales volume to soft drink bottlers in those regions and consolidation in the brewery industry. During 1999, the division continued worldwide placement of new modular beverage packaging systems with customers in international markets at a rate similar to 1998, despite competitive pressures from other packaging materials and non-proprietary packaging systems. In 1998, sales revenue increased over 1997 as a result of higher sales volume. Earnings increased over 1997 as a result of strong volume in North America, slightly higher selling prices and gains in productivity from improved cost control. Consumer and Office Products Segment
-------------------------------------------------- 1999 1998 1997 -------------------------------------------------- Sales $509.3 $482.4 $516.2 Earnings before income taxes and special items 37.9 47.4 57.3 Special items .1 (4.6) ------ ------ ------ Earnings before income taxes $ 38.0 $ 42.8 $ 57.3 --------------------------------------------------
Consumer and Office Products is a producer and distributor of school supplies in North America. It also provides stationery products and computer accessories for home and office use. In 1999, Mead acquired AT-A-GLANCE, as part of its Consumer and Office Products segment. AT-A-GLANCE is a leading producer and marketer of time-management products including planners, appointment books, desk and wall calendars, organizers, posters and related accessories. The segment, formerly known as School and Office Products, was renamed Consumer and Office Products following the acquisition of AT-A-GLANCE. Sales revenue for the segment increased over 1998 as a result of the acquisition of AT-A-GLANCE in the fourth quarter of 1999. Without the acquisition, sales revenue and earnings would have been lower than in 1998 as a result of lower selling prices and lower unit volume of school and office supplies. Segment earnings before special items declined 20% from 1998. Lower prices for paper used in tablets and envelopes led to lower selling prices for many products. Unit volume declined in 1999 as mass retailers shifted the way they managed inventory, reducing the levels they hold. The segment's results were also affected by increased foreign competition in commodity-based and value-added products and from the lack of a strong new product line for the back-to-school selling season. Under the direction of a new management team, the division took steps to strengthen its new product development and announced new licensing arrangements 17 for the back-to-school selling season in 2000. In addition, in 1999 Mead established a subsidiary to expand its current manufacturing and sales in the Mexican market. Mead acquired assets of a Mexican distribution company that has distributed Mead's school supplies in the region for more than 10 years. With the acquisition of AT-A-GLANCE, Mead broadened its distribution system in office products channels, which include office superstores and commercial and contract stationers, complementing Mead's existing presence in school products with mass retailers. The combination also should enable Mead to offer current mass retail customers an expanded product line of time-management products with the AT-A- GLANCE brand name. In 1998, sales declined by 7% compared to 1997 as a result of lower sales volume. Earnings declined from 1997 as lower overall sales volume more than offset improved sales mix and margin rates. SELLING AND ADMINISTRATIVE EXPENSES - ----------------------------------- Selling and administrative expenses for 1999 were $433 million compared to $422 million in 1998. Included in 1998 expenses was a charge of $22 million associated with certain organizational changes and a related reduction in Mead's workforce. Excluding the effect of this charge, the increase in selling and administrative expenses from 1998 to 1999 was $33 million, of which the majority was November and December expenses from AT-A-GLANCE which Mead acquired on November 1, 1999. Another factor contributing to the increase was expense associated with Mead's project to implement an enterprise resource planning ("ERP") system. Excluding the 1998 charge for organizational changes, 1998 expenses were under the 1997 level of $404 million, driven by reduced administrative expenses. OTHER REVENUE - ------------- Other revenue amounts for 1999, 1998 and 1997 were $97 million, $34 million and $7 million, respectively. A gain of $82 million on the sale of Mead's investment in Northwood Inc. was the most significant component of other revenue in 1999. Gains on the sales of other non-strategic assets amounted to $4 million in 1999 and $28 million in 1998. Investment income was $5 million, $6 million and $3 million in 1999, 1998 and 1997, respectively. Of the remaining $6 million in 1999, the most significant item was foreign exchange hedge gains, helping offset the negative effects of weaker currencies in many of the countries in which Mead has foreign operations. INTEREST AND DEBT EXPENSE - ------------------------- Interest and debt expense of $105 million decreased by 3.6 % from the 1998 level of $109 million, despite the increase in the amount of total borrowings at year-end 1999. During most of the year, average debt levels were lower than during 1998. When compared with interest and debt expense for 1997 of $98 million, the 1998 level was higher due to slightly higher average debt levels. Interest rates paid by Mead were not significantly different during the three years, although short-term rates paid by Mead moved up late in 1999. FINANCIAL REVIEW ---------------- LIQUIDITY AND CAPITAL RESOURCES During 1999, Mead spent $570 million to purchase AT-A-GLANCE and two other much smaller entities. These acquisitions were financed with available funds and short-term borrowings. By year-end, the short-term borrowings were reduced by cash proceeds from the sale of Northwood Inc. and other subsequent cash flows from operations. Mead expects the $186 million in short-term borrowings at December 31, 1999, to be substantially paid off by the end of 2000 in the ordinary course of business, provided additional borrowings are not required to fund strategic initiatives. 18 During 1999, Mead's cash flow from operating activities was $474 million compared to $420 million and $400 million in 1998 and 1997, respectively. Improved earnings drove the increase in cash flow compared to 1998. During 1999, Mead received $53 million as proceeds from issuances of common shares resulting from employee exercises of stock options. Proceeds resulting from stock option exercises in 1998 and 1997 were $15 million and $44 million, respectively. Mead continued its stock repurchase program in 1999, acquiring 1.2 million shares for $43 million. Share repurchases in 1998 were 2.6 million shares for $83 million, and 2.1 million shares for $70 million in 1997. Funds for the 1999 repurchases came from internally generated cash flows. Mead's total debt (including notes payable and current maturities) at year-end 1999 was $1.555 billion, up from $1.375 billion in 1998 and $1.430 billion in 1997. A portion of the proceeds of the sale of Mead's distribution business was used to reduce overall debt levels in 1998. During 1998 and 1999, Mead refinanced some of its borrowings related to the Stevenson, Alabama mill. Mead's total debt as a percentage of total capital was 39.0% at the end of 1999 compared with 37.9% at the end of 1998 and 38.5% at the end of 1997. The percentages may change, as warranted, by borrowings to fund strategic opportunities. Additional financing capability is afforded by a $500 million bank credit agreement which expires in October 2002 and a bank credit agreement of $200 million which expires in October 2000. The bank credit agreements support $59.5 million of the company's capital lease obligations and $165.2 million of short- term borrowings, leaving $475.3 million that can be borrowed. At the end of 1999, Mead paid a fixed or capped rate on 67% of its debt and paid a floating rate of interest on the remaining amount. A change of 1% in the floating rate, on an annual basis, would result in a change of three cents in earnings per share. The estimated market value of long-term debt was $39 million less than book value at the end of 1999. Working capital at the end of 1999 was $230 million, down from $407 million and $313 million at the end of 1998 and 1997, respectively. The decrease from 1998 was primarily attributable to a $213 million increase in notes payable and current maturities and a $46 million reduction in cash, offset by approximately $69 million of working capital from AT-A-GLANCE. The 1998 increase from 1997 was primarily driven by growth in cash and inventory balances. Mead's current ratios at the end of 1999, 1998 and 1997 were 1.2, 1.6 and 1.5, respectively. Mead's inventory levels increased by $10 million to $490 million in 1999 compared with $480 million in 1998 and $424 million in 1997. The increase arising from the acquisition of AT-A-GLANCE partially offset reductions occurring elsewhere in the company. The replacement values of inventories exceeded their LIFO values by $170 million at the end of 1999. Adjusted for LIFO, Mead's current ratio would be 1.3 at year-end. CAPITAL SPENDING Capital spending in 1999 was $213 million, down considerably from 1998 and 1997 levels of $384 million and $437 million, respectively. Much of the 1998 and 1997 spending was related to the $224 million expansion and upgrade at the Stevenson, Alabama, corrugating medium mill, which was completed in mid-1998. That project added virgin pulp-making capabilities, a wood fuel boiler and additional dryer capacity to the paper machine. That expansion increased the mill's annual capacity to 815,000 tons from 640,000 tons. In 1999, there were several projects at the specialty paper mill in Potsdam, New York, the paper mill in Chillicothe, Ohio, and the coated paperboard mill in Alabama. 19 EFFECTS OF INFLATION Inflation remains at a low rate and is not expected to have a significant effect in the near term. ENVIRONMENTAL PROCEEDINGS Mead has been notified by the United States Environmental Protection Agency ("USEPA") or by various state or local governments that it may be liable under federal environmental laws or under applicable state or local laws with respect to the cleanup of hazardous substances at six sites currently operated or used by Mead. Mead is also currently named a PRP, or has received third party requests for contributions under federal, state or local laws with respect to at least 20 sites sold by Mead over many years or owned by contractors used by Mead for disposal purposes. There are other former Mead facilities and those of contractors that may contain contamination or may have contributed to potential Superfund sites but for which Mead has not received any notice or claim. Mead's potential liability for all these sites will depend upon several factors, including the extent of contamination, the method of remediation, insurance coverage and contribution by other PRPs. Although the costs that Mead may be required to pay for remediation of all these owned and unowned sites are not certain at this time, Mead has reserves of $40 million related to current environmental litigation and proceedings that it believes are probable and reasonably estimable. Mead believes that it is reasonably possible that costs associated with these sites may exceed current reserves by an amount that could range from an insignificant amount to as much as $40 million. The estimate of this range is less certain than the estimates upon which the reserves are based. In April 1998, USEPA promulgated regulations under the Clean Air Act and Clean Water Act ("the Cluster Rules") designed to reduce air and water discharges of specific substances from U.S. paper and pulp mills. Mead has included in its capital spending plans amounts necessary to comply with the regulations. Various Great Lakes States in 1997, including Michigan and Ohio, adopted state regulations consistent with the Federal Great Lakes Initiative ("GLI"). These state regulations remain subject to USEPA review and final approval. The regulations are subject to change. However, Mead does not expect any significant additional capital expenditures beyond those previously stated in Part I, Item 1, "Business - Environmental Laws and Regulations," will be necessary in the next three years at Mead's Escanaba facility to comply with the requirements of the Michigan GLI regulations as are likely to be finally adopted and approved by USEPA. The State of Ohio determined that it would not apply all GLI regulations to facilities discharging into the Ohio River Basin, for now. Mead's Chillicothe, Ohio, facility discharges into the Ohio River Basin. Mead does not expect that any significant additional capital expenditures beyond those referenced above will be necessary in the next three years at Mead's Chillicothe facility to comply with any requirements of the Ohio GLI regulations as are likely to be finally adopted, approved by USEPA and made applicable to the Ohio River Basin. YEAR 2000 READINESS DISCLOSURE Mead did not experience any significant Year 2000 issues in its information technology ("IT") systems nor non-information technology systems through January 31, 2000. No major business processes, operations or customer deliveries were disrupted as a result of the Year 2000 issue. Beginning in 1997, Mead worked through a five-step process in dealing with the Year 2000 issue: inventory; assessment; corrective action; testing; and implementation. Mead completed all five steps with regard to its information technology systems by year-end 1999. Mead completed all five steps with regard 20 to its non-IT systems, (process control systems in its manufacturing and converting facilities) for all critical systems by year-end 1999. Through the fourth quarter of 1999, the total cost associated with the company's remediation of the Year 2000 issue from 1997 through year-end 1999 was approximately $28 million. The total cost includes approximately $16 million in repair costs and $12 million in replacement costs. Mead had estimated the total cost to be approximately $30 million. The company had contingency plans within each of its businesses for addressing the greatest areas of risk of noncompliance or threats to business operations or company assets related to the Year 2000 issue. DERIVATIVE DISCLOSURE Mead is exposed to market risk from changes in interest rates, foreign currency exchange rates, and commodity prices. To manage these market risk exposures, the company enters into various hedging transactions governed by corporate policies and procedures that are approved and regularly reviewed by the Finance Committee of the Board of Directors. Mead does not use financial instruments for trading purposes. INTEREST RATES Mead's objective is to reduce its interest expense through a blend of fixed and floating interest rate instruments. The company primarily funds itself with long-term debt having final maturities ranging from 5 to 50 years, a portion of which has variable interest rates, and variable interest rate commercial paper. The company uses interest rate swaps and caps in managing its mix of fixed and floating rate debt. Mead assesses its interest rate risk by estimating the potential increase in fair market value of its debt that would result from a hypothetical parallel downward shift of the yield curve. Using the portfolio valuation models available from Bloomberg/TM/ which use theoretical values as well as market prices for instruments with similar characteristics, including the theoretical value of any embedded options (e.g. puts or calls), a hypothetical 100 basis point parallel downward shift of the yield curve would increase the fair market value of Mead's debt by approximately $81 million and $91 million, at December 31, 1999 and 1998, respectively. During 2000, several financial instruments will mature and the company will consider alternatives that are consistent with business conditions, the interest rate environment and its management policy on interest rate exposure. FOREIGN CURRENCY Mead has foreign-based operations, primarily in Canada and Western Europe, which accounted for approximately 14% of its 1999 net sales. In addition, certain of Mead's domestic operations have sales to foreign customers. In the conduct of its foreign operations, Mead also makes intercompany sales, and receives royalties and dividends denominated in many different currencies. All of this exposes Mead to the effect of changes in foreign currency exchange rates. Flows of foreign currencies into and out of Mead's domestic operations are generally stable and regularly occurring, and are recorded at fair market value in Mead's financial statements. Mead's foreign currency management policy permits Mead to enter into foreign currency hedges when these flows exceed a threshold which is a function of these cash flows and forecasted annual net income. During 1999, the company entered into foreign currency hedges to partially offset the foreign currency impact of these flows on operating earnings. 21 Mead also issues intercompany loans to its foreign subsidiaries in their local currencies, exposing it to the effect of changes in spot exchange rates at loan issue and loan repayment dates. Generally, Mead uses forward exchange contracts with terms of less than one year to hedge these exposures. Based upon Mead's overall foreign currency exchange rate exposure at December 31, 1999, including derivative and other foreign currency sensitive instruments, a 10% adverse change in currency rates would not materially affect Mead's financial position, or annual results of operations or cash flows. COMMODITIES Mead is exposed to price changes in raw materials, components, and items purchased for resale. The prices of some of these items can vary significantly over time due to changes in the national and international markets in which the company's many suppliers operate. Mead's selling prices often change in a similar fashion, although often to a greater or lesser degree. The company does not use a significant amount of financial instruments to manage its exposure to commodity price changes. OUTLOOK Selling prices for many grades of paper and paperboard are affected by changes in supply and demand. While growth in demand is generally gradual and tracks the rate of domestic economic growth, new supply comes onto the market in large increments with the start-up of new production capacity. The result can be temporary periods of oversupply that lead to price weakness, as in 1998 and 1999. New capacity for paper and paperboard in the U.S. is expected to grow at a slower rate between 2000 and 2002 than in the previous three years, according to the American Forest and Paper Association. New global capacity, in Europe, Asia Pacific and Canada, has increasingly become a factor in recent years. In 1998 and 1999, new global capacity, weaker markets in Asia Pacific and a strong U.S. dollar relative to many foreign currencies led to an increase in imports into the U.S., lower selling prices for much of the year and an increase in market- related downtime by U.S. paper producers. The overall market demand for carbonless copy paper used in multi-part business forms continued to decline gradually in 1999 as it did in 1998 and 1997. The potential for e-commerce to affect the market for coated paper, which is used for mail order catalogs and magazines, is unknown at this time. Any impact of e-commerce to date appears to be additive to the traditional uses of coated printing papers. The sales by Mead's foreign operations are approximately 14% of overall sales, with most of it in Mead's Packaging, Coated Board and Consumer and Office Products divisions, primarily in Europe and Canada. Fluctuations in European and Canadian currencies can affect operating results of these divisions. Continuing restructuring of Mead's business portfolio has reduced exposure in Canada, with the sale of the company's Northwood investee, and added the potential for exposure with its relatively small acquisitions in the United Kingdom and Mexico. While the impact of currency fluctuations can affect the results of Mead's individual businesses, the impact in 1998 and 1999 was not significant to Mead's overall results. During the year, Mead continued the initial phases of a multi-year implementation of an ERP software system across the company. Mead expects the technology and the redesign of business processes will help achieve meaningful cost reductions and enhanced operating efficiencies. Mead expects a 5% reduction in the number of salaried employees when the implementation is completed, and expects charges in future quarters related to the ERP implementation. Mead previously stated that total charges could be as much as $15 million in future quarters. Mead expects to spend in the range of $100 million to $125 million to implement its ERP system between 1998 and 2002. Through 1999, Mead incurred costs totaling approximately $48 million. These costs include incremental costs for hardware and software, and non-incremental costs such as redeployment of company resources. The expenditures 22 for this system will replace some expenditures that would have been spent to upgrade or replace existing planning systems. These costs do not include costs incurred by operating divisions as they implement the ERP system. Some of the ERP costs will be expensed as incurred. Other costs, such as those for the purchase of systems, will be capitalized in accordance with generally accepted accounting principles. In 1998 and 1999, approximately 70% of the costs were capitalized and 30% were expensed. During 1998 and 1999, Mead assembled an implementation team, developed a common format for the system corporate wide and began a multi-year, phased-in implementation program. The initial implementation was successful at two small Mead operating facilities in the fourth quarter of 1999. In 2000, Mead's Coated Board and Paper divisions are scheduled to implement the ERP system with additional company divisions to follow in 2001 and 2002. FORWARD-LOOKING STATEMENTS Forward-looking statements throughout this report are based on current expectations and subject to numerous risks and uncertainties, which could cause actual results to differ materially from those expressed. These risks and uncertainties include, but are not limited to: growth of supply in different sectors of the paper and forest products industry, particularly in the U.S., Europe, and Asia Pacific; demand for paper and paperboard in U.S., European and Asia Pacific markets; market prices for these products; fluctuations in foreign currency, primarily in Europe; the stability of financial markets; capacity spending levels in the industry; general business and economic conditions in the U.S., Europe, Asia Pacific and South America; interest rates and their volatility; government actions; competitive factors; and opportunities that may be presented to and pursued by the company not known at this time. Item 7A. Quantitative and Qualitative Disclosures About Market Risk See information in Item 7. Item 8. Financial Statements and Supplementary Data Financial Statements
Page ---- Financial Statements: Independent Auditors' Report............................... 24 Statement of earnings...................................... 25 Balance sheets............................................. 26 Statement of shareowners' equity........................... 27 Statement of cash flows.................................... 28 Notes to financial statements.............................. 29-49 Supplementary Data Selected quarterly financial data........................... 50
23 INDEPENDENT AUDITORS' REPORT Board of Directors The Mead Corporation Dayton, Ohio We have audited the accompanying balance sheets of The Mead Corporation and consolidated subsidiaries at December 31, 1999 and 1998, and the related statements of earnings, shareowners' equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of The Mead Corporation and consolidated subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Dayton, Ohio January 27, 2000 24 THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------- STATEMENTS OF EARNINGS - ----------------------
Year Ended December 31 1999 1998 1997 (All amounts in millions, except per share amounts) Net sales $3,799.5 $3,772.2 $3,745.8 Cost of products sold (Note K) 3,086.6 3,049.5 3,008.5 ------------------------------ Gross profit 712.9 722.7 737.3 Selling and administrative expenses (Note K) 432.6 422.3 404.4 ------------------------------ Earnings from operations 280.3 300.4 332.9 Other revenues - net (Note L) 96.7 34.2 7.3 Interest and debt expense (105.1) (109.0) (98.2) ------------------------------ Earnings from continuing operations before income taxes 271.9 225.6 242.0 Income taxes (Note M) 98.5 83.7 87.9 ------------------------------ Earnings from continuing operations before equity in net earnings (loss) of investees 173.4 141.9 154.1 Equity in net earnings (loss) of investees 34.7 (1.8) 8.9 ------------------------------ Earnings from continuing operations 208.1 140.1 163.0 Discontinued operations (Note N) (20.4) (12.9) ------------------------------ Net earnings $ 208.1 $ 119.7 $ 150.1 ============================== Earnings per common share - basic (Note A): Earnings from continuing operations $ 2.04 $ 1.36 $ 1.56 Discontinued operations (.20) (.12) ------------------------------ Net earnings $ 2.04 $ 1.16 $ 1.44 ============================== Weighted-average number of common shares outstanding 102.3 103.3 104.5 ============================== Earnings per common share - assuming dilution (Note A): Earnings from continuing operations $ 1.99 $ 1.34 $ 1.53 Discontinued operations (.20) (.12) ------------------------------ Net earnings $ 1.99 $ 1.14 $ 1.41 ============================== Weighted-average number of common shares outstanding - assuming dilution 104.6 104.9 106.4 ==============================
See notes to financial statements. 25 THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------- BALANCE SHEETS - --------------
December 31 1999 1998 (All amounts in millions) ASSETS - ------ Current assets: Cash and cash equivalents $ 56.4 $ 102.0 Accounts receivable, less allowance for doubtful accounts of $15.5 in 1999 and $17.3 in 1998 547.7 414.7 Inventories (Note C) 489.9 479.5 Deferred tax asset (Note M) 77.5 42.6 Other current assets 58.8 47.6 ------------------- Total current assets 1,230.3 1,086.4 Investments and other assets (Notes D and O) 1,074.0 683.1 Property, plant and equipment, net (Note E) 3,357.4 3,372.7 ------------------- Total assets $5,661.7 $5,142.2 =================== LIABILITIES AND SHAREOWNERS' EQUITY - ----------------------------------- Current liabilities: Notes payable (Note G) $ 186.2 $ Accounts payable (Note F) 266.1 275.9 Accrued expenses and other current liabilities (Notes F and R) 513.2 395.7 Current maturities of long-term debt (Note G) 35.1 7.9 ------------------- Total current liabilities 1,000.6 679.5 Long-term debt (Notes G and Q) 1,333.7 1,367.4 Commitments and contingent liabilities (Notes Q and R) Deferred items (Notes M and P) 896.6 843.3 Shareowners' equity (Notes I and J): Common shares 153.0 151.9 Additional paid-in capital 121.6 66.3 Retained earnings 2,178.0 2,076.9 Other comprehensive loss (21.8) (43.1) ------------------- 2,430.8 2,252.0 ------------------- Total liabilities and shareowners' equity $5,661.7 $5,142.2 ===================
See notes to financial statements. 26 THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------- STATEMENTS OF SHAREOWNERS' EQUITY - ---------------------------------
(All dollar amounts in millions, except per share amounts; all share Other amounts in thousands) Comprehensive Comprehensive Common Shares Additional Retained Loss Earnings ----------------------- Shares Amount Paid-In Capital Earnings (Note T) (Note T) -------------------------------------------------------------------------------------------- December 31, 1996 104,272 $155.5 $ 13.2 $2,080.1 $ (2.4) Net earnings 150.1 $150.1 Shares issued 1,743 2.6 41.2 Shares purchased (2,130) (3.2) (.9) (65.8) Cash dividends - $.61 a common share (63.8) Foreign currency translation adjustment (18.1) (18.1) -------------------------------------------------------------------------------------------- December 31, 1997 103,885 154.9 53.5 2,100.6 (20.5) $132.0 ====== Net earnings 119.7 $119.7 Shares issued 587 .9 14.5 Shares purchased (2,642) (3.9) (1.7) (77.2) Cash dividends - $.64 a common share (66.2) Foreign currency translation adjustment (15.0) (15.0) Change in minimum pension liability (net of income tax benefit of $4.5) (7.6) (7.6) -------------------------------------------------------------------------------------------- December 31, 1998 101,830 151.9 66.3 2,076.9 (43.1) $ 97.1 ====== Net earnings 208.1 $208.1 Shares issued 1,978 2.9 56.4 Shares purchased (1,229) (1.8) (1.1) (40.5) Cash dividends - $.65 a common share (66.5) Foreign currency translation adjustment 17.2 (3.3) Change in minimum pension liability (net of income taxes of $.5) .8 .8 Change in unrealized gain on available-for-sale securities (net of income taxes of $1.8) (Note D) 3.3 3.3 -------------------------------------------------------------------------------------------- December 31, 1999 102,579 $153.0 $121.6 $2,178.0 $(21.8) $208.9 ============================================================================================
See notes to financial statements. 27 THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------- STATEMENTS OF CASH FLOWS - ------------------------
Year Ended December 31 1999 1998 1997 (All dollar amounts in millions) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash flows from operating activities: Net earnings $ 208.1 $ 119.7 $ 150.1 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, amortization and depletion of property, plant and equipment 263.2 260.3 238.4 Depreciation and amortization of other assets 44.2 41.5 44.1 Deferred income taxes 11.9 30.5 37.2 Investees - earnings and dividends (16.1) 16.3 1.3 Gain on sale of assets (86.3) (28.3) Discontinued operations 20.4 12.9 Other 23.0 8.9 (20.8) Change in assets and liabilities, excluding effects of acquisitions and dispositions: Accounts receivable (1.2) 17.1 .3 Inventories 34.0 (46.0) 11.5 Other current assets 7.4 (5.6) 2.1 Accounts payable and accrued liabilities (14.5) (6.1) (26.7) Cash (used in) discontinued operations (8.5) (50.2) --------------------------- Net cash provided by operating activities 473.7 420.2 400.2 --------------------------- Cash flows from investing activities: Capital expenditures (212.9) (384.0) (437.3) Additions to equipment rented to others (26.8) (31.1) (33.0) Payments for acquired businesses, net of cash acquired (559.0) (50.9) Proceeds from sale of assets 185.2 342.2 Other (33.0) (33.6) (3.4) --------------------------- Net cash (used in) investing activities (646.5) (157.4) (473.7) --------------------------- Cash flows from financing activities: Additional borrowings 15.0 160.5 719.5 Payments on borrowings (23.4) (217.2) (547.2) Notes payable 186.2 Cash dividends paid (66.5) (66.2) (63.8) Common shares issued 59.3 15.4 43.8 Common shares purchased (43.4) (82.8) (69.9) --------------------------- Net cash provided by (used in) financing activities 127.2 (190.3) 82.4 --------------------------- Increase (decrease) in cash and cash equivalents (45.6) 72.5 8.9 Cash and cash equivalents at beginning of year 102.0 29.5 20.6 --------------------------- Cash and cash equivalents at end of year $ 56.4 $ 102.0 $ 29.5 ===========================
See notes to financial statements. 28 THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - ----------------------------- YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - -------------------------------------------- A - Significant Accounting Policies CONSOLIDATION. The accompanying financial statements include the accounts of the company and its wholly owned subsidiaries. All intercompany transactions are eliminated. Investments in investees are stated at cost plus the company's equity in their undistributed net earnings since acquisition. CASH AND CASH EQUIVALENTS. The company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. INVENTORIES. The inventories of finished and semi-finished products and raw materials are stated primarily at the lower of cost or market determined on the last-in, first-out (LIFO) basis. Stores and supplies are stated at cost determined on the first-in, first-out (FIFO) basis. OTHER ASSETS. Included in other assets are goodwill and other intangibles, which are being amortized using the straight-line method over their estimated useful lives of 10 to 20 years. The company periodically reviews goodwill balances for impairment based on the expected future cash flows of the related businesses acquired. COMPUTER SOFTWARE COSTS. Effective January 1, 1999, the company adopted the American Institute of Certified Public Accountants' Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 revises the accounting for software development costs and requires the capitalization of certain costs which the company has historically expensed. The adoption of this Statement did not have a material effect on the financial condition, results of operations or liquidity of the company. DEPRECIATION AND DEPLETION. Depreciation of property, plant and equipment and amortization of capital leases and land improvements are calculated using the straight-line method over the estimated useful lives of the properties. The rates used to determine timber depletion are based on projected quantities of timber available for cutting and are calculated annually. INTEREST RATE AND FOREIGN EXCHANGE FINANCIAL INSTRUMENTS. Amounts currently due to or from interest rate swap counterparties are recorded in interest expense in the period in which they accrue. The premiums paid to purchase interest rate caps, as well as gains or losses on terminated interest rate swap and cap agreements, are included in long-term liabilities or assets and amortized to interest expense over the shorter of the original term of the agreements or the life of the financial instruments to which they are matched. Gains or losses on foreign currency forward contracts are recognized currently through income and generally offset the transaction losses or gains on the foreign currency cash flows which they are intended to hedge. ENVIRONMENTAL LIABILITIES. The company records accruals for environmental costs based on estimates developed in consultation with environmental consultants and legal counsel in accordance with the requirements of SFAS No. 5. The estimated costs to be incurred in closing existing landfills, based on current environmental requirements and technologies, are accrued over the expected useful lives of the landfills. 29 ESTIMATES AND ASSUMPTIONS. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported revenues and expenses during a period. Estimates and assumptions are also used in the disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. REVENUE RECOGNITION. The company recognizes revenue when ownership risk passes, which is generally when goods are shipped. NET EARNINGS PER COMMON SHARE. Net earnings per common share are computed by dividing net earnings by the weighted average number of common shares outstanding during each year. The difference between earnings per common share and earnings per common share - assuming dilution is the result of outstanding stock options. STOCK OPTIONS. The company measures compensation cost for stock options issued to employees using the intrinsic value based method of accounting in accordance with Accounting Principles Board Opinion No. 25. ACCOUNTING PRONOUNCEMENTS. In 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued. The statement requires derivatives to be recorded on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in fair value of the derivatives are recorded depending upon whether the instruments meet the criteria for hedge accounting. The company is investigating the impact of this pronouncement, but does not expect it to have a material impact on the company's results of operations, financial position or cash flows. In June 1999, SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities- Deferral of the Effective Date of FASB Statement No. 133-an amendment of FASB Statement No. 133," was issued which delayed the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. B - Acquisitions On November 1, 1999, the company acquired the AT-A-GLANCE Group of Cullman Ventures, Inc., a manufacturer of diaries, appointment books, calendars, posters, organizers and planners, for approximately $540 million in cash. The acquisition has been accounted for as a purchase, and the results of its operations are reflected in the accompanying financial statements from the date of acquisition. The acquisition resulted in goodwill of approximately $235 million, subject to the finalization of the appraisals and other purchase price adjustments which will be completed in 2000. The goodwill will be amortized on the straight-line method over 20 years. To comply with disclosures required by generally accepted accounting principles related to acquisitions, the following unaudited pro forma combined results of operations are presented as though the acquisition occurred at the beginning of each period presented below. In management's opinion, the unaudited pro forma combined results of operations are not indicative of the actual results that would have occurred under the ownership and management of the company. The following unaudited pro forma information includes adjustments for income taxes, interest expense, depreciation and amortization expense to reflect the accounting bases used to record the acquisition: 30 Year Ended December 31 1999 1998 (All dollar amounts in millions) Net sales $4,084.7 $4,102.1 ================== Earnings from continuing operations $ 210.4 $ 141.9 ================== Net earnings $ 210.4 $ 121.5 ================== Earnings per common share - basic: Earnings from continuing operations $ 2.06 $ 1.37 ================== Net earnings $ 2.06 $ 1.17 ================== Earnings per common share - assuming dilution: Earnings from continuing operations $ 2.01 $ 1.35 ================== Net earnings $ 2.01 $ 1.16 ================== The company made additional acquisitions during 1999 for approximately $27 million in cash. These acquisitions were also accounted for as purchases. C - Inventories December 31 1999 1998 (All dollar amounts in millions) Finished and semi-finished products $297.1 $295.0 Raw materials 113.7 109.2 Stores and supplies 79.1 75.3 ------------------ $489.9 $479.5 ================== For purposes of comparison to non-LIFO companies, inventories valued at current replacement cost would have been $169.7 million and $175.6 million higher than reported at December 31, 1999 and 1998, respectively. D - Investments and Other Assets December 31 1999 1998 (All dollar amounts in millions) Pension asset $ 285.5 $264.3 Investment in investees 28.3 127.5 Goodwill and other intangibles (net of accumulated amortization of $10.0 in 1999 and $4.8 in 1998) 387.0 26.3 Cash surrender value of life insurance, less policy loans of $50.6 in 1999 and $45.4 in 1998 147.3 118.8 Equipment rented to others, at cost (net of accumulated depreciation of $265.4 in 1999 and $290.7 in 1998) 69.4 83.3 Convertible debentures (including unrealized gain of $5.1 in 1999) 69.4 Other 87.1 62.9 ------------------ $1,074.0 $683.1 ================== 31 During 1999, the company sold its 50%-owned investment in Northwood Inc. (see Note L). The company's remaining principal investees are the 30% ownership interest in a limited partnership which operates the cogeneration facility located at the Rumford, Maine paper mill and the 50% ownership interest in Northwood Panelboard Company, an oriented structural board mill in Bemidji, Minnesota. The company received dividends and partnership distributions of $27.1 million, $20.3 million and $11.9 million in 1999, 1998 and 1997, respectively. The convertible debentures have a par value of $77.5 million in Canadian dollars. They are classified as available-for-sale securities and are carried at fair value with unrealized gains or losses, net of tax, reported in other comprehensive income. Fair value of the securities is based on an independent valuation. The securities are convertible to common shares of the issuer after May 2000, redeemable by the issuer beginning in November 2002 and mature in November 2006. E - Property, Plant and Equipment December 31 1999 1998 (All dollar amounts in millions) Property, plant and equipment, at cost: Land and land improvements $ 159.6 $ 158.6 Buildings 638.3 615.3 Machinery and equipment 4,646.0 4,492.2 Construction in progress 82.9 87.9 ----------------------- 5,526.8 5,354.0 Less accumulated amortization and depreciation (2,547.0) (2,369.1) ----------------------- 2,979.8 2,984.9 Timber and timberlands, net of timber depletion 377.6 387.8 ----------------------- Property, plant and equipment, net $ 3,357.4 $ 3,372.7 ======================= F - Current Liabilities December 31 1999 1998 (All dollar amounts in millions) Accounts payable: Trade $ 209.1 $ 199.2 Affiliated companies 11.1 32.5 Outstanding checks 45.9 44.2 ----------------------- $ 266.1 $ 275.9 ======================= Accrued expenses and other current liabilities: Accrued wages $ 108.0 $ 88.7 Taxes, other than income 40.2 40.1 Accrued interest 36.8 37.2 Accrued rebates and allowances 99.0 28.6 Other current liabilities 229.2 201.1 ----------------------- $ 513.2 $ 395.7 ======================= 32 G - Long-Term Debt December 31 1999 1998 (All dollar amounts in millions) Capital lease obligations $ 287.4 $ 288.3 Variable-rate Industrial Development Revenue Bonds, due from 2001 through 2023, average effective rate 3.2% 165.4 165.4 8-1/8% debentures, face amount of $150.0, due 2023 (effective rate 8.4%) 148.0 147.9 7-1/8% debentures, face amount of $150.0, due 2025 (effective rate 7.4%) 147.3 147.2 7.35% debentures, face amount of $150.0, due 2017 (effective rate 7.4%) 148.6 148.5 6.84% debentures, face amount of $150.0, due 2037 (effective rate 7.0%) 148.4 148.2 7.55% debentures, face amount of $150.0, due 2047 (effective rate 7.7%) 143.7 143.6 6.60% notes, face amount of $100.0, due 2002 (effective rate 6.9%) 99.3 99.0 Medium-term notes, 7.3% to 9.8%, face amount of $78.5, due from 2000 through 2020 (effective rate 10.0%) 76.8 75.9 Other 3.9 11.3 -------------------- 1,368.8 1,375.3 Less current portion 35.1 7.9 -------------------- $1,333.7 $1,367.4 ==================== Capital lease obligations consist primarily of Industrial Development Revenue Bonds and Notes with an average effective rate of 3.9%. The variable-rate Industrial Development Revenue Bonds are supported by letters of credit. The interest rates on the variable-rate tax-exempt bonds closely follow the tax-exempt commercial paper rates. Notes payable represent commercial paper borrowings with a weighted-average interest rate of 5.94%. The 8-1/8% and 7-1/8% debentures are callable by the company at approximately 103% beginning in 2003. The 6.84% debentures can be put to the company at par value in 2007. The company has an unused $500 million bank credit agreement that extends until October 2002 and an unused $200 million bank credit agreement that expires October 2000. These agreements support $59.5 million of the company's capital lease obligations and $165.2 million of notes payable. They contain restrictive covenants and require commitment fees in accordance with standard banking practice. The company has the ability to borrow up to $475.3 million pursuant to these agreements at December 31, 1999. Maturities of long-term debt for the next five years are $35.1 million in 2000, $12.6 million in 2001, $135.3 million in 2002, $.7 million in 2003 and $6.7 million in 2004. The company has guaranteed obligations of certain affiliated operations and others totaling $39.1 million at December 31, 1999. In addition, the company has a 50% interest in a partnership with Kimberly-Clark Corporation, which has borrowed $300 million under a loan agreement with a syndicate of banks, which matures in 2003. The loan, one-half of which has been guaranteed by the company, may be prepaid at any time either in cash or by delivery of notes receivable from Georgia-Pacific Corporation held by the partnership as part of the consideration 33 from the 1988 sale of Brunswick Pulp and Paper Company, a former affiliate. It is not practicable to estimate the fair value of the above guarantees, however, the company does not expect to incur losses as a result of these guarantees. H - Financial Instruments The company uses various derivative financial instruments as part of an overall strategy to manage the company's exposure to market risks associated with interest rate and foreign currency exchange rate fluctuations. The company uses foreign currency forward contracts to manage the foreign currency exchange rate risks associated with its international operations. The company utilizes interest rate swap and cap agreements to manage its interest rate risks on its debt instruments, including the reset of interest rates on variable-rate debt. The company does not hold nor issue derivative financial instruments for trading purposes. The risk of loss to the company in the event of nonperformance by any counterparty under derivative financial instrument agreements is not considered significant by management. All counterparties are rated A or higher by Moody's and Standard and Poor's. Although the derivative financial instruments expose the company to market risk, fluctuations in the value of the derivatives are mitigated by expected offsetting fluctuations in the matched instruments. As part of an overall strategy to maintain an acceptable level of exposure to the risk of interest rate fluctuation, the company has developed a targeted mix of fixed-rate and cap-protected debt versus variable-rate debt. To efficiently manage this mix, the company may utilize interest rate swap, cap and option agreements to effectively convert the debt portfolio into an acceptable fixed-rate, capped-rate and variable-rate mix. Under interest rate swap agreements, the company agrees with other parties to exchange, at specified intervals, the difference between fixed-rate and variable-rate interest amounts calculated by reference to an agreed-upon notional principal amount. The company utilizes interest rate cap agreements to limit the impact of increases in interest rates on its floating rate debt. The interest rate cap agreements require premium payments to counterparties based upon a notional principal amount. Interest rate cap agreements entitle the company to receive from the counterparties the amounts, if any, by which the selected market interest rates exceed the strike rates stated in the agreements. The fair values of the interest rate swap and cap agreements are estimated using quotes from brokers and represent the cash requirement if the existing agreements had been settled at year-end. Selected information related to the company's interest rate swap and cap agreements is as follows: Swap agreements Cap agreements December 31 1999 1998 1999 1998 (All dollar amounts in millions) Notional amount $ 114.2 $ 114.2 $ 50.0 $ 50.0 ======================================= Fair value $ (3.1) $ (4.6) $ $ Carrying amount (1.5) (3.2) .1 .2 _______________________________________ Net unrecognized (loss) $ (1.6) $ (1.4) $ (.1) $ (.2) ======================================= The company utilizes foreign currency forward contracts to reduce exposure to exchange rate risks primarily associated with transactions in the regular course of the company's international operations. The forward contracts establish the exchange rates at which the company will purchase or sell the contracted amount 34 of specified foreign currencies at a future date. The company utilizes forward contracts which are short-term in duration (generally one month) and receives or pays the difference between the contracted forward rate and the exchange rate at the settlement date. The major currency exposures hedged by the company are the Canadian dollar, British pound, Japanese yen and euro. Selected information related to the company's foreign currency forward contracts is as follows: Foreign currency forward contracts December 31 1999 1998 (All dollar amounts in millions) Notional amount $239.7 $127.2 =============== Fair value $ 6.9 $ (.2) Carrying amount 6.9 (.2) --------------- Net unrecognized gain (loss) $ $ =============== The fair value of the company's long-term debt is estimated based on quoted market prices for the same or similar issues or on current rates offered to the company for debt of the same remaining maturities. The fair value of long-term debt was $1,295.0 million and $1,439.8 million at December 31, 1999 and 1998, respectively, and the related carrying amounts were $1,333.7 million and $1,367.4 million, respectively. The carrying amount of the notes payable and the current maturities of long-term debt are reasonable estimates of their fair value. At December 31, 1999 and 1998, the company held short-term investments which are included in cash and cash equivalents. The carrying amount of these short-term investments is a reasonable estimate of fair value. See Note D for disclosure regarding the investment in convertible debentures. I - Shareowners' Equity The company has authorized 300 million no par common shares. During 1999, the company completed its share repurchase program. In October 1999, the Board of Directors approved a new plan to repurchase up to 10 million common shares from time to time. Under a Rights Agreement, each outstanding common share presently has one right attached which trades with the common share. Generally, the rights become exercisable and trade separately 10 days after a third party acquires 20% or more of the common shares or commences a tender offer for a specified percentage of the common shares. In addition, the rights become exercisable if any party becomes the beneficial owner of 10% or more of the outstanding common shares and is determined by the Board of Directors to be an adverse party. Upon the occurrence of certain additional triggering events specified in the Rights Agreement, each right would entitle its holder (other than, in certain instances, the holder of 20% or more of the common shares) to purchase common shares of the company (or, in certain circumstances, cash, property or other securities of the company) having a value of $100 for $50, the initial exercise price. The rights expire in 2006 and are presently redeemable at $.005 per right. At December 31, 1999, there were 149.2 million common shares reserved for issuance under this plan. The Board of Directors has approved termination benefits for certain key executives and a severance plan for all other salaried employees and established a Benefit Trust in connection with the company's unfunded supplemental retirement plan, deferred compensation plan, directors retirement plan and excess benefits plan to preserve the benefits earned thereunder in the event of a change in 35 control of the company. These plans would be required to be immediately funded upon such an event. The company has preferred shares authorized but unissued as follows: 61,500 undesignated cumulative preferred, par value $100; 20 million undesignated voting cumulative preferred, without par value; 20 million cumulative preferred, without par value; and 295,540 cumulative second preferred, par value $50. At December 31, 1999, there is $1.3 billion available for common dividends which represents the maximum amount of additional indebtedness that can be incurred solely to pay common dividends while remaining in compliance with certain debt covenants. J - Stock-Based Compensation Plans Officers and key employees have been granted stock options under various stock- based compensation plans. Options to purchase 3.4 million shares are accompanied by limited rights which may be exercised in lieu of the option under certain circumstances. The exercise price of all options equals the market price of the company's stock on the date of the grant. The options and rights have a maximum term of 10 years and vest after one year or three years. Under the 1996 Stock Option Plan, additional options (reload options) can be granted at the current market price upon the exercise of the original incentive stock option. The option holder must hold the shares acquired for three years in order to vest in the reload options. There are 11.0 million shares reserved for issuance under these plans. A Restricted Stock Plan provides for the issuance of restricted common shares to certain employees and to directors who are not officers or employees of the company. These shares are restricted for periods of six months to five years. At December 31, 1999, 5,000 common shares are issued and outstanding under the plan. There are 731,000 shares reserved for issuance under this plan. There were 39,000, 7,000 and 27,000 shares granted in 1999, 1998 and 1997, respectively, at a weighted-average price of $29.99, $29.24 and $29.58, respectively. 36 The following table summarizes activity in the company's stock-based compensation plans:
(All share amounts in thousands) 1999 1998 1997 --------------------- -------------------- ------------------- Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price Outstanding at beginning of year 8,574 $26.68 7,480 $24.62 7,470 $22.44 Granted 1,954 30.59 1,734 34.11 1,902 29.73 Exercised (2,021) 24.98 (604) 22.12 (1,825) 21.02 Canceled (65) 31.89 (36) 32.97 (67) 25.52 ------- ------- ------ Outstanding at end of year 8,442 $27.95 8,574 $26.68 7,480 $24.62 ======= ======= ====== Exercisable at year-end 6,343 $27.05 6,739 $24.77 5,445 $22.80 ======= ======= ====== Weighted-average fair value of options granted during the year using the extended binomial option- pricing model $ 8.58 $ 10.56 $ 8.30 Weighted-average assumptions used for grants: Expected dividend yield 2% 2% 2% Expected volatility 25% 29% 21% Risk-free interest rate 5.2% 5.6% 6.3% Expected life of option (in years) 6.0 6.0 5.8
The following table shows various information about stock options outstanding at December 31, 1999:
(All share amounts in thousands) Options Outstanding Options Exercisable ----------------------------------------- ----------------------------- Weighted- Average Number Remaining Weighted- Number Weighted- Outstanding at Contractural Average Exercisable at Average Range of December 31, Life (in Exercise December 31, Exercise Exercise Prices 1999 years) Price 1999 Price $13.31 - $18.32 568 1.6 $ 16.08 568 $ 16.08 20.75 - 29.82 6,176 6.6 27.28 4,416 26.27 30.22 - 43.41 1,698 8.3 34.36 1,359 34.20 ----------- ---------- $13.31 - $43.41 8,442 6.6 $ 27.95 6,343 $ 27.05 =========== ==========
Total compensation costs charged to earnings from continuing operations before income taxes for all stock-based compensation awards were immaterial in 1999, 1998 and 1997. Had compensation costs been determined based on the fair value method of SFAS No. 123 for all plans, the company's net earnings and earnings per common share would have been reduced to the following pro forma amounts: 37 Year Ended December 31 1999 1998 1997 Net earnings (in millions): As reported $208.1 $119.7 $150.1 ====================== Pro forma $198.4 $108.7 $141.4 ====================== Earnings per common share - assuming dilution: As reported $ 1.99 $ 1.14 $ 1.41 ====================== Pro forma $ 1.90 $ 1.04 $ 1.33 ====================== K - Asset Write-downs and Employee Termination Costs During 1999, the company recorded a pretax charge of $18.9 million ($17.5 million in cost of sales and $1.4 million in selling and administrative expenses) associated with the shutdown and disposal of four uncoated paper machines at the Rumford, Maine paper mill. The charge included $13.5 million for asset write-downs and contractual obligations and $5.4 million for severance costs including medical, dental and other benefits. A review for impairment in accordance with SFAS No. 121 was performed and resulted in recognition of a $10.6 million impairment charge to adjust the carrying amount of machinery and equipment and related spare parts included in stores and supplies inventory to their estimated fair values. Also included in the $13.5 million charge is $2.6 million to write off an investment in a joint venture as a result of the permanent decline in its value. The joint venture sold products manufactured on the affected machines. A charge of $.3 million was recorded related to certain contractual obligations which will derive no future benefits. The severance costs relate to 113 salaried and hourly employees, of whom 86 employees have left the company on or before December 31, 1999. Substantially all severance-related amounts not paid by December 31, 1999, are expected to be paid by the end of the first quarter of 2000. Of the total charge, $15.6 million was recorded in the second quarter and $3.3 million in the fourth quarter. In 1998, the company recorded a pretax charge of $37.7 million primarily in cost of sales for asset write-downs and other charges. The charges were comprised of a $10.4 million reserve for stores and supplies inventory; $10.4 million for the write-off of capitalized costs related to unimplemented software in development abandoned as a result of the decision to implement an enterprise resource planning computer system; an $8.2 million charge related to the Japanese packaging operation; $4.6 million for the write-off and disposal of certain plant equipment that was replaced by new equipment at the Containerboard division's mill in Stevenson, Alabama; $2.9 million for the write-off of a capital project in process that was not undertaken as a result of market changes; and a special assessment of $1.2 million related to customs issues. The reserve for stores and supplies was recorded upon the completion of a study in the second quarter of 1998 to determine the future utility of obsolete and excess replacement parts that are used to support the maintenance of plant machinery and equipment in the Paper and Packaging and Paperboard Segments. The study identified the specific items which were to be disposed of and the company is holding those items for disposal. The reserve adjusted those items identified to their net realizable value and the company commenced a disposal program at that time. The majority of the items have been disposed of by December 31, 1999. Those items not yet disposed of have been segregated and are being actively marketed, with final disposition expected by the end of the first quarter of 2000. As a result of the deteriorating economic environment in Japan and poor operating performance by the Japanese packaging operation, a charge was recorded in 1998 to write down certain inventory and to reflect the impairment of property, plant 38 and equipment and goodwill. The fair value of the fixed assets and goodwill and the related write-down in value was determined based on management's assessment of the future cash flows of the operations. In the third quarter of 1998, the company adopted a plan to make organizational changes and reduce its workforce, and recorded a charge of $22.0 million for employee severance and related costs in selling and administrative expenses. This plan involved terminating 318 domestic employees, primarily salaried, and was communicated to affected employees in the third quarter of 1998. The charge covered severance payments and medical, dental and other benefits. Pursuant to this plan, 291 people left the company, with the remainder of the planned terminations not occurring as a result of placement of affected employees in other open positions within the company. As a result of fewer people being terminated, lower severance benefits paid than estimated and less utilization of outplacement benefits by terminated employees, the company reversed $2.7 million of the original charge to selling and administrative expenses in the third quarter of 1999. The following is a summary related to the severance charges (All dollar amounts in millions): 1999 1998 Severance Severance Charge Charge Charge recorded $ $ 22.0 Used for intended purpose (12.1) -------------------------- Balance at December 31, 1998 9.9 Charge recorded 5.4 Used for intended purpose (2.7) (7.2) Charge reversed (2.7) -------------------------- Balance at December 31, 1999 $ 2.7 $ ========================== The total charges (credits) by segment for asset write-downs and employee termination costs are as follows: Year Ended December 31 1999 1998 (All dollar amounts in millions) Paper $ 17.4 $ 28.2 Packaging and Paperboard (.8) 25.2 Consumer and Office Products (.1) 4.6 Corporate and other (.3) 1.7 -------------- $ 16.2 $ 59.7 ============== L - Other Revenues - Net Year Ended December 31 1999 1998 1997 (All dollar amounts in millions) Investment income $ 5.4 $ 6.4 $ 3.0 Gain on sale of Northwood 82.3 Gain on sale of assets 4.0 28.3 Other 5.0 (.5) 4.3 ----------------------- $ 96.7 $34.2 $ 7.3 ======================= 39 During the fourth quarter of 1999, the company sold its 50%-owned investment in Northwood Inc. for $77.5 million of convertible debentures in Canadian dollars (fair value of $63.8 million in U.S. dollars at the sale date) and approximately $163.8 million of cash and recognized a gain of $82.3 million. The 1998 gain on sale of assets is comprised of $11.8 million on the sale of timberland, $13.9 million related to the sale of non-strategic packaging businesses and $2.6 million on the sale of an undeveloped mill site in Tennessee. M - Income Taxes The principal current and non-current deferred tax assets and (liabilities) are as follows: December 31 1999 1998 (All dollar amounts in millions) Deferred tax liabilities: Accelerated depreciation for tax purposes $(564.8) $(540.3) Nontaxable pension asset (108.5) (100.4) Deferred installment gain (47.5) (47.5) Other (64.3) (63.5) ----------------- (785.1) (751.7) Deferred tax assets: Tax credit carryforwards 40.6 27.1 Compensation and fringe benefits accruals 67.9 61.2 Postretirement benefit accrual 52.9 46.9 Loss provisions and other expenses not currently deductible 72.2 50.7 Other 30.1 25.0 ----------------- 263.7 210.9 ----------------- Net deferred liability $(521.4) $(540.8) ================= Included in the balance sheets: Current assets - deferred tax asset $ 77.5 $ 42.6 Deferred items (598.9) (583.4) ----------------- Net deferred liability $(521.4) $(540.8) ================= 40 The significant components of income tax expense are as follows: Year Ended December 31 1999 1998 1997 (All dollar amounts in millions) Currently payable: Federal $ 33.3 $ 9.8 $15.5 Federal alternative minimum tax 2.1 11.1 16.0 State and local 5.3 3.3 .2 Foreign 54.4 13.4 14.3 ---------------------------- 95.1 37.6 46.0 Change in deferred income taxes 14.2 26.0 37.2 ---------------------------- 109.3 63.6 83.2 Allocation to partnership earnings (8.5) (5.7) (1.9) Allocation to discontinued operations 21.3 6.6 Allocation to other comprehensive loss (2.3) 4.5 ---------------------------- $ 98.5 $83.7 $87.9 ============================ The following table summarizes the major differences between the actual income tax provision attributable to continuing operations and taxes computed at the federal statutory rates: Year Ended December 31 1999 1998 1997 (All dollar amounts in millions) Federal taxes computed at statutory rate $95.2 $79.0 $84.7 State and local income taxes, net of federal benefit 3.4 2.9 4.0 Impact related to difference in tax rates for foreign operations 3.1 2.1 (1.2) Other (3.2) (.3) .4 ----------------------- Income taxes $98.5 $83.7 $87.9 ======================= Effective tax rate 36.2% 37.1% 36.3% ======================= Earnings from operations of foreign subsidiaries were $33.0 million, $35.0 million, and $43.9 million in 1999, 1998 and 1997, respectively. At December 31, 1999, no domestic income taxes have been provided on the company's share of the undistributed net earnings of overseas operations due to management's intent to reinvest such amounts indefinitely. Those earnings totaled $113.4 million, including foreign currency translation adjustments. The aggregate amount of unrecognized deferred tax liability is approximately $6 million at December 31, 1999. N - Discontinued Operations In 1998, the company sold its Distribution segment, Zellerbach, and related real estate for $288 million. Revenues of the Distribution segment were $965.0 million and $1,553.3 million in 1998 and 1997, respectively. 41 The following are the components of discontinued operations: Year Ended December 31 1998 1997 (All dollar amounts in millions) Losses from operations of Distribution segment, net of income tax benefit of $3.1 and $6.6 in 1998 and 1997 $ (6.0) $ (12.9) Loss on sale of Distribution segment (including loss on operations during phase-out period of $3.2), net of income tax benefit of $18.2 (14.4) ------------------ $(20.4) $ (12.9) ================== O - Pension Plans The company has pension plans that cover substantially all employees. Pension benefits for bargaining employees are primarily based upon years of credited service. Benefits for salaried and other non-bargaining employees are based upon years of service and the employee's average final earnings. Mead's funding policy is to contribute amounts to the plans sufficient to meet or exceed the minimum requirements of the Employee Retirement Income Security Act. 42 Summary information for all of the company's plans is as follows: December 31 1999 1998 (All dollar amounts in millions) Change in the projected benefit obligation: Projected benefit obligation at beginning of year $ (854.4) $ (749.9) Plan obligation assumed (30.2) Service cost (24.8) (22.0) Interest cost (53.8) (50.7) Actuarial gain (loss) 66.9 (105.4) Benefits paid 101.8 123.9 Plan amendments (16.2) (31.0) Termination adjustment due to benefit enhancements (2.1) (3.6) Settlement adjustment (24.0) Curtailment adjustment .8 8.3 ------------------- Projected benefit obligation at end of year (812.0) (854.4) ------------------- Change in the plan assets: Fair value of plan assets at beginning of year 1,026.8 978.5 Plan assets assumed 38.1 Actual return on plan assets 165.2 156.4 Employer contributions 3.0 15.8 Benefits paid (101.8) (123.9) ------------------- Fair value of plan assets at end of year 1,131.3 1,026.8 ------------------- Plan assets in excess of projected benefit obligation 319.3 172.4 Reconciliation of financial status of plans to amounts recorded in Mead's balance sheets: Unamortized prior service cost 41.9 28.7 Unrecorded effect of net loss(gain) arising from differences between actuarial assumptions used to determine periodic pension expense and actual experience (82.6) 67.2 Unamortized plan assets in excess of plan liabilities (overfunding) at January 1, 1986 - to be recognized as a reduction of future years' pension expense (9.6) (16.0) Adjustment for minimum pension liability (12.3) (16.9) ------------------- Net pension asset $ 256.7 $ 235.4 =================== Amounts recognized in Mead's balance sheets consist of: Pension asset $ 285.5 $ 264.3 Other current liabilities (28.8) (28.9) Other assets 1.5 4.8 Other comprehensive loss 6.8 7.6 Benefit obligation discount rate 8.00% 6.50% =================== Rate of compensation increase (for pay-related plans only) 5.25% 5.25% =================== 43 The total projected benefit obligation for the company's pension plans includes $40.3 million and $39.7 million at December 31, 1999 and 1998, respectively, of the unfunded plans, of which $28.8 million and $28.9 million represent the accumulated benefit obligation. The components of net pension (income) for all pension plans are as follows: Year Ended December 31 1999 1998 1997 (All dollar amounts in millions) Service cost, benefits earned during the year $ 24.8 $ 22.0 $ 20.9 Interest cost on projected benefit obligation 53.8 50.7 51.0 Expected return on plan assets (90.4) (86.7) (78.2) Amortization of prior service cost 2.6 2.8 2.7 Amortization of unrecognized net (gain) loss 6.6 (.3) .8 Amortization of net transition asset (6.4) (7.9) (7.9) Termination loss 3.6 2.5 Settlement loss 13.3 .7 Curtailment loss .4 ------------------------- Net pension (income) (9.0) (2.1) (7.5) Less - net pension expense allocated to discontinued operations 7.4 3.3 ------------------------- Net pension (income) - continuing operations $ (9.0) $ (9.5) $(10.8) ========================= The plan assets consist primarily of common stocks and fixed income securities. The expected long-term rate of return on plan assets used in determining net pension income was 9% in all years. The company's pension plans require the allocation of excess plan assets to plan members if the plans are terminated, merged or consolidated following a change in control (as defined) of the company opposed by the Board of Directors of the company. Amendment of these provisions after such a change in control would require approval of plan participants. The company also has 401(k) plans that cover substantially all U.S. employees. Expense for company matching contributions under these plans was approximately $11.1 million in 1999, $11.9 million in 1998 and $10.3 million in 1997. P - Postretirement Benefits Other than Pension The company funds certain health care benefit costs principally on a pay-as-you- go basis, with retirees paying a portion of the costs. Certain retired employees of businesses acquired by the company are covered under other health care plans that differ from current plans in coverage, deductibles and retiree contributions. 44 Summary information on the company's plans is as follows:
December 31 1999 1998 (All dollar amounts in millions) Change in the projected benefit obligation: Accumulated postretirement benefit obligation at beginning of year $(119.7) $(120.6) Plan obligation assumed (11.2) Service cost (3.9) (3.7) Interest cost (7.5) (7.6) Actuarial gain (loss) 12.3 (1.0) Benefits paid 8.5 8.5 Curtailment adjustment 4.7 -------------------------- Accumulated postretirement benefit obligation at end of year (121.5) (119.7) -------------------------- Change in the plan assets: Fair value of plan assets at beginning of year 10.1 9.1 Actual return on plan assets .9 1.0 Employer contributions 5.6 8.5 Benefits paid (8.5) (8.5) -------------------------- Fair value of plan assets at end of year 8.1 10.1 -------------------------- Accumulated postretirement benefit obligation in excess of plan assets (113.4) (109.6) Reconciliation of financial status of plans to amounts recorded in Mead's balance sheets: Unrecorded effect of net (gain) arising from differences between actuarial assumptions used to determine periodic postretirement expense and actual experience (25.9) (14.1) -------------------------- Accrued postretirement benefit cost - included in deferred items $(139.3) $(123.7) ========================== Benefit obligation discount rate 7.75% - 8.00% 6.50% ==========================
The components of net periodic postretirement benefit cost are as follows:
Year Ended December 31 1999 1998 1997 (All dollar amounts in millions) Service cost, benefits attributed to employee service during the year $ 3.9 $ 3.7 $ 2.5 Interest cost on accumulated postretirement benefit obligation 7.5 7.6 8.0 Expected return on plan assets (.8) (.7) (.6) Curtailment gain (4.7) Amortization of unrecognized net (gain) (.5) (.7) (1.4) -------------------------- Net periodic postretirement benefit cost $10.1 $ 5.2 $ 8.5 ==========================
45 Included in net periodic postretirement benefit cost in 1998 is a curtailment gain of $4.7 million allocated to the company's discontinued operations. The expected long-term rate of return on plan assets used in determining the net periodic postretirement benefit cost was 8% in each year. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation in 1999 was 9.0% declining by 1% per year to an ultimate rate of 5%. The assumed health care trend rates used in 1998 and 1997 were 7.4% and 8.2%, respectively, declining by .8% per year. If the health care cost trend rate assumptions were increased or decreased by 1%, the accumulated postretirement benefit obligation at December 31, 1999, would be increased or decreased by 6.9% and 6.8%, respectively. The effect of this change on the sum of the service cost and interest cost components of net periodic postretirement benefit cost for 1999 would be an increase or decrease of 10.7% and 9.8%, respectively. Q - Leases At December 31, 1999, future minimum annual rental commitments under noncancelable lease obligations are as follows: Capital Operating Leases Leases Year Ending December 31: (All dollar amounts in millions) 2000 $ 13.5 $ 34.6 2001 12.0 26.8 2002 12.0 18.5 2003 12.0 12.8 2004 12.0 10.2 Later years through 2033 582.7 40.5 --------------------- Total minimum lease payments 644.2 $143.4 ====== Less amount representing interest (356.8) ------- Capital lease obligations $ 287.4 ======= The majority of rent expense is for operating leases which are for office, warehouse and manufacturing facilities and delivery, manufacturing and computer equipment. A number of these leases have renewal options. Rent expense was $63.3 million, $51.7 million and $49.8 million in 1999, 1998 and 1997, respectively. R - Litigation and Other Proceedings The company is involved in various litigation generally incidental to normal operations, as well as proceedings regarding equal employment opportunity matters, among others. The company is involved in investigations regarding customs that may result in payments by the company ranging from an insignificant amount to as much as $15 million; however, no liability has been recorded relating to this matter because an obligation is not viewed as probable. The company has also been identified as a potentially responsible party in at least 20 environmental proceedings. It is not possible to determine the ultimate liability, if any, in all these matters. The company has established reserves of approximately $40 million relating to environmental liabilities, including those related to previously discontinued operations, which it believes are probable and reasonably estimable. The company believes that it is reasonably possible that costs associated with these sites may exceed current reserves by an amount that could range from an insignificant amount to as much as $40 million. The estimate 46 of this range is less certain than the estimates upon which reserves are based. In order to establish this range, assumptions less favorable to the company among those outcomes that are considered reasonably possible were used. In the opinion of management, after consultation with legal counsel and after considering established reserves, the resolution of pending litigation and proceedings is not expected to have a material effect on the financial condition, results of operations or liquidity of the company. S - Additional Information on Cash Flows Year Ended December 31 1999 1998 1997 (All dollar amounts in millions) Cash paid during the year for: Interest $106.1 $111.3 $90.0 Less amount capitalized (2.8) (6.3) (9.2) ------------------------- Interest, net of amount capitalized $103.3 $105.0 $80.8 ========================= Income taxes $ 54.0 $ 31.8 $41.3 ========================= T - Comprehensive Earnings The difference between net earnings and comprehensive earnings relates to the changes in foreign currency translation adjustment, additional minimum pension liability and unrealized gain on available-for-sale securities. At December 31, 1999, accumulated other comprehensive loss was comprised of $(18.3) million of foreign currency translation adjustment, $(6.8) million of additional minimum pension liability and $3.3 million of unrealized gain on available-for-sale securities. At December 31, 1998, accumulated other comprehensive loss was comprised of $(35.5) million of foreign currency translation adjustment and $(7.6) million of additional minimum pension liability. The 1999 foreign currency translation adjustment is comprised of $17.2 million of foreign currency translation adjustment arising during 1999 less a $20.5 million reclassification adjustment for foreign currency translation adjustment included in gain on sale of assets. U - Segment Information Industry Segments The company classifies its businesses into three industry segments. The Paper operations manufacture and sell printing, writing, carbonless copy, publishing and specialty paper primarily to domestic publishers, printers and converters. The Packaging and Paperboard operations manufacture and sell beverage and food packaging materials, corrugated shipping containers and paperboard to those markets primarily located in the United States with other operations conducted in Europe, Latin America and Asia Pacific. The Consumer and Office Products operations are conducted predominantly in North America and manufacture and distribute school, office and dated material products to retailers and commercial distributors. 47 The company evaluates performance based on earnings from continuing operations before income taxes and equity in net earnings of investees. The accounting policies of the segments are the same as those described in the significant accounting policies (Note A).
Year Ended December 31 1999 1998 1997 (All dollar amounts in millions) Net sales: Industry segments: Paper $1,783.3 $1,795.6 $1,797.8 Packaging and Paperboard 1,506.9 1,494.2 1,431.8 Consumer and Office Products 509.3 482.4 516.2 ------------------------------ Total $3,799.5 $3,772.2 $3,745.8 ============================== Earnings (loss) from continuing operations before income taxes: Industry segments: Paper $ 147.6 $ 206.3 $ 195.6 Packaging and Paperboard 170.0 142.5 129.6 Consumer and Office Products 38.0 42.8 57.3 Corporate and other (1) (83.7) (166.0) (140.5) ------------------------------ Total $ 271.9 $ 225.6 $ 242.0 ============================== Depreciation, depletion and amortization: Industry segments: Paper $ 120.2 $ 116.8 $ 111.1 Packaging and Paperboard 150.5 160.9 149.1 Consumer and Office Products 16.2 9.1 8.2 Corporate and other 20.5 15.0 14.1 ------------------------------ Total $ 307.4 $ 301.8 $ 282.5 ============================== Identifiable assets (2): Industry segments: Paper $2,114.9 $2,181.3 $2,113.4 Packaging and Paperboard 1,887.0 1,935.9 1,941.3 Consumer and Office Products 803.0 229.8 191.3 Intersegment Elimination (4.9) (1.4) (.5) Corporate and other 861.7 796.6 906.9 ------------------------------ Total $5,661.7 $5,142.2 $5,152.4 ============================== Capital expenditures: Industry segments: Paper $ 82.3 $ 178.4 $ 110.5 Packaging and Paperboard 92.4 169.9 293.8 Consumer and Office Products 14.7 10.6 11.6 Corporate and other 23.5 25.1 21.4 ------------------------------ Total $ 212.9 $ 384.0 $ 437.3 ==============================
48 (1) Corporate and other includes the following: Year Ended December 31 1999 1998 1997 Other revenues $ 96.4 $ 11.2 $ 13.0 Interest expense (105.1) (109.0) (98.2) Other expenses (75.0) (68.2) (55.3) ---------------------------- $ (83.7) $(166.0) $(140.5) ============================ (2) Corporate and other consists primarily of cash and cash equivalents, property, plant and equipment, investments, other assets and net assets of discontinued operations in 1997. Geographic Areas The company has sales from foreign subsidiaries primarily in Canada, Europe, Latin America and Asia Pacific. No individual foreign geographic area is significant to the company relative to total net sales, earnings from continuing operations before income taxes or identifiable assets. The following represents net sales and total assets of the company's foreign subsidiaries: Year Ended December 31 1999 1998 1997 (All dollar amounts in millions) Net Sales: Europe $294.6 $307.1 $309.1 Canada 138.4 139.8 132.3 Asia Pacific 61.6 46.9 52.7 Latin America 46.3 45.5 40.5 -------------------------- Total $540.9 $539.3 $534.6 ========================== Assets: Europe $218.1 $230.2 $226.9 Canada 49.6 50.5 55.0 Asia Pacific 44.8 39.4 48.4 Latin America 33.4 35.1 35.5 -------------------------- Total $345.9 $355.2 $365.8 ========================== 49 Selected Quarterly Financial Data (unaudited) (All dollar amounts in millions, except per share data) 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Year Net sales: 1999 $863.2 $1,004.8 $ 982.2 $949.3 $3,799.5 1998 839.0 1,050.9 1,009.3 873.0 3,772.2 1997 829.5 1,001.4 1,031.4 883.5 3,745.8 Gross profit: 1999 158.7 181.1 174.1 199.0 712.9 1998 178.0 197.5 197.6 149.6 722.7 1997 157.8 193.7 201.6 184.2 737.3 Earnings from continuing operations: 1999 22.9 44.8 50.8 89.6 208.1 1998 33.6 40.2 35.4 30.9 140.1 1997 24.5 49.6 54.8 34.1 163.0 Net earnings: 1999 22.9 44.8 50.8 89.6 208.1 1998 30.6 15.2 35.4 38.5 119.7 1997 20.2 47.8 50.3 31.8 150.1 Per common share - basic: (1) Earnings from continuing operations: 1999 .22 .44 .50 .87 2.04 1998 .32 .39 .34 .30 1.36 1997 .23 .48 .52 .33 1.56 Net earnings: 1999 .22 .44 .50 .87 2.04 1998 .29 .15 .34 .37 1.16 1997 .19 .46 .48 .31 1.44 Per common share - assuming dilution: (1) Earnings from continuing operations: 1999 .22 .43 .48 .86 1.99 1998 .32 .38 .34 .30 1.34 1997 .23 .47 .51 .32 1.53 Net earnings: 1999 .22 .43 .48 .86 1.99 1998 .29 .14 .34 .37 1.14 1997 .19 .45 .47 .30 1.41 Cash dividends per common share: 1999 .16 .16 .16 .17 .65 1998 .16 .16 .16 .16 .64 1997 .15 .15 .15 .16 .61 (1) The number of shares used in the calculation of per share data is computed based on quarterly averages; therefore, the sum of individual earnings per share may not equal the annual computation. 50 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant Information pursuant to this item is incorporated herein by reference to pages 3 through 6 and 24 of the Company's Proxy Statement, definitive copies of which were filed with the Securities and Exchange Commission ("Commission") on March 8, 2000. Information concerning executive officers is also included in Part I of this report following Item 4. Item 11. Executive Compensation Information pursuant to this item is incorporated herein by reference to pages 9 through 23 of the Company's Proxy Statement (excluding the "Report of Compensation Committee on Executive Compensation" on pages 11 through 15 and the "Performance Graph" on page 21), definitive copies of which were filed with the Commission on March 8, 2000. Item 12. Security Ownership of Certain Beneficial Owners and Management Information pursuant to this item is incorporated herein by reference to pages 9 through 11 of the Company's Proxy Statement, definitive copies of which were filed with the Commission on March 8, 2000. Item 13. Certain Relationships and Related Transactions Information pursuant to this item is incorporated herein by reference to pages 24 and 25 of the Company's Proxy Statement, definitive copies of which were filed with the Commission on March 8, 2000. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. Financial Statements The financial statements of The Mead Corporation and consolidated subsidiaries are included in Part II, Item 8. 2. Financial Statement Schedule The information required to be submitted in Schedules I through V for The Mead Corporation and consolidated subsidiaries has either been shown in the financial statements or notes thereto, or is not applicable or required under rules of Regulation S-X, and, therefore, those schedules have been omitted. 51 3. Exhibits (3) Articles of Incorporation and Bylaws: (i) Amended Articles of Incorporation of the Registrant adopted May 28, 1987 (incorporated by reference to Exhibit (3)(i) of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996). (ii) Regulations of the Registrant, as amended April 25, 1996 (incorporated by reference to Exhibit (3)(ii) of Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended March 31, 1996). (4) Instruments defining the rights of security holders, including indentures: (i) Credit Agreement dated as of November 15, 1989 with Bankers Trust Company, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York and fifteen other banks; Amendment No. 1 thereto dated as of November 30, 1991; Amendment No. 2 thereto dated as of May 1, 1994 (incorporated by reference to Exhibit (10)(1) to Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended July 3, 1994); Amendment No. 3 thereto dated as of August 31, 1995 (incorporated by reference to Exhibit (4)(1) to Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended October 1, 1995); Amendment No. 4 thereto dated as of August 31, 1996 (incorporated by reference to Exhibit (4)(i) to Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended September 29, 1996); Amendment No. 5 thereto dated as of October 31, 1997 (incorporated by reference to Exhibit (4)(i) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997); and Amendment No. 6 thereto dated as of April 10, 1998 (incorporated by reference to Exhibit (4)(1) to Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended June 28, 1998). (ii) Indenture dated as of July 15, 1982 between the Registrant and Bankers Trust Company, as Trustee, First Supplemental Indenture dated as of March 1, 1987, Second Supplemental Indenture dated as of October 15, 1989 and Third Supplemental Indenture dated as of November 15, 1991 (incorporated by reference to Exhibit (4)(ii) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997). (iii) Indenture dated as of February 1, 1993 between Registrant and The First National Bank of Chicago, as Trustee (incorporated by reference to Exhibit (4)(iii) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997). (iv) Indenture dated as of October 20, 1997 between Registrant and Citibank, N.A., as Trustee (incorporated by reference to Exhibit 4(g) of Registrant's Current Report on Form 8-K dated October 20, 1997). (v) 364-Day Credit Agreement dated November 3, 1999 with Bank One, N.A. and nine other banks. The total amount of securities authorized under other long-term debt instruments does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. A copy of each such instrument will be furnished to the Commission upon request. 52 (10) Material Contracts: (i) Restated Rights Agreement dated as of November 9, 1996 between Registrant and BankBoston, N.A., as Rights Agent, (incorporated herein by reference to Registrant's Form 8-A, dated November 13, 1996), as amended November 1, 1997 (incorporated by reference to Registrant's Form 8-A/A dated November 3, 1997), as amended December 7, 1999 (incorporated by reference to Registrant's Form 8-A/A dated December 15, 1999); as amended February 16, 2000, and restated in Registrant's Form 8-A/A dated March 6, 2000. (ii) Amended Board Purchase Agreement dated as of January 4, 1988 among the Registrant, Georgia Kraft Company and Inland Container Corporation (incorporated by reference to Exhibit (10)(iv) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997). (iii) Indemnification Agreement dated as of January 4, 1988 among the Registrant, Mead Coated Board, Inc., Temple-Inland Inc., Inland Container Corporation I, Inland Container Corporation, GK Texas Holding Company and Georgia Kraft Company (incorporated by reference to Exhibit (10)(v) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997). (iv) Lease Agreement between The Industrial Development Board of the City of Phenix City, Alabama and Mead Coated Board, Inc., dated as of December 1, 1988, as amended (incorporated by reference to Exhibit (10)(vi) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997). (v) Lease Agreement between The Industrial Development Board of the City of Phenix City, Alabama and Mead Coated Board, Inc., dated as of June 1, 1993, as amended (incorporated by reference to Exhibit (10)(vii) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997). (vi) Lease Agreement between The Industrial Development Board of the City of Phenix City, Alabama and Mead Coated Board, Inc., dated as of September 1, 1997, as amended. (vii) Lease Agreement between The Industrial Development Board of the City of Stevenson, Alabama and The Mead Corporation, dated as of March 1, 1998 (incorporated by reference to Exhibit (10)(3) to Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended March 29, 1998). The following are compensatory plans and arrangements in which directors or executive officers participate: (viii) 1984 Stock Option Plan of the Registrant, as amended and restated through June 24, 1999 (incorporated by reference to Exhibit (10)(1) to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 1999). (ix) 1991 Stock Option Plan of the Registrant, as amended through June 24, 1999 (incorporated by reference to Exhibit (10)(2) to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 1999). (x) 1996 Stock Option Plan of the Registrant as amended through June 24, 1999 (incorporated by reference to Exhibit (10)(3) to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 1999). 53 (xi) Incentive Compensation Election Plan of the Registrant as amended November 17, 1987, as amended October 29, 1988 (incorporated by reference to Exhibit (10)(xi) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997); as amended effective June 24, 1998 (incorporated by reference to Exhibit 10 (xii) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998). (xii) 1985 Supplement to Registrant's Incentive Compensation Election Plan, as amended November 17, 1987, and as further amended October 29, 1988 (incorporated by reference to Exhibit (10)(xii) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997); as amended effective June 24, 1998 (incorporated by reference to Exhibit 10 (xiii) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998). (xiii) Excess Benefit Plan of the Registrant dated January 1, 1996 (incorporated by reference to Exhibit (10)(3) to Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended March 31, 1996); as amended effective June 24, 1998 (incorporated by reference to Exhibit 10 (xiv) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998). (xiv) Excess Earnings Benefit Plan of the Registrant dated January 1, 1996 (incorporated by reference to Exhibit (10)(4) to Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended March 31, 1996); as amended effective June 24, 1998 (incorporated by reference to Exhibit 10 (xv) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998). (xv) Restated Supplemental Executive Retirement Plan effective January 1, 1997 (incorporated by reference to Exhibit (10)(3) to Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended March 30, 1997); as amended effective June 24, 1998 (incorporated by reference to Exhibit 10 (xvi) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998). (xvi) Form of Indemnification Agreement between Registrant and each of John C. Bogle, John G. Breen, Duane E. Collins, William E. Hoglund, James G. Kaiser, Robert J. Kohlhepp, John A. Krol, Susan J. Kropf, Charles S. Mechem, Jr., Heidi G. Miller, Lee J. Styslinger, Jr., Jerome F. Tatar and J. Lawrence Wilson (incorporated by reference to Exhibit 10 (4) to Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended July 4, 1999). (xvii) Form of Severance Agreement between Registrant and each of Elias M. Karter, Raymond W. Lane, Wallace O. Nugent, A. Robert Rosenberger, Jerome F. Tatar and other key employees. (xviii) Restated Benefit Trust Agreement dated August 27, 1996 between Registrant and Society Bank, National Association (incorporated by reference to Exhibit (10)(1) of Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended September 29, 1996); as amended effective June 24, 1998 (incorporated by reference to Exhibit 10 (xix) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998). (xix) Restricted Stock Plan effective December 10, 1987, as amended through June 24, 1999 (incorporated by reference to Exhibit (10)(5) to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 1999). 54 (xx) Deferred Compensation Plan for Directors of the Registrant, as amended through October 29, 1988 (incorporated by reference to Exhibit (10)(xx) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997); as amended effective June 24, 1998 (incorporated by reference to Exhibit 10 (xxi) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998). (xxi) 1985 Supplement to Registrant's Deferred Compensation Plan for Directors, as amended through October 29, 1988 (incorporated by reference to Exhibit (10)(xxi) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997); as amended effective June 24, 1998 (incorporated by reference to Exhibit 10 (xxii) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998). (xxii) Restated Directors Capital Accumulation Plan (incorporated by reference to Exhibit (10)(4) of Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended April 4, 1999). (xxiii) Form of Executive Life Insurance Policy for Key Executives. (xxiv) Long Term Incentive Plan effective 1998 (incorporated by reference to Exhibit (10)(2) to Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended March 29, 1998); as amended effective June 24, 1998 (incorporated by reference to Exhibit 10 (xxvi) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998). (xxv) Long Term Incentive Plan effective 1999 (incorporated by reference to Exhibit 10(2) to Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended April 4, 1999). (xvi) Annual Incentive Plan for 1999 (incorporated by reference to Exhibit (10)(1) of Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended April 4, 1999). (xvii) Restated Executive Capital Accumulation Plan effective January 1, 1999 (incorporated by reference to Exhibit (10)(3) of Registrant's Quarterly Report on Form 10-Q for the Quarterly Period ended April 4, 1999). (21) Subsidiaries of the Registrant. (23) Consent of Independent Auditors. (27) Financial Data Schedule (b) Reports on Form 8-K (1) A Form 8-K was filed on October 25, 1999 reporting under Item 5 Registrant's press release reporting financial results for the quarter ended October 3, 1999. Also filed as an exhibit was a copy of the press release. (2) A Form 8-K was filed on November 2, 1999 reporting under Item 5 the completion of the acquisition of Cullman Ventures, Inc. by merger with Mead Acquisition Corp. Also filed as exhibits were a copy of the Agreement and Plan of Merger and a press release. (3) A Form 8-K was filed on December 15, 1999 reporting under Item 5 Registrant's amendment of a Shareholder Rights Plan. Also filed as an exhibit was a copy of the Amendment. 55 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. THE MEAD CORPORATION Date: February 24, 2000 By JEROME F. TATAR --------------------------- Jerome F. Tatar Chairman of the Board, Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: February 24, 2000 By JEROME F. TATAR --------------------------- Jerome F. Tatar Director, Chairman of the Board, Chief Executive Officer and President Date: February 24, 2000 By TIMOTHY R. MCLEVISH --------------------------- Timothy R. McLevish Vice President and Chief Financial Officer (principal financial officer) Date: February 24, 2000 By PETER H. VOGEL, JR. --------------------------- Peter H. Vogel, Jr. Vice President, Finance and Treasurer (principal accounting officer) Date: February 24, 2000 By JOHN C. BOGLE --------------------------- John C. Bogle Director Date: February 24, 2000 By JOHN G. BREEN ---------------------------- John G. Breen Director Date: February 24, 2000 By DUANE E. COLLINS ---------------------------- Duane E. Collins Director 56 Date: February 24, 2000 By WILLIAM E. HOGLUND ---------------------------------- William E. Hoglund Director Date: February 24, 2000 By JAMES G. KAISER ---------------------------------- James G. Kaiser Director Date: February 24, 2000 By ROBERT J. KOHLHEPP ---------------------------------- Robert J. Kohlhepp Director Date: February 24, 2000 By JOHN A. KROL ---------------------------------- John A. Krol Director Date: February 24, 2000 By SUSAN J. KROPF ---------------------------------- Susan J. Kropf Director Date: February 24, 2000 By CHARLES S. MECHEM, JR. ---------------------------------- Charles S. Mechem, Jr. Director Date: February 24, 2000 By HEIDI G. MILLER ---------------------------------- Heidi G. Miller Director Date: February 24, 2000 By LEE J. STYSLINGER, JR. ---------------------------------- Lee J. Styslinger, Jr. Director Date: February 24, 2000 By J. LAWRENCE WILSON ----------------------------------- J. Lawrence Wilson Director 57 THE MEAD CORPORATION EXHIBITS TO FORM 10-K ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1999 58 EX-4.(V) 2 364-DAY AGREEMENT DATED 11/03/1999 Exhibit 4(v) November 3, 1999 THE MEAD CORPORATION Courthouse Plaza Northeast Dayton, Ohio 45463 Attention: Re: 364 Day Revolving Credit Line ----------------------------- Ladies and Gentlemen: Each of the banks listed on Schedule I attached hereto (each a "Lender" and collectively, the "Lenders") is pleased to confirm that it is prepared to make funds available to The Mead Corporation, an Ohio corporation ("Borrower"), for general corporate purposes, including acquisitions, and for a liquidity and back-up facility to the Borrower's commercial paper program, subject to the terms and conditions outlined below. Agent. Bank One, NA, a national banking association with its principal ----- banking office in Chicago, Illinois (the "Agent") shall act as Agent on behalf of the Lenders under this 364 Day Revolving Credit Line Letter Agreement (this "Agreement") and any documents, instruments and notes in connection herewith (collectively, "Loan Documents"). The provisions of Section 9 (other than the first sentence of Section 9.1) of the Credit Agreement, dated as of November 15, 1989, among the Borrower, the banks party thereto and the Agent (as amended, modified and supplemented from time to time, the "Credit Agreement") shall apply to the duties, obligations, rights and powers of the Agent and the Lenders as if such Section 9 (other than the first sentence of Section 9.1) had been set forth herein mutatis mutandis (all references in the Credit Agreement to "Banks", ------- -------- "Agents", "Company", "Agreement", "Notes", "Loan Documents", "Required Banks", "Commitment" and "Loans" shall be deemed to be references to Lenders, Agent, Borrower, Agreement, Notes (as defined below) and Loan Documents, Required Lenders (as defined below), Commitment (as defined below) and Loans (as defined below), respectively, herein and all other defined terms contained in the Credit Agreement shall have the same meaning in this Agreement unless otherwise defined in this Agreement, but shall be interpreted in the context of this Agreement. Interpretation. In the event of the termination or expiration of the -------------- Credit Agreement (or the Commitments (as defined therein) thereunder), any provisions of the Credit Agreement which are expressly made applicable hereunder or expressly incorporated by reference herein as if such provisions had been set forth herein mutatis mutandis shall be deemed to remain in full force and effect ---------------- for purposes of this Agreement in the form in effect immediately prior to such termination or expiration. In the event of any ambiguity in the interpretation of terms and provisions of this Agreement, such terms and provisions shall be construed and interpreted by reference to similar provisions in the Credit Agreement in the context of this Agreement (including, without limitation, the intent and purposes hereof). Commitment. Each Lender severally agrees to make loans ("Loans") to ---------- Borrower in an aggregate principal amount not to exceed at any one time such Lender's maximum commitment as set forth opposite such Lender's name on Schedule I attached hereto as such amount may be reduced in part or in whole by three business days written notice to such Lender (with respect to such Lender, the "Commitment" and, all commitments together, the "Total Commitment"). Borrower may borrow, repay and prepay Loans and reborrow at any time during the period from the date hereof to but excluding the date occurring 364 days after the date of the Notes (the "Availability Period"), subject to the limitations set forth herein and in the promissory notes in favor of each of the Lenders (collectively, the "Notes" or each individually, a "Note"), which shall evidence the Loans and be substantially in the form of Exhibit "A" attached hereto. Termination; Reduction of Commitment. Borrower may, upon at least three ------------------------------------ business days notice to the Agent, terminate at any time, or irrevocably reduce from time to time, the unused amount of the Total Commitment pro rata to the -------- Commitment of each Lender in multiples of $10,000,000 or, if less, the amount of the Total Commitment; provided, that no reduction shall reduce the Total -------- Commitment below the aggregate unpaid principal amount of all Loans then outstanding. All accrued but unpaid facility fees with respect to such terminated or reduced Commitments shall be payable on the effective date of such termination or reduction. Facility Fee. A facility fee shall accrue on the Commitment of each Lender ------------ during the Availability Period at a rate per annum equal to 0.08%, calculated on the basis of a 365/366 day year, for the actual number of days elapsed, and payable quarterly in arrears on the last business day of each calendar quarter. Utilization Fee. A utilization fee shall also accrue on the Commitment of ---------------- each Lender during the Availability Period during any calendar quarter when the daily average sum of the outstanding principal balance of the Loans during such quarter exceeds 33% of the average daily Total Commitments during such quarter, which utilization fee shall be in an amount equal to 0.125% per annum times the daily average outstanding principal amount of the Loans during such quarter. Accrued utilization fees shall be calculated on the basis of 365/366 day year, for the actual number of days elapsed, and shall be payable quarterly in arrears on the last business day of each calendar quarter. Interest Rate. Each Loan shall bear interest as selected by Borrower and ------------- provided in the Notes. Interest Periods; Maturity. Eurodollar Loans (defined in the Notes) and -------------------------- Variable Rate Loans (defined in the Notes) shall be available for interest periods ("Interest Periods") of, at Borrower's selection, one, two, three or six months or such other period as may be agreed upon among the Lenders and the Borrower. Upon three business days notice to the Agent, at the expiration of any Interest Period, Borrower may elect to continue or convert any applicable Loans consistent with the provisions of this Agreement. No Interest Period may extend beyond the date occurring 364 days after the date of the Notes (the "Termination Date"), the date on which all Loans shall finally mature. Payments; Prepayments. All payments and prepayments of principal and --------------------- interest shall be made on the terms and conditions specified in the Notes. Drawdowns; Funding. Borrower may borrow under the Total Commitment by ------------------ giving the Agent notice by 12:00 noon New York City time at least one business day prior to a Variable Rate Loan and at least three business days prior to a Eurodollar Loan. Immediately upon its receipt thereof, the Agent shall deliver copies of such notices to the Lenders. No later than 11:00 a.m. (Chicago time) on the date of the requested Loan, each Lender shall pay to the Agent its pro --- rata portion of the principal amount of the requested Loan to be made on such - ---- date. No later than 2:00 p.m. (Chicago time) on the date of the requested Loan, the Agent shall make available to Borrower the principal amount of the requested Loan. Each requested Loan shall be in a minimum amount of $10,000,000 and in integral multiples of $1,000,000 thereafter. Defaulting Lenders. No Lender shall be responsible for any default by any ------------------ other Lender in fulfilling its obligations hereunder and each Lender shall be obligated to fulfill its obligations hereunder regardless of the failure of any other Lender to fulfill its obligations hereunder. A defaulting Lender shall not be entitled to any facility fees, utilization fees or interest with respect to any amounts not funded by such Lender in breach of its obligations hereunder. The Agent may, in its sole discretion, but shall not be obligated to, fulfill the funding obligations of any defaulting Lender. Conditions of Lending. The obligation of the Lenders to make Loans to --------------------- Borrower is subject to the conditions precedent that (a) in the case of the initial Loan, each Lender shall have received its Note duly executed and delivered by Borrower, and the Agents shall have received (i) a corporate borrowing resolution certified by Borrower's Secretary or Assistant Secretary, (ii) an incumbency certificate of Borrower's Secretary or Assistant Secretary setting forth the names, titles and true signatures of Borrower's officers authorized to sign this Agreement and the Notes, (iii) an opinion of counsel to the Borrower substantially in the form of Exhibit "B" hereto, (iv) the representations and warranties of Borrower in the Credit Agreement shall be true and correct in all material respects as if made on such date (other than the representations and warranties that relate solely to an earlier date which shall be true as of such date) and (b) in the case of all Loans, (i) no Event of Default (or event or circumstance which with the giving of notice or the passage of time or both would constitute an Event of Default (a "Default")) under this Agreement or the Notes has occurred and is continuing, or would result from the making of such Loan, and (ii) the representations and warranties of Borrower herein shall be true and correct in all material respects as if made on such date (other than representations and warranties that relate solely to an earlier date which shall be true as of such date, the representation in clause (h) of the following section and the representation in the following section regarding Year 2000 Issues and the Year 2000 Program). Representations and Warranties. Borrower hereby represents and warrants ------------------------------ that: (a) this Agreement and the Notes when delivered will be the legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally, (b) the execution, delivery and performance by Borrower of this Agreement and the Notes have been authorized by all necessary corporate action and do not and will not contravene Borrower's charter or by-laws or any applicable law or any contractual provision binding on or affecting Borrower, (c) as of the date hereof, there is no Default or Event of Default under this Agreement, (d) there are no pending or threatened actions, suits or proceedings against or affecting the Borrower before any court, governmental agency or arbitrator, which are reasonably likely to, in any one case or in the aggregate, materially adversely affect the financial condition, operations, properties or business of the Borrower or the ability of the Borrower to perform in its obligations under any of the Loan Documents, (e) no part of the proceeds of any Loan shall be used to purchase or carry any "margin stock" (as defined in Regulation U) in violation of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System, (f) to the best of Borrower's knowledge, the financial statement schedules contained in Borrower's most recent 10-K Report are true and accurate, were prepared in accordance with generally accepted accounting principles and fairly present the financial condition of the Borrower at such date, (g) the representations and warranties set forth in Sections 8.4 and 8.6 of the Credit Agreement are true and correct in all material respects, which representations and warranties are incorporated herein by reference as if fully set forth herein, and (h) since December 31, 1998 and except for matters disclosed by the Borrower in any filing since December 31, 1998 with the Securities and Exchange Commission, there has been no change in the business, conditions (financial or otherwise) or results of operations of the Borrower and its subsidiaries which could reasonably be expected to have a Material Adverse Effect. "Material Adverse Effect" means a material adverse effect on (i) the ----------------------- business, property, condition (financial or otherwise), results of operations, or prospects of the Borrower and its subsidiaries taken as a whole, (ii) the ability of the Borrower to perform its obligations under this Agreement or the Notes, or (iii) the validity or enforceability of this Agreement or the Notes or the rights or remedies of the Agent or the Lenders thereunder. In addition, Borrower hereby represents and warrants that it has made an assessment of the Year 2000 Issues and has a program for remediating the Year 2000 Issues on a timely basis (the "Year 2000 Program"). Based on such assessment and on the Year 2000 Program, Borrower does not reasonably anticipate that Year 2000 Issues will have a Material Adverse Effect. As used in this Agreement, "Year 2000 Issues" means anticipated costs, problems and ---------------- uncertainties associated with the inability of certain computer applications to effectively handle data including dates on and after January 1, 2000, as such inability materially affects the business, operations and financial condition of the Borrower and its subsidiaries. Covenants. During the term of this Agreement, Borrower will, for the --------- benefit of the Lenders, perform, comply with and be bound by its agreements, covenants and obligations set forth in Sections 5 and 6 of the Credit Agreement as such Sections may be modified or amended, and subject to any waivers of compliance granted by the Required Banks (as defined therein), from time to time, as if such Sections 5 and 6 had been set forth herein mutatis mutandis. ------- -------- In addition, Borrower covenants and agrees that it will take all such actions as are reasonably necessary to assure that the Borrower's and each subsidiary's computer systems are able to operate and effectively process data including dates on and after January 1, 2000. At the request of the Agent, the Borrower will provide the Agent with assurance acceptable to the Agent of the Borrower's Year 2000 compatibility. Events of Default. Any following events shall be an "Event of Default": ----------------- ---------------- (a) Borrower shall fail to pay (i) the principal of any Note as and when due and payable, or (ii) any interest on, or any other amount due under, any Note or this Agreement within ten (10) days of the due date thereof; (b) any material representation or warranty made by Borrower in any Note, this Agreement or any other Loan Document shall prove to have been incorrect in any material respect on or as of the date made; (c) Borrower shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed, and such failure shall not have been remedied within thirty (30) days after written notice thereof from the Agent or any Lender; (b) Borrower or any Significant Subsidiary (as defined in the Credit Agreement) defaults in the payment of principal of, or interest on, any indebtedness for borrowed money in an amount equal to at least $50,000,000 (other than indebtedness under this Agreement or the Credit Agreement) and such default has not been cured within any period of grace provided with respect thereto; (e) any Event of Default (as defined in the Credit Agreement) shall occur under the Credit Agreement; (f) Borrower or any Significant Subsidiary (i) shall generally not, or be unable to, or shall admit in writing its inability to, pay its debts as its debts become due; (ii) shall make a general assignment for the benefit of creditors; (iii) shall file a petition in bankruptcy or for any relief under any law of any jurisdiction relating to reorganization, arrangement, readjustment of debt, dissolution or liquidation; (iv) shall have any such petition filed against it in which an adjudication is made or order for relief is entered or which shall remain undismissed for a period of 60 days or shall consist nor acquiesce thereto; or (v) shall have had a receiver, custodian or trustee appointed for all or a substantial part of its property; or (g) any "group" (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) acquires 20% or more, in the aggregate, of the capital stock of Borrower entitled, at the time, to vote for the election of Borrower's directors. If an Event of Default shall have occurred and be continuing, the Agent, if directed in writing by Lenders with Commitments aggregating at least 66 2/3% of the Total Commitment (or if the Total Commitment has been terminated, Lenders with Loans aggregating at least 66 2/3% of the total amount of Loans then outstanding) (the "Required Lenders"), shall declare the principal and accrued but unpaid interest ---------------- under the Notes immediately due and payable, and the Agent, if directed in writing by the Required Lenders, shall terminate the Total Commitment. Upon the occurrence of any "bankruptcy" or "insolvency" Event of Default, the Total Commitment shall terminate immediately and the principal and accrued but unpaid interest under the Notes shall be immediately due and payable without requiring any notice or action by the Agents or the Lenders. Amendment and Waiver. With the prior written consent of the Required -------------------- Lenders and Borrower, any provision of this Agreement or any Note may be amended, waived, supplemented, restated, discharged or terminated; except that the written consent of Borrower and all of the Lenders shall be required to extend the final maturity of any Loan or any Note, to reduce the rate of interest on principal or the amount of the facility fee or the utilization fee, to extend the time of payment of principal, interest, the facility fee or the utilization fee, to reduce the amount of unpaid principal of any Loan or any Note, to increase the Commitment of any Lender then in effect, to change the percentage specified in the definition of Required Lenders or to amend, modify or waive this paragraph. Expenses; Indemnification. (i) The Borrower shall reimburse the Agent for ------------------------- any costs, reasonable internal charges and out-of-pocket expenses (including reasonable attorneys' fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent) paid or incurred by the Agent in connection with the preparation, negotiation, execution, delivery, syndication, review, amendment, modification, and administration of the Loan Documents. The Borrower also agrees to reimburse the Agent and the Lenders for any costs, reasonable internal charges and out-of-pocket expenses (including reasonable attorneys' fees and time charges of attorneys for the Agent and the Lenders, which attorneys may be employees of the Agent or the Lenders) paid or incurred by the Agent or any Lender in connection with the collection and enforcement of the Loan Documents. (ii) The Borrower hereby further agrees to indemnify the Agent, each Lender, their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent, any Lender or any affiliate is a party thereto) which any of them may reasonably pay or incur arising out of or relating to this Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Loan hereunder except to the extent that they result from the gross negligence or willful misconduct of the party seeking indemnification. The obligations of the Borrower under this Section shall survive the termination of this Agreement. Setoff. In addition to any rights now or hereafter granted under ------ applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Lender (including without limitation by branches, affiliates and agencies of such Lender wherever located) to or for the credit or the account of the Borrower against and on account of the obligations and liabilities of the Borrower to such Lender under this Agreement and the Notes, including, without limitation, all interests, in obligations purchased by such Lender pursuant to the following paragraph, and all other claims of any nature or description arising out of or connected with this Agreement and the Notes, irrespective of whether or not such Lender shall have made any demand hereunder and although said obligations, liabilities or claims, or any of them, shall be contingent or unmatured. Proration of Excess Payments. The Lenders agree among themselves that, ---------------------------- with respect to all amounts received by them which are applicable to the payment of principal of or interest on the Notes, equitable adjustment will be made so that, in effect, all such amounts will be shared ratably among the Lenders on the basis of the amounts then owed and due to each of them in respect of such obligation, whether received by voluntary payment, by realization upon security, by the exercise of the right of set-off or bankers, lien, by counterclaim or cross action, under or pursuant to this Agreement, the Notes or otherwise. Each of the Lenders agrees that if it should receive any payment on its Notes of a sum or sums in excess of its pro rata portion, then the Lender receiving such -------- excess payment shall purchase for cash from the other Lenders an interest in the Notes of such Lenders in such amount as shall result in a ratable participation by each of the Lenders in the aggregate unpaid amount of all outstanding Notes then held by all of the Lenders. If all or any portion of such excess payment is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Governing Law. This Agreement shall be governed by the laws of the State ------------- of New York. Waiver of Jury Trial. The Agent, the Lenders and the Borrower, after -------------------- consulting or having had the opportunity to consult with counsel, knowingly, voluntarily and intentionally waive any right either of them may have to a trial by jury in any litigation based upon or arising out of this Agreement, the Notes or any related instrument or agreement or any of the transactions contemplated by this Agreement, the Notes or any course of conduct, dealing, statements (whether oral or written) or actions of any of them. Neither the Agent, any Lender nor the Borrower shall seek to consolidate, by counterclaim or otherwise, any such action in which a jury trial has been waived with any other action in which a jury trial cannot be or has not been waived. These provisions shall not be deemed to have been modified in any respect or relinquished by the Agent, any Lender or the Borrower except by a written instrument executed by all of them. Please evidence your acceptance of the foregoing by signing and returning to us the enclosed copy of this Agreement on or before November 3, 1999, the ---------------- date on which our commitment to enter into this Agreement (if not accepted prior thereto) will expire. Very truly yours, BANK ONE, NA, As Agent and a Lender By: Glenn A. Currin -------------------------------------------- GLENN A. CURRIN Title: First Vice President ----------------------------------------- BANK OF AMERICA, N.A. By: Michael Balok -------------------------------------------- MICHAEL BALOK Title: Managing Director ----------------------------------------- CITICORP USA, INC. By: Wolfgang Viragh -------------------------------------------- Title: _________________________________________ DEUTSCHE BANK AG, New York Branch and/or Cayman Islands Branch By: Hans-Josef Thiele -------------------------------------------- Title: Director ----------------------------------------- By: Belinda J. Wheeler -------------------------------------------- Title: Vice President ---------------------------------------- MELLON BANK, NA By: Mark F. Johnston -------------------------------------------- Title: VP ----------------------------------------- MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: Robert Bottamedi -------------------------------------------- ROBERT BOTTAMEDI Title: VICE PRESIDENT ----------------------------------------- THE BANK OF NOVA SCOTIA By: F. C. H. Ashby -------------------------------------------- F. C. H. ASHBY Title: Senior Manager Loan Operations ----------------------------------------- SOCIETE GENERALE By: Jay Sands -------------------------------------------- Title: Managing Director ----------------------------------------- WACHOVIA BANK OF GEORGIA, NA By: Bradford Watkins -------------------------------------------- Title: Vice President ----------------------------------------- THE SUMITOMO BANK, LIMITED By: Peter R. C. Knight -------------------------------------------- Title: S V P ----------------------------------------- Agreed and Accepted: THE MEAD CORPORATION By: Timothy R. McLevish ------------------------------ Title: Vice President-Finance & Treasurer ---------------------------------- Exhibit "A" ----------- Promissory Note --------------- THE MEAD CORPORATION $_____________ November __, 1999 FOR VALUE RECEIVED, the undersigned unconditionally promises to pay to the order of ___________________________(the "Bank"), at the principal office of the Agent, for the account of the Lending Office (as hereinafter defined), the principal amount of each loan endorsed on the schedule attached hereto and made a part hereof (including any continuations, the "Schedule") on the maturity date of such loan as shown on the Schedule, and to pay interest on the unpaid balance of the principal amount of such loan from and including the date of such loan (as shown on the Schedule) to such maturity date at a rate per annum equal to: (a) a variable rate equal to: the higher of (i) the Federal Funds Rate plus 1/2 of 1% and (ii) the Corporate Base Rate (such higher rate being the "Variable Rate" and such loan a "Variable Rate Loan"; or (b) a fixed rate 32/100 of 1% above the Eurodollar Rate applicable to such loan (such loan a "Eurodollar Loan"). Any principal not paid when due shall bear interest from maturity until paid in full at a rate per annum equal to the Default Rate. Interest shall be payable on the relevant Interest Payment Date. Interest shall be calculated on the basis of a year of 365 or 366 days (in the case of Variable Rate Loans) and 360 days (in the case of the Eurodollar Loans) and, in each case, for the actual days elapsed. All payments hereunder shall be made in lawful money of the United States and in immediately available funds. Any extension of time for the payment of the principal of this note resulting from the due date falling on a non- Banking Day shall be included in the computation of interest. The date, and Interest Periods (as defined in the Letter Agreement (as defined below)) of, and the interest rates with respect to, the loans and any payments of principal shall be recorded by the Bank on its books and prior to any transfer of this note (or, at the discretion of the Bank, at any other time) endorsed by the Bank on the Schedule, which shall be conclusive in the absence of manifest error; provided, however, that the Bank's failure to endorse the Schedule shall not affect the Undersigned's obligations hereunder. 1. Related Letter Agreement. Loans evidenced hereby are made pursuant to ------------------------ that certain 364 day revolving credit line letter agreement dated November __, 1999 (as amended, modified or supplemented from time to time, the "Letter Agreement") between the undersigned, the Bank and the other banks party thereto as Lenders, and Bank One, NA (the "Agent"). Capitalized terms used herein and not defined herein shall have the meanings given thereto to the Letter Agreement. 2. Certain Definitions. As used herein, the following terms shall have ------------------- the corresponding meanings: (a) "Banking Day" means (i) with respect to any borrowing, payment or ----------- rate selection of Eurodollar Loans, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago and New York for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system. (b) "Corporate Base Rate" means a rate per annum equal to the ------------------- corporate base rate or prime rate of interest announced by the Agent or its parent, Bank One Corporation, from time to time, changing when and as said corporate base rate or prime rate changes. (c) "Default Rate" means, in respect of any amount not paid when due, ------------ a rate per annum during the period commencing on the due date until such amount is paid in full equal to a rate 2% above the Variable Rate. (d) "Eurodollar Rate" means, with respect to a Eurodollar Loan for the --------------- relevant Interest Period, the sum of (i) the quotient of (a) the average rate per annum (rounded to the nearest 1/16 of 1%) quoted by the Agent at approximately 11:00 a.m. London time (or as soon thereafter as practicable) two Banking Days prior to the first day of an Interest Period during which the Eurodollar Rate will accrue for the offering by the Agent to leading banks in the London interbank market of U.S. dollar deposits having a term comparable to the relevant Loan and in an amount comparable to the Agent's portion of the principal amount of the relevant Loan, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period. (e) "Federal Funds Rate" means, for any day, an interest rate per ------------------ annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Banking Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Banking Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. (f) "Interest Payment Date" means for any loan hereunder, the first --------------------- day commencing after such loan as follows: (i) for any Variable Rate Loan, the last Banking Day of each March, June, September and December; (ii) for any Eurodollar Loan, at three-month intervals; and (iii) for any amount, upon maturity and any repayment. (g) "Lending Office" means the office (or affiliate) as the Bank may -------------- from time to time specify, provided that the Bank shall not be entitled to designate or change the lending office if, as a result, the undersigned shall be required to make any payment pursuant to Section 3 hereof. (h) "Regulation D" means Regulation D of the Board of Governors of the ------------ Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. (i) "Regulatory Change" means any changes after the date hereof in ----------------- United States federal, state or foreign laws or regulations (including Regulation D) or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks including the Bank of or under any United States federal or state, or any foreign, laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. (j) "Reserve Requirement" means, with respect to an Interest Period, ------------------- the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities. 3. Additional Costs, Etc. ---------------------- (a) If, as a result of any Regulatory Change, the Bank determines that the cost to the Bank of making or maintaining any Eurodollar Loan evidenced hereby is increased (including, without limitation, due to increased capital requirements), or any amount received or receivable by the Bank hereunder is reduced, or the Bank is required to make any payment in connection with any transaction contemplated hereby (excluding, however, income, gross or net receipts, franchise or other similar taxes), then the undersigned shall pay to the Bank on demand such additional amount or amounts as the Bank determines in good faith will compensate the Bank for such increased cost, reduction or payment, provided that the foregoing shall not apply to (i) any taxes, or any withholding or deduction of taxes unless the Bank is, on the date hereof, entitled to a complete exemption from withholding or deduction of taxes on all amounts to be received hereunder by the Bank, or (ii) to any taxes (or withholding or deductions with respect thereto) required to be deducted or withheld by reason of the failure of the Bank to comply with applicable certification, information, documentation or other reporting requirements if such compliance is required by treaty, statute or regulation as a precondition to relief or exemption from such taxes, withholding or deductions. (b) If it becomes unlawful for the Bank to maintain any Eurodollar Loan, the Bank shall promptly notify the undersigned, and such loan shall be thereby converted into a Variable Rate Loan on the date specified by the Bank. (c) If there is any payment of a Eurodollar Loan prior to its stated maturity (by reason of acceleration or otherwise) or a Eurodollar Loan is not borrowed or prepaid after a notice of borrowing or prepayment has been received by the Bank, the undersigned will promptly pay the Bank on demand an amount determined by the Bank in good faith sufficient to compensate it for such payment. 4. Events of Default. If an Event of Default shall have occurred and be ----------------- continuing, THEN, in any case, Eurodollar Loans may not be continued for additional interest periods and the Bank may instruct the Agent in writing to declare that the unpaid principal amount of this Note, together with accrued but unpaid interest, shall be immediately due and payable; provided, that such principal, together with accrued but unpaid interest, shall not become immediately due and payable unless the Required Lenders shall have so requested; provided, further, that in the case of an Event of Default under clause (e) of the definition thereof in the Letter Agreement, the unpaid principal amount of this Note, together with accrued interest, shall immediately become due and payable without any notice or other action by the Bank. 5. Miscellaneous. ------------- (a) The undersigned waives presentment, notice of dishonor, protest and any other formality with respect to this Note. (b) The undersigned agrees to reimburse the Bank on demand for all costs, expenses and charges (including, without limitation, reasonable fees and charges of external legal counsel for the Bank and costs allocated by its internal legal department) in connection with the enforcement of this Note and the Letter Agreement. (c) This Note shall be binding on the undersigned and its successors and assigns and shall inure to the benefit of the Bank and its successors and assigns, except that the undersigned may not delegate any obligations hereunder without the prior written consent of the Bank. (d) This Note shall be governed by and interpreted and construed in accordance with the laws of the State of New York, provided that the foregoing is not intended to limit the maximum rate of interest which may be charged or collected by the Bank hereon if, under the law applicable to it, the Bank may charge or collect such interest at a higher rate than is permissible under the law of said State. In no case shall the interest hereon exceed the maximum amount which the Bank may charge or collect under such law applicable to it. THE MEAD CORPORATION By: ____________________________________________ Its: ___________________________________________
Loan Number Amount of Balance Amount and Maturity Payment and Remaining Notation Date Interest Date of Loan Number Unpaid Made by - ---- -------- -- ----------- ------ ------- Rate Loan ---- ----
SCHEDULE I ---------- Lenders ------- Name and Address of Lenders Commitment - ------------------------------------------------ ----------- BANK ONE, NA, a national banking association $27,000,000 with its principal office in Chicago, Illinois c/o Bank One, NA 100 East Broad Street Columbus, Ohio 43215 Attention: Paul Harris Facsimile: (614) 248-5518 BANK OF AMERICA, N.A. $23,000,000 555 California Street, 41/st/ Floor San Francisco, CA 94104 Attention: Michael Balok Facsimile: (415) 622-4585 CITICORP USA, INC. $23,000,000 399 Park Avenue, 8/th/ Floor Zone 6 New York, New York 10043 Attention: Wolfgang Viragh Facsimile: (212) 793-0289 DEUTSCHE BANK AG New York Branch $18,500,000 and/or Cayman Island Branch 31 West 52/nd/ Street 24/th/ Floor New York, New York 10019 Attention: Hans-Josef Thiele Facsimile: (212-469-8212 MELLON BANK, NA $18,500,000 One Mellon Center, Room 4401 Pittsburgh, PA 15258 Attention: George Davis Facsimile: (412) 234-8888 SCHEDULE I ---------- Lenders ------- Name and Address of Lenders Commitment - ------------------------------------------- ----------- MORGAN GUARANTY TRUST COMPANY OF NEW YORK $18,500,000 60 Wall Street New York, New York 10260 Attention: Robert Bottamedi Facsimile: (212) 648-5018 THE BANK OF NOVA SCOTIA $18,500,000 181 West Madison Street Suite 3700 Chicago. Illinois 60602 Attention: Keith Rauschenberger Facsimile: (312) 201-4106 With a copy to: BNS Atlanta Office 600 Peachtree St. Northeast, Suite 2700 Atlanta, GA 30308 Attention: Shannon Dancila Facsimile: (404) 888-8998 SOCIETE GENERALE $18,500,000 181 West Madison Street Suite 3400 Chicago, Illinois 60602 Attention: Michael Lincoln Facsimile: (312) 578-5099 WACHOVIA BANK OF GEORGIA, NA $18,500,000 191 Peachtree Street Northeast, 28/th/ Floor Atlanta, Georgia 30303 Attention: Bradford Watkins Facsimile: (404) 332-6898 THE SUMITOMO BANK, LIMITED $16,000,000 New York Branch 277 Park Avenue New York, New York 10172 Attention: Rohn Laudenschlager Facsimile: (212) 224-4384 EX-10.(I) 3 AMENDED RESTATED RIGHTS AGREEMENT EXHIBIT (10)(i) SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________ FORM 8-A/A AMENDMENT NO. 3 FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 THE MEAD CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 31-0535759 - -------------------------------------------------------------------------------- (State of Incorporation or Organization) (IRS Employer Identification No.) Mead World Headquarters, Courthouse Plaza Northeast Dayton, Ohio 45463 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) If this form relates to the registration If this form relates to the of a class of securities pursuant to registration of a class of Section 12(b) of the Exchange Act and is securities pursuant to Section effective pursuant to General Instruction 12(g) of the Exchange Act and A.(c), please check the following box. [X] is effective pursuant to General Instruction A.(d), please check the following box. [_] Securities Act registration statement file number to which this form relates: N/A - --------------- (If applicable) Securities to be registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which to be so registered each class is to be registered ------------------- ------------------------------ Common Share Stock Purchase New York Stock Exchange Rights (Pursuant to Rights Pacific Stock Exchange Agreement dated as of Chicago Stock Exchange November 9, 1996 and amended as of December 7, 1999 and February 16, 2000 and Certificate of Adjustment dated as of November 1, 1997) Securities to be registered pursuant to Section 12(g) of the Act: None - -------------------------------------------------------------------------------- (Title of Class) This Registration Statement on Form 8-A/A amends and restates the Registration Statement on Form 8-A filed with the Securities and Exchange Commission by The Mead Corporation (the "Company") on November 13, 1996 (the "Original Form 8-A") relating to the rights distributed to the stockholders of the Company (the "Rights") in connection with the Rights Agreement (the "Rights Agreement"), dated as of November 9, 1996, between the Company and BankBoston, N.A. (as successor to The First National Bank of Boston) (the "Rights Agent"), as Rights Agent. On December 7, 1999, the Company and the Rights Agent entered into Amendment No. 1 to the Rights Agreement, which is incorporated herein by reference. On February 16, 2000, the Company and the Rights Agent entered into Amendment No. 2 to the Rights Agreement, which is included as Exhibit 4 hereto and is incorporated herein by reference. Item 1. Description of Securities To Be Registered. ------------------------------------------ On November 9, 1996, the Board of Directors of The Mead Corporation, an Ohio corporation (the "Company"), authorized and granted to each holder of a Common Share, without par value, of the Company (the "Common Shares") outstanding at the close of business on November 14, 1996 (the "Record Date") one Right for each Common Share held as of the Record Date. At such time, each Right entitled the registered holder to purchase from the Company one Common Share (or, in certain other circumstances, other consideration) at a price of $200 (the "Purchase Price"), subject to adjustment in certain circumstances. The Purchase Price may be paid, at the election of the registered holder, in cash, Common Shares or a combination thereof. The description and terms of the Rights are set forth in a Rights Agreement, dated as of November 9, 1996 (the "Rights Agreement"), between the Company and the First National Bank of Boston, a Certificate of Adjustment dated as of November 1, 1997, Amendment No. 1 (the "Amendment No. 1") dated as of December 7, 1999, between the Company and BankBoston, N.A. (as successor to The First National Bank of Boston), as Rights Agent and Amendment No. 2 (the "Amendment No. 2") dated as of February 16, 2000, between the Company and BankBoston, N.A. Initially, the Rights are attached to the certificates representing outstanding Common Shares, and no separate certificates evidencing the Rights (the "Rights Certificates") have been distributed. Until the earlier to occur of (i) ten days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the outstanding Common Shares (the "Share Acquisition Date"), (ii) ten Business Days following the commencement of (or public announcement of the intent to commence) a tender offer or exchange offer by any person or group if upon consummation thereof, such person or group would be the beneficial owner of 20% or more of the outstanding Common Shares or (iii) ten days following a determination by the Board of Directors of the Company that any Person is an Adverse Person (the earliest of such dates being called the "Distribution Date"), the Rights will be evidenced by the Common Share certificates. The Board of Directors of the Company will declare any Person to be an Adverse Person upon their determination that such Person has become the Beneficial Owner of a substantial amount (i.e., not less than 10%) --- of the Common Shares then outstanding and upon the determination by a majority of the independent Directors that: (i) such Beneficial Ownership is intended to cause the Company to repurchase the Common Shares owned by such Person or to cause pressure on the Company to take action intended to provide such person 2 with short-term financial gain which, in their determination, is not in the best long-term interests of the Company and its shareholders or (ii) such Beneficial Ownership is reasonably likely to cause a material adverse impact on the business of the Company. The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred with and only with Common Share certificates. Until the Distribution Date (or earlier redemption or expiration of the Rights), the transfer of any certificate for Common Shares will also constitute the transfer of the Rights associated with the Common Shares represented by such certificate. As soon as practicable following the Distribution Date, Right Certificates will be mailed to holders of record of the Common Shares as of the Close of Business on the Distribution Date and, thereafter, such separate Right Certificates alone will evidence the Rights. The Rights are not exercisable until the Distribution Date and will expire at the Close of Business on November 14, 2006, unless earlier redeemed or extended by the Company as described below. In the event that (i) a person or group becomes an Acquiring Person (other than pursuant to an offer for all outstanding Common Shares at a price and on terms which a majority of the independent Directors determine to be adequate and otherwise to be in the best interests of shareholders) or (ii) the Board of Directors of the Company declares a Person to be an Adverse Person, the Rights Agreement provides that proper provision shall be made so that each holder of a Right will thereafter have the right to receive, upon the exercise thereof, Common Shares (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two (2) times the exercise price of the Right. However, Rights are not exercisable following the occurrence of either of the events set forth above until such time as the Rights are no longer redeemable by the Company as set forth below. Notwithstanding the foregoing, following the occurrence of any of the events set forth in this paragraph, any Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by an Acquiring Person or an Adverse Person shall immediately become null and void. In the event that following the Share Acquisition Date, (i) the Company engages in a merger or consolidation in which the Company is not the surviving corporation, (ii) the Company engages in a merger or consolidation with another person in which the Company is the surviving corporation, but in which all or part of its Common Shares are changes or exchanged, or (iii) 50% or more of the Company's assets or earning power is sold or transferred (except with respect to clause (i) and (ii), a "cleanup" merger which follows an offer described in the preceding paragraph), the Rights Agreement provides that proper provision shall be made so that each holder of a Right shall thereafter have the right to receive, upon the exercise thereof, Common Shares of the acquiring company having a value equal to two (2) times the exercise price of the Right. The events set forth in this paragraph and in the preceding paragraph are referred to as the "Triggering Events." The Purchase Price payable, and the number of Common Shares issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Common Shares, (ii) upon the grant to holders of the Common Shares of certain rights or warrants to subscribe for Common Shares or securities convertible into Common Shares at less than the current market price of the Common Shares, or (iii) upon the distribution to 3 holders of the Common Shares of evidences of indebtedness or assets (excluding regular quarterly dividends) or of subscription rights or warrants (other than those referred to above). With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. No fractional Common Shares will be issued upon exercise of the Rights and, in lieu thereof, a cash payment will be made based on the market price of the Common Shares on the last trading date prior to the date of exercise. At any time after the date of the Rights Agreement until ten days following the Share Acquisition Date, the Board of Directors of the Company may redeem the Rights in whole, but not in part, at the then current redemption price per Right, payable in cash or stock (the "Redemption Price"). Immediately upon the action of the Board of Directors of the Company ordering redemption of the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. The foregoing notwithstanding, the Rights may not be redeemed at any time subsequent to the Board of Directors' determination that any Person is an Adverse Person. Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the Rights will not be taxable to shareholders or to the Company, shareholders may, depending upon the circumstances, recognize taxable income in the event that a Triggering Event shall occur. Any of the provisions of the Rights Agreement may be amended by the Board of Directors of the Company prior to the Distribution Date. After the Distribution Date, the provisions of the Rights Agreement may be amended by the Board of Directors of the Company in order to cure any ambiguity, defect or inconsistency; to shorten or lengthen any time period under the Rights Agreement; or in any other respect that will not adversely affect the interests of holders of Rights; provided, however, that no amendment may be made at such -------- ------- time as the Rights are not redeemable. As of November 5, 1996, there were 52,261,831 Common Shares outstanding, 13,964,589 shares held in the treasury and 8,845,593 Common Shares authorized for issuance upon exercise of options granted under the Company's employee benefit plans. Each outstanding Common Share on November 14, 1996, will receive one Right. As long as the Rights are attached to the Common Shares and in certain other circumstances specified in the Rights Agreement, the Company will issue one Right for each Common Share issued on or after November 14, 1996. The Rights may have certain anti-takeover effects. The Rights will cause substantial dilution to a person or group that attempts to acquire the Company without conditioning the offer on a substantial number of Rights being acquired. The Rights should not interfere with any merger or other business combination approved by the Board of Directors of the Company since the Board of Directors may, at its option, at any time prior to ten days following the Share Acquisition Date redeem all but not less than all the then outstanding Rights. 4 On November 1, 1997, the Board of Directors of the Company declared a two-for-one stock split to be effectuated through the distribution on December 1, 1997 of one Common Share to the holder of record of each Common Share outstanding at the close of business on November 12, 1997 (the "Share Distribution"). Certain computational adjustments under the Rights Agreement are required as a consequence of the Share Distribution. Pursuant to Sections 11, 12 and 23 of the Rights Agreement, effective as of the close of business on November 12, 1997: (a) the Purchase Price will be adjusted from $200 to $100; (b) the Redemption Price will be adjusted from $0.01 to $0.0O5; and (c) the number of Rights outstanding will be adjusted, in lieu of any adjustment in the number of Common Shares issuable upon the exercise of a Right, by issuing one new Right attached to each Common Share in the Share Distribution. A copy of Amendment No. 2 is attached hereto as Exhibit 4 and is incorporated herein by reference. The foregoing description of the Rights does not purport to be complete and is qualified in its entirety by reference to such Exhibit. Item 2. Exhibits. -------- 1 Rights Agreement, dated as of November 9, 1996, between The Mead Corporation and BankBoston, N.A. (as successor to the First National Bank of Boston), as Rights Agent, including the form of Rights Certificate as Exhibit A and the Summary of Rights to Purchase Common Stock as Exhibit B. Pursuant to the Rights Agreement, printed Rights Certificates will not be mailed until after the earlier of (i) the tenth day after the Share Acquisition Date (ii) the tenth Business Day after the date of the commencement of a tender or exchange offer by any person or group of affiliated or associated persons, if upon consummation thereof, such person or group would be the beneficial owner of 20% or more of such outstanding Common Shares or (iii) the tenth day after the Board of Directors determines that a person is an Adverse Person. (Incorporated by reference to Exhibit 1 to the Company's Registration Statement on Form 8-A dated November 13, 1996.) 2 Certificate of Adjustment dated as of November 1, 1997 made by the Mead Corporation in accordance with the Rights Agreement. (Incorporated by reference to Exhibit 2 to the Company's Registration Statement on Form 8-A/A-1 dated November 3, 1997.) 3 Amendment No. 1 to the Rights Agreement, dated as of December 7, 1999, between The Mead Corporation and BankBoston, N.A. (as successor to the First National Bank of Boston), as Rights Agent. (Incorporated by reference to Exhibit 3 to the Company's Registration Statement on Form 8-A/A-1 dated December 15, 1999.) 4 Amendment No. 2 to the Rights Agreement, dated as of February 16, 2000, between The Mead Corporation and BankBoston, N.A. (as successor to the First National Bank of Boston), as Rights Agent. 5 SIGNATURE Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: March 6, 2000 THE MEAD CORPORATION By: /s/ Timothy R. McLevish ---------------------------- Name: Timothy R. McLevish Title: Vice President and Chief Financial Officer 6 EXHIBIT INDEX ------------- Exhibit Description - ------- ----------- 1 Rights Agreement, dated as of November 9, 1996, between The Mead Corporation and BankBoston, N.A. (as successor to the First National Bank of Boston), as Rights Agent, including the form of Rights Certificate as Exhibit A and the Summary of Rights to Purchase Common Stock as Exhibit B. Pursuant to the Rights Agreement, printed Rights Certificates will not be mailed until after the earlier of (i) the tenth day after the Share Acquisition Date (ii) the tenth Business Day after the date of the commencement of a tender or exchange offer by any person or group of affiliated or associated persons, if upon consummation thereof, such person or group would be the beneficial owner of 20% or more of such outstanding Common Shares or (iii) the tenth day after the Board of Directors determines that a person is an Adverse Person. (Incorporated by reference to Exhibit 1 to the Company's Registration Statement on Form 8-A dated November 13, 1996.) 2 Certificate of Adjustment dated as of November 1, 1997 made by the Mead Corporation in accordance with the Rights Agreement. (Incorporated by reference to Exhibit 2 to the Company's Registration Statement on Form 8-A/A-1 dated November 3, 1997.) 3 Amendment No. 1 to the Rights Agreement, dated as of December 7, 1999, between The Mead Corporation and BankBoston, N.A. (as successor to the First National Bank of Boston), as Rights Agent. (Incorporated by reference to Exhibit 3 to the Company's Registration Statement on Form 8-A/A dated December 15, 1999.) 4 Amendment No. 2 to the Rights Agreement, dated as of February 16, 2000, between The Mead Corporation and BankBoston, N.A. (as successor to the First National Bank of Boston), as Rights Agent. 7 AMENDMENT NO. 2 TO THE RIGHTS AGREEMENT --------------------------------------- Amendment No. 2 to the Rights Agreement, dated as of February 16, 2000 -- (the "Amendment"), by and between The Mead Corporation, an Ohio corporation (the "Company"), and BankBoston, N.A. (formerly The First National Bank of Boston), a national banking association organized under the laws of the United States of America, as Rights Agent (the "Rights Agent"). WHEREAS, the Company and the Rights Agent entered into a Rights Agreement on November 9, 1996 and Amendment No. 1 on December 7, 1999 thereto (collectively, the "Agreement"); WHEREAS, pursuant to Section 26 of the Agreement, the Company has determined to modify the terms of the Agreement in certain respects. NOW, THEREFORE, in consideration of the promises and mutual agreements herein set forth, and intending to be legally bound hereby, the parties hereto agree that the Agreement shall be and hereby is amended in the following manner: Section 1. Amendment of Reservation and Availability of Common Shares. ---------------------------------------------------------- Section 9(a) of the Agreement is hereby amended in its entirety to read as follows: "The Company covenants and agrees that from after the time that the Rights first become exercisable and except as provided in Section 11(a)(iii) or in the following sentence, the Company will cause to be reserved and kept available for issuance upon exercise of the Rights out of its authorized and unissued Common Shares or Common Shares held in its treasury, all Common Shares which are not reserved for other purposes. The foregoing notwithstanding, if at the time the Rights first become exercisable (other than as a result of a Triggering Event), the sum of the number of authorized, but unissued Common Shares and the number of Common Shares held in treasury (including for this purpose the number of authorized, but unissued shares or treasury shares reserved for issuance upon exercise of the Rights) minus the number of Common Shares (whether authorized, but unissued shares or treasury shares) reserved for issuance for purposes other than upon exercise of the Rights is not sufficient to permit the exercise in full of the Rights for Common Shares, each Right shall thereafter be exercisable for a fraction of a Common Share and such other consideration designated by the Board of Directors of the Company which the Board of Directors of the Company has determined, based on the advice of a nationally recognized investment banking firm selected by the Board of Directors of the Company, to have a value equal to the Common Share (or fraction thereof) for which the Right may otherwise have been exercisable. Common Shares shall not be deemed reserved hereunder and, as such, unavailable for other purposes, unless and until the Rights first become exercisable. The provisions of this Section 9(a) shall be interpreted in a manner consistent with Section 11(a)(iii)". Section 2. Amendment of Appointment of Rights Agent. Section 2 of the ---------------------------------------- Agreement is hereby amended by inserting the following which appears at the end thereof: ", upon ten (10) days' prior written notice to the Rights Agent. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such co-Rights Agent". Section 3. Amendment of Concerning the Rights Agent. Section 18 is hereby ---------------------------------------- amended by inserting the word "gross" in front of the words "negligence, bad faith or willful misconduct" in the tenth line of Section 18. Section 4. Amendment of Duties of Rights Agent. Section 20(c) is hereby ----------------------------------- amended by inserting the word "gross" in front of the words "negligence, bad faith or willful misconduct" in the second line of Section 20. Section 5. Changing the Name of Rights Agent. All references in the --------------------------------- Agreement to "The First National Bank of Boston" are hereby amended to read "BankBoston, N.A." Section 6. "Agreement" as Amended. The term "Agreement" as used in the --------------------- Agreement shall be deemed to refer to the Agreement as amended hereby, and all references to the Agreement shall be deemed to include this Amendment. Section 7. Effectiveness. This Amendment shall be effective as of the date ------------- first written above, and except as set forth herein, the Agreement shall remain in full force and effect and otherwise shall be unaffected hereby. 2 Section 8. Counterparts. This Amendment may be executed in two or more ------------ counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and attested as of the date first written above. THE MEAD CORPORATION By: /s/ TIMOTHY R. MCLEVISH ------------------------ Name: Timothy R. McLevish Title: Vice President and CFO BANKBOSTON, N.A. By: /s/ TYLER H. HAYNES -------------------- Name: Tyler H. Haynes Title: Director, Client Services 4 EX-10.(VI) 4 LEASE AGREEMENT DATED 09/01/1997 EXHIBIT 10(vi) LEASE AGREEMENT between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA and MEAD COATED BOARD, INC. Dated as of September 1, 1997 This Lease Agreement and all right, title and interest of The Industrial Development Board of the City of Phenix City, Alabama in any rental payments and other receipts and revenues derived under this Lease Agreement have been assigned to AmSouth Bank of Alabama, as Trustee under the Trust Indenture, dated as of even date herewith, from The Industrial Development Board of the City of Phenix City, Alabama, which secures $150,000,000 in aggregate principal amount of The Industrial Development Board of the City of Phenix City, Alabama Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1997A and Additional Bonds as permitted and provided for under said Trust Indenture. This instrument prepared by: Thompson Hine & Flory LLP 312 Walnut Street 14th Floor Cincinnati, Ohio 45202 LEASE AGREEMENT --------------- TABLE OF CONTENTS ----------------- (The Table of Contents for this Lease Agreement is for convenience of reference only and is not intended to define, limit or describe the scope or intent of any provisions of this Lease Agreement.)
Page ---- ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION 1 Section 1.1 - Definitions 1 Section 1.2 - Rules of Construction 5 ARTICLE II REPRESENTATIONS AND WARRANTIES 5 Section 2.1 - Representations and Warranties by the Board 5 Section 2.2 - Representations and Warranties by the Company 8 ARTICLE III LEASING CLAUSES AND TITLE 9 Section 3.1 - Lease of the Project 9 Section 3.2 - Warranty of Title 9 Section 3.3 - Quiet Enjoyment 9 ARTICLE IV COMPLETION OF THE PROJECT FACILITIES; ISSUANCE OF THE BONDS 9 Section 4.1 - Agreement to Acquire, Construct and Install the Project Facilities 10 Section 4.2 - Agreement to Issue Bonds; Application of Bond Proceeds 10 Section 4.3 - Company Required to Pay Costs if Project Fund Insufficient 10 Section 4.4 - Board to Pursue Remedies Against Suppliers, Contractors and Subcontractors and Their Sureties 11 Section 4.5 - Issuance of Additional Bonds 11 ARTICLE V EFFECTIVE DATE OF THIS AGREEMENT; DURATION OF LEASE TERM; RENTAL PROVISIONS 12 Section 5.1 - Effective Date of This Agreement; Duration of Lease Term 12 Section 5.2 - Delivery and Acceptance of Possession 12 Section 5.3 - Rents and Other Amounts Payable 12 Section 5.4 - Place of Rental Payments 13 Section 5.5 - Obligations of Company Hereunder Absolute and Unconditional 13 Section 5.6 - Company's Performance Under Indenture 14 Section 5.7 - Payments in Lieu of Taxes 14 ARTICLE VI MAINTENANCE, MODIFICATION, TAXES AND INSURANCE 15 Section 6.1 - Maintenance and Modification of Project Facilities by Company 15 Section 6.2 - Removal of Portions of Project 16 Section 6.3 - Taxes, Other Governmental Charges and Utility Charges 16 Section 6.4 - Insurance Required 18 Section 6.5 - Application of Net Proceeds of Insurance 18 Section 6.6 - Additional Provisions Respecting Insurance 18 Section 6.7 - Other Board Expenses 18 Section 6.8 - Advances by Board or Trustee 19 Section 6.9 - Indemnification of Board and Trustee 19 Section 6.10 - Investment Credit 20 ARTICLE VII DAMAGE, DESTRUCTION AND CONDEMNATION 20 Section 7.1 - Damage and Destruction 20
Section 7.2 - Condemnation 20 Section 7.3 - Condemnation of Company-Owned Property 21 Section 7.4 - Further Assurances and Corrective Instruments 21 ARTICLE VIII SPECIAL AGREEMENTS 21 Section 8.1 - No Warranty of Condition or Suitability by the Board 21 Section 8.2 - Inspection of the Project 21 Section 8.3 - Company to Maintain Its Corporate Existence; Exceptions Permitted 22 Section 8.4 - Qualification in the State 22 Section 8.5 - Granting of Easements 22 Section 8.6 - Release of Certain Land 23 ARTICLE IX ASSIGNMENT, SUBLEASING, PLEDGING AND SELLING; REDEMPTION; RENT PREPAYMENT AND ABATEMENT 24 Section 9.1 - Assignment and Subleasing 24 Section 9.2 - Pledge under Indenture 24 Section 9.3 - Restrictions on Sale of Project by Board 25 Section 9.4 - Redemption of Bonds 25 Section 9.5 - Prepayment of Rents 25 Section 9.6 - Rent Abatements if Bonds Paid Prior to Maturity 25 Section 9.7 - Reference to Bonds Ineffective After Bonds Paid 26 ARTICLE X EVENTS OF DEFAULT AND REMEDIES 26 Section 10.1 - Events of Default Defined 26 Section 10.2 - Remedies 27 Section 10.3 - No Remedy Exclusive 28 Section 10.4 - Agreement to Pay Attorneys' Fees and Expenses 28 Section 10.5 - No Additional Waiver Implied by One Waiver 28 Section 10.6 - Waiver of Appraisement, Valuation, etc. 28 Section 10.7 - Waiver of Events of Default 28 ARTICLE XI OPTIONS IN FAVOR OF COMPANY; OBLIGATION TO PURCHASE PROJECT 29 Section 11.1 - General Option to Prepay Rent and Purchase Project 29 Section 11.2 - Conveyance on Purchase 29 Section 11.3 - Relative Positions of Options and Indenture 30 ARTICLE XII MISCELLANEOUS 30 Section 12.1 - Notices 30 Section 12.2 - Binding Effect 31 Section 12.3 - Severability 31 Section 12.4 - Amounts Remaining in Bond Fund 31 Section 12.5 - Amendments, Changes and Modifications 31 Section 12.6 - Execution Counterparts 31 Section 12.7 - Captions 31 Section 12.8 - Recording of Agreement 31 Section 12.9 - Law Governing Construction of Agreement 32 Section 12.10 - Net Lease 32 EXHIBIT "A" - DESCRIPTION OF PROJECT LAND A-1
LEASE AGREEMENT THIS LEASE AGREEMENT, made and entered into as of September 1, 1997, by and between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA (the "Board"), a public corporation organized and existing under the laws of the State of Alabama, as lessor, and MEAD COATED BOARD, INC. (the "Company"), a corporation organized and existing under the laws of the State of Delaware and qualified to do business in the State of Alabama, as lessee; WITNESSETH: In consideration of the respective representations and agreements hereinafter contained, the Board and the Company agree as follows (provided, that in the performance of the agreements of the Board herein contained, any obligation it may thereby incur for the payment of money shall not be a general debt on its part but shall be payable solely out of the rents, payments and revenues derived from this Lease Agreement, the sale of the "Bonds" as hereinafter defined, the insurance and condemnation awards herein described and any other revenues arising out of or in connection with its ownership of the "Project" as hereinafter defined): ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION Section 1.1 - Definitions. In addition to the words and terms elsewhere defined herein, the following words and terms as used herein shall have the following meanings unless the context or use clearly indicates another or different meaning or intent, and any other words and terms defined in the Indenture shall have the same meanings when used herein as assigned them in the Indenture unless the context or use clearly indicates another or different meaning or intent: "Act" means the statutes codified as Code of Alabama 1975, Title 11, Chapter 54, Article 4, as amended and supplemented and at the time in force and effect; "Additional Bonds" means the bonds of any series, other than the Bonds, authorized under the Indenture and authenticated and delivered in accordance with Section 401 of the Indenture. "Agreement" means this Lease Agreement as it now exists and as it may hereafter be amended pursuant to Section 12.5 of this Lease Agreement and Article XV of the Indenture; "Authorized Board Representative" means the person at the time designated to act on behalf of the Board by written certificate furnished to the Company and the Trustee containing the specimen signature of such person and signed on behalf of the Board by its Chairman or Vice Chairman. Such certificate may designate an alternate or alternates; "Authorized Company Representative" means the person at the time designated to act on behalf of the Company by written certificate furnished to the Board and the Trustee containing the specimen signature of such person and signed on behalf of the Company by the President or any Vice President of the Company. Such certificate may designate an alternate or alternates; "Board" means The Industrial Development Board of the City of Phenix City, Alabama, a public corporation of the State, and its successors and assigns; "Bond Fund" means the Bond principal and interest payment fund created pursuant to Section 702 of the Indenture and within which have been established a general account and a special account. Any reference herein to the "Bond Fund" without further limitation or explanation shall be deemed to be a reference to the general account in the Bond Fund; "bondholder" or "holder of the Bonds" means the registered owner of any Bond; "Bonds" means the $150,000,000 in aggregate principal amount of The Industrial Development Board of the City of Phenix City, Alabama Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1997A, issued pursuant to the Indenture; "City" means the City of Phenix City, Alabama, a municipal corporation of the State; "Company" means the corporation designated as such in the first paragraph hereof and its successors and assigns, including any surviving, resulting or transferee corporation as provided in Section 8.3; "default" means an event or condition the occurrence of which would, with the lapse of time or the giving of notice or both, become an Event of Default; "Event of Default" means one of the events so denominated and described in Section 10.1; "Government Obligations" means (a) direct obligations of the United States of America, (b) obligations unconditionally guaranteed by the United States of America and (c) securities or receipts evidencing ownership interests in obligations or specified portions (such as principal or interest) of obligations described in (a) or (b); "Indenture" means the Trust Indenture, of even date herewith, between the Board and the Trustee, including any indenture supplemental thereto; "Lease Term" means the duration of the leasehold interest created hereby as specified in Section 5.1; "Net Proceeds", when used with respect to any insurance or condemnation award, means the gross proceeds from the insurance or condemnation award with respect to which that term is used remaining after payment of all expenses (including attorneys' fees and any Extraordinary Expenses of the Trustee as defined in the Indenture) incurred in the collection of such gross proceeds; "Notes" means those unpaid and outstanding industrial development notes issued by the Board, pursuant to resolutions of the Board to finance the costs of the Project; "payment in full of the Bonds" specifically encompasses the situations described in Article X of the Indenture; "Permitted Encumbrances" means, as of any particular time, (a) liens for ad valorem taxes, special assessments or other governmental charges not then delinquent or permitted to exist as provided in Section 6.3; (b) this Agreement and the security interests created herein; (c) such utility, access or other easements and rights-of-way, restrictions, reservations, reversions and exceptions as the Authorized Company Representative certifies will not materially interfere with or impair the operation of the Project (or, if it is not being operated, the operations for which it was designed or last modified); (d) unfiled and inchoate mechanics' and materialmen's liens for construction work in progress; (e) mechanics', materialmen's, suppliers' and vendors' liens or other similar liens not then payable, and those permitted to exist as provided in Section 6.1; (f) such minor defects, irregularities, encumbrances, easements, rights-of-ways and clouds on title as the Authorized Company Representative certifies do not, in the aggregate, materially impair the property affected thereby for the purpose for which it was acquired or is held by the Board or the Company; (g) that certain Lease Agreement dated as of November 1, 1983 between Georgia Kraft Company and the Board, as amended in an Assignment, Assumption and Amendatory Lease Agreement dated as of January 4, 1988 among the Board, Georgia Kraft Company and the Company; (h) that certain Lease Agreement dated as of December 1, 1983 between Georgia Kraft Company and the Board, as amended in an Assignment, Assumption and Amendatory Lease Agreement dated as of January 4, 1988 among the Board, Georgia Kraft Company and the Company; (i) that certain Lease Agreement dated as of December 1, 1985 between Georgia Kraft Company and the Board, as amended in an Assignment, Assumption and Amendatory Lease Agreement dated as of January 4, 1988 among the Board, Georgia Kraft Company and the Company; (j) that certain Lease Agreement dated as of July 1, 1986 between Georgia Kraft Company and the Board, as amended in an Assignment, Assumption and Amendatory Lease Agreement dated as of January 4, 1988 among the Board, Georgia Kraft Company and the Company; (k) that certain Lease Agreement dated as of December 1, 1988 between the Company and the Board executed in connection with the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1988; (l) that certain Lease Agreement dated as of December 1, 1988 between the Company and the Board in connection with the Board's Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1988A, 1989A, 1989B, 1989C, 1989D, 1989E, 1990A, 1991A and other bonds of the Board, as amended and supplemented from time to time; (m) that certain Lease Agreement dated as of September 1, 1990 between the Company and the Board in connection with the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1990A; (n) that certain Lease Agreement dated as of October 1, 1990 between the Company and the Board in connection with the Board's Environmental Improvement Revenue Refunding Bonds (Mead Coated Board Project), Series 1990B; (o) that certain Lease Agreement dated as of June 1, 1993 between the Company and the Board in connection with the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1993A; (p) that certain Lease Agreement dated as of June 1, 1993 between the Company and the Board in connection with the Board's Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1993A, 1995A and other bonds of the Board, as amended and supplemented from time to time; and (q) that certain Lease Agreement dated as of March 1, 1996 between the Company and the Board in connection with the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1996; "person" means natural persons, firms, associations, corporations and public bodies; "Project" means the Project Land and the Project Facilities, as they may at any time exist; "Project Facilities" means the facilities acquired, constructed and installed with proceeds from the sale of the Notes, to the extent such Notes are refunded from the proceeds of the sale of the Bonds, as they may at any time exist; "Project Fund" means the fund created pursuant to Section 601 of the Indenture; "Project Land" means the real property described in Exhibit "A" attached hereto and by this reference made a part hereof, less such real property as may be released from this Agreement pursuant to Section 8.6 or taken by the exercise of the power of eminent domain as provided in Section 7.2; "security interest" or "security interests" shall refer to the security interests created herein and in the Indenture and shall have the meaning set forth in the Uniform Commercial Code of the State; "State" means the State of Alabama; "Trustee" means AmSouth Bank of Alabama, or any co-trustee or any successor trustee under the Indenture. Section 1.2 - Rules of Construction. Unless the context clearly indicates to the contrary: (a) "Herein", "hereby", "hereunder", "hereof", "hereinbefore", "hereinafter" and other equivalent words refer to this Agreement and not solely to the particular Article, Section or subdivision hereof in which such word is used. (b) Words importing the singular number shall include the plural number and vice versa, and any pronoun used herein shall be deemed to cover all genders. (c) All references herein to particular Articles or Sections are references to Articles or Sections of this Agreement. ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1 - Representations and Warranties by the Board. The Board makes the following representations and warranties as the basis for the undertakings on its part herein contained: (a) Organization and Authority. The Board is a public corporation -------------------------- duly organized and validly existing under the provisions of the Act by authority of a resolution adopted by the Board of Commissioners of the City on June 14, 1960 and a Certificate of Incorporation duly filed for record on October 17, 1960, in the office of the Judge of Probate of Russell County, Alabama, which Certificate of Incorporation has not been amended or been revoked and is of full force and effect. The Board has all requisite power and authority under the Act (1) to issue the Bonds, (2) to use the proceeds thereof to refund the Notes issued to pay the cost to acquire, construct and install the Project Facilities, (3) to own, lease, encumber and dispose of the Project, and (4) to enter into, and perform its obligations under, the Indenture and this Agreement. This Agreement and the Indenture have been duly authorized, executed and delivered by the Board and are legal, valid and binding agreements enforceable against the Board in accordance with their respective terms. (b) Pending Litigation. There are no actions, suits, proceedings, ------------------ inquiries or investigations pending, or to the knowledge of the Board threatened, against or affecting the Board in any court or before any governmental authority or arbitration board or tribunal, which adversely affect the validity or enforceability of the Bonds, the Indenture, this Agreement, or any agreement or instrument to which the Board is a party and which is used or contemplated for use in the consummation of the transactions contemplated hereby or thereby. (c) Issue, Sale and Other Transactions Are Legal and Authorized. The ----------------------------------------------------------- issue and sale of the Bonds and the execution and delivery by the Board of the Indenture and this Agreement and the compliance by the Board with all of the provisions of each thereof and of the Bonds (i) are within the purposes, powers and authority of the Board, (ii) to the best of the knowledge of the Board, have been done in full compliance with the provisions of the Act, are legal and will not conflict with or constitute on the part of the Board a violation of or a breach of or default under, or result in the creation of any lien or encumbrance (other than Permitted Encumbrances) upon any property of the Board under the provisions of, its Certificate of Incorporation or Bylaws, or any indenture, mortgage, deed of trust, note agreement or other agreement or instrument to which the Board is a party or by which the Board is bound, or any license, judgment, decree, law, statute, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Board or any of its activities or properties, and (iii) have been duly authorized by all necessary corporate action on the part of the Board. (d) Governmental Consents. Neither the nature of the Board nor any of --------------------- its activities or properties, nor any relationship between the Board and any other person, nor any circumstance in connection with the offer, issue, sale or delivery of any of the Bonds is such as to require the consent, approval or authorization of, or the filing, registration or qualification with, any governmental authority on the part of the Board in connection with the execution, delivery and performance of the Indenture and this Agreement, or the offer, issue, sale or delivery of the Bonds, other than (i) the filing with the Alabama Securities Commission of the notification of the Board's intention to issue the Bonds required by Act No. 586 enacted at the 1978 Regular Session of the Legislature of the State and the issuance by the Director of the Alabama Securities Commission of such Certificate of Notification as may be required by said Act, and (ii) the due filing and recording of this Agreement, the Indenture and the financing statements covering the security interests created hereunder and under the Indenture. The Board has filed the notification referred to in (i) of the preceding sentence and the Director of the Alabama Securities Commission has issued a Certificate of Notification applicable to the Bonds, which Certificate of Notification has not been revoked or rescinded and is in full force and effect. (e) No Defaults. The Board is not in default under the Act or under ----------- its Certificate of Incorporation or Bylaws or any other agreement or instrument to which it is a party or by which is bound. (f) No Prior Pledge. Neither the Project, this Agreement nor any of --------------- the payments to be received by the Board under this Agreement have been mortgaged, pledged or hypothecated in any manner or for any purpose other than as provided in the Indenture as security of the payment of the Bonds. (g) Nature and Location of Project. The Project will constitute a ------------------------------ "project" within the meaning of the Act, and the acquisition, construction and installation of the Project Facilities is in furtherance of the public purpose of the Act. The Project will be located within 25 miles of the corporate limits of the City, and no part thereof is located within the corporate limits or the police jurisdiction of any other incorporated municipality or any county of any state other than Russell County, Alabama. (h) Official Action. By resolutions duly adopted on November 3, 1987, --------------- January 20, 1988, August 31, 1988, February 27, 1991, October 22, 1991 and December 19, 1991, the Board took official action providing for the acquisition, construction and installation of the Project Facilities and the financing of the Project Facilities through the issuance of the Bonds. Section 2.2 - Representations and Warranties by the Company. The Company makes the following representations and warranties as the basis for the undertakings on its part herein contained: (a) The Company (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) has all requisite corporate power and authority to carry on its business as now being conducted and as presently proposed to be conducted, and (ii) has duly qualified and is authorized to do business and is in good standing as a foreign corporation in the State. (b) The Company has the corporate power and has been duly authorized to enter into this Agreement and to perform all of its obligations hereunder and thereunder. (c) The willingness of the Board to issue the Bonds for purposes of financing costs of acquiring, constructing, and installing the Project, and to lease the Project to the Company, has induced the Company to locate the Project within the State of Alabama and, more particularly, within 25 miles of the City. (d) The Project will create or preserve jobs and employment opportunities within the boundaries of the State of Alabama, thereby improving the economic welfare of the State of Alabama and the City. (e) The acquisition, construction, and installation of any part of the Project was not commenced, and no item which constitutes a part of the Project was ordered, prior to the date of the resolution referred to in Section 2.1(h) above that refers to such part of the Project. (f) The Company is not subject to any contractual or other limitation or provision of any nature whatsoever which in any material way limits, restricts or prevents the Company from entering into this Agreement, or performing any of its obligations hereunder; and the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, and the fulfillment of or compliance with the terms and conditions of this Agreement will not conflict with or result in a breach of the terms, conditions or provisions of any restriction, agreement or instrument to which the Company is a party or by which it is bound, or constitute a default under any of the foregoing. (g) The acquisition, construction, and installation of the Project will comply in all material respects with all applicable zoning, planning, building, environmental and other regulations of the governmental authorities having jurisdiction of the Project, and all necessary permits, licenses, consents and permissions necessary for the Project have been or will be obtained. (h) The acquisition, construction, and installation of the Project as well as its intended use and operation are in complete conformance with the purposes and provisions of the Act. (i) No event has occurred and no condition exists that would constitute an "Event of Default" under this Agreement which, with the lapse of time or with the giving of notice or both, would become an "Event of Default" under this Agreement. (j) To the best of its knowledge and belief, the Company is not in violation of any laws, ordinances, governmental rules or regulations to which it is subject and has not failed to obtain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of its properties or to the conduct of its business, which violation or failure to obtain would reasonably be expected to materially and adversely affect the ability of the Company to perform its obligations under this Agreement. ARTICLE III LEASING CLAUSES AND TITLE Section 3.1 - Lease of the Project. The Board hereby leases to the Company, and the Company hereby leases from the Board, the Project at the rent set forth in Sections 5.3 and 5.7 and in accordance with the provisions hereof. Section 3.2 - Warranty of Title. The Board for itself, its successors and assigns, warrants to the Company, its successors and assigns, that it has good and marketable fee simple title in and to the Project Land free from all encumbrances except Permitted Encumbrances. Upon the execution and delivery of this Agreement, the Board agrees that it will furnish to the Company an opinion of the Board's counsel stating that the Board holds such title in and to the Project Land. Section 3.3 - Quiet Enjoyment. The Board warrants and covenants that it will defend the Company in the quiet enjoyment and peaceable possession of the Project, and all appurtenances thereto belonging, free from all claims of all persons whomsoever, throughout the Lease Term, so long as the Company shall perform the covenants, conditions and agreements to be performed by it hereunder, or so long as the period for remedying any default in such performance shall not have expired. ARTICLE IV COMPLETION OF THE PROJECT FACILITIES; ISSUANCE OF THE BONDS Section 4.1 - Agreement to Acquire, Construct and Install the Project Facilities. The Board agrees that it will cause the Project Facilities to be acquired, constructed and installed on the Project Land, wholly within the boundary lines thereof. The Board agrees that it will enter into, or accept the assignment of, such contracts as the Company may request in order to effectuate the purposes of this Section but that it will not execute any other contract or give any order for construction or for the acquisition and installation of any equipment relating to the Project Facilities, unless and until the Authorized Company Representative shall have approved the same in writing. The Board hereby makes, constitutes and appoints the Company and The Mead Corporation as its true, lawful and agents for the acquisition, construction and installation of the Project Facilities, and the Company and The Mead Corporation have accepted such agency to act and do all things on behalf of the Board, to perform all acts and agreements of the Board hereinbefore provided in this Section, and to bring any actions or proceedings against any person which the Board might bring with respect thereto as the Company and The Mead Corporation shall deem proper. The Board hereby ratifies and confirms all actions of, and assumes and adopts all contracts entered into by, the Company and The Mead Corporation with respect to the Project Facilities prior to the date hereof. This appointment of the Company and The Mead Corporation to act as agents and all authority hereby conferred or granted is conferred and granted irrevocably until all activities in connection with the acquisition, construction and installation of the Project Facilities shall have been completed, and shall not be terminated prior thereto by act of the Board or of the Company and The Mead Corporation. So long as the Company is not in default hereunder, upon the completion of the Project (or at any time prior or subsequent thereto upon the request of the Company) the Board will assign to the Company all warranties and guarantees of all contractors, subcontractors, suppliers, architects and engineers for the furnishing of labor, materials or equipment or supervision or design in connection with the Project Facilities and any rights or causes of action arising from or against any of the foregoing. Section 4.2 - Agreement to Issue Bonds; Application of Bond Proceeds. In order to provide funds for the payment of the cost of the acquisition, construction and installation of the Project Facilities through the refunding of the Notes, the Board agrees that it will authorize, sell and deliver the Bonds to the initial purchasers thereof. Upon receipt of the proceeds from the sale of the Bonds, the Board will deposit all accrued interest (if any) received upon the sale of the Bonds in the Bond Fund and will deposit the balance of the proceeds from said sale to the Project Fund, to be applied to the payment of the Notes upon receipt by the Trustee of Notes tendered for cancellation. Section 4.3 - Company Required to Pay Costs if Project Fund Insufficient. If the moneys in the Project Fund available for payment of the costs of the Project Facilities should not be sufficient to pay the costs thereof in full, and if Additional Bonds are not issued to finance the completion of the Project Facilities, the Company agrees to complete the Project Facilities and to pay all that portion of the costs of the Project Facilities as may be in excess of the moneys available therefor in the Project Fund. The Board does not make any warranty, either express or implied, that the moneys which will be paid into the Project Fund and which, under the provisions hereof, will be available for payment of the costs of refunding the Notes, will be sufficient to pay all the costs which will be incurred in that connection. The Company agrees that if after exhaustion of the moneys in the Project Fund the Company should pay any portion of the costs of refunding the Notes pursuant to the provisions of this Section, it shall not be entitled to any reimbursement therefor from the Board or from the Trustee or from the holders or owners of any of the Bonds, nor shall it be entitled to any diminution in or postponement or abatement of the rents payable under Section 5.3. Section 4.4 - Board to Pursue Remedies Against Suppliers, Contractors and Subcontractors and Their Sureties. At the direction and sole cost of the Company, the Board will promptly proceed, either separately or in conjunction with others, to exhaust the remedies of the Board against any defaulting supplier, contractor or subcontractor and against any surety therefor, for the performance of any contract made in connection with the Project Facilities. If the Company shall so notify the Board, the Company may, in its own name or in the name of the Board, prosecute or defend any action or proceeding or take any other action involving any such supplier, contractor, subcontractor or surety which the Company deems reasonably necessary, and in such event the Board agrees to cooperate fully with the Company and to take all action necessary, to the extent it might lawfully do so, to effect the substitution of the Company for the Board in any such action or proceeding. Any moneys recovered by way of damages, refunds, adjustments or otherwise in connection with the foregoing shall be paid to the Bond Fund. Section 4.5 - Issuance of Additional Bonds. So long as there shall not have occurred and be continuing an event of default hereunder or under the Indenture, the Board shall, from time to time at the request of the Company, use its best efforts to issue Additional Bonds in aggregate principal amounts as requested by the Company under the terms and conditions provided herein and in the Indenture, but in no event shall the Board be liable for not issuing Additional Bonds. Additional Bonds may be issued to finance the (a) payment of outstanding Notes, (b) refunding all of the Bonds of any one or more series then outstanding, (c) payment of costs of the Project or (d) any combination of the foregoing; provided, in any case, that either prior to or contemporaneously with the issuance of Additional Bonds (i) the terms, conditions, manner of issuance, purchase price, delivery and contemplated disposition of the proceeds of the sale of such Additional Bonds shall have been approved in writing by the President or any Vice President of the Company, and (ii) the conditions specified in Article IV of the Indenture with respect to the issuance of such Additional Bonds shall have been satisfied. ARTICLE V EFFECTIVE DATE OF THIS AGREEMENT; DURATION OF LEASE TERM; RENTAL PROVISIONS Section 5.1 - Effective Date of This Agreement; Duration of Lease Term. This Agreement shall become effective upon its execution and delivery and the leasehold interest created hereby shall then begin, and, unless sooner terminated or extended under the provisions hereof (including particularly Articles X and XI), shall expire upon the latter to occur of the following events: (i) midnight, September 1, 2037, or (ii) payment in full of all Bonds and any Additional Bonds. Section 5.2 - Delivery and Acceptance of Possession. The Board agrees to deliver to the Company sole and exclusive possession of the Project (subject to the right of the Trustee to enter thereon for inspection purposes and to the other provisions of Section 8.2) on the Completion Date and the Company agrees to accept possession of the Project upon such delivery; provided, however, that the Company shall be permitted such possession of the Project prior to the Completion Date as shall not interfere with the acquisition, construction and installation of the Project Facilities. Section 5.3 - Rents and Other Amounts Payable. On March 1, 1998, and September 1 and March 1 in each year thereafter until payment in full of the Bonds, the Company shall pay to the Trustee, for the account of the Board, as rent for the Project, a sum of money equal to the amount payable on such date as principal of and interest on the Bonds, as provided in the Indenture. In any event, on each date on which a payment of principal or interest is payable on the Bonds, if at any such date the amount of money available in the Bond Fund is insufficient to make required payments of principal and interest on such date, the Company shall forthwith pay to the Trustee, in immediately available funds, the amount of any such deficiency. Anything herein to the contrary notwithstanding, any amount of money at any time held by the Trustee in the Bond Fund shall be credited against the next succeeding payment of rent and shall reduce the payment to be then made by the Company; and further, if, and for so long as, the amount held by the Trustee in the Bond Fund should be sufficient to pay at the times required the principal of and the interest on all Bonds then remaining unpaid, the Company shall not be obligated to make any further rental payments under the provisions of this Section. The Company agrees to pay to the Trustee until the principal of and the interest on the Bonds shall have been paid in full (i) an amount equal to the annual fee of the Trustee for the Ordinary Services of the Trustee rendered and its Ordinary Expenses incurred under the Indenture, (ii) the reasonable fees and charges of the Trustee and any other paying agent for acting as paying agent and as bond registrar and the reasonable fees of Trustee's counsel as provided in the Indenture, as and when the same become due, and (iii) the reasonable fees and charges of the Trustee for Extraordinary Services rendered by it and Extraordinary Expenses incurred by it, as such terms are defined in the Indenture, as and when the same become due; provided, that the Company may, without precipitating an Event of Default hereunder, withhold such payment to contest in good faith the necessity for any such Extraordinary Services and Extraordinary Expenses and the reasonableness of any such fees, charges or expenses. If the Company should fail to make any of the payments required in this Section, the item or installment which the Company has failed to make shall continue as an obligation of the Company until the same shall have been fully paid, and the Company agrees to pay the same (in the case of interest, to the extent permitted by law) with interest thereon at the rate per annum equal to one percent per annum over the applicable interest rate borne by the Bonds, calculated as described in the Indenture. The provisions of this Section shall be subject to the provisions of Section 9.6. Section 5.4 - Place of Rental Payments. The rents provided for in Section 5.3 and the interest on delinquent rents shall be paid directly to the Trustee for the account of the Board and will be deposited in the Bond Fund. The other payments provided for in Section 5.3 shall be paid directly to the Trustee for its own use or for disbursement to any other paying agent, as the case may be. Section 5.5 - Obligations of Company Hereunder Absolute and Unconditional. Subject to the provisions of Section 9.6, the obligations of the Company to make the payments required in Section 5.3 and to perform and observe the other agreements on its part contained herein shall be absolute and unconditional. Until such time as payment in full of the Bonds shall have been made, the Company (i) will not suspend or discontinue any payments provided for in Section 5.3 except to the extent the same have been prepaid, (ii) will perform and observe all of its other agreements contained herein, (iii) will not suspend or discontinue any payments provided for in Section 5.3 because of any right of set off which the Company may have against the Board, the Trustee or the holder of any Bond (provided that nothing herein shall prevent the assertion of any claim by the Company by separate suit or compulsory counterclaim) and (iv) except as provided in Section 11.1 will not terminate the Lease Term for any cause, including, without limiting the generality of the foregoing, failure of the Board to complete the Project Facilities, failure of the Board's title in and to the Project or any part thereof, any acts or circumstances that may constitute failure of consideration, eviction or constructive eviction, destruction of or damage to the Project, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either or any failure of the Board to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or in connection herewith or with the Indenture. Nothing contained in this Section shall be construed to release the Board from the performance of any of the agreements on its part herein contained; and if the Board should fail to perform any such agreement, the Company may institute such action against the Board as the Company may deem necessary to compel performance or recover its damages for nonperformance so long as such action shall not do violence to the agreements on the part of the Company contained in the preceding sentence. The Company may, however, at its own cost and expense and in its own name or in the name of the Board, prosecute or defend any action or proceeding or take any other action involving third persons which the Company deems reasonably necessary in order to insure the completion of the acquisition, construction and installation of the Project Facilities or to secure or protect its right of possession, occupancy and use of the Project hereunder, and in such event the Board hereby agrees to cooperate fully with the Company and to take all lawful action which is required to effect the substitution of the Company for the Board in any such action or proceeding if the Company shall so request. Nothing contained herein shall be construed to be a waiver of any rights which the Company may have against the Board under this Agreement, or against other persons under this Agreement, the Indenture, or otherwise, or under any provision of law. Section 5.6 - Company's Performance Under Indenture. The Company agrees, for the benefit of the holders from time to time of the Bonds, to do and perform all acts and things contemplated in the Indenture to be done or performed by it. Section 5.7 - Payments in Lieu of Taxes. The Board and the Company acknowledge that, under present law, the Project, as long as it is owned by the Board, is exempt from ad valorem taxation by the State of Alabama or any political or taxing subdivision thereof, including Russell County. The Company agrees that it will make payments in lieu of taxes ("PILOT Payments")so long as the Bonds and any Additional Bonds are outstanding and subject to the provisions of the last paragraph of this Section 5.7, in the amounts and at the times and in the manner set forth below. The PILOT Payments shall be payable on August 15 of each year, commencing August 15, 1998. The aggregate PILOT Payments for each year shall be in an amount equal to 60% of the "education taxes" (as defined below) that would be payable with respect to the Project leased under the Lease, calculated as of the December 31 of the second preceding calendar year (each December 31, an "Assessment Date") with respect to those portions of the Project capitalized for financial accounting purposes and leased under this Agreement on such Assessment Date. For purposes of this Section 5.7, "education taxes" means the ad valorem taxes then currently levied on property situated in Russell County to support public schools in Russell County (i.e., ---- the levy for the Russell County Board of Education and the Russell County countywide schools levy levied as of the applicable Assessment Date), which taxes would be assessed against the Project if the Project was not exempt from ad valorem taxes. The PILOT Payments shall be distributed as follows: 55% to the Phenix City Board of Education, 35% to the Russell County Board of Education, 5% of the Calculation Amount to the City of Phenix City and 5% of the Calculation Amount to Russell County. The calculation of the amount of PILOT Payments due shall be made by the Company and by March 15 of each year, the Company will provide to the Board and each recipient of PILOT Payments a report of the amount due on the next succeeding August 15. The Company's calculations of the PILOT Payments, absent manifest error, shall be conclusive and binding upon the Board and all recipients of PILOT Payments. The Board acknowledges that the obligation of the Company to made any payment of PILOT Payments as additional rent provided for in this section is conditioned upon the Project remaining exempt from ad valorem taxation throughout the period or term to which the Project so becomes subject to ad valorem taxation. ARTICLE VI MAINTENANCE, MODIFICATION, TAXES AND INSURANCE Section 6.1 - Maintenance and Modification of Project Facilities by Company. (a) Throughout the Lease Term, the Company shall at its own expense (i) keep the Project Facilities in as reasonably safe condition as the operation thereof will permit, and (ii) keep the Project Facilities in good repair and in good operating condition, making from time to time all necessary repairs thereto and renewals and replacements thereof. (b) The Company may from time to time, in its sole discretion and at its own expense, make any additions, modifications or improvements to the Project Facilities, including installation of additional machinery, equipment, and related property that do not impair the effective use of the Project Facilities. All machinery, equipment and related personal property so installed by the Company shall not be subject to this Agreement but shall be subject to the Landlord's Lien created under the Code of Alabama 1975, Section 35-9-60. All such machinery, equipment and related personal property may be modified or removed at any time while there exists no event of default hereunder; provided, that any damage to the Project Facilities occasioned by such modification or removal shall be repaired by the Company at its own expense. (c) The Company shall not permit any mechanics', materialmen's, suppliers', vendors' or other similar liens to be established or remain against the Project for labor or materials furnished or services rendered in connection with any additions, modifications, improvements, repairs, renewals or replacements so made by it; provided, that if the Company shall first notify the Trustee of its intention so to do, the Company may in good faith contest any mechanics', materialmen's, suppliers', vendors' or other similar liens filed or established against the Project, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom unless the Board of the Trustee shall notify the Company that by nonpayment of any such items the lien or security interests afforded by this Agreement or the Indenture as to any part of the Project or the rents, payments and revenues from the Project will be materially endangered or the Project or any part thereof or the rents, payments and revenues from the Project will be subject to loss or forfeiture, in which event the Company shall promptly pay and cause to be satisfied and discharged all such unpaid items. The Board will cooperate fully with the Company in any such contest. Section 6.2 - Removal of Portions of Project. The Board shall not be under any obligation to renew, repair or replace any inadequate, obsolete, worn out, unsuitable, undesirable, inappropriate or unnecessary items of machinery or equipment comprising the Project Facilities. If the Company in its sole discretion determines that any such items have become inadequate, obsolete, worn out, unsuitable, undesirable, inappropriate or unnecessary for its purposes at such time, the Company may remove such items from the Project and (on behalf of the Board) sell, trade in, or otherwise dispose of them (as a whole or in part) without any responsibility or accountability to the Board or the Trustee therefor, provided that such removal does not impair the operation of the Project Facilities. The removal of any portion of the Project Facilities pursuant to the provisions of this Section shall not entitle the Company to any diminution in or postponement or abatement of the rents payable under Section 5.3. The Company shall promptly report to the Trustee each such removal, substitution, sale, trade-in or other disposition. Section 6.3 - Taxes, Other Governmental Charges and Utility Charges. The Company agrees to pay promptly as and when the same shall become due and payable, each and every lawful cost, expense and obligation of every kind and nature, foreseen or unforeseen, for the payment of which the Board or the Company is or shall become liable by reason of its estate or interest in the Project or any portion thereof, by reason of any right or interest of the Board or the Company in or under this Agreement, or by reason of or in any manner connected with or arising out of the possession, operation, maintenance, alteration, repair, rebuilding or use of the Project or any part thereof. The Company also agrees to pay and discharge all lawful real estate taxes, personal property taxes, water charges, sewer charges, assessments and all other lawful governmental taxes, impositions and charges of every kind and nature, ordinary and extraordinary, general or special, foreseen or unforeseen, whether similar or dissimilar to any of the foregoing, and all applicable interest and penalties thereon, if any, which at any time during the term of this Agreement shall be or become due and payable by the Board or the Company and which shall be lawfully levied, assessed or imposed (a) upon or with respect to, or shall be or become liens upon, the Project or any portion thereof or any interest of the Board or the Company therein or under this Agreement; (b) upon or with respect to the income or profits of the Board from the Project or under this Agreement; (c) upon or with respect to the possession, operation, management, maintenance, alterations, repair, rebuilding, use or occupancy of the Project or any portion thereof; or (d) upon this transaction or any document to which the Board or the Company is a party creating or transferring an interest or an estate in the Project; under or by virtue of any present or future law, statute, ordinance, regulation or other requirement of any governmental authority, whether federal, state, county, city, municipal, school or otherwise. The Company also agrees to pay any special assessments for public improvements or benefits for which the Company would have otherwise have been liable had it in fact been the owner of the Project. The Company shall, at its sole cost and expense, procure or cause to be procured any and all necessary building permits, other permits, licenses and other authorizations required for the lawful and proper construction, use, occupation, operation and management of the Project. The Company also agrees to pay or cause to be paid all lawful charges for gas, water, sewer, electricity, light, heat, power, telephone and other utility and service used, rendered or supplied to, upon or in connection with the Project and the Board will cooperate with the Company in securing such permits, licenses and authorizations. The Company may, at its own expense and in its own name and behalf or in the name and behalf of the Board, in good faith contest any such taxes, assessments and other charges and, in the event of any such contest, may permit the taxes, assessments and other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Board or the Trustee shall notify the Company that by nonpayment of any such items the lien or security interests afforded by this Agreement or the Indenture as to any part of the Project or the rents, payments and revenues derived from the Project will be materially endangered or the Project or any part thereof will be subject to loss or forfeiture, in which event such taxes, assessments or charges shall be paid promptly. The Board shall cooperate fully with the Company in any such contest. If the Company shall fail to pay any of the foregoing items required by this Section to be paid by the Company and shall not cure any failure within any applicable curative provisions provided herein, the Board or the Trustee may (but shall be under no obligation to) pay the same, and any amounts so advanced therefor by the Board or the Trustee shall become an additional obligation of the Company to the one making the advancement, which amounts, together with interest thereon at the rate of interest borne by the Bonds from the date thereof, the Company agrees to pay. Section 6.4 - Insurance Required. Throughout the Lease Term the Company shall keep the Project continuously insured (or maintain programs of self- insurance) against such risks as are customarily insured against by businesses of like size and type. Section 6.5 - Application of Net Proceeds of Insurance. The insurance carried pursuant to the provisions of Section 6.4 shall be applied as follows: (i) the Net Proceeds of casualty insurance shall be applied as provided in Section 7.1, and (ii) the Net Proceeds of public liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which such insurance proceeds may be paid. Section 6.6 - Additional Provisions Respecting Insurance. All insurance, if any, required in Section 6.4 may be taken out and maintained in insurance companies selected by the Company and may be written with deductible amounts comparable to those on similar policies carried by other companies engaged in businesses similar in size and type and other respects as the Company. The insurance hereby required may be contained in blanket policies or self-insurance programs now or hereafter maintained by the Company. Section 6.7 - Other Board Expenses. Anything to the contrary herein notwithstanding, the Company shall pay any reasonable and necessary expenses not specifically mentioned herein which are incurred by the Board in connection with the Project, this Agreement, the Indenture, any financing statements or the Bonds, and which are not payable from the Project Fund pursuant to Section 4.2. Section 6.8 - Advances by Board or Trustee. If the Company fails to maintain the insurance coverage required hereby or fails to keep the Project Facilities in as reasonably safe condition as its operating conditions will permit, or fails to keep the Project Facilities in good repair and good operating condition and shall not cure any failure within any applicable curative provisions provided herein, the Board or the Trustee may (but unless satisfactorily indemnified shall be under no obligation to) take out policies of insurance and pay the premiums on the same or make the required repairs, renewals and replacements; and all amounts so advanced therefor by the Board or the Trustee will become an additional obligation of the Company to the one making the advancement, which amounts, together with interest thereon at the rate of interest borne by the Bonds from the date thereof, the Company agrees to pay. Section 6.9 - Indemnification of Board and Trustee. The Company will also pay and discharge and will indemnify and hold harmless the Issuer and the members, officers, agents and employees of the Issuer from (a) any condition of the Project caused by the Company, (b) any liens, taxes, assessments, impositions and other charges upon payments by the Company to the Issuer hereunder, (c) any breach or default on the part of the Company in the performance of any of its obligations hereunder, (d) any act of negligence of the Company or of its agents, contractors, servants, employees or licensees, (e) any act of negligence of any assignee or sublessee of the Company, or of any agents, contractors, servants, employees or licensees of any assignee or sublessee of the Company and (f) any and all liability, damages, costs and expenses arising out of or resulting from the acquisition, construction and installation of the Project or the use or operation of the Project or any other activity carried out thereon or in connection therewith or the transactions contemplated by this Agreement and the Indenture, including the reasonable fees and expenses of counsel, except as the same may arise out of the negligence or misconduct on the part of the Issuer. If any such lien or charge is sought to be imposed upon payments, or any such taxes, assessments, impositions or other charges are sought to be imposed, or any such liability, damages, costs and expenses are sought to be imposed, the Issuer will give prompt notice to the Company, and the Company shall have the sole right and duty to assume, and will assume, the defense thereof, with full power to litigate, compromise or settle the same in its sole discretion. The indemnification provided by this Section shall survive the termination of this Agreement. The Company agrees to indemnify the Trustee, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the Indenture, including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties thereunder or hereunder. Section 6.10 - Investment Credit. The Board agrees that any investment tax credit with respect to the Project or any part thereof shall be made available to the Company, and the Board will fully cooperate with the Company in any effort by the Company to avail itself of any such investment tax credit, but neither the Board nor the Trustee shall have any responsibility or liability for the Company's failure to receive any such investment tax credit. The Board agrees to cause the Trustee to cooperate in making any investment tax credit available to the Company. ARTICLE VII DAMAGE, DESTRUCTION AND CONDEMNATION Section 7.1 - Damage and Destruction. If prior to payment in full of the Bonds the Project Facilities are destroyed (in whole or in part) or are damaged by fire or other casualty, the Company, or the Board at the Company's direction, (i) shall promptly replace, repair, rebuild or restore the property damaged or destroyed to substantially the same condition as existed prior to the event causing such damage or destruction, with such changes, alterations and modifications (including the substitution and addition of other property) as may be desired by the Company and as will not impair the operation of the Project Facilities, and (ii) shall apply for such purpose so much as may be necessary of any Net Proceeds of insurance resulting from claims for such losses, as well as any additional moneys of the Company necessary therefor. All Net Proceeds of insurance resulting from claims for such losses shall be paid to the Company. If said Net Proceeds are not sufficient to pay in full the costs of such replacement, repair, rebuilding or restoration, the Company shall nonetheless complete the work thereof and shall pay that portion of the costs thereof in excess of the amount of said Net Proceeds. The Company shall not, by reason of the payment of such excess costs, be entitled to any reimbursement from the Board or any abatement, diminution or postponement of the amounts payable under Section 5.3. Section 7.2 - Condemnation. If the title in and to, or the temporary use of, the Project or any part thereof shall be taken under the exercise of the power of eminent domain by any governmental body or by any other person acting under governmental authority, the Company shall be obligated to continue to pay the rents specified in Section 5.3. The Board, the Company and the Trustee shall cause the Net Proceeds received by them or any of them, from any award made in such eminent domain proceeding, to be paid to and held by the Company and applied in one or more of the following ways at the election of the Company: (a) the restoration of the Project to substantially the same condition as existed prior to the exercise of such power of eminent domain; (b) the acquisition, by construction or otherwise, of other industrial facilities suitable for the Company's operations at the Project (which facilities will be deemed a part of the Project and available for use and occupancy by the Company and will be leased to the Company hereunder without the payment of any rents other than herein provided to the same extent as if such other improvements were specifically described herein); provided, that such facilities will be acquired subject to no liens, security interests or encumbrances prior to the lien afforded by this Agreement and the Indenture, other than Permitted Encumbrances; or (c) payment into the Bond Fund to provide for payment in full of the Bonds at the earliest date that the Bonds may be called for redemption. The Board shall cooperate fully with the Company in the handling and conduct of any prospective or pending eminent domain proceeding with respect to the Project or any part thereof and shall, to the extent it may lawfully do so, permit the Company to litigate in any such proceeding in the name and on behalf of the Board. In no event will the Board voluntarily settle, or consent to the settlement of, any prospective or pending eminent domain proceeding with respect to the Project or any part thereof without the written consent of the Company. Section 7.3 - Condemnation of Company-Owned Property. The Company shall be entitled to the proceeds of any condemnation award or portion thereof made for damages to or taking of its own property or for damages on account of the taking of or interference with the Company's rights to possession, use or occupancy of the Project. Section 7.4 - Further Assurances and Corrective Instruments. The Board and the Company agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Project herein described or intended so to be or for carrying out the intention of or facilitating the performance of this Agreement. ARTICLE VIII SPECIAL AGREEMENTS Section 8.1 - No Warranty of Condition or Suitability by the Board. THE BOARD MAKES NO WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE CONDITION OF THE PROJECT OR THAT IT WILL BE SUITABLE FOR THE COMPANY'S PURPOSES OR NEEDS. The Company releases the Board from, agrees that the Board shall not be liable for and agrees to hold the Board harmless against, any loss that may be occasioned by any cause whatsoever pertaining to the Project or the use thereof. Section 8.2 - Inspection of the Project. The Company agrees that the Authorized Board Representative and any duly authorized agent of the Trustee shall have the right at all reasonable times to enter upon, examine and inspect the Project without interference or prejudice to the operations of the Company. The Company further agrees that any authorized agent of the Board or the Trustee shall have such rights of access to the Project as may be reasonable and necessary for the proper maintenance of the Project in the event of the failure by the Company to perform its obligations under Section 6.1. Section 8.3 - Company to Maintain Its Corporate Existence; Exceptions Permitted. The Company agrees that it will maintain its corporate existence, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another corporation or permit one or more other corporations to consolidate with or merge into it; provided that the Company may, without violating the agreement contained in this Section 8.3, consolidate with or merge into another corporation incorporated and existing under the laws of one of the states of the United States of America or the District of Columbia (a "domestic corporation"), or permit one or more other domestic corporations to consolidate with or merge into it, or sell or otherwise transfer to another domestic corporation all or substantially all of its assets as an entirety and thereafter dissolve, provided, if the Company is not the surviving, resulting or transferee corporation, as the case may be, such surviving, resulting or transferee corporation assumes in writing all of the obligations of the Company under the Agreement and qualifies to do business in the State. Notwithstanding the foregoing, the Company shall not dissolve or otherwise dispose of all or substantially all of its assets and shall not consolidate with or merge into another corporation or permit one or more other corporations to consolidate with or merge into it if, after giving effect to such action, a default would result under this Agreement or the Indenture. Section 8.4 - Qualification in the State. The Company agrees (except as may be otherwise permitted pursuant to the provisions of Section 8.3) that throughout the Lease Term it will continue to be a corporation either organized under the laws of the State or duly qualified to do business in the State as a foreign corporation. Section 8.5 - Granting of Easements. If no Event of Default shall have happened and be continuing, the Company may at any time or times cause to be granted easements (including party wall agreements), licenses, rights-of-way (temporary or perpetual and including the dedication of public highways) and other rights or privileges in the nature of easements with respect to any property included in the Project Land and such grant will be free from any lien or security interest created by this Agreement and the Indenture, or the Company may cause to be released existing easements, licenses, rights-of-way and other rights or privileges in the nature of easements, held with respect to any property included in the Project Land with or without consideration and the Board agrees that it shall execute and deliver and will cause and direct the Trustee to execute and deliver any instrument necessary or appropriate to confirm and grant or release any such easement, license, right-of-way or other right or privilege upon receipt of: (i) a copy of the instrument of grant or release, and (ii) a written application signed by the president or any vice president of the Company requesting the execution and delivery of such instrument and stating that such grant or release is not detrimental to the proper conduct of the business of the Company, and that such grant or release will not impair the effective use or interfere with the operations of the Project Facilities and will not materially weaken, diminish or impair the security intended to be given by or under this Agreement and the Indenture. Section 8.6 - Release of Certain Land. Notwithstanding any other provision hereof, the parties hereto reserve the right to amend this Agreement at any time and from time to time by mutual agreement for the purpose of effecting the release of and removal of (i) any unimproved part of the Project Land (on which no component of the Project Facilities is located but on which parking, transportation or utility facilities may be located) on which the Board proposes to construct improvements for lease or sale to another person or persons under another and different agreement, or (ii) any part of the Project Land with respect to which the Board proposes to grant an easement or convey a fee interest or other title to a railroad or other public or private carrier or to any public utility or public body in order that transportation facilities or services by rail, water, road or other means or utility services for the Project may be provided, increased or improved; provided, that if at the time any such amendment is made any of the Bonds are outstanding, there shall be deposited with the Trustee the following: (a) a copy of such amendment as executed; (b) a resolution of the Board (i) stating that the Board is not in default under any of the provisions hereof or of the Indenture and that the Company is not to the knowledge of the Board in default under any of the provisions hereof, (ii) giving an adequate legal description of that portion of the Project Land to be released, (iii) stating the purpose for which the Board desires the release, (iv) stating that the improvements which will be constructed or the facilities and services which will be provided, increased or improved will be such as will promote at least one of the public purposes of the Board, and (v) requesting such release; (c) a certificate of the president or any vice president of the Company indicating approval of such amendment and stating that the Company is not in default under any of the provisions hereof; (d) a copy of the agreement between the Board and such other person wherein the Board agrees to construct improvements on the portion of the Project Land so requested to be released and agrees to lease or sell the same to such other person, and wherein such other person agrees to lease or purchase the same from the Board, or a copy of the instrument granting the easement or conveying the title or other interest to a railroad, public utility or public body; and (e) a certificate of the Authorized Company Representative, dated not more than 60 days prior to the date of such amendment and stating that (i) the portion of the Project Land so proposed to be released is necessary or desirable for railroad, utility services or roads to benefit the Project or is not otherwise needed for the operation of the Project Facilities for the purposes hereinabove stated, and (ii) the release so proposed to be made will not impair the usefulness of the Project Facilities and will not destroy the means of ingress thereto and egress therefrom. No release effected under this Section shall entitle the Company to any diminution in or postponement or abatement of the rents payable under Section 5.3. ARTICLE IX ASSIGNMENT, SUBLEASING, PLEDGING AND SELLING; REDEMPTION; RENT PREPAYMENT AND ABATEMENT Section 9.1 - Assignment and Subleasing. This Agreement may be assigned by the Company without the necessity of obtaining the consent of the Board or the Trustee, subject, however, to the following conditions: (a) no assignment (other than pursuant to Section 8.3) or sublease shall relieve the Company from primary liability for any of its obligations hereunder, and if any such assignment occurs, the Company shall continue to remain primarily liable for payment of the rents specified in Section 5.3 and for performance and observance of the other agreements on its part herein provided to be performed and observed by it; and (b) the Company shall, within 30 days after the delivery thereof, furnish or cause to be furnished to the Board and to the Trustee a true and complete copy of each such assignment or sublease, as the case may be, together with any instrument of assumption. Section 9.2 - Pledge under Indenture. Under the terms of the Indenture, the Board shall assign and create a security interest with respect to its interest in, and pledge all rents, revenues and receipts arising out of or in connection with its ownership of, the Project to the Trustee, as security for the payment of the principal of and interest on the Bonds, but the Indenture and said assignment and pledge shall be subject and subordinate to this Agreement. Section 9.3 - Restrictions on Sale of Project by Board. The Board agrees that, except as set forth in Section 9.2 or as otherwise provided in the Agreement and Indenture, it shall not (i) sell (other than as contemplated herein), assign, transfer or convey the Project during the Lease Term, (ii) create or suffer to be created any debt, lien or charge on the rents, payments and revenues arising out of or in connection with its ownership of the Project, or (iii) take any other action which might reasonably be construed as tending to cause or induce the levy or assessment of ad valorem taxes on the Project or on its title in and to the Project. If the laws of the State at the time permit such action to be taken, nothing contained in this Section shall prevent the consolidation of the Board with, or the merger of the Board into, or the transfer of the Project as an entirety to, any public corporation whose property and income are not subject to taxation and which has corporate authority to carry on the business of owning and leasing the Project; provided (a) that no such action shall be taken without the prior written consent of the Company, unless such action shall be required by law, and (b) that upon any such consolidation, merger or transfer, the due and punctual payment of the principal of and the interest on the Bonds, and the due and punctual performance and observance of all the agreements hereof to be kept and performed by the Board, shall be expressly assumed in writing by the corporation resulting from such consolidation or surviving such merger or to which the Project shall be transferred as an entirety. Section 9.4 - Redemption of Bonds. The Board, at the request at any time of the Company and if the same are then redeemable, shall forthwith take all steps that may be necessary under the applicable redemption provisions of the Indenture to effect redemption of all or any portion of the Bonds, as may be specified by the Company, on the earliest applicable redemption date on which such redemption may be made under such applicable provisions or upon the date set for the redemption by the Company pursuant to Sections 7.2 or 11.1. As long as the Company is not in default hereunder and the Board is not obligated to call Bonds pursuant to the terms of the Indenture, the Board shall not redeem any Bond prior to its respective stated maturity unless requested to do so in writing by the Company. Section 9.5 - Prepayment of Rents. There is expressly reserved to the Company the right, and the Company is authorized and permitted, at any time it may choose, so long as it is not in default hereunder, to prepay all or any part of the rents and other payments payable under Section 5.3, and the Board agrees that the Trustee may accept such prepayment when the same is tendered by the Company. All prepaid rents shall be credited on the rents specified in Section 5.3, and at the election of the Company shall be used for the redemption or purchase of Bonds in the manner and to the extent provided in the Indenture. Section 9.6 - Rent Abatements if Bonds Paid Prior to Maturity. If at any time the Indenture is discharged in accordance with Article X of the Indenture, and if the Company is not at the time otherwise in default hereunder, the Company shall be entitled to use and occupy the Project, without the payment of rent during the interval (but otherwise on the terms and conditions hereof), from the date on which such moneys are in the Bond Fund to and including the later to occur of either (i) midnight, September 1, 2037 or (ii) payment in full of all Bonds and any Additional Bonds. Section 9.7 - Reference to Bonds Ineffective After Bonds Paid. Upon payment in full of the Bonds and all fees and charges of the Trustee, all references herein to the Bonds and the Trustee shall be ineffective and neither the Trustee nor the holders of any of the Bonds shall thereafter have any rights hereunder, saving and excepting those that shall have theretofore vested. Reference is hereby made to Section 1002 of the Indenture which sets forth the conditions upon the existence or occurrence of which payment in full of the Bonds shall be deemed to have been made. 21 ARTICLE X EVENTS OF DEFAULT AND REMEDIES Section 10.1 - Events of Default Defined. The following shall be Events of Default hereunder and the term Event of Default shall mean, whenever it is used herein, any one or more of the following events: (a) Failure by the Company to make any payment required under Section 5.3 on or before the date that the payment is due and continuance of such failure for ten Business Days after receipt of notice of such failure from the Trustee. (b) Failure by the Company to observe and perform any other covenant, condition or agreement on its part under this Agreement (other than as referred to in subsection (a) of this Section), for a period of ninety (90) days after written notice, specifying such failure and requesting that it be remedied, shall be given to the Company by the Trustee, unless the Trustee shall agree in writing to an extension of such time prior to its expiration; provided, however, if the failure stated in the notice cannot be remedied within the applicable period, the Board and the Trustee will not unreasonably withhold their consent to an extension of such time if it is possible to correct such failure and corrective action is instituted by the Company within the applicable period and diligently pursued until the default is corrected; (c) Any warranty, representation or other statement by or on behalf of the Company contained in this Agreement, or any instrument furnished in compliance with or in reference to this Agreement or the Indenture, is false or misleading in any material respect; or (d) The dissolution or liquidation of the Company or the filing by the Company of a voluntary petition in bankruptcy, or the commission by the Company of any act of bankruptcy, or adjudication of the Company as a bankrupt, or assignment by the Company for the benefit of its creditors, or the entry by the Company into an agreement of composition with its creditors, or the approval by a court of competent jurisdiction of a petition applicable to the Company in any proceeding for its reorganization instituted under the provisions of the Federal bankruptcy statutes, as amended, or under any similar act which may hereafter be enacted. The term "dissolution or liquidation of the Company", as used in this subsection, shall not be construed to include the cessation of the corporate existence of the Company resulting from a merger or consolidation of the Company into or with another corporation or a dissolution or liquidation of the Company following a transfer of all or substantially all of its assets as an entirety. Section 10.2 - Remedies. Whenever any Event of Default shall have happened and be continuing, the Trustee, as the assignee of the Board under the Indenture, shall have the following rights and remedies: (a) The Trustee may, and upon the written request of the holders of not less than twenty-five percent (25%) in outstanding principal amount of the Bonds, shall by notice in writing delivered to the Company, declare all installments of rent payable under Section 5.3 for the remainder of the Lease Term to be immediately due and payable. Upon such acceleration, the amount then due and payable by the Company as accelerated rent shall be the sum required to provide for payment in full of the Bonds on the earliest possible date on which such payment can be made. Such sums as may then become payable shall be paid into the Bond Fund and after payment in full of the Bonds and payment of any cost occasioned by such Event of Default, any excess moneys in the Bond Fund shall be returned to the Company as an overpayment of rent. Notwithstanding the foregoing, upon the occurrence of an Event of Default by reason of the occurrence of any event specified for Section 10.1(d), all installments of rent payable under Section 5.3 for the remainder of the Lease Term shall automatically become 22 and be immediately due and payable without any action by the Trustee or the Board being necessary. (b) The Trustee may take whatever action at law or in equity may appear necessary or desirable to collect the rents and any other payments then due and thereafter to become due, or to enforce performance and observance of any covenant, condition or agreement of the Company hereunder; (c) The Trustee may exercise any remedies provided for in the Indenture and, with respect to any security interest, the rights of a secured party under the Uniform Commercial Code of the State. Any amounts collected pursuant to action taken under this Section shall be paid into the Bond Fund and applied in accordance with the provisions of the Indenture or, if payment in full of the Bonds has been made, shall be paid to the Company. Section 10.3 - No Remedy Exclusive. No remedy herein conferred upon or reserved to the Board or the Trustee is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon the occurrence of any Event of Default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right or power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Board or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice or notices as may be herein expressly required. Such remedies as are reserved to the Board in this Article shall also extend to the Trustee, and the Trustee and the holders of the Bonds shall be deemed third-party beneficiaries of all agreements herein contained. Section 10.4 - Agreement to Pay Attorneys' Fees and Expenses. If there should occur an Event of Default hereunder and the Board or the Trustee should employ attorneys or incur other expenses for the collection of rents or the enforcement of performance or observance of any agreement on the part of the Company herein contained, the Company agrees that it will on demand therefor pay to the Board or the Trustee the reasonable fee of such attorneys and such other reasonable expenses so incurred by the Board or the Trustee. Section 10.5 - No Additional Waiver Implied by One Waiver. If any agreement contained herein should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. Section 10.6 - Waiver of Appraisement, Valuation, etc. If there should occur an Event of Default hereunder, the Company agrees to waive, to the extent it may lawfully do so, the benefit of all appraisement, valuation, stay, extension or redemption laws now or hereafter in force, and all right of appraisement and redemption to which it may be entitled. Section 10.7 - Waiver of Events of Default. Notwithstanding anything herein to the contrary, the Trustee shall be deemed to have waived any Event of Default hereunder and its consequences and to have rescinded any acceleration of the rents and other amounts payable under this Agreement whenever the Trustee has waived such Event of Default pursuant to the Indenture. ARTICLE XI OPTIONS IN FAVOR OF COMPANY; OBLIGATION TO PURCHASE PROJECT Section 11.1 - General Option to Prepay Rent and Purchase Project. At any time, the Company shall have, and is hereby granted, the option to prepay the rent payable 23 under Section 5.3, in whole or in part. To exercise the option granted in this paragraph, the Company shall, on or before the 20th day next preceding the date set for redemption of the Bonds (which shall be an interest payment date if less than all the Bonds are to be redeemed), give written notice to the Board and the Trustee of its intention to exercise the option granted in this section on such date and shall specify therein the principal amount of Bonds to be redeemed with the moneys received upon such prepayment. Upon the exercise of such option, the Company shall direct the Trustee to redeem Bonds in the principal amount and on the date specified in the notice referred to in the preceding sentence and shall make arrangements satisfactory to the Trustee for the giving of the required notice of redemption of Bonds. The purchase price which shall be paid to the Trustee by the Company in the event of its exercise of the option granted in this paragraph shall be the sum of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the redemption date plus all fees and expenses of the Trustee and the paying agent accrued and to accrue through such redemption date. The Company shall have the option to purchase the Project at any time, in the event that the Indenture is discharged pursuant to Article IX of the Indenture, by the Company (i) depositing irrevocably with the Trustee either moneys in an amount which shall be sufficient, or Government Obligations the principal of and interest on which when due will provide moneys which, together with the moneys, if any, deposited with or held by the Trustee at the same time and available for such purpose shall be sufficient pursuant to the Indenture, to pay the principal of and interest on all of the Bonds due and to become due on or prior to the redemption date (if the Bonds are to be redeemed) or maturity thereof; (ii) paying to the Trustee all Trustee's fees and expenses due in connection with the payment or redemption of any such Bonds, and, (iii) if any Bonds are to be redeemed on any date prior to their maturity, giving the Trustee irrevocable instructions to redeem such Bonds on such date and either evidence satisfactory to the Trustee that all redemption notices required by the Indenture have been given or irrevocable power authorizing the Trustee to give such redemption notices. Section 11.2 - Conveyance on Purchase. At the closing of any purchase of the Project as provided hereunder, the Board shall upon receipt of the purchase price deliver to the Company documents conveying to the Company good and marketable fee simple title in and to the Project, subject to the following: (a) those liens, security interests and encumbrances (if any) to which such title in and to said property was subject at the effective date of this Agreement but excluding this Agreement and the Indenture; (b) those liens and encumbrances created by the Company or to the creation or suffering of which the Company consented; (c) those liens and encumbrances resulting from the failure of the Company to perform or observe any of its agreements contained herein; and (d) Permitted Encumbrances other than this Agreement and the Indenture. Section 11.3 - Relative Positions of Options and Indenture. The options granted to the Company in this Article shall be and remain prior and superior to the Indenture and may be exercised whether or not there exists an Event of Default hereunder, provided that the existence of such Event of Default will not result in nonfulfillment of any condition to the exercise of any such option. ARTICLE XII MISCELLANEOUS Section 12.1 - Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when mailed by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: 24 (a) If to the Board - The Industrial Development Board of the City of Phenix City, Alabama c/o Kenneth A. Roberts SouthTrust Bank of Russell County P.O. Box 2316 Phenix City, Alabama 36868-2316 with a copy to Sydney Smith, Esq. Smith & Smith 1503 Broad Street Phenix City, Alabama 36867 (b) If to the Company- Mead Coated Board, Inc. Mead World Headquarters Dayton, Ohio 45463 Attention: Treasurer with a copy to: Thompson Hine & Flory LLP 312 Walnut Street 14th Floor Cincinnati, Ohio 45202 Attention: Robert A. Selak (c) If to the Trustee- AmSouth Bank of Alabama 1901 Sixth Avenue North Birmingham, Alabama 35203 Attention: Corporate Trust Department A duplicate copy of each notice, certificate or other communication given hereunder by either the Board, the Company or the Trustee to any one of the others shall also be given to all of the others. The Board, the Company and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. Section 12.2 - Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the Board, the Company and their respective successors and assigns. To the extent provided herein and in the Indenture, the Trustee and the holders of the Bonds shall be deemed to be third party beneficiaries hereof, but nothing herein contained shall be deemed to create any right in, or to be for the benefit of, any other person not a party hereto. Section 12.3 - Severability. If any provision hereof shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. Section 12.4 - Amounts Remaining in Bond Fund. Subject to and in accordance with the terms and conditions of Section 709 of the Indenture, certain surplus moneys remaining in the two accounts in the Bond Fund shall belong to and be paid to the Company by the Trustee as an overpayment of rents. Section 12.5 - Amendments, Changes and Modifications. Except as otherwise provided herein or in the Indenture, subsequent to the date of issuance and delivery of the Bonds and prior to their payment in full, this Agreement may not be effectively amended or terminated without the written consent of the Trustee. 25 Section 12.6 - Execution Counterparts. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Section 12.7 - Captions. The captions and headings herein are for convenience only and in no way define, limit or describe the scope or intent of any provisions hereof. Section 12.8 - Recording of Agreement. This Agreement and every assignment and modification hereof shall be recorded in the Office of the Judge of Probate of Russell County, Alabama, or in such other office as may be at the time provided by law as the proper place for such recordation. Section 12.9 - Law Governing Construction of Agreement. This Agreement shall be governed by, and construed in accordance with, the laws of the State. Section 12.10 - Net Lease. This Agreement shall be deemed a "net lease", and the Company shall pay absolutely net during the Lease Term the rents specified herein, without abatement, deduction or set-off other than those herein expressly provided. IN WITNESS WHEREOF, the Board and the Company have caused this Agreement to be executed in their respective corporate names as of the date first above written. THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA Kenneth A. Roberts By: ------------------------------- Chairman MEAD COATED BOARD, INC. William B. Plummer By: ------------------------------- Treasurer 26 ACKNOWLEDGMENT OF BOARD STATE OF ALABAMA ) ) COUNTY OF RUSSELL ) I, Carol D. Clegg, a Notary Public in and for said County in said State, -------------- hereby certify that Kenneth A. Roberts, whose name as Chairman of the Board of Directors of THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA, a public corporation and instrumentality under the laws of the State of Alabama, is signed to the foregoing instrument and who is known to me, acknowledged before me on this day that, being informed of the contents of the said instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said public corporation. GIVEN under my hand and seal of office, this 11th day of September, 1997. ---- Carol D. Clegg ----------------------------- Notary Public CAROL D. CLEGG NOTARY PUBLIC ALABAMA STATE-AT-LARGE (SEAL) My commission expires: 1/2/2001 --------- 27 ACKNOWLEDGMENT OF COMPANY STATE OF OHIO ) ) COUNTY OF MONTGOMERY ) I, Carol D. Clegg, a Notary Public in and for said County in said State, -------------- hereby certify that William Plummer, whose name as Treasurer of MEAD COATED BOARD, INC., a corporation organized and existing under the laws of the State of Delaware, is signed to the foregoing instrument and who is known to me, acknowledged before me on this day that, being informed of the contents of the said instrument, he or she, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. GIVEN under my hand and seal of office, this 11th day of September, 1997. ---- Carol D. Clegg ------------------------------- Notary Public CAROL D. CLEGG NOTARY PUBLIC ALABAMA STATE-AT-LARGE (SEAL) My commission expires: 1/2/2001 --------- 28 EXHIBIT "A" to Lease Agreement between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA and MEAD COATED BOARD, INC. dated as of September 1, 1997 DESCRIPTION OF PROJECT LAND --------------------------- The Project Land includes the following property: The following real estate and premises situated in the County of Russell and State of Alabama: Eight hundred eighty four and 47/100 (884.47) acres located in Sections 32, 33, 21, 28, and 27, Township 14 North, Range 30 East, and Section 5, Township 13 North, Range 30 East, and beginning at the Southwest corner of Section 32, Township 14 North, Range 30 East, Russell County, Alabama, run thence North 00 degrees 38 minutes East a distance of 354.26 feet along a fence line to a concrete monument, thence North 37 degrees 57 minutes 25 seconds East a distance of 2086.55 feet to a point, thence North 57 degrees 13 minutes East a distance of 4397.87 feet to a point, thence North 01 degree 38 minutes East a distance of 970.55 feet to a point, thence North 37 degrees 53 minutes East a distance of 1948.85 feet to a point, thence North 00 degrees 37 minutes West a distance of 2783.92 feet to a point, thence North 45 degrees 16 minutes East a distance of 1570.95 feet to a concrete monument, thence North 00 degrees 27 minutes East a distance of 621.32 feet to a concrete monument, thence South 88 degrees 26 minutes 40 seconds East a distance of 1048.15 feet to a concrete monument, thence South 00 degrees 41 minutes 10 seconds East a distance of 601.95 feet to a concrete monument, thence South 89 degrees 33 minutes 20 seconds East along the north line of Section 28, Township 14 North, Range 30 East a distance of 1915.88 feet to a concrete monument, said monument being the northeast corner of said Section 28, which is the northwest corner of Section 27, in Township 14 North, Range 30 East, thence South 89 degrees 33 minutes 20 seconds East along the North line of said Section 27 to the boundary line between the State of Georgia, and the State of Alabama; thence Southerly and Southwesterly along said line between the State of Alabama and the State of Georgia, as the same runs, to the northerly and southerly line along the west side of Section 5, Township 13 North, Range 30 East, run thence North 00 degrees 28 minutes East along the West line of said Section 5, to a point marked by an iron pipe; thence North 00 degrees 28 minutes East along the west line of said Section 5 a distance of 2825.00 feet to the northwest corner of Section 5, and the point of beginning. (The Portion of said line from the northerly line of a public road known as the Ferry Road to the northwest corner of said Section 5, which is the southwest corner of Section 32, Township 14 North, Range 30 East, being along an old fence.) There is hereby expressly excepted from said described lands those lands heretofore taken in fee simple by condemnation by the United States of America and subject to flowage easements taken by the United States of America by condemnation and subject to the easement rights (a) for right of way for railroad purposes and (b) for a public road over and through said described lands, such public road right of way having been conveyed by the W.C. Bradley Company, to Russell County, Alabama, by deed recorded in Deed Record 387, pages 787-788, in the office of the Judge of Probate in and for Russell County, Alabama. Said described lands hereby conveyed contain in the aggregate according to survey made, eight hundred eighty four and 47/100ths (884.47) acres (the "1997 Leased Land"); 29 less and except the following property: PARCEL 1 Beginning at a point which is 743.81 feet east and 477.58 feet south of the northwest corner of section 28, Township 14 North, Range 30 East, Russell County, Alabama, which section corner is marked by a concrete monument, this point thus determined, being the northwest corner of the property to be conveyed, then proceeding south 128.84 feet, then east 85.0 feet, then north 128.84 feet, then west 85.0 feet to the point of beginning. PARCEL 2 Beginning at a point which is 928.0 feet South and 1479.0 feet East of the Northwest corner of Section 28 in Township 14 North, Range 30 East, Russell County, Alabama, which corner is marked by a concrete monument, then proceeding North a distance of 120.0 feet, then West 100.0 feet, then South 120.0 feet, then East 100.0 feet to the point of beginning. PARCEL 3 At the Southwest corner of Section 22, Township 14 North, Range 30 East, Russell County, Alabama as the point of beginning, run along the South line of Section 22 N89 -50'E 976.85 feet to the property line of the United States Government; thence along said property line N2 -50'W 1296.69 feet to a branch which runs into Bluff Creek; thence along said branch the following courses; N41 -41'W 340.67 feet; S85 -42'W 324.22 feet; S81 -08'W 330.0 feet; N25 -48'W 145.58 feet; S76 -52'W 198.66 feet; N44 -03'W 152.62 feet; S46 -35'Q 84.21 feet; S21 -00'E 83.39 feet; N82 -27'W 94.15 feet; S7 -51'E 148.82 feet; S66 -39'W 386.20 feet; S62 -55'W 237.23 feet; S65 -05'W 232.38 feet; S74 -24'W 408.97 feet; S51 -52'W 371.60 feet; S19 -42'W 231.02 feet; S62 -26'W 198.83 feet; N85 -48'W 229.54 feet; S89 -23'W 159.01 feet; N83 -01'W 327.29 feet; S80 -02'W 437.03 feet; thence S59 -27'W 318.79 feet; thence S3 -28'E 199.83 feet; thence S1 -16'E 607.22 feet; thence N87 -24'E 343.43 feet; thence N82 -04'E 516.01 feet; thence N70 -45'E 540.58 feet; thence N89 -18'E 472.15 feet; thence N0 -01'E 400.58 feet; thence S89 -59'E 446.0 feet; thence S0 -01'W 395.0 feet; thence N89 -18'E 171.06 feet; thence N46 -28'E 463.45 feet to the South line of Section 21; thence along said Section line S90 -48'E 749.92 feet to the point of beginning and containing 121.14 acres more or less. PARCEL 4A All that tract or parcel of land situated lying and being in Section 28, Township 14 North, Range 30 East, Russell County, Alabama, and being more particularly described as follows: To find the point of beginning, commence at the northwest corner of Section 28, Township 14 North, Range 30 East, which corner is marked by a concrete monument and, from said point, thence running South 89 degrees 33 minutes 20 seconds East, along the North line of said Section 28, a distance of 1,250.03 feet to an iron pin, said iron pin being the beginning point of the property herein conveyed; and from said point of beginning running thence South 89 degrees 33 minutes 20 seconds East, along the North line of said Section 28, a distance of 400.0 feet to a point; thence running South 01 degree 02 minutes 40 seconds West a distance of 704.0 feet, more or less, to a point; thence running South 45 degrees 16 minutes 00 seconds West a distance of 560.0 feet, more or less, to an iron pin; thence running North 01 degree 02 minutes 40 seconds East a distance of 1,076.19 feet to the point of beginning. The property herein described is bounded on the West and South by property of Grantee herein, on the North and East by property of Grantor herein and said described tract contains 8.2 acres, more or less. PARCEL 4B Commencing at the Northwest corner of Section 28 in Township 14 North, Range 30 East, Russell County, Alabama, which corner is marked by a concrete monument and proceeding east along the north line of said Section 28, which is the north property line of Georgia Kraft Company, a distance of two hundred forth-nine and ninety-six hundredths (249.96) feet to the point of intersection with the east 30 right-of-way line of the Central of Georgia Railroad which point is marked by an iron pin, said iron pin being the point of beginning of the property herein conveyed. From said point of beginning running thence over and along the west boundary of said tract number one, which is the east right-of-way line of the Central of Georgia Railroad which is fifty feet from and parallel to the center line of the main line track, on a bearing of south one degree, two minutes and forty seconds west (S 1 02' 40" W) a distance of sixteen hundred forty-three and fifty-nine hundredths (1643.59) feet to a point, thence along the west boundary of the said tract number one, which is the east right-of-way line of the Central of Georgia Railroad and is fifty (50) feet from and concentric with the center line of the main line track, following a circular curve to the right, having a radius of eight hundred sixty-four and forty-nine hundredths (864.49) feet for an arc distance of three hundred seventy-two and forty-three hundredths (372.43) feet to an iron pin marking the southwest corner of said tract number one which is the point where the east right-of-way line of the Central of Georgia Railroad main line terminates on the north right-of-way line of the spur track serving the Georgia Kraft Company mill, said point being fifty (50) feet from the center line of the main line track and twenty-five (25) feet from the center line of the aforesaid spur track; thence along the south boundary of said tract number one, which is the north right-of-way line of the spur track serving the Georgia Kraft Company mill and is twenty - five (25) feet from and parallel to the center line of the aforesaid spur track, on a bearing of north fifty-one degrees, fifty-two minutes and ten seconds east (N 51 52' 10" E) for a distance of thirteen-hundred fifty-nine and ninety-three hundredths (1359.93) feet to an iron pin marking the south - east corner of said tract number one; thence along the east line of said tract number one on a bearing of north zero degrees and thirty-seven minutes west (N 0 37' W) a distance of fifty-three and fifty-six hundredths (53.56) feet to an iron pin; thence along the east boundary of said tract number one on bearing of north forty-five degrees and sixteen minutes east a distance of thirty-seven and eighty hundredths (37.80) feet to an iron pin; thence along the east boundary of said tract number one on a bearing of north one degree, two minutes and forty seconds east (N 1 02' 40" E) a distance of one thousand seventy-six and nineteen hundredths (1076.19) feet to an iron pin marking the north east corner of said tract number one and being on the north line of the aforesaid Section 28; on a bearing of north eighty-nine degrees thirty-three minutes and twenty seconds West (N 89 33' 20" W) a distance of one thousand and seven hundredths (1000.07) feet to the point of beginning. The above described boundaries of said tract number one enclose thirty-five and fifty-one hundredths (35.51) acres, more or less; excepting from the foregoing description of Parcel 4A and Parcel 4B the following described Tracts A, B and C: TRACT A A 200 foot wide strip of land for a road right-of-way situated in Sections 20, 28 and 29, Township 14 North, Range 30 East, in Russell County, Alabama, and being 100 feet on either side of and contiguous with the following described centerline: Commence at the Northeast corner of Section 20, Township 14 North, Range 30 East and run North 86 degrees 56 minutes West for a distance of 751.7 feet; thence South 33 degrees 37 minutes West for a distance of 2187.0 feet; thence South 18 degrees 31 minutes West for a distance of 856.7 feet; thence South 19 degrees 29 minutes West for a distance of 507.5 feet; thence South 89 degrees 26 minutes East for a distance of 91.80 feet; thence from the last described course turn left 151 degrees 00 minutes and run Northwesterly 138.20 feet to a point in the center of Alabama Highway No. 165 and the point of beginning for said centerline; thence turn right 180 degrees 00 minutes and run Southeasterly along said centerline 230.00 feet to the point of a curve to the right; said curve having a 17 degree 32 minutes 16 seconds degree of curvature and an included angle of 62 degrees 45 minutes; thence continue along said curve an arc distance of 359.20 feet to the point of tangent to said curve; thence continue tangent to last described curve Southerly a distance of 1719.47 feet to the point of a curve to 31 the left; said curve having a 10 degree 00 minutes 14 seconds degree of curvature and an included angle of 27 degrees 25 minutes 40 seconds; thence continue along said curve an arc distance of 274.51 feet to the point of tangent to said curve; thence continue tangent to the last described curve Southeasterly 1097.83 feet to the point of a curve to the left; said curve having a 12 degree 30 minute degree of curvature and an included angle of 101 degrees 50 minutes 41 seconds; thence continue along said curve an arc distance of 816.38 feet to the point of tangent to said curve; thence continue tangent to last described curve Northeasterly 1351.87 feet to the point of a curve to the right; said curve having a 22 degree 31 minutes 55 seconds degree of curvature and an included angle of 37 degrees 53 minutes 10 seconds; thence continue along said curve an arc distance of 168.14 feet to the intersection of said curve and the centerline of existing railroad; said intersection being the end of said centerline of roadway description. Said strip of land lying in Sections 20, 28 and 29, Township 14 North, Range 30 East, Russell County, Alabama and containing 27.62 acres more or less. TRACT B Beginning at a point which is 743.81 feet east and 477.58 feet south of the northwest corner of Section 28, Township 14 North, Range 30 East, Russell County, Alabama, which section corner is marked by a concrete monument, this point thus determined, being the northwest corner of the property to be conveyed, then proceeding south 128.84 feet, then east 85.0 feet, then north 128.84 feet, then west 85.0 feet to the point of beginning. TRACT C Beginning at a point which is 928.0 feet South and 1479.0 feet East of the Northwest corner of Section 28 in Township 14 North, Range 30 East, Russell County, Alabama, which corner is marked by a concrete monument, then proceeding North a distance of 120.0 feet, then West 100.0 feet, then South 120.0 feet, then East 100.0 feet to the point of beginning. PARCEL 5 WASTE WOOD CONVEYOR TO SCALPER (C-28506) AREA AND TRUCK DUMPER (C-28505) AREA All that portion of land and structures lying 9' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 31 59' 52' E, 291.25' to the point of beginning; thence S 0 00' W, 231.00' to a point on the north side of a rectangular area (Truck Dumper) bounded by a N 792,366.0, N 792,326.5, and E 234,642.0, and E 234,765.5, said rectangular area being the point of ending; said land being 0.21 + acres; NO. 1 BARK TRANSFER CONVEYOR (C-28503) AREA, NO. 2 BARK TRANSFER CONVEYOR (C-28504) AREA, BARK HOG STRUCTURE (C-28534) AREA AND REFUSE CONVEYOR SCALPER (C-28533) AREA All that portion of land and structures lying 9' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 31 59' 52" E, 291.25' to the point of beginning; thence S 8 20' 17" W, 284.46' to the center 32 of a rectangular area which is parallel to the last said course 22' north to south by 15' east to west; thence S 81 39' 40" E, 843.58' to a parallel rectangular area (Bark Hog Structure) 26.00' north to south (10.00' lying south of last said course) by 37.50'; thence continue along last said course 27.00'; thence N 45 07' 38" E, 350.71' to the point of ending; said land being 0.63 + acres; - NO. 2 TURBINE AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02 of the West Zone of the State of Georgia Coordinate System; thence S 25 19' 16" E, 663.98' to the point of beginning (N 792,550.0 E 233,534.0); thence S 0 00' W, 50.00'; thence N 90 00' E, 121.00'; thence N 0 00' W, 50.00'; thence N 90 00' W, 121.00' to the point of beginning; said land being 0.14 + acres; - SANITARY PACKAGE TREATMENT PLANT AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 48 35' 13" W, 1186.73' to the point of beginning (N 791,565.0. E 233,610.0); thence S 0' 00" W, 12.00'; thence N 90 00' W, 64.00'; thence N. 0' 00" W 12.00'; thence N 90' 00" E, 64.00' to the point of beginning; said land being 0.02 + acres; and - NO. 3 BARK BOILER AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02 of the West Zone of the State of Georgia Coordinate System; thence S 29 39' 25" E, 461.76' to the point of beginning (N 792,748.92, E 233,478.50); thence N 90 00' E, 73.57'; thence S 0 00' W, 34.50'; thence N 90 00' W, 11.82'; thence S 0 00' W, 143.17'; thence N 90 00' W, 90.62'; thence N 0 00" W, 83.08'; thence N 90 00" E, 28.87'; thence N 0 00' W, 94.59' to the point of beginning; said land being 0.32 + acres; - PARCEL 6 NEW RECLAIM PLATE FEED AND CONVEYOR AREA (C-28511), CHIPS CONVEYOR TO SCREEN HOUSE AREA (C-28513), AND CHIPS SCREEN HOUSE AREA (C-28515) All that portion of land and structures lying 13' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 63 51' 31" E, 790.90' to the point of beginning; thence N 90 00' W, 82.00; thence S 0' 00" W, 8.75'; thence N 90 00' W, 232.22'; thence S 15 17' 15" E, 479.72' to a point on the northmost side of a rectangular area (Chip Screen House) which parallels last said course and is 75.0' north to south (7.00' of which is west of last said 33 course) by 49.0' east to west; said rectangular area being the point of ending; said land being 0.56+ acres; CHIPS CONVEYOR TO PINE STORAGE AREA (C-28538) All that portion of land and structures lying 14' on each side of the following described centerline: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 45 24' 34" E, 692.79' to the point of beginning; thence S 36 51' 02" E, 454.94' to the point of ending; said land being 0.29+ acres; - CHIPPER DISCHARGE CONVEYOR AREA (C-28536) AND CHIPS TO HARDWOOD STORAGE CONVEYOR AREA (C-28537) All that portion of land and structures lying 14' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 71 34' 06" E, 600.24' to the point of beginning; thence S 71 04' 32" E, 640.91'; thence N 50 08' 32" E, 61.59' to the point of ending; said land being 0.45 + acres; - CHIP CONVEYOR TO DIGESTER AREA (C-28521), CHIP CONVEYOR TO SURGE BIN AREA (C-28519), AND CHIP SILO AREA (C-28520) All that portion of land and structures lying 14' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence S 48 21' 59" W, 84.29' to the point of beginning; thence S 56 07' 32" E, 319.22' to the center of a circular area (Chip Silo) with a radius of 15.00' and a central angle of 360 00' bounded by a rectangular structure 32' -6" + East-West and 32' -6" + North-South; thence N 82 51' 32" E, - - 355.48' to the point of ending; said land being 0.45 + acres; - NEW WASHER FACILITY AND BATCH DIGESTER AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence N 48 06' 06" W, 35.94' to the point of beginning (N 792,374.0, E 234,473.25); thence S 0 00' W, 133.50'; thence N 90 00' W, 103.39'; thence S 0 00' W, 103.50'; thence 90 00' W, 48.00'; thence N 0 00' W, 55.75'; thence N 90 00' W, 80.00; thence S 0 00' W, 42.75'; thence N 90 00' W, 63.00; thence N 0 00' W, 110.00'; thence N45 00' E, 55.00'; thence N0 00' W, 23.11'; thence 90 00' E, 23.00'; thence N 0 00' W, 23.25'; thence N90 00' E, 170.00'; thence N 0 00' W, 28.75'; thence N 90 00' E, 62.50' to the point of beginning; said area being 1.01 + acres; - MILL WATER COOLING TOWER AND NEW REACTOR CLARIFIER AREA 34 All that portion of and, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 48 46' 07" W, 591.71' to the point of beginning (N 791, 960.0 E 234,055.0); thence S 0 00' W, 170.00'; thence N 90 00' W, 111.00; thence 0 00' W, 170.00'; thence N 90 00' E, 111.00' to the point of beginning; said land being 0.43 + acres; - TURPENTINE RECOVERY FACILITY AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 63 26' 06" W, 11.18' to the point of beginning (N 792,345.0, E 234, 490.0); thence N 0' 00" W, 30.00'; thence N 90 00" E, 20.00'; thence S 0 00' W, 30.00'; thence N 90 00' W, 20.00' to the point of beginning; said land being 0.01 + acres; - LOG STORAGE AREA (C-28522), LOG FEED DECKS AREA (C-28523), DRUM AREA (C-28525, VIBRATING CONVEYORS AREA (C-28532), CHIPPER POWER FEED ROLLS AREA (C-28528), CHIP BLDG. AREA (C-28535), AND BARK COLLECTING CONVEYOR AREA (C-28531) All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence N 80 22' 54" E, 879.79' to the point of beginning; thence N 0 00' W, 326.00'; thence N 90 00' E, 711.08'; thence S 0 00' W, 326.00'; thence N 90 00' W, 328.00'; thence S 0 00' W, 188.00'; thence N 90 00' W, 50.00'; thence N 0 00' W, 188.00'; thence N 90 00' W, 333.08' to the point of beginning; said land being 5.54 + acres; - AREA "B" MAINTENANCE SHOP AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 11 04' 57" W, 197.69' to the point of beginning (N 792,156.0, E 234,462.0); thence S 0 00" W, 82.00'; thence N 90 00" w, 52.00'; thence N 0 00' W, 82.00'; thence N 90 00' E, 52.00 to the point of beginning' said land being 0.10 + acres; - NEW LIME KILN/RECAUSTICIZING All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02 of the West Zone of the State of Georgia Coordinate System; thence N 70 51' 29" E, 267.79' to the point of beginning (N 793,238.0 E 233,503.0); thence N 90 00' E, 399.23'; thence S 0 00' W, 50.00'; thence N 90 00' W, 10.00'; thence S 0 00' W, 40.00'; thence N 90 00' W, 136.23'; thence N 0 00' W, 80.00'; thence N 90 00' W, 50.00'; thence S 35 0 00' W, 10.00'; thence N 90 00' W, 54.00'; thence S 0 00' W, 40.00'; thence N 90 00' E, 65.00'; thence S 0 00' W, 30.00'; thence N 90 00' W, 150.00'; thence N 0 00' W, 17.00'; thence N 90 00' W, 64.00'; thence N 0 00' W, 73.00' to the point of beginning; said land being 0.657, more or less acres, less than and except all structures not included in the Mead Corporation Contract No. 21-3097A. NO. 2 RECOVERY BOILER AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02, of the West Zone of the State of Georgia Coordinate System; thence S 40 16' 34" E, 439.77' to the point of beginning (N 792,814.67, E 233,534.32'); thence N 90 00' E, 36.30'; thence N 0 00' W, 20.50'; thence N 90 00' E, 72.26'; thence N 0 00' W, 14.83'; thence N 90 00' E, 110.50'; thence S 0 00' W, 42.58'; thence N 90 00' E, 26.00'; thence S 0 00' W, 81.00' thence N 90 00' W, 51.00' thence N 0 00" W, 25.12'; thence N 90 00' W, 72.26'; thence N 90 00' W, 20.50'; thence N 0 00' W, 36.30'; thence N 0 00' W, 34.00' to the point of beginning' said land being 0.47 + acres; - NEW EVAPORATORS AND NEW TANKS AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19; E 233,250.02, of the West Zone of the State of Georgia Coordinate System; thence S 62 01' 33" E, 637.83' to the point of beginning (N 792,851.0, E 233,813.33); thence N 90 00' E, 246.67'; thence along an arc South and East 53.41' having a radius of 34.00' with a central angle of 90 00'; thence S 0 00' W, 135.33'; thence along an arc South and West 53.41' having a radius of 34.00' with a central angle of 90 00'; thence N 90 00' W, 34.00'; thence N 0 00' W, 99.79'; thence N 90 00' W, 69.00'; thence N 59 47' 19" W, 91.42'; thence N 90 00' W, 64.67'; thence N 0 00' W, 57.54' to the point of beginning; said land being 0.72 + acres; - PARCEL 7 LIME MUD WASTE DISPOSAL FACILITIES All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233, 250.02 of the West Zone of the State of Georgia Coordinate System; thence N 86 38' 59" E, 253.41' to the point of beginning (N 793,165.00 E 233,503.00); thence N 90 00' E, 64.00'; thence S 0 00' E, 17.00'; thence N 90 00' E, 150.00; thence N 0 00' E, 30.00'; thence N 90 00' W, 65.00'; thence N 0 00' E, 40.00'; thence N 90 00' E, 54.00'; thence N 0 00' E, 10.00'; thence N 90 00' E, 50.00'; thence S 0 00' E, 80.00'; thence N 90 00' E, 136.23'; thence N 0 00' E, 40.00'; thence N 90 00' E, 75.00'; thence S 0 00' E, 78.00;' thence N 90 00' W, 464.23'; thence 0 00' E, 55.00'; to the point of beginning; said land being 0.633 more or less acres, less than and except all structures not included in the Mead Corporation Contract No. 21- 3097A. PARCEL 8A A tract of land situated in the Northwest Quarter of the Northeast Quarter (NW 1/4 of NE 1/4) and the Southwest Quarter of the Northeast Quarter (SW 1/4 of NE 1/4) of Section 28, Township 14 North, Range 30 East, Russell County, Alabama, being more particularly described as follows: 36 Commence at the Northwest corner of Section 28 Township 14 North, Range 30 East; thence run South 89 degrees 33 minutes 20 seconds East along the North Boundary of such Section 28 a distance of 2806.62 feet to a point; thence turn right and run due South a distance of 1210.86 feet to a point at the western end of the Bark Handling System, such point being the beginning of the tract of land herein described. Begin at such point of beginning, turn an angle to the left and run North 45 degrees 00 minutes East a distance of 63.64 feet to a point; thence turn an angle to the right 45 degrees 00 minutes and run easterly a distance of 310.00 feet to a point; thence turn an angle to the right 45 degrees 00 minutes and run southeasterly a distance of 63.64 feet to a point; thence turn an angle to the left 45 degrees 00 minutes and run easterly a distance of 270.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run southerly a distance of 155.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run easterly a distance of 136.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run southerly a distance of 94.35 feet to a point; thence turn an angle to the right 30 degrees 00 minutes and run southwesterly a distance of 263.00 feet to a point; thence turn an angle to the left 30 degrees 00 minutes and run southerly a distance of 132.88 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run westerly a distance of 84.50 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 405.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run westerly a distance of 120.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 115.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run westerly a distance of 470.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 90.00 feet to the point of beginning. PARCEL 8B A tract of land situated in the Northeast Quarter of the Northwest Quarter (NE 1/4 of NW 1/4) and the Southeast Quarter of the Northwest Quarter (SE 1/4 of NW 1/4) of Section 28, Township 14 North, Range 30 East, Russell County, Alabama, being more particularly described as follows: Commence at the Northwest corner of Section 28, Township 14 North, Range 30 East; thence run South 89 degrees 33 minutes 20 seconds East along the North Boundary of such Section 28 a distance of 2290.86 feet to a point; thence turn right and run due South a distance of 1225.36 feet to a point at the Northeast corner of the #2 Bark Boiler Building, such point being the point of beginning of the tract of land herein described. Being at such point of beginning, continue due South a distance of 95.75 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run westerly a distance of 67.50 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 95.75 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run easterly a distance of 15.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run northerly a distance of 40.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run easterly a distance of 34.50 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run southerly a distance of 40.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run easterly a distance of 18.00 feet to the point of beginning. PARCEL 9 All that portion of land, and structures lying thereon, in Section 28, T14N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 794,023.97, E 232,940.10 of the West Zone of the State of Georgia Coordinate System; thence S 52 11' 16" E 37 381.63' to the point of beginning (N 793,790.00 E 233,241.60); thence N 90 00' 00" E 760.00'; thence S 0 00' 00" E 102.00'; thence N 90 00' 00" E 128.04'; thence S 0 00' 00" E 960.48' (at existing utility bridge)' the N 90 00' 00" W 13.00'; thence N 0 00' 00" W 672.48', thence N 90 00' 00 W 875.04'; thence N 0 00' 00" E 390.00' to the point of beginning; said land being 7.85+ acres; less than and except any structures not included in the - Mead Corporation Contract No. 21-4162; (collectively, (Parcels 1 through 9) the "Other Leased Land") together with the following easements: (a) An easement and right for pedestrian and vehicular traffic to use all present and future walks, railroads, roads, driveways and docks upon the Other Leased Land in order to provide all necessary or convenient ingress or egress between the 1997 Leased Land and railroads, public roads and highways and the Chattahoochee River and to permit passage between the 1997 Leased Land and the Other Leased Land; (b) An easement and right for the passage of pedestrians and vehicles and for the construction, erection, installation, operation, maintenance, renewal, replacement and use of material conveying systems, including without limitation pipelines, through any part of the Other Leased Land necessary or convenient in order to assure the passage of equipment, raw materials, items in the process of manufacture, and finished products from the 1997 Leased Land to the Other Leased Land, including without limitation such rights and easements as are necessary for the movement of personnel, vehicles and materials among and between the various parcels of land comprising the Other Leased Land in order to permit and facilitate the operation of the Project; (c) An easement and right to erect, install, construct, maintain, renew, replace and use on, over and under any part of the Other Leased Land, such pipes, conduits, and wires as are necessary or convenient to insure access to and an adequate system for or supply of gas, oil, steam, compressed air, process and space heat, water, fire protection, sewage and industrial waste disposal, electricity, communications, instrumentation and control, and other similar facilities to the 1997 Leased Land and the Project including, without limitation, the right to make connections with machinery, equipment, pipes, conduits and wires, structures and other improvements and appurtenances thereto, on the Other Leased Land; and (d) An easement and right to create and maintain upon the Other Leased Land encroachments of equipment, structures or other improvements which will be included on the 1997 Leased Land and within the Project as presently planned, and any similar replacements or substitutions of portions of the Project for as long as any such equipment, structures or other improvements remain standing, including without limitation the rights of lateral or party wall support, and to connect any such equipment, structure or other improvements to any structure or improvement on the Other Leased Land; but subject to the following easements over the 1997 Leased Land in favor of the Other Leased Land: (a) An easement and right for pedestrian and vehicular traffic to use all present and future walks, railroads, roads, driveways and docks upon the 1997 Leased Land in order to provide all necessary or convenient ingress and egress among and between all portions of the Other Leased Land and between the Other Leased Land and the 1997 Leased Land, including without limitation portions on which additional improvements may be erected, and railroads, public works and highways and the Chattahoochee River and to permit passage among and between the various parcels of land comprising the Other Leased Land; 38 (b) An easement and right for the passage of pedestrians, vehicles, and for the construction, installation, operation, maintenance, renewal, replacement and use of material conveyance systems, including without limitation, pipelines, through any part of the 1997 Leased Land necessary or convenient in order to assure the passage of equipment, and finished products from one portion of the Other Leased Land to another or between the Other Leased Land and the 1997 Leased Land, including, without limitation such rights and easements as are necessary for the movement of personnel, vehicles and material among and between the various parcels of land comprising the Other Leased Land in order to permit and facilitate the operation of any facilities located on the Other Leased Land; (c) An easement and right to erect, install, construct, maintain, renew, replace and use on, over and under any part of the 1997 Leased Land, such pipes, conduits, and wires and appurtenances as are necessary or convenient to assure access to and an adequate system for or supply of gas, oil, steam, compressed air, process and space heat, water, fire protection, sewage and industrial waste disposal, electricity, communications, instrumentation and control, and other similar facilities to the Other Leased Land, including without limitation, the right to make connections with machinery, equipment, pipes, conduits and wires, structures and other improvements and appurtenances thereto, on the 1997 Leased Land; and (d) An easement and right to maintain any present equipment, structures or other improvements included within the facilities presently located on the Other Leased Land as encroachments upon the 1997 Leased Land as long as any such equipment, structures or other improvements remain standing, and to construct and maintain similar encroachments on the 1997 Leased Land in respect of any additional improvements constructed adjacent to the 1997 Leased Land, as long as any such additional improvements remain standing, including without limitation the rights of lateral or party wall support, and to connect such additional improvements to any structure or any improvements on the 1997 Leased Land. subject in all cases to the following: (1) Lease Agreement dated as of November 1, 1983 between the Board, as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time relating to the Board's Industrial Development Revenue Bonds (Georgia Kraft Project), Series 1983; (2) Lease Agreement dated as of December 1, 1983 between the Board as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Georgia Kraft Project), Series 1983; (3) Lease Agreement dated as of December 1, 1985 between the Board, as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Refunding Bonds (Georgia Kraft Project), Series 1985; (4) Lease Agreement dated as of July 1, 1986 between the Board, as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time, relating to the Board's Industrial Development Revenue Bonds (Georgia Kraft Project), Series 1986; (5) Lease Agreement dated as of December 1, 1988 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1988; (6) Lease Agreement dated as of December 1, 1988 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating 39 to the Board's Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1988A, 1989A, 1989B, 1989C, 1989D, 1989E, 1900A and 1991A; (7) Lease Agreement dated as of June 1, 1990 between the Board, as lessor, and Industrial Warehouse Services, Inc., as lessee, as amended and supplemented from time to time, relating to the Board's First Mortgage Revenue Bonds (Industrial Warehouse Services, Inc.), Series 1990; (8) Lease Agreement dated as of September 1, 1990 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1990A; (9) Lease Agreement dated as of October 1, 1990 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Refunding Bonds (Mead Coated Board Project), Series 1990B; (10) Lease Agreement dated as of June 1, 1993 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1993A; (11) Lease Agreement dated as of June 1, 1993 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1993A and 1995A; and (12) Lease Agreement dated as of March 1, 1996 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1996. 40 FIRST AMENDMENT --------------- TO -- LEASE AGREEMENT --------------- THIS FIRST AMENDMENT TO LEASE AGREEMENT (the "Amendment") is made and entered into as of August 1, 1998 by and between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA (the "Board"), a public body corporate and politic duly organized and existing under the Constitution and laws of the State of Alabama, and MEAD COATED BOARD, INC., a Delaware corporation (the "Company"). R E C I T A L S --------------- The Board has previously issued and sold $150,000,000 in aggregate principal amount of The Industrial Development Board of the City of Phenix City, Alabama Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1997A (the "Bonds") pursuant to a Trust Indenture dated as of September 1, 1997 (the "Original Indenture") from the Board to AmSouth Bank (formerly AmSouth Bank of Alabama and AmSouth Bank, N.A.), as Trustee (the "Trustee"). The Board has used the proceeds of the sale of the Bonds for the payment of outstanding industrial development temporary borrowing notes (the "Notes") issued by the Board for the purpose of funding the acquisition, construction and installation of a coated natural kraft mill and related facilities (the "Project") in connection with certain industrial facilities located near Phenix City, Alabama. The Project is owned by the Board and leased to the Company pursuant to a Lease Agreement dated as of September 1, 1997 (the "Agreement"). The Agreement obligates the Company to make rental payments in such amounts and at such times as will provide for the payment of the principal and interest on the Bonds as the same becomes due and payable. In addition, the Company is required under Section 5.7 of the Agreement to make certain payments in lieu of taxes ("PILOT Payments"). The Board and the Company now wish to amend Section 5.7 to revise the provisions relating to PILOT Payments. Pursuant to Section 1502 of the Indenture, the Board and the Company are permitted to amend the Agreement so long as the Trustee and the Bondholder consent to such amendment. The Trustee and the Bondholder have consented to this Amendment. NOW, THEREFORE, as contemplated by Section 12.5 of the Agreement and in accordance with Section 1502 of the Indenture, the parties hereto desire to amend the Agreement as follows: Section 1. Amendment of Agreement. Section 5.7 of the Agreement is --------- ---------------------- amended by adding at the end of such section the following paragraph: Notwithstanding the foregoing, the PILOT Payments shall be reduced as set forth in this paragraph. The PILOT Payments in the aggregate due under this Agreement, combined with the payments in lieu of tax payable by the Company pursuant to Section 5.7 of the Lease Agreement dated as of June 1, 1993 (the "1993 Lease") between the Board and the Company, without giving effect to the reduction provided for in this paragraph, are herein referred to as the "Formula Payments". The total payments due under this Section 5.7 and under Section 5.7 of the 1993 Lease are herein referred to as the "Aggregate Payments". The Aggregate Payments due to the Phenix City Board of Education in August, 1998 shall be $139,867, reflecting a reduction from the Formula Payments otherwise due to the Phenix City Board of Education. The Aggregate Payments due to the Russell County Board of Education in August, 1998 shall be $82,256, reflecting a reduction from the Formula Payments otherwise due to the Russell County Board of Education. The Aggregate Payments due to the Russell County Board of Education in August, 1999 shall be reduced by $6,551 from the Formula Payments otherwise due to the Russell County Board of Education. The Aggregate Payments due to Russell County in August, 1998 and each successive year thereafter shall be reduced from the Formula Payments otherwise due to Russell County to $61,894 until the aggregate amount of such reductions from the Formula Payment totals $135,310; provided that in the year in which such aggregate reductions would exceed $135,310, such reduction from the Formula Payment shall be in an amount equal to the amount necessary to cause the aggregate reductions to total $135,310. Section 2. Agreement and Amendment as One Document. As amended by this ---------- --------------------------------------- Amendment, the Agreement is in all respects ratified and confirmed and the Agreement and this Amendment shall be read, taken and construed as one and the same instrument. Section 3. References. All references herein or in the Agreement to any ---------- ---------- Article, Section or provision of the Agreement shall refer to any such Article, Section or provision as hereby amended. Section 4. Counterparts. This Amendment may be simultaneously executed in ---------- ------------ several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 5. Captions. The captions or headings in this Amendment are for ---------- -------- convenience only and in no way define, limit or describe the scope or intent of any provision of this Amendment. Section 6. Applicable Law. This Amendment shall be construed in ---------- -------------- accordance with the laws of the State of Alabama. IN WITNESS WHEREOF, the Board and the Company have caused this Amendment to be executed in their respective corporate names as of the date first written above. THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA Kenneth A. Roberts By:-------------------------------- Chairman MEAD COATED BOARD, INC. Timothy R. McLevish By: ------------------------------- Treasurer ACKNOWLEDGMENT OF BOARD STATE OF ALABAMA COUNTY OF RUSSELL I, Sydney S. Smith, a Notary Public in and for said County in said State, --------------- hereby certify that Kenneth A. Roberts, whose name as Chairman of the Board of Directors of THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA, a public corporation and instrumentality under the laws of the State of Alabama, is signed to the foregoing instrument and who is known to me, acknowledged before me on this day that, being informed of the contents of the said instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said public corporation. GIVEN under my hand and seal of office, this 9th day of September, 1998. --- Sydney S. Smith ----------------------------- Notary Public SYDNEY S. SMITH NOTARY PUBLIC ALABAMA STATE-AT-LARGE (SEAL) My commission expires:2/28/2000 --------- ACKNOWLEDGMENT OF COMPANY STATE OF OHIO COUNTY OF MONTGOMERY I, Phyllis M. Crabill, Notary Public in and for said County in said State, ------------------ hereby certify that Timothy R. McLevish, whose name as Treasurer of MEAD COATED BOARD, INC., a corporation organized and existing under the laws of the State of Delaware, is signed to the foregoing instrument and who is known to me, acknowledged before me on this day that, being informed of the contents of the said instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. GIVEN under my hand and seal of office, this 16th day of September, 1998. ---- Phyllis M. Crabill ------------------------------- Notary Public Phyllis M. Crabill In and for the State of Ohio (SEAL) My commission expires: August 31, 1999 --------------- CONSENT OF BONDHOLDER --------------------- Mead Coated Board, Inc., as holder of all of the outstanding Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1997A of The Industrial Development Board of the City of Phenix City, Alabama (the "Board"), hereby consents to the execution and delivery of the foregoing First Amendment To Lease Agreement, dated as of August 1, 1998, between the Board and Mead Coated Board, Inc., amending the Lease Agreement, dated as of September 1, 1997, as amended between the Board and Mead Coated Board, Inc. IN WITNESS WHEREOF, Mead Coated Board, Inc. has caused this Consent of Bondholder to be executed in its name and behalf as of August 1, 1998. MEAD COATED BOARD, INC. Timothy R. McLevish By: ------------------------------- Treasurer CONSENT OF TRUSTEE ------------------ AMSOUTH BANK, as Trustee under the Trust Indenture dated as of September 1, 1997, as amended, from the Industrial Development Board of the City of Phenix City, Alabama (the "Board"), hereby consents to the execution and delivery of the foregoing First Amendment To Lease Agreement, dated as of August 1, 1998, between the Board and Mead Coated Board, Inc., amending the Lease Agreement dated as of September 1, 1997 between the Board and Mead Coated Board, Inc. IN WITNESS WHEREOF, AmSouth Bank has caused this Consent of Trustee to be executed in its name and behalf as of August 1, 1998. AMSOUTH BANK, as Trustee Lyn R. Cone By: ------------------------------- Title: Assistant Vice President EXHIBIT "A" to First Amendment To Lease Agreement between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA and MEAD COATED BOARD, INC. dated as of August 1, 1998 DESCRIPTION OF PROJECT LAND --------------------------- The Project Land includes the following property: The following real estate and premises situated in the County of Russell and State of Alabama: Eight hundred eighty four and 47/100 (884.47) acres located in Sections 32, 33, 21, 28, and 27, Township 14 North, Range 30 East, and Section 5, Township 13 North, Range 30 East, and beginning at the Southwest corner of Section 32, Township 14 North, Range 30 East, Russell County, Alabama, run thence North 00 degrees 38 minutes East a distance of 354.26 feet along a fence line to a concrete monument, thence North 37 degrees 57 minutes 25 seconds East a distance of 2086.55 feet to a point, thence North 57 degrees 13 minutes East a distance of 4397.87 feet to a point, thence North 01 degree 38 minutes East a distance of 970.55 feet to a point, thence North 37 degrees 53 minutes East a distance of 1948.85 feet to a point, thence North 00 degrees 37 minutes West a distance of 2783.92 feet to a point, thence North 45 degrees 16 minutes East a distance of 1570.95 feet to a concrete monument, thence North 00 degrees 27 minutes East a distance of 621.32 feet to a concrete monument, thence South 88 degrees 26 minutes 40 seconds East a distance of 1048.15 feet to a concrete monument, thence South 00 degrees 41 minutes 10 seconds East a distance of 601.95 feet to a concrete monument, thence South 89 degrees 33 minutes 20 seconds East along the north line of Section 28, Township 14 North, Range 30 East a distance of 1915.88 feet to a concrete monument, said monument being the northeast corner of said Section 28, which is the northwest corner of Section 27, in Township 14 North, Range 30 East, thence South 89 degrees 33 minutes 20 seconds East along the North line of said Section 27 to the boundary line between the State of Georgia, and the State of Alabama; thence Southerly and Southwesterly along said line between the State of Alabama and the State of Georgia, as the same runs, to the northerly and southerly line along the west side of Section 5, Township 13 North, Range 30 East, run thence North 00 degrees 28 minutes East along the West line of said Section 5, to a point marked by an iron pipe; thence North 00 degrees 28 minutes East along the west line of said Section 5 a distance of 2825.00 feet to the northwest corner of Section 5, and the point of beginning. (The Portion of said line from the northerly line of a public road known as the Ferry Road to the northwest corner of said Section 5, which is the southwest corner of Section 32, Township 14 North, Range 30 East, being along an old fence.) There is hereby expressly excepted from said described lands those lands heretofore taken in fee simple by condemnation by the United States of America and subject to flowage easements taken by the United States of America by condemnation and subject to the easement rights (a) for right of way for railroad purposes and (b) for a public road over and through said described lands, such public road right of way having been conveyed by the W.C. Bradley Company, to Russell County, Alabama, by deed recorded in Deed Record 387, pages 787-788, in the office of the Judge of Probate in and for Russell County, Alabama. Said described lands hereby conveyed contain in the aggregate according to survey made, eight hundred eighty four and 47/100ths (884.47) acres (the "1997 Leased Land"); less and except the following property: PARCEL 1 Beginning at a point which is 743.81 feet east and 477.58 feet south of the northwest corner of section 28, Township 14 North, Range 30 East, Russell County, Alabama, which section corner is marked by a concrete monument, this point thus determined, being the northwest corner of the property to be conveyed, then proceeding south 128.84 feet, then east 85.0 feet, then north 128.84 feet, then west 85.0 feet to the point of beginning. PARCEL 2 Beginning at a point which is 928.0 feet South and 1479.0 feet East of the Northwest corner of Section 28 in Township 14 North, Range 30 East, Russell County, Alabama, which corner is marked by a concrete monument, then proceeding North a distance of 120.0 feet, then West 100.0 feet, then South 120.0 feet, then East 100.0 feet to the point of beginning. PARCEL 3 At the Southwest corner of Section 22, Township 14 North, Range 30 East, Russell County, Alabama as the point of beginning, run along the South line of Section 22 N89 -50'E 976.85 feet to the property line of the United States Government; thence along said property line N2 -50'W 1296.69 feet to a branch which runs into Bluff Creek; thence along said branch the following courses; N41 -41'W 340.67 feet; S85 -42'W 324.22 feet; S81 -08'W 330.0 feet; N25 - 48'W 145.58 feet; S76 -52'W 198.66 feet; N44 -03'W 152.62 feet; S46 -35'Q 84.21 feet; S21 -00'E 83.39 feet; N82 -27'W 94.15 feet; S7-51'E 148.82 feet; S66 -39'W 386.20 feet; S62 -55'W 237.23 feet; S65 -05'W 232.38 feet; S74 -24'W 408.97 feet; S51 -52'W 371.60 feet; S19 -42'W 231.02 feet; S62 - 26'W 198.83 feet; N85 -48'W 229.54 feet; S89 -23'W 159.01 feet; N83 -01'W 327.29 feet; S80 -02'W 437.03 feet; thence S59 -27'W 318.79 feet; thence S3 - 28'E 199.83 feet; thence S1 -16'E 607.22 feet; thence N87 -24'E 343.43 feet; thence N82 -04'E 516.01 feet; thence N70 -45'E 540.58 feet; thence N89 -18'E 472.15 feet; thence N0 -01'E 400.58 feet; thence S89 -59'E 446.0 feet; thence S0 -01'W 395.0 feet; thence N89 -18'E 171.06 feet; thence N46 - 28'E 463.45 feet to the South line of Section 21; thence along said Section line S90 -48'E 749.92 feet to the point of beginning and containing 121.14 acres more or less. PARCEL 4A All that tract or parcel of land situated lying and being in Section 28, Township 14 North, Range 30 East, Russell County, Alabama, and being more particularly described as follows: To find the point of beginning, commence at the northwest corner of Section 28, Township 14 North, Range 30 East, which corner is marked by a concrete monument and, from said point, thence running South 89 degrees 33 minutes 20 seconds East, along the North line of said Section 28, a distance of 1,250.03 feet to an iron pin, said iron pin being the beginning point of the property herein conveyed; and from said point of beginning running thence South 89 degrees 33 minutes 20 seconds East, along the North line of said Section 28, a distance of 400.0 feet to a point; thence running South 01 degree 02 minutes 40 seconds West a distance of 704.0 feet, more or less, to a point; thence running South 45 degrees 16 minutes 00 seconds West a distance of 560.0 feet, more or less, to an iron pin; thence running North 01 degree 02 minutes 40 seconds East a distance of 1,076.19 feet to the point of beginning. The property herein described is bounded on the West and South by property of Grantee herein, on the North and East by property of Grantor herein and said described tract contains 8.2 acres, more or less. PARCEL 4B Commencing at the Northwest corner of Section 28 in Township 14 North, Range 30 East, Russell County, Alabama, which corner is marked by a concrete monument and proceeding east along the north line of said Section 28, which is the north property line of Georgia Kraft Company, a distance of two hundred forth-nine and ninety-six hundredths (249.96) feet to the point of intersection with the east right-of-way line of the Central of Georgia Railroad which point is marked by an iron pin, said iron pin being the point of beginning of the property herein conveyed. From said point of beginning running thence over and along the west boundary of said tract number one, which is the east right-of-way line of the Central of Georgia Railroad which is fifty feet from and parallel to the center line of the main line track, on a bearing of south one degree, two minutes and forty seconds west (S 1 02' 40" W) a distance of sixteen hundred forty-three and fifty-nine hundredths (1643.59) feet to a point, thence along the west boundary of the said tract number one, which is the east right-of-way line of the Central of Georgia Railroad and is fifty (50) feet from and concentric with the center line of the main line track, following a circular curve to the right, having a radius of eight hundred sixty-four and forty-nine hundredths (864.49) feet for an arc distance of three hundred seventy-two and forty-three hundredths (372.43) feet to an iron pin marking the southwest corner of said tract number one which is the point where the east right-of-way line of the Central of Georgia Railroad main line terminates on the north right-of-way line of the spur track serving the Georgia Kraft Company mill, said point being fifty (50) feet from the center line of the main line track and twenty-five (25) feet from the center line of the aforesaid spur track; thence along the south boundary of said tract number one, which is the north right-of-way line of the spur track serving the Georgia Kraft Company mill and is twenty-five (25) feet from and parallel to the center line of the aforesaid spur track, on a bearing of north fifty-one degrees, fifty-two minutes and ten seconds east (N 51 52' 10" E) for a distance of thirteen-hundred fifty-nine and ninety-three hundredths (1359.93) feet to an iron pin marking the south-east corner of said tract number one; thence along the east line of said tract number one on a bearing of north zero degrees and thirty-seven minutes west (N 0 37' W) a distance of fifty-three and fifty-six hundredths (53.56) feet to an iron pin; thence along the east boundary of said tract number one on bearing of north forty-five degrees and sixteen minutes east a distance of thirty- seven and eighty hundredths (37.80) feet to an iron pin; thence along the east boundary of said tract number one on a bearing of north one degree, two minutes and forty seconds east (N 1 02' 40" E) a distance of one thousand seventy-six and nineteen hundredths (1076.19) feet to an iron pin marking the north east corner of said tract number one and being on the north line of the aforesaid Section 28; on a bearing of north eighty-nine degrees thirty-three minutes and twenty seconds West (N 89 33' 20" W) a distance of one thousand and seven hundredths (1000.07) feet to the point of beginning. The above described boundaries of said tract number one enclose thirty-five and fifty-one hundredths (35.51) acres, more or less; excepting from the foregoing description of Parcel 4A and Parcel 4B the following described Tracts A, B and C: TRACT A A 200 foot wide strip of land for a road right-of-way situated in Sections 20, 28 and 29, Township 14 North, Range 30 East, in Russell County, Alabama, and being 100 feet on either side of and contiguous with the following described centerline: Commence at the Northeast corner of Section 20, Township 14 North, Range 30 East and run North 86 degrees 56 minutes West for a distance of 751.7 feet; thence South 33 degrees 37 minutes West for a distance of 2187.0 feet; thence South 18 degrees 31 minutes West for a distance of 856.7 feet; thence South 19 degrees 29 minutes West for a distance of 507.5 feet; thence South 89 degrees 26 minutes East for a distance of 91.80 feet; thence from the last described course turn left 151 degrees 00 minutes and run Northwesterly 138.20 feet to a point in the center of Alabama Highway No. 165 and the point of beginning for said centerline; thence turn right 180 degrees 00 minutes and run Southeasterly along said centerline 230.00 feet to the point of a curve to the right; said curve having a 17 degree 32 minutes 16 seconds degree of curvature and an included angle of 62 degrees 45 minutes; thence continue along said curve an arc distance of 359.20 feet to the point of tangent to said curve; thence continue tangent to last described curve Southerly a distance of 1719.47 feet to the point of a curve to the left; said curve having a 10 degree 00 minutes 14 seconds degree of curvature and an included angle of 27 degrees 25 minutes 40 seconds; thence continue along said curve an arc distance of 274.51 feet to the point of tangent to said curve; thence continue tangent to the last described curve Southeasterly 1097.83 feet to the point of a curve to the left; said curve having a 12 degree 30 minute degree of curvature and an included angle of 101 degrees 50 minutes 41 seconds; thence continue along said curve an arc distance of 816.38 feet to the point of tangent to said curve; thence continue tangent to last described curve Northeasterly 1351.87 feet to the point of a curve to the right; said curve having a 22 degree 31 minutes 55 seconds degree of curvature and an included angle of 37 degrees 53 minutes 10 seconds; thence continue along said curve an arc distance of 168.14 feet to the intersection of said curve and the centerline of existing railroad; said intersection being the end of said centerline of roadway description. Said strip of land lying in Sections 20, 28 and 29, Township 14 North, Range 30 East, Russell County, Alabama and containing 27.62 acres more or less. TRACT B Beginning at a point which is 743.81 feet east and 477.58 feet south of the northwest corner of Section 28, Township 14 North, Range 30 East, Russell County, Alabama, which section corner is marked by a concrete monument, this point thus determined, being the northwest corner of the property to be conveyed, then proceeding south 128.84 feet, then east 85.0 feet, then north 128.84 feet, then west 85.0 feet to the point of beginning. TRACT C Beginning at a point which is 928.0 feet South and 1479.0 feet East of the Northwest corner of Section 28 in Township 14 North, Range 30 East, Russell County, Alabama, which corner is marked by a concrete monument, then proceeding North a distance of 120.0 feet, then West 100.0 feet, then South 120.0 feet, then East 100.0 feet to the point of beginning. PARCEL 5 WASTE WOOD CONVEYOR TO SCALPER (C-28506) AREA AND TRUCK DUMPER (C-28505) AREA All that portion of land and structures lying 9' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 31 59' 52' E, 291.25' to the point of beginning; thence S 0 00' W, 231.00' to a point on the north side of a rectangular area (Truck Dumper) bounded by a N 792,366.0, N 792,326.5, and E 234,642.0, and E 234,765.5, said rectangular area being the point of ending; said land being 0.21 + - acres; NO. 1 BARK TRANSFER CONVEYOR (C-28503) AREA, NO. 2 BARK TRANSFER CONVEYOR (C-28504) AREA, BARK HOG STRUCTURE (C-28534) AREA AND REFUSE CONVEYOR SCALPER (C-28533) AREA All that portion of land and structures lying 9' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 31 59' 52" E, 291.25' to the point of beginning; thence S 8 20' 17" W, 284.46' to the center of a rectangular area which is parallel to the last said course 22' north to south by 15' east to west; thence S 81 39' 40" E, 843.58' to a parallel rectangular area (Bark Hog Structure) 26.00' north to south (10.00' lying south of last said course) by 37.50'; thence continue along last said course 27.00'; thence N 45 07' 38" E, 350.71' to the point of ending; said land being 0.63 + acres; NO. 2 TURBINE AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02 of the West Zone of the State of Georgia Coordinate System; thence S 25 19' 16" E, 663.98' to the point of beginning (N 792,550.0 E 233,534.0); thence S 0 00' W, 50.00'; thence N 90 00' E, 121.00'; thence N 0 00' W, 50.00'; thence N 90 00' W, 121.00' to the point of beginning; said land being 0.14 + acres; - SANITARY PACKAGE TREATMENT PLANT AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 48 35' 13" W, 1186.73' to the point of beginning (N 791,565.0. E 233,610.0); thence S 0' 00" W, 12.00'; thence N 90 00' W, 64.00'; thence N, 0' 00" W 12.00'; thence N 90' 00" E, 64.00' to the point of beginning; said land being 0.02 + acres; and - NO. 3 BARK BOILER AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02 of the West Zone of the State of Georgia Coordinate System; thence S 29 39' 25" E, 461.76' to the point of beginning (N 792,748.92, E 233,478.50); thence N 90 00' E, 73.57'; thence S 0 00' W, 34.50'; thence N 90 00' W, 11.82'; thence S 0 00' W, 143.17'; thence N 90 00' W, 90.62'; thence N 0 00" W, 83.08'; thence N 90 00" E, 28.87'; thence N 0 00' W, 94.59' to the point of beginning; said land being 0.32 + acres; - PARCEL 6 NEW RECLAIM PLATE FEED AND CONVEYOR AREA (C-28511), CHIPS CONVEYOR TO SCREEN HOUSE AREA (C-28513), AND CHIPS SCREEN HOUSE AREA (C-28515) All that portion of land and structures lying 13' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 63 51' 31" E, 790.90' to the point of beginning; thence N 90 00' W, 82.00; thence S 0' 00" W, 8.75'; thence N 90 00' W, 232.22'; thence S 15 17' 15" E, 479.72' to a point on the northmost side of a rectangular area (Chip Screen House) which parallels last said course and is 75.0' north to south (7.00' of which is west of last said course) by 49.0' east to west; said rectangular area being the point of ending; said land being 0.56+ acres; CHIPS CONVEYOR TO PINE STORAGE AREA (C-28538) All that portion of land and structures lying 14' on each side of the following described centerline: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 45 24' 34" E, 692.79' to the point of beginning; thence S 36 51' 02" E, 454.94' to the point of ending; said land being 0.29+ acres; - CHIPPER DISCHARGE CONVEYOR AREA (C-28536) AND CHIPS TO HARDWOOD STORAGE CONVEYOR AREA (C-28537) All that portion of land and structures lying 14' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 71 34' 06" E, 600.24' to the point of beginning; thence S 71 04' 32" E, 640.91'; thence N 50 08' 32" E, 61.59' to the point of ending; said land being 0.45 + acres; - CHIP CONVEYOR TO DIGESTER AREA (C-28521), CHIP CONVEYOR TO SURGE BIN AREA (C-28519), AND CHIP SILO AREA (C-28520) All that portion of land and structures lying 14' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence S 48 21' 59" W, 84.29' to the point of beginning; thence S 56 07' 32" E, 319.22' to the center of a circular area (Chip Silo) with a radius of 15.00' and a central angle of 360 00' bounded by a rectangular structure 32' -6" + East-West and 32' -6" + North-South; thence N 82 51' 32" E, - - 355.48' to the point of ending; said land being 0.45 + acres; - NEW WASHER FACILITY AND BATCH DIGESTER AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence N 48 06' 06" W, 35.94' to the point of beginning (N 792,374.0, E 234,473.25); thence S 0 00' W, 133.50'; thence N 90 00' W, 103.39'; thence S 0 00' W, 103.50'; thence 90 00' W, 48.00'; thence N 0 00' W, 55.75'; thence N 90 00' W, 80.00; thence S 0 00' W, 42.75'; thence N 90 00' W, 63.00; thence N 0 00' W, 110.00'; thence N45 00' E, 55.00'; thence N0 00' W, 23.11'; thence 90 00' E, 23.00'; thence N 0 00' W, 23.25'; thence N90 00' E, 170.00'; thence N 0 00' W, 28.75'; thence N 90 00' E, 62.50' to the point of beginning; said area being 1.01 + acres; - MILL WATER COOLING TOWER AND NEW REACTOR CLARIFIER AREA All that portion of and, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 48 46' 07" W, 591.71' to the point of beginning (N 791, 960.0 E 234,055.0); thence S 0 00' W, 170.00'; thence N 90 00' W, 111.00; thence 0 00' W, 170.00'; thence N 90 00' E, 111.00' to the point of beginning; said land being 0.43 + - acres; TURPENTINE RECOVERY FACILITY AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 63 26' 06" W, 11.18' to the point of beginning (N 792,345.0, E 234, 490.0); thence N 0' 00" W, 30.00'; thence N 90 00" E, 20.00'; thence S 0 00' W, 30.00'; thence N 90 00' W, 20.00' to the point of beginning; said land being 0.01 + acres; - LOG STORAGE AREA (C-28522), LOG FEED DECKS AREA (C-28523), DRUM AREA (C-28525, VIBRATING CONVEYORS AREA (C-28532), CHIPPER POWER FEED ROLLS AREA (C-28528), CHIP BLDG. AREA (C-28535), AND BARK COLLECTING CONVEYOR AREA (C-28531) All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence N 80 22' 54" E, 879.79' to the point of beginning; thence N 0 00' W, 326.00'; thence N 90 00' E, 711.08'; thence S 0 00' W, 326.00'; thence N 90 00' W, 328.00'; thence S 0 00' W, 188.00'; thence N 90 00' W, 50.00'; thence N 0 00' W, 188.00'; thence N 90 00' W, 333.08' to the point of beginning; said land being 5.54 + acres; - AREA "B" MAINTENANCE SHOP AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 11 04' 57" W, 197.69' to the point of beginning (N 792,156.0, E 234,462.0); thence S 0 00" W, 82.00'; thence N 90 00" w, 52.00'; thence N 0 00' W, 82.00'; thence N 90 00' E, 52.00 to the point of beginning' said land being 0.10 + acres; - NEW LIME KILN/RECAUSTICIZING All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02 of the West Zone of the State of Georgia Coordinate System; thence N 70 51' 29" E, 267.79' to the point of beginning (N 793,238.0 E 233,503.0); thence N 90 00' E, 399.23'; thence S 0 00' W, 50.00'; thence N 90 00' W, 10.00'; thence S 0 00' W, 40.00'; thence N 90 00' W, 136.23'; thence N 0 00' W, 80.00'; thence N 90 00' W, 50.00'; thence S 0 00' W, 10.00'; thence N 90 00' W, 54.00'; thence S 0 00' W, 40.00'; thence N 90 00' E, 65.00'; thence S 0 00' W, 30.00'; thence N 90 00' W, 150.00'; thence N 0 00' W, 17.00'; thence N 90 00' W, 64.00'; thence N 0 00' W, 73.00' to the point of beginning; said land being 0.657, more or less acres, less than and except all structures not included in the Mead Corporation Contract No. 21-3097A. NO. 2 RECOVERY BOILER AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02, of the West Zone of the State of Georgia Coordinate System; thence S 40 16' 34" E, 439.77' to the point of beginning (N 792,814.67, E 233,534.32'); thence N 90 00' E, 36.30'; thence N 0 00' W, 20.50'; thence N 90 00' E, 72.26'; thence N 0 00' W, 14.83'; thence N 90 00' E, 110.50'; thence S 0 00' W, 42.58'; thence N 90 00' E, 26.00'; thence S 0 00' W, 81.00' thence N 90 00' W, 51.00' thence N 0 00" W, 25.12'; thence N 90 00' W, 72.26'; thence N 90 00' W, 20.50'; thence N 0 00' W, 36.30'; thence N 0 00' W, 34.00' to the point of beginning' said land being 0.47 + acres; - NEW EVAPORATORS AND NEW TANKS AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19; E 233,250.02, of the West Zone of the State of Georgia Coordinate System; thence S 62 01' 33" E, 637.83' to the point of beginning (N 792,851.0, E 233,813.33); thence N 90 00' E, 246.67'; thence along an arc South and East 53.41' having a radius of 34.00' with a central angle of 90 00'; thence S 0 00' W, 135.33'; thence along an arc South and West 53.41' having a radius of 34.00' with a central angle of 90 00'; thence N 90 00' W, 34.00'; thence N 0 00' W, 99.79'; thence N 90 00' W, 69.00'; thence N 59 47' 19" W, 91.42'; thence N 90 00' W, 64.67'; thence N 0 00' W, 57.54' to the point of beginning; said land being 0.72 + acres; - PARCEL 7 LIME MUD WASTE DISPOSAL FACILITIES All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233, 250.02 of the West Zone of the State of Georgia Coordinate System; thence N 86 38' 59" E, 253.41' to the point of beginning (N 793,165.00 E 233,503.00); thence N 90 00' E, 64.00'; thence S 0 00' E, 17.00'; thence N 90 00' E, 150.00; thence N 0 00' E, 30.00'; thence N 90 00' W, 65.00'; thence N 0 00' E, 40.00'; thence N 90 00' E, 54.00'; thence N 0 00' E, 10.00'; thence N 90 00' E, 50.00'; thence S 0 00' E, 80.00'; thence N 90 00' E, 136.23'; thence N 0 00' E, 40.00'; thence N 90 00' E, 75.00'; thence S 0 00' E, 78.00;' thence N 90 00' W, 464.23'; thence 0 00' E, 55.00'; to the point of beginning; said land being 0.633 more or less acres, less than and except all structures not included in the Mead Corporation Contract No. 21- 3097A. PARCEL 8A A tract of land situated in the Northwest Quarter of the Northeast Quarter (NW 1/4 of NE 1/4) and the Southwest Quarter of the Northeast Quarter (SW 1/4 of NE 1/4) of Section 28, Township 14 North, Range 30 East, Russell County, Alabama, being more particularly described as follows: Commence at the Northwest corner of Section 28 Township 14 North, Range 30 East; thence run South 89 degrees 33 minutes 20 seconds East along the North Boundary of such Section 28 a distance of 2806.62 feet to a point; thence turn right and run due South a distance of 1210.86 feet to a point at the western end of the Bark Handling System, such point being the beginning of the tract of land herein described. Begin at such point of beginning, turn an angle to the left and run North 45 degrees 00 minutes East a distance of 63.64 feet to a point; thence turn an angle to the right 45 degrees 00 minutes and run easterly a distance of 310.00 feet to a point; thence turn an angle to the right 45 degrees 00 minutes and run southeasterly a distance of 63.64 feet to a point; thence turn an angle to the left 45 degrees 00 minutes and run easterly a distance of 270.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run southerly a distance of 155.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run easterly a distance of 136.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run southerly a distance of 94.35 feet to a point; thence turn an angle to the right 30 degrees 00 minutes and run southwesterly a distance of 263.00 feet to a point; thence turn an angle to the left 30 degrees 00 minutes and run southerly a distance of 132.88 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run westerly a distance of 84.50 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 405.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run westerly a distance of 120.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 115.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run westerly a distance of 470.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 90.00 feet to the point of beginning. PARCEL 8B A tract of land situated in the Northeast Quarter of the Northwest Quarter (NE 1/4 of NW 1/4) and the Southeast Quarter of the Northwest Quarter (SE 1/4 of NW 1/4) of Section 28, Township 14 North, Range 30 East, Russell County, Alabama, being more particularly described as follows: Commence at the Northwest corner of Section 28, Township 14 North, Range 30 East; thence run South 89 degrees 33 minutes 20 seconds East along the North Boundary of such Section 28 a distance of 2290.86 feet to a point; thence turn right and run due South a distance of 1225.36 feet to a point at the Northeast corner of the #2 Bark Boiler Building, such point being the point of beginning of the tract of land herein described. Being at such point of beginning, continue due South a distance of 95.75 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run westerly a distance of 67.50 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 95.75 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run easterly a distance of 15.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run northerly a distance of 40.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run easterly a distance of 34.50 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run southerly a distance of 40.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run easterly a distance of 18.00 feet to the point of beginning. PARCEL 9 All that portion of land, and structures lying thereon, in Section 28, T14N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 794,023.97, E 232,940.10 of the West Zone of the State of Georgia Coordinate System; thence S 52 11' 16" E 381.63' to the point of beginning (N 793,790.00 E 233,241.60); thence N 90 00' 00" E 760.00'; thence S 0 00' 00" E 102.00'; thence N 90 00' 00" E 128.04'; thence S 0 00' 00" E 960.48' (at existing utility bridge)' the N 90 00' 00" W 13.00'; thence N 0 00' 00" W 672.48', thence N 90 00' 00 W 875.04'; thence N 0 00' 00" E 390.00' to the point of beginning; said land being 7.85 + acres; less than and except any - structures not included in the Mead Corporation Contract No. 21-4162; (collectively, (Parcels 1 through 9) the "Other Leased Land") together with the following easements: (a) An easement and right for pedestrian and vehicular traffic to use all present and future walks, railroads, roads, driveways and docks upon the Other Leased Land in order to provide all necessary or convenient ingress or egress between the 1997 Leased Land and railroads, public roads and highways and the Chattahoochee River and to permit passage between the 1997 Leased Land and the Other Leased Land; (b) An easement and right for the passage of pedestrians and vehicles and for the construction, erection, installation, operation, maintenance, renewal, replacement and use of material conveying systems, including without limitation pipelines, through any part of the Other Leased Land necessary or convenient in order to assure the passage of equipment, raw materials, items in the process of manufacture, and finished products from the 1997 Leased Land to the Other Leased Land, including without limitation such rights and easements as are necessary for the movement of personnel, vehicles and materials among and between the various parcels of land comprising the Other Leased Land in order to permit and facilitate the operation of the Project; (c) An easement and right to erect, install, construct, maintain, renew, replace and use on, over and under any part of the Other Leased Land, such pipes, conduits, and wires as are necessary or convenient to insure access to and an adequate system for or supply of gas, oil, steam, compressed air, process and space heat, water, fire protection, sewage and industrial waste disposal, electricity, communications, instrumentation and control, and other similar facilities to the 1997 Leased Land and the Project including, without limitation, the right to make connections with machinery, equipment, pipes, conduits and wires, structures and other improvements and appurtenances thereto, on the Other Leased Land; and (d) An easement and right to create and maintain upon the Other Leased Land encroachments of equipment, structures or other improvements which will be included on the 1997 Leased Land and within the Project as presently planned, and any similar replacements or substitutions of portions of the Project for as long as any such equipment, structures or other improvements remain standing, including without limitation the rights of lateral or party wall support, and to connect any such equipment, structure or other improvements to any structure or improvement on the Other Leased Land; but subject to the following easements over the 1997 Leased Land in favor of the Other Leased Land: (a) An easement and right for pedestrian and vehicular traffic to use all present and future walks, railroads, roads, driveways and docks upon the 1997 Leased Land in order to provide all necessary or convenient ingress and egress among and between all portions of the Other Leased Land and between the Other Leased Land and the 1997 Leased Land, including without limitation portions on which additional improvements may be erected, and railroads, public works and highways and the Chattahoochee River and to permit passage among and between the various parcels of land comprising the Other Leased Land; (b) An easement and right for the passage of pedestrians, vehicles, and for the construction, installation, operation, maintenance, renewal, replacement and use of material conveyance systems, including without limitation, pipelines, through any part of the 1997 Leased Land necessary or convenient in order to assure the passage of equipment, and finished products from one portion of the Other Leased Land to another or between the Other Leased Land and the 1997 Leased Land, including, without limitation such rights and easements as are necessary for the movement of personnel, vehicles and material among and between the various parcels of land comprising the Other Leased Land in order to permit and facilitate the operation of any facilities located on the Other Leased Land; (c) An easement and right to erect, install, construct, maintain, renew, replace and use on, over and under any part of the 1997 Leased Land, such pipes, conduits, and wires and appurtenances as are necessary or convenient to assure access to and an adequate system for or supply of gas, oil, steam, compressed air, process and space heat, water, fire protection, sewage and industrial waste disposal, electricity, communications, instrumentation and control, and other similar facilities to the Other Leased Land, including without limitation, the right to make connections with machinery, equipment, pipes, conduits and wires, structures and other improvements and appurtenances thereto, on the 1997 Leased Land; and (d) An easement and right to maintain any present equipment, structures or other improvements included within the facilities presently located on the Other Leased Land as encroachments upon the 1997 Leased Land as long as any such equipment, structures or other improvements remain standing, and to construct and maintain similar encroachments on the 1997 Leased Land in respect of any additional improvements constructed adjacent to the 1997 Leased Land, as long as any such additional improvements remain standing, including without limitation the rights of lateral or party wall support, and to connect such additional improvements to any structure or any improvements on the 1997 Leased Land. subject in all cases to the following: (1) Lease Agreement dated as of November 1, 1983 between the Board, as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time relating to the Board's Industrial Development Revenue Bonds (Georgia Kraft Project), Series 1983; (2) Lease Agreement dated as of December 1, 1983 between the Board as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Georgia Kraft Project), Series 1983; (3) Lease Agreement dated as of December 1, 1985 between the Board, as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Refunding Bonds (Georgia Kraft Project), Series 1985; (4) Lease Agreement dated as of July 1, 1986 between the Board, as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time, relating to the Board's Industrial Development Revenue Bonds (Georgia Kraft Project), Series 1986; (5) Lease Agreement dated as of December 1, 1988 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1988; (6) Lease Agreement dated as of December 1, 1988 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1988A, 1989A, 1989B, 1989C, 1989D, 1989E, 1900A and 1991A; (7) Lease Agreement dated as of June 1, 1990 between the Board, as lessor, and Industrial Warehouse Services, Inc., as lessee, as amended and supplemented from time to time, relating to the Board's First Mortgage Revenue Bonds (Industrial Warehouse Services, Inc.), Series 1990; (8) Lease Agreement dated as of June 1, 1993 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1993A; (9) Lease Agreement dated as of June 1, 1993 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1993A and 1995A; (10) Lease Agreement dated as of March 1, 1996 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1996; (11) Lease Agreement dated as of September 1, 1997 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1997A; (12) Lease Agreement dated as of February 1, 1998 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Refunding Bonds (Mead Coated Board Project), Series 1998A; and (13) Lease Agreement dated as of February 1, 1998 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Refunding Bonds (Mead Coated Board Project), Series 1998B. SECOND AMENDMENT ---------------- TO -- LEASE AGREEMENT --------------- THIS SECOND AMENDMENT TO LEASE AGREEMENT (the "Amendment") is made and entered into as of September 30, 1998 by and between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA (the "Board"), a public body corporate and politic duly organized and existing under the Constitution and laws of the State of Alabama, and MEAD COATED BOARD, INC., a Delaware corporation (the "Company"). R E C I T A L S --------------- The Board previously issued and sold (i) $150,000,000 in aggregate principal amount of The Industrial Development Board of the City of Phenix City, Alabama Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1997A (the "Series 1997A Bonds") pursuant to a Trust Indenture dated as of September 1, 1997 (the "Original Indenture") from the Board to AmSouth Bank, formerly AmSouth Bank of Alabama, as Trustee (the "Prior Trustee"). Pursuant to the First Supplemental Indenture dated as of September 15, 1998 (the "First Supplemental Indenture") and a resolution of the Board of even date, The First National Bank of Chicago has been appointed as successor trustee under the Original Indenture (the "Trustee"). The Board has used the proceeds of the sale of the Series 1997A Bonds for the payment of outstanding industrial development temporary borrowing notes (the "Notes") issued by the Board for the purpose of funding the acquisition, construction and installation of a coated natural kraft mill and related facilities (the "Project") in connection with certain industrial facilities located near Phenix City, Alabama. The Project is owned by the Board and leased to the Company pursuant to a Lease Agreement dated as of September 1, 1997, as amended by a First Amendment to Lease Agreement dated as of August 1, 1998 (the "Agreement"). The Agreement obligates the Company to make rental payments in such amounts and at such times as will provide for the payment of the principal and interest on the Series 1997A Bonds as the same becomes due and payable. Under Article IV of the Original Indenture, the Board is permitted to issue Additional Bonds (as defined in the Original Indenture) in order to pay additional Notes issued by the Board in connection with the Project. In that connection, the Board is issuing $85,000,000 in aggregate principal amount of Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1998A (the "Series 1998A Bonds"), pursuant to the Original Indenture as supplemented by a Second Supplemental Trust Indenture dated as of September 30, 1998 (the "Second Supplemental Indenture") from the Board to the Trustee. The Original Indenture as supplemented by the First Supplemental Indenture, the Second Supplemental Indenture is hereinafter referred to as the "Indenture". NOW, THEREFORE, as contemplated by Section 4.5 of the Agreement and in accordance with Section 1501 of the Original Indenture, the parties hereto desire to amend the Agreement as follows: ARTICLE I PROVISIONS FOR AMENDING THE AGREEMENT ------------------------------------- Section 1.1 Amendment of Section 5.3 of the Agreement. The term "Bonds" ----------- ----------------------------------------- as used in Section 5.3 of the Agreement shall include the Series 1998A Bonds. Section 1.2 Terms of Agreement Applicable to Series 1998A Bonds. All ----------- --------------------------------------------------- terms, conditions, representations and covenants set forth in the Agreement applicable to the Series 1997A Bonds and not specifically otherwise provided for in the Indenture, any supplements thereto or the Agreement, shall apply with full force and effect to the Series 1998A Bonds. Without limiting the foregoing, all references in the Agreement to the "Bonds" shall be deemed to mean the Series 1997A Bonds and the Series 1998A Bonds, including without limitation the provisions of Section 5.3 of the Agreement relating to the payment of rents. Section 1.3 Representations and Warranties by the Board. The Board makes ----------- ------------------------------------- ----- the following representations and warranties as the basis for the undertakings on its part herein contained: (a) Organization and Authority. The Board is a public corporation -------------------------- duly organized and validly existing under the provisions of the Act by authority of a resolution adopted by the Board of Commissioners of the City on June 14, 1960 and a Certificate of Incorporation duly filed for record on October 17, 1960, in the office of the Judge of Probate of Russell County, Alabama, which Certificate of Incorporation has not been amended or been revoked and is of full force and effect. The Board has all requisite power and authority under the Act (1) to issue the Series 1998A Bonds, (2) to use the proceeds thereof to refund the Notes issued to pay the cost to acquire, construct and install the Project, (3) to own, lease, encumber and dispose of the Project, and (4) to enter into, and perform its obligations under, the Indenture, the Agreement and this Amendment. This Amendment and the Second Supplemental Indenture have been duly authorized, executed and delivered by the Board and are legal, valid and binding agreements enforceable against the Board in accordance with their respective terms. (b) Pending Litigation. There are no actions, suits, proceedings, ------------------ inquiries or investigations pending, or to the knowledge of the Board threatened, against or affecting the Board in any court or before any governmental authority or arbitration board or tribunal, which adversely affect the validity or enforceability of the Series 1998A Bonds, the Indenture, the Agreement, this Amendment, or any agreement or instrument to which the Board is a party and which is used or contemplated for use in the consummation of the transactions contemplated hereby or thereby. (c) Issue, Sale and Other Transactions Are Legal and Authorized. The ----------------------------------------------------------- issue and sale of the Series 1998A Bonds and the execution and delivery by the Board of the Second Supplemental Indenture and this Amendment and the compliance by the Board with all of the provisions of each thereof and of the Series 1998A Bonds (i) are within the purposes, powers and authority of the Board, (ii) to the best of the knowledge of the Board, have been done in full compliance with the provisions of the Act, are legal and will not conflict with or constitute on the part of the Board a violation of or a breach of or default under, or result in the creation of any lien or encumbrance (other than Permitted Encumbrances under the Agreement) upon any property of the Board under the provisions of, its certificate of incorporation or Bylaws, or any indenture, mortgage, deed of trust, note agreement or other agreement or instrument to which the Board is a party or by which the Board is bound, or any license, judgment, decree, law, statute, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Board or any of its activities or properties, and (iii) have been duly authorized by all necessary corporate action on the part of the Board. (d) Governmental Consents. Neither the nature of the Board nor any --------------------- of its activities or properties, nor any relationship between the Board and any other person, nor any circumstance in connection with the offer, issue, sale or delivery of any of the Series 1998A Bonds is such as to require the consent, approval or authorization of, or the filing, registration or qualification with, any governmental authority on the part of the Board in connection with the execution, delivery and performance of the Second Supplemental Indenture and this Amendment, or the offer, issue, sale or delivery of the Series 1998A Bonds, other than (i) the filing with the Alabama Securities Commission of the notification of the Board's intention to issue the Series 1998A Bonds required by Act No. 586 enacted at the 1978 Regular Session of the Legislature of the State and the issuance by the Director of the Alabama Securities Commission of such Certificate of Notification as may be required by said Act, and (ii) the due filing and recording of this Amendment, the Second Supplemental Indenture and any financing statements covering the security interests created hereunder and under the Indenture. The Board has filed the notification referred to in (i) of the preceding sentence and the Director of the Alabama Securities Commission has issued a Certificate of Notification applicable to the Series 1998A Bonds, which Certificate of Notification has not been revoked or rescinded and is in full force and effect. (e) No Defaults. The Board is not in default under the Act or under ----------- its Certificate of Incorporation or Bylaws or any other agreement or instrument to which it is a party or by which is bound. Section 1.4 Representations and Warranties by the Company. The Company ----------- --------------------------------------------- makes the following representations and warranties as the basis for the undertakings on its part herein contained: (a) The Company (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) has all requisite corporate power and authority to carry on its business as now being conducted and as presently proposed to be conducted, and (iii) has duly qualified and is authorized to do business and is in good standing as a foreign corporation in the State. (b) The Company has the corporate power and has been duly authorized to enter into this Amendment and to perform all of its obligations hereunder. (c) The willingness of the Board to issue the Series 1998A Bonds for purposes of financing costs of acquiring, constructing, and installing the Project, and to lease the Project to the Company, has induced the Company to locate the Project within the State of Alabama and, more particularly, within 25 miles of the City. (d) The Company is not subject to any contractual or other limitation or provision of any nature whatsoever which in any material way limits, restricts or prevents the Company from entering into this Amendment, or performing any of its obligations hereunder; and the execution and delivery of consummation of the transactions contemplated hereby, and the fulfillment of or compliance with the terms and conditions of this Amendment will not conflict with or result in a breach of the terms, conditions or provisions of any restriction, agreement or instrument to which the Company is a party or by which it is bound, or constitute a default under any of the foregoing. (e) No event has occurred and no condition exists that would constitute an "Event of Default" under the Agreement or this Amendment which, with the lapse of time or with the giving of notice or both, would become an "Event of Default" under the Agreement or this Amendment. (f) To the best of its knowledge and belief, the Company is not in violation of any laws, ordinances, governmental rules or regulations to which it is subject and has not failed to obtain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of its properties or to the conduct of its business, which violation or failure to obtain would reasonably be expected to materially and adversely affect the ability of the Company to perform its obligations under this Amendment. ARTICLE II MISCELLANEOUS ------------- Section 2.1 Agreement and Amendment as One Document. As amended by this ----------- --------------------------------------- Amendment, the Agreement is in all respects ratified and confirmed and the Agreement and this Amendment shall be read, taken and construed as one and the same instrument. Section 2.2 References. All references herein or in the Agreement to any ----------- ---------- Article, Section or provision of the Agreement shall refer to any such Article, Section or provision as hereby amended. Section 2.3 Counterparts. This Amendment may be simultaneously executed ----------- ------------ in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 2.4 Captions. The captions or headings in this Amendment are for ----------- -------- convenience only and in no way define, limit or describe the scope or intent of any provision of this Amendment. Section 2.5 Applicable Law. This Amendment shall be construed in ----------- -------------- accordance with the laws of the State of Alabama. IN WITNESS WHEREOF, the Board and the Company have caused this Amendment to be executed in their respective corporate names as of the date first written above. THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA Kenneth A. Roberts By:-------------------------------- Chairman MEAD COATED BOARD, INC. Timothy R. McLevish By:------------------------------- Treasurer ACKNOWLEDGMENT OF BOARD STATE OF ALABAMA COUNTY OF RUSSELL I, Sydney S. Smith, a Notary Public in and for said County in said State, --------------- hereby certify that Kenneth A. Roberts, whose name as Chairman of the Board of Directors of THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA, a public corporation and instrumentality under the laws of the State of Alabama, is signed to the foregoing instrument and who is known to me, acknowledged before me on this day that, being informed of the contents of the said instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said public corporation. GIVEN under my hand and seal of office, this 9th day of September, 1998. --- Sydney S. Smith ----------------------------- Notary Public SYDNEY S. SMITH NOTARY PUBLIC ALABAMA STATE-AT-LARGE (SEAL) My commission expires:2/28/2000 ----------------- ACKNOWLEDGMENT OF COMPANY STATE OF OHIO COUNTY OF MONTGOMERY I, Phyllis M. Crabill, Notary Public in and for said County in said State, ------------------ hereby certify that Timothy R. McLevish, whose name as Treasurer of MEAD COATED BOARD, INC., a corporation organized and existing under the laws of the State of Delaware, is signed to the foregoing instrument and who is known to me, acknowledged before me on this day that, being informed of the contents of the said instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. GIVEN under my hand and seal of office, this 23rd day of September, 1998. ---- Phyllis M. Crabill ------------------------------- Notary Public Phyllis M. Crabill In and for the State of Ohio (SEAL) My commission expires:August 31, 1999 ---------------- CONSENT OF BONDHOLDER --------------------- Mead Coated Board, Inc., as holder of all of the outstanding Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1997A of The Industrial Development Board of the City of Phenix City, Alabama (the "Board"), hereby consents to the execution and delivery of the foregoing Second Amendment To Lease Agreement, dated as of September 30, 1998, between the Board and Mead Coated Board, Inc., amending the Lease Agreement, dated as of September 1, 1997 between the Board and Mead Coated Board, Inc. IN WITNESS WHEREOF, Mead Coated Board, Inc. has caused this Consent of Bondholder to be executed in its name and behalf as of September 30, 1998. MEAD COATED BOARD, INC. By: /s/ Timothy R. McLevish ------------------------------- Treasurer CONSENT OF TRUSTEE ------------------ THE FIRST NATIONAL BANK OF CHICAGO, as successor Trustee under the Trust Indenture dated as of September 1, 1997, as supplemented from the Industrial Development Board of the City of Phenix City, Alabama (the "Board"), hereby consents to the execution and delivery of the foregoing Second Amendment To Lease Agreement, dated as of September 30, 1998, between the Board and Mead Coated Board, Inc., amending the Lease Agreement, dated as of September 1, 1997 between the Board and Mead Coated Board, Inc. IN WITNESS WHEREOF, The First National Bank of Chicago has caused this Consent of Trustee to be executed in its name and behalf as of September 30, 1998. THE FIRST NATIONAL BANK OF CHICAGO as Trustee By: /s/ Sandra L. Caruba ------------------------------- Title: Vice President ---------------------------- EXHIBIT "A" to Second Amendment To Lease Agreement between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA and MEAD COATED BOARD, INC. dated as of September 30, 1998 DESCRIPTION OF PROJECT LAND --------------------------- The Project Land includes the following property: The following real estate and premises situated in the County of Russell and State of Alabama: Eight hundred eighty four and 47/100 (884.47) acres located in Sections 32, 33, 21, 28, and 27, Township 14 North, Range 30 East, and Section 5, Township 13 North, Range 30 East, and beginning at the Southwest corner of Section 32, Township 14 North, Range 30 East, Russell County, Alabama, run thence North 00 degrees 38 minutes East a distance of 354.26 feet along a fence line to a concrete monument, thence North 37 degrees 57 minutes 25 seconds East a distance of 2086.55 feet to a point, thence North 57 degrees 13 minutes East a distance of 4397.87 feet to a point, thence North 01 degree 38 minutes East a distance of 970.55 feet to a point, thence North 37 degrees 53 minutes East a distance of 1948.85 feet to a point, thence North 00 degrees 37 minutes West a distance of 2783.92 feet to a point, thence North 45 degrees 16 minutes East a distance of 1570.95 feet to a concrete monument, thence North 00 degrees 27 minutes East a distance of 621.32 feet to a concrete monument, thence South 88 degrees 26 minutes 40 seconds East a distance of 1048.15 feet to a concrete monument, thence South 00 degrees 41 minutes 10 seconds East a distance of 601.95 feet to a concrete monument, thence South 89 degrees 33 minutes 20 seconds East along the north line of Section 28, Township 14 North, Range 30 East a distance of 1915.88 feet to a concrete monument, said monument being the northeast corner of said Section 28, which is the northwest corner of Section 27, in Township 14 North, Range 30 East, thence South 89 degrees 33 minutes 20 seconds East along the North line of said Section 27 to the boundary line between the State of Georgia, and the State of Alabama; thence Southerly and Southwesterly along said line between the State of Alabama and the State of Georgia, as the same runs, to the northerly and southerly line along the west side of Section 5, Township 13 North, Range 30 East, run thence North 00 degrees 28 minutes East along the West line of said Section 5, to a point marked by an iron pipe; thence North 00 degrees 28 minutes East along the west line of said Section 5 a distance of 2825.00 feet to the northwest corner of Section 5, and the point of beginning. (The Portion of said line from the northerly line of a public road known as the Ferry Road to the northwest corner of said Section 5, which is the southwest corner of Section 32, Township 14 North, Range 30 East, being along an old fence.) There is hereby expressly excepted from said described lands those lands heretofore taken in fee simple by condemnation by the United States of America and subject to flowage easements taken by the United States of America by condemnation and subject to the easement rights (a) for right of way for railroad purposes and (b) for a public road over and through said described lands, such public road right of way having been conveyed by the W.C. Bradley Company, to Russell County, Alabama, by deed recorded in Deed Record 387, pages 787-788, in the office of the Judge of Probate in and for Russell County, Alabama. Said described lands hereby conveyed contain in the aggregate according to survey made, eight hundred eighty four and 47/100ths (884.47) acres (the "1997 Leased Land"); less and except the following property: PARCEL 1 Beginning at a point which is 743.81 feet east and 477.58 feet south of the northwest corner of section 28, Township 14 North, Range 30 East, Russell County, Alabama, which section corner is marked by a concrete monument, this point thus determined, being the northwest corner of the property to be conveyed, then proceeding south 128.84 feet, then east 85.0 feet, then north 128.84 feet, then west 85.0 feet to the point of beginning. PARCEL 2 Beginning at a point which is 928.0 feet South and 1479.0 feet East of the Northwest corner of Section 28 in Township 14 North, Range 30 East, Russell County, Alabama, which corner is marked by a concrete monument, then proceeding North a distance of 120.0 feet, then West 100.0 feet, then South 120.0 feet, then East 100.0 feet to the point of beginning. PARCEL 3 At the Southwest corner of Section 22, Township 14 North, Range 30 East, Russell County, Alabama as the point of beginning, run along the South line of Section 22 N89 -50'E 976.85 feet to the property line of the United States Government; thence along said property line N2 -50'W 1296.69 feet to a branch which runs into Bluff Creek; thence along said branch the following courses; N41 -41'W 340.67 feet; S85 -42'W 324.22 feet; S81 -08'W 330.0 feet; N25 -48'W 145.58 feet; S76 -52'W 198.66 feet; N44 -03'W 152.62 feet; S46 -35'Q 84.21 feet; S21 -00'E 83.39 feet; N82 -27'W 94.15 feet; S7 -51'E 148.82 feet; S66 -39'W 386.20 feet; S62 -55'W 237.23 feet; S65 -05'W 232.38 feet; S74 -24'W 408.97 feet; S51 -52'W 371.60 feet; S19 -42'W 231.02 feet; S62 -26'W 198.83 feet; N85 -48'W 229.54 feet; S89 -23'W 159.01 feet; N83 -01'W 327.29 feet; S80 -02'W 437.03 feet; thence S59 -27'W 318.79 feet; thence S3 -28'E 199.83 feet; thence S1 -16'E 607.22 feet; thence N87 -24'E 343.43 feet; thence N82 -04'E 516.01 feet; thence N70 -45'E 540.58 feet; thence N89 -18'E 472.15 feet; thence N0 -01'E 400.58 feet; thence S89 -59'E 446.0 feet; thence S0 -01'W 395.0 feet; thence N89 -18'E 171.06 feet; thence N46 -28'E 463.45 feet to the South line of Section 21; thence along said Section line S90 -48'E 749.92 feet to the point of beginning and containing 121.14 acres more or less. PARCEL 4A All that tract or parcel of land situated lying and being in Section 28, Township 14 North, Range 30 East, Russell County, Alabama, and being more particularly described as follows: To find the point of beginning, commence at the northwest corner of Section 28, Township 14 North, Range 30 East, which corner is marked by a concrete monument and, from said point, thence running South 89 degrees 33 minutes 20 seconds East, along the North line of said Section 28, a distance of 1,250.03 feet to an iron pin, said iron pin being the beginning point of the property herein conveyed; and from said point of beginning running thence South 89 degrees 33 minutes 20 seconds East, along the North line of said Section 28, a distance of 400.0 feet to a point; thence running South 01 degree 02 minutes 40 seconds West a distance of 704.0 feet, more or less, to a point; thence running South 45 degrees 16 minutes 00 seconds West a distance of 560.0 feet, more or less, to an iron pin; thence running North 01 degree 02 minutes 40 seconds East a distance of 1,076.19 feet to the point of beginning. The property herein described is bounded on the West and South by property of Grantee herein, on the North and East by property of Grantor herein and said described tract contains 8.2 acres, more or less. PARCEL 4B Commencing at the Northwest corner of Section 28 in Township 14 North, Range 30 East, Russell County, Alabama, which corner is marked by a concrete monument and proceeding east along the north line of said Section 28, which is the north property line of Georgia Kraft Company, a distance of two hundred forth-nine and ninety-six hundredths (249.96) feet to the point of intersection with the east right-of-way line of the Central of Georgia Railroad which point is marked by an iron pin, said iron pin being the point of beginning of the property herein conveyed. From said point of beginning running thence over and along the west boundary of said tract number one, which is the east right-of-way line of the Central of Georgia Railroad which is fifty feet from and parallel to the center line of the main line track, on a bearing of south one degree, two minutes and forty seconds west (S 1 02' 40" W) a distance of sixteen hundred forty-three and fifty-nine hundredths (1643.59) feet to a point, thence along the west boundary of the said tract number one, which is the east right-of-way line of the Central of Georgia Railroad and is fifty (50) feet from and concentric with the center line of the main line track, following a circular curve to the right, having a radius of eight hundred sixty-four and forty-nine hundredths (864.49) feet for an arc distance of three hundred seventy-two and forty-three hundredths (372.43) feet to an iron pin marking the southwest corner of said tract number one which is the point where the east right-of-way line of the Central of Georgia Railroad main line terminates on the north right-of-way line of the spur track serving the Georgia Kraft Company mill, said point being fifty (50) feet from the center line of the main line track and twenty-five (25) feet from the center line of the aforesaid spur track; thence along the south boundary of said tract number one, which is the north right-of-way line of the spur track serving the Georgia Kraft Company mill and is twenty-five (25) feet from and parallel to the center line of the aforesaid spur track, on a bearing of north fifty-one degrees, fifty-two minutes and ten seconds east (N 51 52' 10" E) for a distance of thirteen-hundred fifty-nine and ninety-three hundredths (1359.93) feet to an iron pin marking the south- east corner of said tract number one; thence along the east line of said tract number one on a bearing of north zero degrees and thirty-seven minutes west (N 0 37' W) a distance of fifty-three and fifty-six hundredths (53.56) feet to an iron pin; thence along the east boundary of said tract number one on bearing of north forty-five degrees and sixteen minutes east a distance of thirty-seven and eighty hundredths (37.80) feet to an iron pin; thence along the east boundary of said tract number one on a bearing of north one degree, two minutes and forty seconds east (N 1 02' 40" E) a distance of one thousand seventy-six and nineteen hundredths (1076.19) feet to an iron pin marking the north east corner of said tract number one and being on the north line of the aforesaid Section 28; on a bearing of north eighty-nine degrees thirty-three minutes and twenty seconds West (N 89 33' 20" W) a distance of one thousand and seven hundredths (1000.07) feet to the point of beginning. The above described boundaries of said tract number one enclose thirty-five and fifty-one hundredths (35.51) acres, more or less; excepting from the foregoing description of Parcel 4A and Parcel 4B the following described Tracts A, B and C: TRACT A A 200 foot wide strip of land for a road right-of-way situated in Sections 20, 28 and 29, Township 14 North, Range 30 East, in Russell County, Alabama, and being 100 feet on either side of and contiguous with the following described centerline: Commence at the Northeast corner of Section 20, Township 14 North, Range 30 East and run North 86 degrees 56 minutes West for a distance of 751.7 feet; thence South 33 degrees 37 minutes West for a distance of 2187.0 feet; thence South 18 degrees 31 minutes West for a distance of 856.7 feet; thence South 19 degrees 29 minutes West for a distance of 507.5 feet; thence South 89 degrees 26 minutes East for a distance of 91.80 feet; thence from the last described course turn left 151 degrees 00 minutes and run Northwesterly 138.20 feet to a point in the center of Alabama Highway No. 165 and the point of beginning for said centerline; thence turn right 180 degrees 00 minutes and run Southeasterly along said centerline 230.00 feet to the point of a curve to the right; said curve having a 17 degree 32 minutes 16 seconds degree of curvature and an included angle of 62 degrees 45 minutes; thence continue along said curve an arc distance of 359.20 feet to the point of tangent to said curve; thence continue tangent to last described curve Southerly a distance of 1719.47 feet to the point of a curve to the left; said curve having a 10 degree 00 minutes 14 seconds degree of curvature and an included angle of 27 degrees 25 minutes 40 seconds; thence continue along said curve an arc distance of 274.51 feet to the point of tangent to said curve; thence continue tangent to the last described curve Southeasterly 1097.83 feet to the point of a curve to the left; said curve having a 12 degree 30 minute degree of curvature and an included angle of 101 degrees 50 minutes 41 seconds; thence continue along said curve an arc distance of 816.38 feet to the point of tangent to said curve; thence continue tangent to last described curve Northeasterly 1351.87 feet to the point of a curve to the right; said curve having a 22 degree 31 minutes 55 seconds degree of curvature and an included angle of 37 degrees 53 minutes 10 seconds; thence continue along said curve an arc distance of 168.14 feet to the intersection of said curve and the centerline of existing railroad; said intersection being the end of said centerline of roadway description. Said strip of land lying in Sections 20, 28 and 29, Township 14 North, Range 30 East, Russell County, Alabama and containing 27.62 acres more or less. TRACT B Beginning at a point which is 743.81 feet east and 477.58 feet south of the northwest corner of Section 28, Township 14 North, Range 30 East, Russell County, Alabama, which section corner is marked by a concrete monument, this point thus determined, being the northwest corner of the property to be conveyed, then proceeding south 128.84 feet, then east 85.0 feet, then north 128.84 feet, then west 85.0 feet to the point of beginning. TRACT C Beginning at a point which is 928.0 feet South and 1479.0 feet East of the Northwest corner of Section 28 in Township 14 North, Range 30 East, Russell County, Alabama, which corner is marked by a concrete monument, then proceeding North a distance of 120.0 feet, then West 100.0 feet, then South 120.0 feet, then East 100.0 feet to the point of beginning. PARCEL 5 WASTE WOOD CONVEYOR TO SCALPER (C-28506) AREA AND TRUCK DUMPER (C-28505) AREA All that portion of land and structures lying 9' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 31 59' 52' E, 291.25' to the point of beginning; thence S 0 00' W, 231.00' to a point on the north side of a rectangular area (Truck Dumper) bounded by a N 792,366.0, N 792,326.5, and E 234,642.0, and E 234,765.5, said rectangular area being the point of ending; said land being 0.21 + - acres; NO. 1 BARK TRANSFER CONVEYOR (C-28503) AREA, NO. 2 BARK TRANSFER CONVEYOR (C-28504) AREA, BARK HOG STRUCTURE (C-28534) AREA AND REFUSE CONVEYOR SCALPER (C-28533) AREA All that portion of land and structures lying 9' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 31 59' 52" E, 291.25' to the point of beginning; thence S 8 20' 17" W, 284.46' to the center of a rectangular area which is parallel to the last said course 22' north to south by 15' east to west; thence S 81 39' 40" E, 843.58' to a parallel rectangular area (Bark Hog Structure) 26.00' north to south (10.00' lying south of last said course) by 37.50'; thence continue along last said course 27.00'; thence N 45 07' 38" E, 350.71' to the point of ending; said land being 0.63 + acres; NO. 2 TURBINE AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02 of the West Zone of the State of Georgia Coordinate System; thence S 25 19' 16" E, 663.98' to the point of beginning (N 792,550.0 E 233,534.0); thence S 0 00' W, 50.00'; thence N 90 00' E, 121.00'; thence N 0 00' W, 50.00'; thence N 90 00' W, 121.00' to the point of beginning; said land being 0.14 + acres; - SANITARY PACKAGE TREATMENT PLANT AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 48 35' 13" W, 1186.73' to the point of beginning (N 791,565.0. E 233,610.0); thence S 0' 00" W, 12.00'; thence N 90 00' W, 64.00'; thence N. 0' 00" W 12.00'; thence N 90' 00" E, 64.00' to the point of beginning; said land being 0.02 + acres; and - NO. 3 BARK BOILER AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02 of the West Zone of the State of Georgia Coordinate System; thence S 29 39' 25" E, 461.76' to the point of beginning (N 792,748.92, E 233,478.50); thence N 90 00' E, 73.57'; thence S 0 00' W, 34.50'; thence N 90 00' W, 11.82'; thence S 0 00' W, 143.17'; thence N 90 00' W, 90.62'; thence N 0 00" W, 83.08'; thence N 90 00" E, 28.87'; thence N 0 00' W, 94.59' to the point of beginning; said land being 0.32 + acres; - PARCEL 6 NEW RECLAIM PLATE FEED AND CONVEYOR AREA (C-28511), CHIPS CONVEYOR TO SCREEN HOUSE AREA (C-28513), AND CHIPS SCREEN HOUSE AREA (C-28515) All that portion of land and structures lying 13' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 63 51' 31" E, 790.90' to the point of beginning; thence N 90 00' W, 82.00; thence S 0' 00" W, 8.75'; thence N 90 00' W, 232.22'; thence S 15 17' 15" E, 479.72' to a point on the northmost side of a rectangular area (Chip Screen House) which parallels last said course and is 75.0' north to south (7.00' of which is west of last said course) by 49.0' east to west; said rectangular area being the point of ending; said land being 0.56+ acres; CHIPS CONVEYOR TO PINE STORAGE AREA (C-28538) All that portion of land and structures lying 14' on each side of the following described centerline: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 45 24' 34" E, 692.79' to the point of beginning; thence S 36 51' 02" E, 454.94' to the point of ending; said land being 0.29+ acres; - CHIPPER DISCHARGE CONVEYOR AREA (C-28536) AND CHIPS TO HARDWOOD STORAGE CONVEYOR AREA (C-28537) All that portion of land and structures lying 14' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 71 34' 06" E, 600.24' to the point of beginning; thence S 71 04' 32" E, 640.91'; thence N 50 08' 32" E, 61.59' to the point of ending; said land being 0.45 + acres; - CHIP CONVEYOR TO DIGESTER AREA (C-28521), CHIP CONVEYOR TO SURGE BIN AREA (C-28519), AND CHIP SILO AREA (C-28520) All that portion of land and structures lying 14' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence S 48 21' 59" W, 84.29' to the point of beginning; thence S 56 07' 32" E, 319.22' to the center of a circular area (Chip Silo) with a radius of 15.00' and a central angle of 360 00' bounded by a rectangular structure 32' -6" + East-West and 32' -6" + North-South; thence N 82 51' 32" E, - - 355.48' to the point of ending; said land being 0.45 + acres; - NEW WASHER FACILITY AND BATCH DIGESTER AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence N 48 06' 06" W, 35.94' to the point of beginning (N 792,374.0, E 234,473.25); thence S 0 00' W, 133.50'; thence N 90 00' W, 103.39'; thence S 0 00' W, 103.50'; thence 90 00' W, 48.00'; thence N 0 00' W, 55.75'; thence N 90 00' W, 80.00; thence S 0 00' W, 42.75'; thence N 90 00' W, 63.00; thence N 0 00' W, 110.00'; thence N45 00' E, 55.00'; thence N0 00' W, 23.11'; thence 90 00' E, 23.00'; thence N 0 00' W, 23.25'; thence N90 00' E, 170.00'; thence N 0 00' W, 28.75'; thence N 90 00' E, 62.50' to the point of beginning; said area being 1.01 + acres; - MILL WATER COOLING TOWER AND NEW REACTOR CLARIFIER AREA All that portion of and, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 48 46' 07" W, 591.71' to the point of beginning (N 791, 960.0 E 234,055.0); thence S 0 00' W, 170.00'; thence N 90 00' W, 111.00; thence 0 00' W, 170.00'; thence N 90 00' E, 111.00' to the point of beginning; said land being 0.43 + - acres; TURPENTINE RECOVERY FACILITY AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 63 26' 06" W, 11.18' to the point of beginning (N 792,345.0, E 234, 490.0); thence N 0' 00" W, 30.00'; thence N 90 00" E, 20.00'; thence S 0 00' W, 30.00'; thence N 90 00' W, 20.00' to the point of beginning; said land being 0.01 + acres; - LOG STORAGE AREA (C-28522), LOG FEED DECKS AREA (C-28523), DRUM AREA (C-28525, VIBRATING CONVEYORS AREA (C-28532), CHIPPER POWER FEED ROLLS AREA (C-28528), CHIP BLDG. AREA (C-28535), AND BARK COLLECTING CONVEYOR AREA (C-28531) All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence N 80 22' 54" E, 879.79' to the point of beginning; thence N 0 00' W, 326.00'; thence N 90 00' E, 711.08'; thence S 0 00' W, 326.00'; thence N 90 00' W, 328.00'; thence S 0 00' W, 188.00'; thence N 90 00' W, 50.00'; thence N 0 00' W, 188.00'; thence N 90 00' W, 333.08' to the point of beginning; said land being 5.54 + acres; - AREA "B" MAINTENANCE SHOP AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 11 04' 57" W, 197.69' to the point of beginning (N 792,156.0, E 234,462.0); thence S 0 00" W, 82.00'; thence N 90 00" w, 52.00'; thence N 0 00' W, 82.00'; thence N 90 00' E, 52.00 to the point of beginning' said land being 0.10 + acres; - NEW LIME KILN/RECAUSTICIZING All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02 of the West Zone of the State of Georgia Coordinate System; thence N 70 51' 29" E, 267.79' to the point of beginning (N 793,238.0 E 233,503.0); thence N 90 00' E, 399.23'; thence S 0 00' W, 50.00'; thence N 90 00' W, 10.00'; thence S 0 00' W, 40.00'; thence N 90 00' W, 136.23'; thence N 0 00' W, 80.00'; thence N 90 00' W, 50.00'; thence S 0 00' W, 10.00'; thence N 90 00' W, 54.00'; thence S 0 00' W, 40.00'; thence N 90 00' E, 65.00'; thence S 0 00' W, 30.00'; thence N 90 00' W, 150.00'; thence N 0 00' W, 17.00'; thence N 90 00' W, 64.00'; thence N 0 00' W, 73.00' to the point of beginning; said land being 0.657, more or less acres, less than and except all structures not included in the Mead Corporation Contract No. 21-3097A. NO. 2 RECOVERY BOILER AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02, of the West Zone of the State of Georgia Coordinate System; thence S 40 16' 34" E, 439.77' to the point of beginning (N 792,814.67, E 233,534.32'); thence N 90 00' E, 36.30'; thence N 0 00' W, 20.50'; thence N 90 00' E, 72.26'; thence N 0 00' W, 14.83'; thence N 90 00' E, 110.50'; thence S 0 00' W, 42.58'; thence N 90 00' E, 26.00'; thence S 0 00' W, 81.00' thence N 90 00' W, 51.00' thence N 0 00" W, 25.12'; thence N 90 00' W, 72.26'; thence N 90 00' W, 20.50'; thence N 0 00' W, 36.30'; thence N 0 00' W, 34.00' to the point of beginning' said land being 0.47 + acres; - NEW EVAPORATORS AND NEW TANKS AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19; E 233,250.02, of the West Zone of the State of Georgia Coordinate System; thence S 62 01' 33" E, 637.83' to the point of beginning (N 792,851.0, E 233,813.33); thence N 90 00' E, 246.67'; thence along an arc South and East 53.41' having a radius of 34.00' with a central angle of 90 00'; thence S 0 00' W, 135.33'; thence along an arc South and West 53.41' having a radius of 34.00' with a central angle of 90 00'; thence N 90 00' W, 34.00'; thence N 0 00' W, 99.79'; thence N 90 00' W, 69.00'; thence N 59 47' 19" W, 91.42'; thence N 90 00' W, 64.67'; thence N 0 00' W, 57.54' to the point of beginning; said land being 0.72 + acres; - PARCEL 7 LIME MUD WASTE DISPOSAL FACILITIES All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233, 250.02 of the West Zone of the State of Georgia Coordinate System; thence N 86 38' 59" E, 253.41' to the point of beginning (N 793,165.00 E 233,503.00); thence N 90 00' E, 64.00'; thence S 0 00' E, 17.00'; thence N 90 00' E, 150.00; thence N 0 00' E, 30.00'; thence N 90 00' W, 65.00'; thence N 0 00' E, 40.00'; thence N 90 00' E, 54.00'; thence N 0 00' E, 10.00'; thence N 90 00' E, 50.00'; thence S 0 00' E, 80.00'; thence N 90 00' E, 136.23'; thence N 0 00' E, 40.00'; thence N 90 00' E, 75.00'; thence S 0 00' E, 78.00;' thence N 90 00' W, 464.23'; thence 0 00' E, 55.00'; to the point of beginning; said land being 0.633 more or less acres, less than and except all structures not included in the Mead Corporation Contract No. 21- 3097A. PARCEL 8A A tract of land situated in the Northwest Quarter of the Northeast Quarter (NW 1/4 of NE 1/4) and the Southwest Quarter of the Northeast Quarter (SW 1/4 of NE 1/4) of Section 28, Township 14 North, Range 30 East, Russell County, Alabama, being more particularly described as follows: Commence at the Northwest corner of Section 28 Township 14 North, Range 30 East; thence run South 89 degrees 33 minutes 20 seconds East along the North Boundary of such Section 28 a distance of 2806.62 feet to a point; thence turn right and run due South a distance of 1210.86 feet to a point at the western end of the Bark Handling System, such point being the beginning of the tract of land herein described. Begin at such point of beginning, turn an angle to the left and run North 45 degrees 00 minutes East a distance of 63.64 feet to a point; thence turn an angle to the right 45 degrees 00 minutes and run easterly a distance of 310.00 feet to a point; thence turn an angle to the right 45 degrees 00 minutes and run southeasterly a distance of 63.64 feet to a point; thence turn an angle to the left 45 degrees 00 minutes and run easterly a distance of 270.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run southerly a distance of 155.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run easterly a distance of 136.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run southerly a distance of 94.35 feet to a point; thence turn an angle to the right 30 degrees 00 minutes and run southwesterly a distance of 263.00 feet to a point; thence turn an angle to the left 30 degrees 00 minutes and run southerly a distance of 132.88 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run westerly a distance of 84.50 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 405.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run westerly a distance of 120.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 115.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run westerly a distance of 470.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 90.00 feet to the point of beginning. PARCEL 8B A tract of land situated in the Northeast Quarter of the Northwest Quarter (NE 1/4 of NW 1/4) and the Southeast Quarter of the Northwest Quarter (SE 1/4 of NW 1/4) of Section 28, Township 14 North, Range 30 East, Russell County, Alabama, being more particularly described as follows: Commence at the Northwest corner of Section 28, Township 14 North, Range 30 East; thence run South 89 degrees 33 minutes 20 seconds East along the North Boundary of such Section 28 a distance of 2290.86 feet to a point; thence turn right and run due South a distance of 1225.36 feet to a point at the Northeast corner of the #2 Bark Boiler Building, such point being the point of beginning of the tract of land herein described. Being at such point of beginning, continue due South a distance of 95.75 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run westerly a distance of 67.50 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 95.75 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run easterly a distance of 15.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run northerly a distance of 40.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run easterly a distance of 34.50 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run southerly a distance of 40.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run easterly a distance of 18.00 feet to the point of beginning. PARCEL 9 All that portion of land, and structures lying thereon, in Section 28, T14N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 794,023.97, E 232,940.10 of the West Zone of the State of Georgia Coordinate System; thence S 52 11' 16" E 381.63' to the point of beginning (N 793,790.00 E 233,241.60); thence N 90 00' 00" E 760.00'; thence S 0 00' 00" E 102.00'; thence N 90 00' 00" E 128.04'; thence S 0 00' 00" E 960.48' (at existing utility bridge)' the N 90 00' 00" W 13.00'; thence N 0 00' 00" W 672.48', thence N 90 00' 00 W 875.04'; thence N 0 00' 00" E 390.00' to the point of beginning; said land being 7.85 + acres; less than and except any - structures not included in the Mead Corporation Contract No. 21-4162; (collectively, (Parcels 1 through 9) the "Other Leased Land") together with the following easements: (a) An easement and right for pedestrian and vehicular traffic to use all present and future walks, railroads, roads, driveways and docks upon the Other Leased Land in order to provide all necessary or convenient ingress or egress between the 1997 Leased Land and railroads, public roads and highways and the Chattahoochee River and to permit passage between the 1997 Leased Land and the Other Leased Land; (b) An easement and right for the passage of pedestrians and vehicles and for the construction, erection, installation, operation, maintenance, renewal, replacement and use of material conveying systems, including without limitation pipelines, through any part of the Other Leased Land necessary or convenient in order to assure the passage of equipment, raw materials, items in the process of manufacture, and finished products from the 1997 Leased Land to the Other Leased Land, including without limitation such rights and easements as are necessary for the movement of personnel, vehicles and materials among and between the various parcels of land comprising the Other Leased Land in order to permit and facilitate the operation of the Project; (c) An easement and right to erect, install, construct, maintain, renew, replace and use on, over and under any part of the Other Leased Land, such pipes, conduits, and wires as are necessary or convenient to insure access to and an adequate system for or supply of gas, oil, steam, compressed air, process and space heat, water, fire protection, sewage and industrial waste disposal, electricity, communications, instrumentation and control, and other similar facilities to the 1997 Leased Land and the Project including, without limitation, the right to make connections with machinery, equipment, pipes, conduits and wires, structures and other improvements and appurtenances thereto, on the Other Leased Land; and (d) An easement and right to create and maintain upon the Other Leased Land encroachments of equipment, structures or other improvements which will be included on the 1997 Leased Land and within the Project as presently planned, and any similar replacements or substitutions of portions of the Project for as long as any such equipment, structures or other improvements remain standing, including without limitation the rights of lateral or party wall support, and to connect any such equipment, structure or other improvements to any structure or improvement on the Other Leased Land; but subject to the following easements over the 1997 Leased Land in favor of the Other Leased Land: (a) An easement and right for pedestrian and vehicular traffic to use all present and future walks, railroads, roads, driveways and docks upon the 1997 Leased Land in order to provide all necessary or convenient ingress and egress among and between all portions of the Other Leased Land and between the Other Leased Land and the 1997 Leased Land, including without limitation portions on which additional improvements may be erected, and railroads, public works and highways and the Chattahoochee River and to permit passage among and between the various parcels of land comprising the Other Leased Land; (b) An easement and right for the passage of pedestrians, vehicles, and for the construction, installation, operation, maintenance, renewal, replacement and use of material conveyance systems, including without limitation, pipelines, through any part of the 1997 Leased Land necessary or convenient in order to assure the passage of equipment, and finished products from one portion of the Other Leased Land to another or between the Other Leased Land and the 1997 Leased Land, including, without limitation such rights and easements as are necessary for the movement of personnel, vehicles and material among and between the various parcels of land comprising the Other Leased Land in order to permit and facilitate the operation of any facilities located on the Other Leased Land; (c) An easement and right to erect, install, construct, maintain, renew, replace and use on, over and under any part of the 1997 Leased Land, such pipes, conduits, and wires and appurtenances as are necessary or convenient to assure access to and an adequate system for or supply of gas, oil, steam, compressed air, process and space heat, water, fire protection, sewage and industrial waste disposal, electricity, communications, instrumentation and control, and other similar facilities to the Other Leased Land, including without limitation, the right to make connections with machinery, equipment, pipes, conduits and wires, structures and other improvements and appurtenances thereto, on the 1997 Leased Land; and (d) An easement and right to maintain any present equipment, structures or other improvements included within the facilities presently located on the Other Leased Land as encroachments upon the 1997 Leased Land as long as any such equipment, structures or other improvements remain standing, and to construct and maintain similar encroachments on the 1997 Leased Land in respect of any additional improvements constructed adjacent to the 1997 Leased Land, as long as any such additional improvements remain standing, including without limitation the rights of lateral or party wall support, and to connect such additional improvements to any structure or any improvements on the 1997 Leased Land. subject in all cases to the following: (1) Lease Agreement dated as of November 1, 1983 between the Board, as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time relating to the Board's Industrial Development Revenue Bonds (Georgia Kraft Project), Series 1983; (2) Lease Agreement dated as of December 1, 1983 between the Board as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Georgia Kraft Project), Series 1983; (3) Lease Agreement dated as of December 1, 1985 between the Board, as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Refunding Bonds (Georgia Kraft Project), Series 1985; (4) Lease Agreement dated as of July 1, 1986 between the Board, as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time, relating to the Board's Industrial Development Revenue Bonds (Georgia Kraft Project), Series 1986; (5) Lease Agreement dated as of December 1, 1988 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1988; (6) Lease Agreement dated as of December 1, 1988 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1988A, 1989A, 1989B, 1989C, 1989D, 1989E, 1900A and 1991A; (7) Lease Agreement dated as of June 1, 1990 between the Board, as lessor, and Industrial Warehouse Services, Inc., as lessee, as amended and supplemented from time to time, relating to the Board's First Mortgage Revenue Bonds (Industrial Warehouse Services, Inc.), Series 1990; (8) Lease Agreement dated as of June 1, 1993 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1993A; (9) Lease Agreement dated as of June 1, 1993 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1993A and 1995A; (10) Lease Agreement dated as of March 1, 1996 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1996; (11) Lease Agreement dated as of September 1, 1997 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1997A and 1998A; (12) Lease Agreement dated as of February 1, 1998 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Refunding Bonds (Mead Coated Board Project), Series 1998A; and (13) Lease Agreement dated as of February 1, 1998 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Refunding Bonds (Mead Coated Board Project), Series 1998B. THIRD AMENDMENT --------------- TO -- LEASE AGREEMENT --------------- THIS THIRD AMENDMENT TO LEASE AGREEMENT (the "Amendment") is made and entered into as of August 1, 1999 by and between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA (the "Board"), a public body corporate and politic duly organized and existing under the Constitution and laws of the State of Alabama, and MEAD COATED BOARD, INC., a Delaware corporation (the "Company"). R E C I T A L S --------------- The Board previously issued and sold (i) $150,000,000 in aggregate principal amount of the Industrial Development Board of the City of Phenix City, Alabama Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1997A (the "Series 1997A Bonds"), and (ii) $85,000,000 in aggregate principal amount of the Industrial Development Board of Phenix City, Alabama Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1998A (the "Series 1998A Bonds") pursuant to a Trust Indenture dated as of September 1, 1997 (the "Original Indenture" as amended and supplemented to date, the "Indenture") from the Board to The First National Bank of Chicago, as successor Trustee (the "Trustee"). The Board has used the proceeds of the sale of the Series 1997A Bonds for the payment of outstanding industrial development temporary borrowing notes (the "Notes") issued by the Board for the purpose of funding the acquisition, construction and installation of a coated natural kraft mill and related facilities (the "Project") in connection with certain industrial facilities located near Phenix City, Alabama. The Project is owned by the Board and leased to the Company pursuant to a Lease Agreement dated as of September 1, 1997, as amended by a First Amendment to Lease Agreement dated as of August 1, 1998 and a Second Amendment to Lease Agreement dated as of September 30, 1998 (the "Agreement"). The Agreement obligates the Company to make rental payments in such amounts and at such times as will provide for the payment of the principal and interest on the Series 1997A Bonds and the Series 1998A Bonds as the same becomes due and payable. Under Article IV of the Original Indenture, the Board is permitted to issue Additional Bonds (as defined in the Original Indenture) in order to pay additional Notes issued by the Board in furtherance of the Project. In that connection, the Board is issuing $30,000,000 in aggregate principal amount of Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1999A (the "Series 1999A Bonds"), pursuant to the Original Indenture as supplemented by a Third Supplemental Trust Indenture dated as of August 1, 1999 (the "Third Supplemental Indenture") from the Board to the Trustee. The Original Indenture as supplemented by the First Supplemental Indenture, the Second Supplemental Indenture and the Third Supplemental Indenture is hereinafter referred to as the "Indenture". NOW, THEREFORE, as contemplated by Section 4.5 of the Agreement and in accordance with Section 1501 of the Original Indenture, the parties hereto desire to amend the Agreement as follows: ARTICLE I PROVISIONS FOR AMENDING THE AGREEMENT ------------------------------------- Section 1.1 Amendment of Section 5.3 of the Agreement. The term "Bonds" ----------- ----------------------------------------- as used in Section 5.3 of the Agreement shall include the Series 1999A Bonds. Section 1.2 Terms of Agreement Applicable to Series 1999A Bonds. All ----------- --------------------------------------------------- terms, conditions, representations and covenants set forth in the Agreement applicable to the Series 1997A Bonds and the Series 1998A Bonds and not specifically otherwise provided for in the Indenture, any supplements thereto or the Agreement, shall apply with full force and effect to the Series 1999A Bonds. Without limiting the foregoing, all references in the Agreement to the "Bonds" shall be deemed to mean the Series 1997A Bonds, the Series 1998A Bonds and the Series 1999A Bonds including without limitation the provisions of Section 5.3 of the Agreement relating to the payment of rents. Section 1.3 Representations and Warranties by the Board. The Board makes ----------- ------------------------------------- ----- the following representations and warranties as the basis for the undertakings on its part herein contained: (a) Organization and Authority. The Board is a public corporation -------------------------- duly organized and validly existing under the provisions of the Act by authority of a resolution adopted by the Board of Commissioners of the City on June 14, 1960 and a Certificate of Incorporation duly filed for record on October 17, 1960, in the office of the Judge of Probate of Russell County, Alabama, which Certificate of Incorporation has not been amended or been revoked and is of full force and effect. The Board has all requisite power and authority under the Act (1) to issue the Series 1999A Bonds, (2) to use the proceeds thereof to refund the Notes issued to pay the cost to acquire, construct and install the Project, (3) to own, lease, encumber and dispose of the Project, and (4) to enter into, and perform its obligations under, the Indenture, the Agreement and this Amendment. This Amendment and the Third Supplemental Indenture have been duly authorized, executed and delivered by the Board and are legal, valid and binding agreements enforceable against the Board in accordance with their respective terms. (b) Pending Litigation. There are no actions, suits, proceedings, ------------------ inquiries or investigations pending, or to the knowledge of the Board threatened, against or affecting the Board in any court or before any governmental authority or arbitration board or tribunal, which adversely affect the validity or enforceability of the Series 1999A Bonds, the Indenture, the Agreement, this Amendment, or any agreement or instrument to which the Board is a party and which is used or contemplated for use in the consummation of the transactions contemplated hereby or thereby. (c) Issue, Sale and Other Transactions Are Legal and Authorized. The ----------------------------------------------------------- issue and sale of the Series 1999A Bonds and the execution and delivery by the Board of the Third Supplemental Indenture and this Amendment and the compliance by the Board with all of the provisions of each thereof and of the Series 1999A Bonds (i) are within the purposes, powers and authority of the Board, (ii) to the best of the knowledge of the Board, have been done in full compliance with the provisions of the Act, are legal and will not conflict with or constitute on the part of the Board a violation of or a breach of or default under, or result in the creation of any lien or encumbrance (other than Permitted Encumbrances under the Agreement) upon any property of the Board under the provisions of, its certificate of incorporation or Bylaws, or any indenture, mortgage, deed of trust, note agreement or other agreement or instrument to which the Board is a party or by which the Board is bound, or any license, judgment, decree, law, statute, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Board or any of its activities or properties, and (iii) have been duly authorized by all necessary corporate action on the part of the Board. (d) Governmental Consents. Neither the nature of the Board nor any --------------------- of its activities or properties, nor any relationship between the Board and any other person, nor any circumstance in connection with the offer, issue, sale or delivery of any of the Series 1999A Bonds is such as to require the consent, approval or authorization of, or the filing, registration or qualification with, any governmental authority on the part of the Board in connection with the execution, delivery and performance of the Third Supplemental Indenture and this Amendment, or the offer, issue, sale or delivery of the Series 1999A Bonds, other than (i) the filing with the Alabama Securities Commission of the notification of the Board's intention to issue the Series 1999A Bonds required by Act No. 586 enacted at the 1978 Regular Session of the Legislature of the State and the issuance by the Director of the Alabama Securities Commission of such Certificate of Notification as may be required by said Act, and (ii) the due filing and recording of Third Supplemental Indenture and any financing statements covering the security interests created hereunder and under the Indenture. The Board has filed the notification referred to in (i) of the preceding sentence and the Director of the Alabama Securities Commission has issued a Certificate of Notification applicable to the Series 1999A Bonds, which Certificate of Notification has not been revoked or rescinded and is in full force and effect. (e) No Defaults. The Board is not in default under the Act or under ----------- its Certificate of Incorporation or Bylaws or any other agreement or instrument to which it is a party or by which is bound. Section 1.4 Representations and Warranties by the Company. The Company ----------- --------------------------------------------- makes the following representations and warranties as the basis for the undertakings on its part herein contained: (a) The Company (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) has all requisite corporate power and authority to carry on its business as now being conducted and as presently proposed to be conducted, and (iii) has duly qualified and is authorized to do business and is in good standing as a foreign corporation in the State. (b) The Company has the corporate power and has been duly authorized to enter into this Amendment and to perform all of its obligations hereunder. (c) The willingness of the Board to issue the Series 1999A Bonds for purposes of financing costs of acquiring, constructing, and installing the Project, and to lease the Project to the Company, has induced the Company to locate the Project within the State of Alabama and, more particularly, within 25 miles of the City. (d) The Company is not subject to any contractual or other limitation or provision of any nature whatsoever which in any material way limits, restricts or prevents the Company from entering into this Amendment, or performing any of its obligations hereunder; and the execution and delivery of consummation of the transactions contemplated hereby, and the fulfillment of or compliance with the terms and conditions of this Amendment will not conflict with or result in a breach of the terms, conditions or provisions of any restriction, agreement or instrument to which the Company is a party or by which it is bound, or constitute a default under any of the foregoing. (e) No event has occurred and no condition exists that would constitute an "Event of Default" under the Agreement or this Amendment which, with the lapse of time or with the giving of notice or both, would become an "Event of Default" under the Agreement or this Amendment. (f) To the best of its knowledge and belief, the Company is not in violation of any laws, ordinances, governmental rules or regulations to which it is subject and has not failed to obtain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of its properties or to the conduct of its business, which violation or failure to obtain would reasonably be expected to materially and adversely affect the ability of the Company to perform its obligations under this Amendment. ARTICLE II MISCELLANEOUS ------------- Section 2.1 Agreement and Amendment as One Document. As amended by this ----------- --------------------------------------- Amendment, the Agreement is in all respects ratified and confirmed and the Agreement and this Amendment shall be read, taken and construed as one and the same instrument. Section 2.2 References. All references herein or in the Agreement to any ----------- ---------- Article, Section or provision of the Agreement shall refer to any such Article, Section or provision as hereby amended. Section 2.3 Counterparts. This Amendment may be simultaneously executed ----------- ------------ in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 2.4 Captions. The captions or headings in this Amendment are for ----------- -------- convenience only and in no way define, limit or describe the scope or intent of any provision of this Amendment. Section 2.5 Applicable Law. This Amendment shall be construed in ----------- -------------- accordance with the laws of the State of Alabama. IN WITNESS WHEREOF, the Board and the Company have caused this Amendment to be executed in their respective corporate names as of the date first written above. THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA By: /s/ Kenneth A. Roberts -------------------------------- Chairman MEAD COATED BOARD, INC. By: /s/ Timothy R. McLevish -------------------------------- Treasurer ACKNOWLEDGMENT OF BOARD STATE OF ALABAMA COUNTY OF RUSSELL I, Sydney S. Smith, a Notary Public in and for said County in said State, --------------- hereby certify that Kenneth A. Roberts, whose name as Chairman of the Board of Directors of THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA, a public corporation and instrumentality under the laws of the State of Alabama, is signed to the foregoing instrument and who is known to me, acknowledged before me on this day that, being informed of the contents of the said instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said public corporation. GIVEN under my hand and seal of office, this 21st day of July _____, 1999. ---- Sydney S. Smith ----------------------------- Notary Public SYDNEY S. SMITH NOTARY PUBLIC ALABAMA STATE-AT-LARGE (SEAL) My commission expires: 2/28/2000 --------- ACKNOWLEDGMENT OF COMPANY STATE OF OHIO COUNTY OF MONTGOMERY I, Denise L. Williams, Notary Public in and for said County in said State, ------------------ hereby certify that Timothy R. McLevish, whose name as Treasurer of MEAD COATED BOARD, INC., a corporation organized and existing under the laws of the State of Delaware, is signed to the foregoing instrument and who is known to me, acknowledged before me on this day that, being informed of the contents of the said instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. GIVEN under my hand and seal of office, this 3rd day of August, 1999. --- Denise L. Williams ------------------------------- Notary Public DENISE L. WILLIAMS, Notary Public In and for the State of Ohio My Commission Expires May 1, 2002 (SEAL) My commission expires: May 1, 2002 ------------ CONSENT OF BONDHOLDER --------------------- Mead Coated Board, Inc., as holder of all of the outstanding Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1997A and Series 1998A of The Industrial Development Board of the City of Phenix City, Alabama (the "Board"), hereby consents to the execution and delivery of the foregoing Third Amendment To Lease Agreement, dated as of August 1, 1999, between the Board and Mead Coated Board, Inc., amending the Lease Agreement, dated as of September 1, 1997 between the Board and Mead Coated Board, Inc. IN WITNESS WHEREOF, Mead Coated Board, Inc. has caused this Consent of Bondholder to be executed in its name and behalf as of August 1, 1999. - MEAD COATED BOARD, INC. Timothy R. McLevish By:------------------------------- Treasurer CONSENT OF TRUSTEE ------------------ THE FIRST NATIONAL BANK OF CHICAGO, as successor Trustee under the Trust Indenture dated as of September 1, 1997, as supplemented from the Industrial Development Board of the City of Phenix City, Alabama (the "Board"), hereby consents to the execution and delivery of the foregoing Third Amendment To Lease Agreement, dated as of August 1, 1999, between the Board and Mead Coated Board, Inc., amending the Lease Agreement, dated as of September 1, 1997 between the Board and Mead Coated Board, Inc. IN WITNESS WHEREOF, The First National Bank of Chicago has caused this Consent of Trustee to be executed in its name and behalf as of August 1, 1999. - THE FIRST NATIONAL BANK OF CHICAGO as Trustee Amy Movitz By: ------------------------------- Assistant Vice President Title: ----------------------------- EXHIBIT "A" to Third Amendment To Lease Agreement between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA and MEAD COATED BOARD, INC. dated as of August 1 , 1999 - DESCRIPTION OF PROJECT LAND --------------------------- The Project Land includes the following property: The following real estate and premises situated in the County of Russell and State of Alabama: Eight hundred eighty four and 47/100 (884.47) acres located in Sections 32, 33, 21, 28, and 27, Township 14 North, Range 30 East, and Section 5, Township 13 North, Range 30 East, and beginning at the Southwest corner of Section 32, Township 14 North, Range 30 East, Russell County, Alabama, run thence North 00 degrees 38 minutes East a distance of 354.26 feet along a fence line to a concrete monument, thence North 37 degrees 57 minutes 25 seconds East a distance of 2086.55 feet to a point, thence North 57 degrees 13 minutes East a distance of 4397.87 feet to a point, thence North 01 degree 38 minutes East a distance of 970.55 feet to a point, thence North 37 degrees 53 minutes East a distance of 1948.85 feet to a point, thence North 00 degrees 37 minutes West a distance of 2783.92 feet to a point, thence North 45 degrees 16 minutes East a distance of 1570.95 feet to a concrete monument, thence North 00 degrees 27 minutes East a distance of 621.32 feet to a concrete monument, thence South 88 degrees 26 minutes 40 seconds East a distance of 1048.15 feet to a concrete monument, thence South 00 degrees 41 minutes 10 seconds East a distance of 601.95 feet to a concrete monument, thence South 89 degrees 33 minutes 20 seconds East along the north line of Section 28, Township 14 North, Range 30 East a distance of 1915.88 feet to a concrete monument, said monument being the northeast corner of said Section 28, which is the northwest corner of Section 27, in Township 14 North, Range 30 East, thence South 89 degrees 33 minutes 20 seconds East along the North line of said Section 27 to the boundary line between the State of Georgia, and the State of Alabama; thence Southerly and Southwesterly along said line between the State of Alabama and the State of Georgia, as the same runs, to the northerly and southerly line along the west side of Section 5, Township 13 North, Range 30 East, run thence North 00 degrees 28 minutes East along the West line of said Section 5, to a point marked by an iron pipe; thence North 00 degrees 28 minutes East along the west line of said Section 5 a distance of 2825.00 feet to the northwest corner of Section 5, and the point of beginning. (The Portion of said line from the northerly line of a public road known as the Ferry Road to the northwest corner of said Section 5, which is the southwest corner of Section 32, Township 14 North, Range 30 East, being along an old fence.) There is hereby expressly excepted from said described lands those lands heretofore taken in fee simple by condemnation by the United States of America and subject to flowage easements taken by the United States of America by condemnation and subject to the easement rights (a) for right of way for railroad purposes and (b) for a public road over and through said described lands, such public road right of way having been conveyed by the W.C. Bradley Company, to Russell County, Alabama, by deed recorded in Deed Record 387, pages 787-788, in the office of the Judge of Probate in and for Russell County, Alabama. Said described lands hereby conveyed contain in the aggregate according to survey made, eight hundred eighty four and 47/100ths (884.47) acres (the "1997 Leased Land"); less and except the following property: PARCEL 1 Beginning at a point which is 743.81 feet east and 477.58 feet south of the northwest corner of section 28, Township 14 North, Range 30 East, Russell County, Alabama, which section corner is marked by a concrete monument, this point thus determined, being the northwest corner of the property to be conveyed, then proceeding south 128.84 feet, then east 85.0 feet, then north 128.84 feet, then west 85.0 feet to the point of beginning. PARCEL 2 Beginning at a point which is 928.0 feet South and 1479.0 feet East of the Northwest corner of Section 28 in Township 14 North, Range 30 East, Russell County, Alabama, which corner is marked by a concrete monument, then proceeding North a distance of 120.0 feet, then West 100.0 feet, then South 120.0 feet, then East 100.0 feet to the point of beginning. PARCEL 3 At the Southwest corner of Section 22, Township 14 North, Range 30 East, Russell County, Alabama as the point of beginning, run along the South line of Section 22 N89 -50'E 976.85 feet to the property line of the United States Government; thence along said property line N2 -50'W 1296.69 feet to a branch which runs into Bluff Creek; thence along said branch the following courses; N41 -41'W 340.67 feet; S85 -42'W 324.22 feet; S81 -08'W 330.0 feet; N25 -48'W 145.58 feet; S76 -52'W 198.66 feet; N44 -03'W 152.62 feet; S46 -35'Q 84.21 feet; S21 -00'E 83.39 feet; N82 -27'W 94.15 feet; S7-51'E 148.82 feet; S66 -39'W 386.20 feet; S62 -55'W 237.23 feet; S65 -05'W 232.38 feet; S74 -24'W 408.97 feet; S51 -52'W 371.60 feet; S19 -42'W 231.02 feet; S62 -26'W 198.83 feet; N85 -48'W 229.54 feet; S89 -23'W 159.01 feet; N83 -01'W 327.29 feet; S80 -02'W 437.03 feet; thence S59 -27'W 318.79 feet; thence S3 -28'E 199.83 feet; thence S1 -16'E 607.22 feet; thence N87 - 24'E 343.43 feet; thence N82 -04'E 516.01 feet; thence N70 -45'E 540.58 feet; thence N89 -18'E 472.15 feet; thence N0 -01'E 400.58 feet; thence S89 -59'E 446.0 feet; thence S0 -01'W 395.0 feet; thence N89 -18'E 171.06 feet; thence N46 -28'E 463.45 feet to the South line of Section 21; thence along said Section line S90 -48'E 749.92 feet to the point of beginning and containing 121.14 acres more or less. PARCEL 4A All that tract or parcel of land situated lying and being in Section 28, Township 14 North, Range 30 East, Russell County, Alabama, and being more particularly described as follows: To find the point of beginning, commence at the northwest corner of Section 28, Township 14 North, Range 30 East, which corner is marked by a concrete monument and, from said point, thence running South 89 degrees 33 minutes 20 seconds East, along the North line of said Section 28, a distance of 1,250.03 feet to an iron pin, said iron pin being the beginning point of the property herein conveyed; and from said point of beginning running thence South 89 degrees 33 minutes 20 seconds East, along the North line of said Section 28, a distance of 400.0 feet to a point; thence running South 01 degree 02 minutes 40 seconds West a distance of 704.0 feet, more or less, to a point; thence running South 45 degrees 16 minutes 00 seconds West a distance of 560.0 feet, more or less, to an iron pin; thence running North 01 degree 02 minutes 40 seconds East a distance of 1,076.19 feet to the point of beginning. The property herein described is bounded on the West and South by property of Grantee herein, on the North and East by property of Grantor herein and said described tract contains 8.2 acres, more or less. PARCEL 4B Commencing at the Northwest corner of Section 28 in Township 14 North, Range 30 East, Russell County, Alabama, which corner is marked by a concrete monument and proceeding east along the north line of said Section 28, which is the north property line of Georgia Kraft Company, a distance of two hundred forth-nine and ninety-six hundredths (249.96) feet to the point of intersection with the east right-of-way line of the Central of Georgia Railroad which point is marked by an iron pin, said iron pin being the point of beginning of the property herein conveyed. From said point of beginning running thence over and along the west boundary of said tract number one, which is the east right-of-way line of the Central of Georgia Railroad which is fifty feet from and parallel to the center line of the main line track, on a bearing of south one degree, two minutes and forty seconds west (S 1 02' 40" W) a distance of sixteen hundred forty-three and fifty-nine hundredths (1643.59) feet to a point, thence along the west boundary of the said tract number one, which is the east right-of-way line of the Central of Georgia Railroad and is fifty (50) feet from and concentric with the center line of the main line track, following a circular curve to the right, having a radius of eight hundred sixty-four and forty-nine hundredths (864.49) feet for an arc distance of three hundred seventy-two and forty-three hundredths (372.43) feet to an iron pin marking the southwest corner of said tract number one which is the point where the east right-of-way line of the Central of Georgia Railroad main line terminates on the north right-of-way line of the spur track serving the Georgia Kraft Company mill, said point being fifty (50) feet from the center line of the main line track and twenty-five (25) feet from the center line of the aforesaid spur track; thence along the south boundary of said tract number one, which is the north right-of-way line of the spur track serving the Georgia Kraft Company mill and is twenty-five (25) feet from and parallel to the center line of the aforesaid spur track, on a bearing of north fifty-one degrees, fifty- two minutes and ten seconds east (N 51 52' 10" E) for a distance of thirteen-hundred fifty-nine and ninety-three hundredths (1359.93) feet to an iron pin marking the south-east corner of said tract number one; thence along the east line of said tract number one on a bearing of north zero degrees and thirty-seven minutes west (N 0 37' W) a distance of fifty-three and fifty-six hundredths (53.56) feet to an iron pin; thence along the east boundary of said tract number one on bearing of north forty-five degrees and sixteen minutes east a distance of thirty-seven and eighty hundredths (37.80) feet to an iron pin; thence along the east boundary of said tract number one on a bearing of north one degree, two minutes and forty seconds east (N 1 02' 40" E) a distance of one thousand seventy-six and nineteen hundredths (1076.19) feet to an iron pin marking the north east corner of said tract number one and being on the north line of the aforesaid Section 28; on a bearing of north eighty-nine degrees thirty-three minutes and twenty seconds West (N 89 33' 20" W) a distance of one thousand and seven hundredths (1000.07) feet to the point of beginning. The above described boundaries of said tract number one enclose thirty-five and fifty-one hundredths (35.51) acres, more or less; excepting from the foregoing description of Parcel 4A and Parcel 4B the following described Tracts A, B and C: TRACT A A 200 foot wide strip of land for a road right-of-way situated in Sections 20, 28 and 29, Township 14 North, Range 30 East, in Russell County, Alabama, and being 100 feet on either side of and contiguous with the following described centerline: Commence at the Northeast corner of Section 20, Township 14 North, Range 30 East and run North 86 degrees 56 minutes West for a distance of 751.7 feet; thence South 33 degrees 37 minutes West for a distance of 2187.0 feet; thence South 18 degrees 31 minutes West for a distance of 856.7 feet; thence South 19 degrees 29 minutes West for a distance of 507.5 feet; thence South 89 degrees 26 minutes East for a distance of 91.80 feet; thence from the last described course turn left 151 degrees 00 minutes and run Northwesterly 138.20 feet to a point in the center of Alabama Highway No. 165 and the point of beginning for said centerline; thence turn right 180 degrees 00 minutes and run Southeasterly along said centerline 230.00 feet to the point of a curve to the right; said curve having a 17 degree 32 minutes 16 seconds degree of curvature and an included angle of 62 degrees 45 minutes; thence continue along said curve an arc distance of 359.20 feet to the point of tangent to said curve; thence continue tangent to last described curve Southerly a distance of 1719.47 feet to the point of a curve to the left; said curve having a 10 degree 00 minutes 14 seconds degree of curvature and an included angle of 27 degrees 25 minutes 40 seconds; thence continue along said curve an arc distance of 274.51 feet to the point of tangent to said curve; thence continue tangent to the last described curve Southeasterly 1097.83 feet to the point of a curve to the left; said curve having a 12 degree 30 minute degree of curvature and an included angle of 101 degrees 50 minutes 41 seconds; thence continue along said curve an arc distance of 816.38 feet to the point of tangent to said curve; thence continue tangent to last described curve Northeasterly 1351.87 feet to the point of a curve to the right; said curve having a 22 degree 31 minutes 55 seconds degree of curvature and an included angle of 37 degrees 53 minutes 10 seconds; thence continue along said curve an arc distance of 168.14 feet to the intersection of said curve and the centerline of existing railroad; said intersection being the end of said centerline of roadway description. Said strip of land lying in Sections 20, 28 and 29, Township 14 North, Range 30 East, Russell County, Alabama and containing 27.62 acres more or less. TRACT B Beginning at a point which is 743.81 feet east and 477.58 feet south of the northwest corner of Section 28, Township 14 North, Range 30 East, Russell County, Alabama, which section corner is marked by a concrete monument, this point thus determined, being the northwest corner of the property to be conveyed, then proceeding south 128.84 feet, then east 85.0 feet, then north 128.84 feet, then west 85.0 feet to the point of beginning. TRACT C Beginning at a point which is 928.0 feet South and 1479.0 feet East of the Northwest corner of Section 28 in Township 14 North, Range 30 East, Russell County, Alabama, which corner is marked by a concrete monument, then proceeding North a distance of 120.0 feet, then West 100.0 feet, then South 120.0 feet, then East 100.0 feet to the point of beginning. PARCEL 5 WASTE WOOD CONVEYOR TO SCALPER (C-28506) AREA AND TRUCK DUMPER (C-28505) AREA All that portion of land and structures lying 9' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 31 59' 52' E, 291.25' to the point of beginning; thence S 0 00' W, 231.00' to a point on the north side of a rectangular area (Truck Dumper) bounded by a N 792,366.0, N 792,326.5, and E 234,642.0, and E 234,765.5, said rectangular area being the point of ending; said land being 0.21 + acres; - NO. 1 BARK TRANSFER CONVEYOR (C-28503) AREA, NO. 2 BARK TRANSFER CONVEYOR (C-28504) AREA, BARK HOG STRUCTURE (C-28534) AREA AND REFUSE CONVEYOR SCALPER (C-28533) AREA All that portion of land and structures lying 9' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 31 59' 52" E, 291.25' to the point of beginning; thence S 8 20' 17" W, 284.46' to the center of a rectangular area which is parallel to the last said course 22' north to south by 15' east to west; thence S 81 39' 40" E, 843.58' to a parallel rectangular area (Bark Hog Structure) 26.00' north to south (10.00' lying south of last said course) by 37.50'; thence continue along last said course 27.00'; thence N 45 07' 38" E, 350.71' to the point of ending; said land being 0.63 + acres; NO. 2 TURBINE AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02 of the West Zone of the State of Georgia Coordinate System; thence S 25 19' 16" E, 663.98' to the point of beginning (N 792,550.0 E 233,534.0); thence S 0 00' W, 50.00'; thence N 90 00' E, 121.00'; thence N 0 00' W, 50.00'; thence N 90 00' W, 121.00' to the point of beginning; said land being 0.14 + acres; - SANITARY PACKAGE TREATMENT PLANT AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 48 35' 13" W, 1186.73' to the point of beginning (N 791,565.0. E 233,610.0); thence S 0' 00" W, 12.00'; thence N 90 00' W, 64.00'; thence N. 0' 00" W 12.00'; thence N 90' 00" E, 64.00' to the point of beginning; said land being 0.02 + acres; and - NO. 3 BARK BOILER AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02 of the West Zone of the State of Georgia Coordinate System; thence S 29 39' 25" E, 461.76' to the point of beginning (N 792,748.92, E 233,478.50); thence N 90 00' E, 73.57'; thence S 0 00' W, 34.50'; thence N 90 00' W, 11.82'; thence S 0 00' W, 143.17'; thence N 90 00' W, 90.62'; thence N 0 00" W, 83.08'; thence N 90 00" E, 28.87'; thence N 0 00' W, 94.59' to the point of beginning; said land being 0.32 + acres; - PARCEL 6 NEW RECLAIM PLATE FEED AND CONVEYOR AREA (C-28511), CHIPS CONVEYOR TO SCREEN HOUSE AREA (C-28513), AND CHIPS SCREEN HOUSE AREA (C-28515) All that portion of land and structures lying 13' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 63 51' 31" E, 790.90' to the point of beginning; thence N 90 00' W, 82.00; thence S 0' 00" W, 8.75'; thence N 90 00' W, 232.22'; thence S 15 17' 15" E, 479.72' to a point on the northmost side of a rectangular area (Chip Screen House) which parallels last said course and is 75.0' north to south (7.00' of which is west of last said course) by 49.0' east to west; said rectangular area being the point of ending; said land being 0.56+ acres; CHIPS CONVEYOR TO PINE STORAGE AREA (C-28538) All that portion of land and structures lying 14' on each side of the following described centerline: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 45 24' 34" E, 692.79' to the point of beginning; thence S 36 51' 02" E, 454.94' to the point of ending; said land being 0.29 + acres; - CHIPPER DISCHARGE CONVEYOR AREA (C-28536) AND CHIPS TO HARDWOOD STORAGE CONVEYOR AREA (C-28537) All that portion of land and structures lying 14' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence N 71 34' 06" E, 600.24' to the point of beginning; thence S 71 04' 32" E, 640.91'; thence N 50 08' 32" E, 61.59' to the point of ending; said land being 0.45 + acres; - CHIP CONVEYOR TO DIGESTER AREA (C-28521), CHIP CONVEYOR TO SURGE BIN AREA (C-28519), AND CHIP SILO AREA (C-28520) All that portion of land and structures lying 14' on each side of the following described centerline and also including any specifically noted areas which extend beyond said centerline strip: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; and lying in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama; thence S 48 21' 59" W, 84.29' to the point of beginning; thence S 56 07' 32" E, 319.22' to the center of a circular area (Chip Silo) with a radius of 15.00' and a central angle of 360 00' bounded by a rectangular structure 32' -6" + East-West and 32' -6" - + North-South; thence N 82 51' 32" E, 355.48' to the point of ending; - said land being 0.45 + acres; - NEW WASHER FACILITY AND BATCH DIGESTER AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence N 48 06' 06" W, 35.94' to the point of beginning (N 792,374.0, E 234,473.25); thence S 0 00' W, 133.50'; thence N 90 00' W, 103.39'; thence S 0 00' W, 103.50'; thence 90 00' W, 48.00'; thence N 0 00' W, 55.75'; thence N 90 00' W, 80.00; thence S 0 00' W, 42.75'; thence N 90 00' W, 63.00; thence N 0 00' W, 110.00'; thence N45 00' E, 55.00'; thence N0 00' W, 23.11'; thence 90 00' E, 23.00'; thence N 0 00' W, 23.25'; thence N90 00' E, 170.00'; thence N 0 00' W, 28.75'; thence N 90 00' E, 62.50' to the point of beginning; said area being 1.01 + acres; - MILL WATER COOLING TOWER AND NEW REACTOR CLARIFIER AREA All that portion of and, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 48 46' 07" W, 591.71' to the point of beginning (N 791, 960.0 E 234,055.0); thence S 0 00' W, 170.00'; thence N 90 00' W, 111.00; thence 0 00' W, 170.00'; thence N 90 00' E, 111.00' to the point of beginning; said land being 0.43 + acres; - TURPENTINE RECOVERY FACILITY AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 63 26' 06" W, 11.18' to the point of beginning (N 792,345.0, E 234, 490.0); thence N 0' 00" W, 30.00'; thence N 90 00" E, 20.00'; thence S 0 00' W, 30.00'; thence N 90 00' W, 20.00' to the point of beginning; said land being 0.01 + acres; - LOG STORAGE AREA (C-28522), LOG FEED DECKS AREA (C-28523), DRUM AREA (C-28525, VIBRATING CONVEYORS AREA (C-28532), CHIPPER POWER FEED ROLLS AREA (C-28528), CHIP BLDG. AREA (C-28535), AND BARK COLLECTING CONVEYOR AREA (C-28531) All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence N 80 22' 54" E, 879.79' to the point of beginning; thence N 0 00' W, 326.00'; thence N 90 00' E, 711.08'; thence S 0 00' W, 326.00'; thence N 90 00' W, 328.00'; thence S 0 00' W, 188.00'; thence N 90 00' W, 50.00'; thence N 0 00' W, 188.00'; thence N 90 00' W, 333.08' to the point of beginning; said land being 5.54 + acres; - AREA "B" MAINTENANCE SHOP AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 792,350.00, E 234,500.00, of the West Zone of the State of Georgia Coordinate System; thence S 11 04' 57" W, 197.69' to the point of beginning (N 792,156.0, E 234,462.0); thence S 0 00" W, 82.00'; thence N 90 00" w, 52.00'; thence N 0 00' W, 82.00'; thence N 90 00' E, 52.00 to the point of beginning' said land being 0.10 + acres; - NEW LIME KILN/RECAUSTICIZING All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02 of the West Zone of the State of Georgia Coordinate System; thence N 70 51' 29" E, 267.79' to the point of beginning (N 793,238.0 E 233,503.0); thence N 90 00' E, 399.23'; thence S 0 00' W, 50.00'; thence N 90 00' W, 10.00'; thence S 0 00' W, 40.00'; thence N 90 00' W, 136.23'; thence N 0 00' W, 80.00'; thence N 90 00' W, 50.00'; thence S 0 00' W, 10.00'; thence N 90 00' W, 54.00'; thence S 0 00' W, 40.00'; thence N 90 00' E, 65.00'; thence S 0 00' W, 30.00'; thence N 90 00' W, 150.00'; thence N 0 00' W, 17.00'; thence N 90 00' W, 64.00'; thence N 0 00' W, 73.00' to the point of beginning; said land being 0.657, more or less acres, less than and except all structures not included in the Mead Corporation Contract No. 21-3097A. NO. 2 RECOVERY BOILER AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233,250.02, of the West Zone of the State of Georgia Coordinate System; thence S 40 16' 34" E, 439.77' to the point of beginning (N 792,814.67, E 233,534.32'); thence N 90 00' E, 36.30'; thence N 0 00' W, 20.50'; thence N 90 00' E, 72.26'; thence N 0 00' W, 14.83'; thence N 90 00' E, 110.50'; thence S 0 00' W, 42.58'; thence N 90 00' E, 26.00'; thence S 0 00' W, 81.00' thence N 90 00' W, 51.00' thence N 0 00" W, 25.12'; thence N 90 00' W, 72.26'; thence N 90 00' W, 20.50'; thence N 0 00' W, 36.30'; thence N 0 00' W, 34.00' to the point of beginning' said land being 0.47 + acres; - NEW EVAPORATORS AND NEW TANKS AREA All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19; E 233,250.02, of the West Zone of the State of Georgia Coordinate System; thence S 62 01' 33" E, 637.83' to the point of beginning (N 792,851.0, E 233,813.33); thence N 90 00' E, 246.67'; thence along an arc South and East 53.41' having a radius of 34.00' with a central angle of 90 00'; thence S 0 00' W, 135.33'; thence along an arc South and West 53.41' having a radius of 34.00' with a central angle of 90 00'; thence N 90 00' W, 34.00'; thence N 0 00' W, 99.79'; thence N 90 00' W, 69.00'; thence N 59 47' 19" W, 91.42'; thence N 90 00' W, 64.67'; thence N 0 00' W, 57.54' to the point of beginning; said land being 0.72 + acres; - PARCEL 7 LIME MUD WASTE DISPOSAL FACILITIES All that portion of land, and structures lying thereon, in Section 28, T 14 N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 793,150.19, E 233, 250.02 of the West Zone of the State of Georgia Coordinate System; thence N 86 38' 59" E, 253.41' to the point of beginning (N 793,165.00 E 233,503.00); thence N 90 00' E, 64.00'; thence S 0 00' E, 17.00'; thence N 90 00' E, 150.00; thence N 0 00' E, 30.00'; thence N 90 00' W, 65.00'; thence N 0 00' E, 40.00'; thence N 90 00' E, 54.00'; thence N 0 00' E, 10.00'; thence N 90 00' E, 50.00'; thence S 0 00' E, 80.00'; thence N 90 00' E, 136.23'; thence N 0 00' E, 40.00'; thence N 90 00' E, 75.00'; thence S 0 00' E, 78.00;' thence N 90 00' W, 464.23'; thence 0 00' E, 55.00'; to the point of beginning; said land being 0.633 more or less acres, less than and except all structures not included in the Mead Corporation Contract No. 21- 3097A. PARCEL 8A A tract of land situated in the Northwest Quarter of the Northeast Quarter (NW 1/4 of NE 1/4) and the Southwest Quarter of the Northeast Quarter (SW 1/4 of NE 1/4) of Section 28, Township 14 North, Range 30 East, Russell County, Alabama, being more particularly described as follows: Commence at the Northwest corner of Section 28 Township 14 North, Range 30 East; thence run South 89 degrees 33 minutes 20 seconds East along the North Boundary of such Section 28 a distance of 2806.62 feet to a point; thence turn right and run due South a distance of 1210.86 feet to a point at the western end of the Bark Handling System, such point being the beginning of the tract of land herein described. Begin at such point of beginning, turn an angle to the left and run North 45 degrees 00 minutes East a distance of 63.64 feet to a point; thence turn an angle to the right 45 degrees 00 minutes and run easterly a distance of 310.00 feet to a point; thence turn an angle to the right 45 degrees 00 minutes and run southeasterly a distance of 63.64 feet to a point; thence turn an angle to the left 45 degrees 00 minutes and run easterly a distance of 270.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run southerly a distance of 155.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run easterly a distance of 136.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run southerly a distance of 94.35 feet to a point; thence turn an angle to the right 30 degrees 00 minutes and run southwesterly a distance of 263.00 feet to a point; thence turn an angle to the left 30 degrees 00 minutes and run southerly a distance of 132.88 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run westerly a distance of 84.50 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 405.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run westerly a distance of 120.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 115.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run westerly a distance of 470.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 90.00 feet to the point of beginning. PARCEL 8B A tract of land situated in the Northeast Quarter of the Northwest Quarter (NE 1/4 of NW 1/4) and the Southeast Quarter of the Northwest Quarter (SE 1/4 of NW 1/4) of Section 28, Township 14 North, Range 30 East, Russell County, Alabama, being more particularly described as follows: Commence at the Northwest corner of Section 28, Township 14 North, Range 30 East; thence run South 89 degrees 33 minutes 20 seconds East along the North Boundary of such Section 28 a distance of 2290.86 feet to a point; thence turn right and run due South a distance of 1225.36 feet to a point at the Northeast corner of the #2 Bark Boiler Building, such point being the point of beginning of the tract of land herein described. Being at such point of beginning, continue due South a distance of 95.75 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run westerly a distance of 67.50 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run northerly a distance of 95.75 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run easterly a distance of 15.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run northerly a distance of 40.00 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run easterly a distance of 34.50 feet to a point; thence turn an angle to the right 90 degrees 00 minutes and run southerly a distance of 40.00 feet to a point; thence turn an angle to the left 90 degrees 00 minutes and run easterly a distance of 18.00 feet to the point of beginning. PARCEL 9 All that portion of land, and structures lying thereon, in Section 28, T14N, R 30 E, County of Russell, State of Alabama, more particularly described as follows: Commence at a monument having grid coordinates N 794,023.97, E 232,940.10 of the West Zone of the State of Georgia Coordinate System; thence S 52 11' 16" E 381.63' to the point of beginning (N 793,790.00 E 233,241.60); thence N 90 00' 00" E 760.00'; thence S 0 00' 00" E 102.00'; thence N 90 00' 00" E 128.04'; thence S 0 00' 00" E 960.48' (at existing utility bridge)' the N 90 00' 00" W 13.00'; thence N 0 00' 00" W 672.48', thence N 90 00' 00 W 875.04'; thence N 0 00' 00" E 390.00' to the point of beginning; said land being 7.85 + acres; less than and except any structures not included in the - Mead Corporation Contract No. 21-4162; (collectively, (Parcels 1 through 9) the "Other Leased Land") together with the following easements: (a) An easement and right for pedestrian and vehicular traffic to use all present and future walks, railroads, roads, driveways and docks upon the Other Leased Land in order to provide all necessary or convenient ingress or egress between the 1997 Leased Land and railroads, public roads and highways and the Chattahoochee River and to permit passage between the 1997 Leased Land and the Other Leased Land; (b) An easement and right for the passage of pedestrians and vehicles and for the construction, erection, installation, operation, maintenance, renewal, replacement and use of material conveying systems, including without limitation pipelines, through any part of the Other Leased Land necessary or convenient in order to assure the passage of equipment, raw materials, items in the process of manufacture, and finished products from the 1997 Leased Land to the Other Leased Land, including without limitation such rights and easements as are necessary for the movement of personnel, vehicles and materials among and between the various parcels of land comprising the Other Leased Land in order to permit and facilitate the operation of the Project; (c) An easement and right to erect, install, construct, maintain, renew, replace and use on, over and under any part of the Other Leased Land, such pipes, conduits, and wires as are necessary or convenient to insure access to and an adequate system for or supply of gas, oil, steam, compressed air, process and space heat, water, fire protection, sewage and industrial waste disposal, electricity, communications, instrumentation and control, and other similar facilities to the 1997 Leased Land and the Project including, without limitation, the right to make connections with machinery, equipment, pipes, conduits and wires, structures and other improvements and appurtenances thereto, on the Other Leased Land; and (d) An easement and right to create and maintain upon the Other Leased Land encroachments of equipment, structures or other improvements which will be included on the 1997 Leased Land and within the Project as presently planned, and any similar replacements or substitutions of portions of the Project for as long as any such equipment, structures or other improvements remain standing, including without limitation the rights of lateral or party wall support, and to connect any such equipment, structure or other improvements to any structure or improvement on the Other Leased Land; but subject to the following easements over the 1997 Leased Land in favor of the Other Leased Land: (a) An easement and right for pedestrian and vehicular traffic to use all present and future walks, railroads, roads, driveways and docks upon the 1997 Leased Land in order to provide all necessary or convenient ingress and egress among and between all portions of the Other Leased Land and between the Other Leased Land and the 1997 Leased Land, including without limitation portions on which additional improvements may be erected, and railroads, public works and highways and the Chattahoochee River and to permit passage among and between the various parcels of land comprising the Other Leased Land; (b) An easement and right for the passage of pedestrians, vehicles, and for the construction, installation, operation, maintenance, renewal, replacement and use of material conveyance systems, including without limitation, pipelines, through any part of the 1997 Leased Land necessary or convenient in order to assure the passage of equipment, and finished products from one portion of the Other Leased Land to another or between the Other Leased Land and the 1997 Leased Land, including, without limitation such rights and easements as are necessary for the movement of personnel, vehicles and material among and between the various parcels of land comprising the Other Leased Land in order to permit and facilitate the operation of any facilities located on the Other Leased Land; (c) An easement and right to erect, install, construct, maintain, renew, replace and use on, over and under any part of the 1997 Leased Land, such pipes, conduits, and wires and appurtenances as are necessary or convenient to assure access to and an adequate system for or supply of gas, oil, steam, compressed air, process and space heat, water, fire protection, sewage and industrial waste disposal, electricity, communications, instrumentation and control, and other similar facilities to the Other Leased Land, including without limitation, the right to make connections with machinery, equipment, pipes, conduits and wires, structures and other improvements and appurtenances thereto, on the 1997 Leased Land; and (d) An easement and right to maintain any present equipment, structures or other improvements included within the facilities presently located on the Other Leased Land as encroachments upon the 1997 Leased Land as long as any such equipment, structures or other improvements remain standing, and to construct and maintain similar encroachments on the 1997 Leased Land in respect of any additional improvements constructed adjacent to the 1997 Leased Land, as long as any such additional improvements remain standing, including without limitation the rights of lateral or party wall support, and to connect such additional improvements to any structure or any improvements on the 1997 Leased Land. subject in all cases to the following: (1) Lease Agreement dated as of November 1, 1983 between the Board, as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time relating to the Board's Industrial Development Revenue Bonds (Georgia Kraft Project), Series 1983; (2) Lease Agreement dated as of December 1, 1983 between the Board as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Georgia Kraft Project), Series 1983; (3) Lease Agreement dated as of December 1, 1985 between the Board, as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Refunding Bonds (Georgia Kraft Project), Series 1985; (4) Lease Agreement dated as of July 1, 1986 between the Board, as lessor, and the Company (as assignee of Georgia Kraft Company), as lessee, as amended and supplemented from time to time, relating to the Board's Industrial Development Revenue Bonds (Georgia Kraft Project), Series 1986; (5) Lease Agreement dated as of December 1, 1988 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1988; (6) Lease Agreement dated as of December 1, 1988 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1988A, 1989A, 1989B, 1989C, 1989D, 1989E, 1900A and 1991A; (7) Lease Agreement dated as of June 1, 1990 between the Board, as lessor, and Industrial Warehouse Services, Inc., as lessee, as amended and supplemented from time to time, relating to the Board's First Mortgage Revenue Bonds (Industrial Warehouse Services, Inc.), Series 1990; (8) Lease Agreement dated as of June 1, 1993 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1993A; (9) Lease Agreement dated as of June 1, 1993 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1993A and 1995A; (10) Lease Agreement dated as of March 1, 1996 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Bonds (Mead Coated Board Project), Series 1996; (11) Lease Agreement dated as of September 1, 1997 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1997A and 1998A; (12) Lease Agreement dated as of February 1, 1998 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Refunding Bonds (Mead Coated Board Project), Series 1998A; and (13) Lease Agreement dated as of February 1, 1998 between the Board, as lessor, and the Company, as lessee, as amended and supplemented from time to time, relating to the Board's Environmental Improvement Revenue Refunding Bonds (Mead Coated Board Project), Series 1998B. EX-10.(XVII) 5 FORM OF SEVERENCE AGREEMENT Exhibit 10(xvii) January 1, 2000 Name Title The Mead Corporation Courthouse Plaza N.E. Dayton, Ohio 45463 Dear Name: The Mead Corporation (the "Corporation") recognizes that your contribution to the growth and success of the Corporation has been substantial and desires to assure the Corporation of your continued employment. In this connection the Board of Directors of the Corporation (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, the uncertainty and questions which it may raise among management may result in the departure or distraction of management personnel to the detriment of the Corporation and its stockholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporation's management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Corporation. In order to induce you to remain in the employ of the Corporation, the Corporation agrees that you shall receive the severance benefits set forth in Section 4 hereof in the event your employment with the Corporation is terminated subsequent to a "Change in Control of the Corporation" (as defined in Section 2 hereof) under the circumstances described below. 1. Term of Agreement. This Agreement will commence on the date hereof and ----------------- shall continue in effect until December 31, 2000; provided, however, that commencing on January 1, 2001 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than November 1 of the preceding year, the Corporation shall have given notice that it does not wish to extend this Agreement; provided, further, if a Change in Control of the Corporation shall have occurred during the original or extended term of this Agreement, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the month in which such Change in Control of the Corporation occurred. 2. Change in Control of the Corporation. ------------------------------------ (a) No benefits shall be payable hereunder unless there shall have been a Change in Control of the Corporation, as set forth below. For purposes of this Agreement, a "Change in Control of the Corporation" shall be deemed to have occurred if an event set forth in any one of the following paragraphs shall have occurred: (i) date of expiration of a Tender Offer (other than an offer by the Corporation), if the offeror acquires Shares pursuant to such Tender Offer; (ii) the date of approval by the shareholders of the Corporation of a definitive agreement: (x) for the merger or consolidation of the Corporation or any direct or indirect subsidiary of the Corporation into or with another corporation, other than (1) a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent ((i) in the case of a merger or consolidation of the Corporation, either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof, or (ii) in the case of a merger or consolidation of any direct or indirect subsidiary of the Corporation, either by remaining outstanding if the Corporation continues as a parent of the merged or consolidated subsidiary or by being converted into voting securities of the surviving entity or any parent thereof) at least 51% of the combined voting power of the voting securities of the Corporation or such surviving or parent entity outstanding immediately after such merger or consolidation, or (2) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Corporation or its Affiliates) representing 20% or more of the combined voting power of the Corporation's then outstanding securities, or (y) for the sale or disposition of all or substantially all of the assets of the Corporation, other than a sale or disposition by the Corporation of all or substantially all of the Corporation's assets to an entity, at least 51% of the combined voting power of the voting securities of which are owned (directly or indirectly) by shareholders of the Corporation in substantially the same proportions as their ownership of the Corporation immediately prior to such sale or disposition; (iii) (x) any Person is or becomes the Beneficial Owner of 20% or more of the voting power of the then outstanding securities of the Corporation (not including in the securities beneficially owned by such Person any securities acquired directly from the Corporation or its affiliates), excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (x) (1) of paragraph (ii) above or (y) the date of authorization, by both a majority of the voting power of the Corporation and a majority of the portion of such voting power excluding the voting power of interested Shares, of a control share acquisition (as such term in defined in Chapter 1701 of the Ohio Revised Code); and (iv) a change in the composition of the Board of Directors such that individuals who were members of the Board of Directors on the date two years prior to such change (and any new directors (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Corporation) who were elected, or were nominated for election, by the Corporation's shareholders with the affirmative vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such two year period or whose election or nomination for election was previously so approved) no longer constitute a majority of the Board of Directors. Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Corporation immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Corporation immediately following such transaction or series of transactions. Terms used in this Section 2 have the following meanings: "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the 1934 Act. "Beneficial Owner" shall have the meaning defined in Rule 13d-3 under the 1934 Act. "Person" shall have the meaning given in Section 3(a)(9) of the 1934 Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Corporation or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation. "Tender Offer" means a tender offer or a request or invitation for tenders or an exchange offer subject to regulation under Section 14(d) of the 1934 Act and the rules and regulations thereunder, as the same may be amended, modified or superseded from time to time. (b) For purposes of this Agreement, a "Potential Change in Control of the Corporation" shall be deemed to have occurred if (i) the Corporation enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Corporation, (ii) any person (including the Corporation) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Corporation, (iii) any person is declared to be an "Adverse Person" by the Board under the Rights Agreement dated November 9, 1996; or (iv) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Corporation has occurred. You agree that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control of the Corporation, you will remain in the employ of the Corporation until the earliest of (i) a date which is six (6) months from the occurrence of such Potential Change in Control of the Corporation, (ii) the termination by you of your employment by reason of Disability or Retirement (at your normal retirement date), as defined in Section 3(a), or (iii) the occurrence of a Change in Control of the Corporation. 3. Termination Following a Change in Control of the Corporation. If any ------------------------------------------------------------ of the events described in Section 2 hereof constituting a Change in Control of the Corporation shall have occurred, subject to the limitations of Section 4(e) hereof, you shall be entitled to the benefits provided in Section 4(d) hereof upon the termination of your employment during the term of this Agreement unless such termination is (i) because of your death, Disability or Retirement, (ii) by the Corporation for Cause or (iii) by you other than for Good Reason. (a) Disability; Retirement. If, as a result of your incapacity due to ---------------------- physical or mental illness, you shall have been absent from the full-time performance of your duties with the Corporation for six (6) consecutive months, and within thirty (30) days after written notice of termination is given you shall not have returned to the full-time performance of your duties, the Corporation may terminate your employment for "Disability." Termination for Disability, in accordance with, and for the purposes of, this Agreement shall not necessarily mean that you are "terminated" for purposes of determining your participation in the Corporation's retirement, insurance and other applicable programs and plans. Your status as a terminated or inactive employee and your benefits under the Corporation's applicable programs and plans then in effect shall be determined in accordance with such programs and plans. Termination by the Corporation or you of your employment by reason of "Retirement" shall mean termination on or after your "normal retirement date," as defined in The Mead Retirement Plan for Salaried and Certain Non-Bargaining Hourly Employees as of the date hereof, or in accordance with any retirement arrangement established with your consent with respect to you. (b) Cause. Termination by the Corporation of your employment for ----- "Cause" shall mean termination upon (i) the willful and continued failure by you to substantially perform your duties with the Corporation (other than any such failure resulting from termination by you for Good Reason), after a demand for substantial performance is delivered to you that specifically identifies the manner in which the Corporation believes that you have not substantially performed your duties, and you have failed to resume substantial performance of your duties on a continuous basis within fourteen (14) days of receiving such demand, (ii) the willful engaging by you in conduct which is demonstrably and materially injurious to the Corporation, monetarily or otherwise or (iii) your conviction of a felony or conviction of a misdemeanor which impairs your ability substantially to perform your duties with the Corporation. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Corporation. (c) Good Reason. You shall be entitled to terminate your employment ----------- for Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, the occurrence after a Change in Control of the Corporation of any one or more of the following: (i) the assignment to you of duties which are substantially inconsistent with your present duties, responsibilities and status as the Title of the Corporation or a substantial reduction or alteration in the nature or status of your responsibilities from those in effect as of the date hereof; (ii) a reduction by the Corporation in your base salary as in effect on the date hereof or as the same shall be increased from time to time ("Base Salary"); (iii) the Corporation's requiring you to be based at a location in excess of twenty-five (25) miles from the location where you are currently based; (iv) the failure by the Corporation to continue in effect any of the Corporation's employee benefit plans, policies, practices or arrangements, including, but not limited to, those plans, policies and arrangements maintained solely for the benefit of key management personnel, in which you participate, or the failure by the Corporation to continue your participation therein on substantially the same basis, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed as of the date hereof; provided, however, that such plans, policies or arrangements are not replaced by one or more alternative or substitute plans, policies, or arrangements providing substantially equivalent benefits in the aggregate; (v) the failure of the Corporation to obtain a satisfactory agreement from any successor to the Corporation to assume and agree to perform this Agreement, as contemplated in Section 5 hereof; and (vi) any purported termination by the Corporation of your employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (d) below, and for purposes of this Agreement, no such purported termination shall be effective. Your right to terminate your employment pursuant to this Subsection (c) shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. (d) Notice of Termination. Any termination by the Corporation for --------------------- Cause or by you for Good Reason shall be communicated by Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (e) Date of Termination. "Date of Termination" shall mean the date ------------------- specified in the Notice of Termination where required or in any other case upon ceasing to perform services to the Corporation; provided that if within thirty (30) days after any Notice of Termination one party notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date finally determined to be the Date of Termination, either by mutual written agreement of the parties or by a binding and final arbitration award. 4. Compensation Upon Termination or During Disability. Except as provided -------------------------------------------------- in Section 4(e) hereof, following a Change in Control of the Corporation, as defined in Section 2 hereof, upon termination of your employment or during a period of disability, you shall be entitled to the following benefits: (a) During any period that you fail to perform your full-time duties with the Corporation as a result of incapacity due to physical or mental illness, you shall continue to receive your Base Salary at the rate in effect at the commencement of any such period, until your employment is terminated pursuant to Section 3(a) hereof. Thereafter, your benefits shall be determined in accordance with the Corporation's retirement, insurance and other applicable programs and plans then in effect. (b) If your employment shall be terminated by the Corporation for Cause or by you other than for Good Reason, the Corporation shall pay you your full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given or on the Date of Termination if no Notice of Termination is required hereunder, plus all other amounts to which you are entitled under any compensation plan of the Corporation at the time such payments are due, and the Corporation shall have no further obligations to you under this Agreement. (c) If your employment terminates by reason of your Retirement, or by reason of your death, your benefits shall be determined in accordance with the Corporation's retirement, survivor's benefits, insurance and other applicable programs and plans, then in effect. (d) If your employment by the Corporation shall be terminated (i) by the Corporation other than for Cause, Retirement or Disability or (ii) by you for Good Reason, you shall be entitled to the benefits (the "Severance Payments") provided below, in lieu of the benefits provided by the Corporation's general severance program: (i) the Corporation shall pay you your full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, or the Date of Termination where no Notice of Termination is required hereunder; (ii) the Corporation will pay as severance benefits to you, not later than the fifth day following the Date of Termination, a lump sum severance payment equal to two times the sum of your (A) annual Base Salary in effect immediately prior to the occurrence of the circumstances giving rise to such termination, and (B) the greater of (1) your most recent annual award under the Corporation's long-term and short-term incentive plans as in effect from time to time or (2) the target payout under such plan in respect of the year in which such termination occurs; (iii) in lieu of shares of common stock of the Corporation ("Option Shares") issuable upon exercise of outstanding options ("Options"), if any, granted to you under the Corporation's stock option plans, together with any additional, substitute or successor option program or plan as may be in effect from time to time (which Options shall be cancelled upon the making of the payment referred to below), you shall receive an amount in cash equal to the product of (A) the higher of the closing price of Option Shares reported on the New York Stock Exchange on the Date of Termination or the highest per share price for Option Shares actually paid in connection with any Change in Control of the Corporation, over the per share exercise price of each Option held by you, times (B) the number of Option Shares covered by each such Option (the "Product Amount"); provided, however, that, if payment of the Product Amount in cash would cause a transaction of the Corporation intended by the Corporation to qualify for "pooling-of-interests" accounting not to qualify for such accounting, payment of the Product Amount shall be made in shares of the stock of the company which is the resulting or surviving company in such transaction which are at the time of closing of such transaction of equal value to the Product Amount. (iv) for a twenty-four (24) month period after the Date of Termination, the Corporation will arrange to provide you at the Corporation's expense with benefits under the Corporation's life insurance, medical and dental plans, or benefits substantially similar to the benefits you were receiving immediately prior to the Notice of Termination under such plans and to provide you, at your expense, with benefits under the Corporation's accident and disability plans, if the respective insurance carrier agrees to do so; but benefits otherwise receivable by you pursuant to this Paragraph (iv) shall be reduced to the extent comparable benefits are actually received by you during the twenty-four (24) month period following your termination, and any such benefits actually received by you shall be reported to the Corporation; and (v) for a twelve (12) month period after the Date of Termination, the Corporation will provide you with outplacement counseling with an independent professional at the Corporation's expense. (e) Notwithstanding the provisions of Subsection (d) hereof, if, in the opinion of tax counsel selected by the Corporation's independent auditors, (i) any payments or benefits which would otherwise be received by you, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Corporation, any person whose actions result in a change in control of the Corporation or any person affiliated with the Corporation or such person, constitute "parachute payments" (such payments, including the Severance Payments, being hereinafter called "Total Payments") within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code"), and (ii) the aggregate present value of the Total Payments would exceed 2.99 times your "base amount," as defined in Section 280G(b)(3) of the Code, then, in lieu of the Severance Payments, the Corporation shall pay to you under this Subsection, no later than the fifth day following the Date of Termination, a lump sum amount such that the aggregate present value of the Total Payments is equal to 2.99 times your base amount. For purposes of the preceding paragraph, your base amount and the value of the Total Payments shall be determined by the Corporation's independent auditors in accordance with the principles of Section 280G of the Code and based upon the advice of the tax counsel referred to herein. (f) The payments provided for in Subsections (d) and (e) above shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Corporation shall pay to you on such day an estimate as determined in good faith by the Corporation of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Termination. Notwithstanding the immediately preceding sentence, in the event that payment of the amount described in Section 4(d)(iii) is required by the proviso in such Section to be made in shares of stock, the calculation of the number of such shares and the payment of such shares may be delayed by the Corporation beyond the thirty-day payment deadline, if such delay is determined in good faith by the Corporation to be necessary and payment is made as soon as the number of such shares can be determined. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Corporation to you payable on the fifth day after demand by the Corporation (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). (g) The Corporation shall also pay to you all legal fees and expenses incurred by you as a result of such termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder). (h) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. 5. Successors; Binding Agreement. ----------------------------- (a) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation or of any division or subsidiary thereof employing you to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Corporation in the same amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement, to your devisee, legatee or other designee or, if there is not such designee, to your estate. 6. Notice. For the purpose of this Agreement, notices and all other ------ communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement. 7. Miscellaneous. No provision of this Agreement may be modified, waived ------------- or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio. 8. Validity. The invalidity or unenforceability of any provision of this -------- this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. Counterparts. This Agreement may be executed in several ------------ counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 10. Arbitration. Any dispute or controversy arising under or in ----------- connection with this Agreement shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. 11. Effective Date. This Agreement shall become effective as of the date -------------- set forth above. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Corporation the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, THE MEAD CORPORATION By _______________________________ Name Title Agreed to this _____ day of _______, ____. By ___________________________ Name Title EX-10.(XXIII) 6 FORM OF EXECUTIVE LIFE INSURANCE POLICY Exhibit 10(xxiii) CERTIFICATE SCHEDULE GROUP NUMBER: 960000945G POLICYHOLDER: CT-0000000004 EMPLOYER: THE MEAD CORPORATION CERTIFICATE NUMBER: 005722786A INSURED: _____________________ CERTIFICATE DATE: JAN 01, 2000 ISSUE AGE OF THE INSURED: ____________ RATING CLASS: UNISMOKE FACE AMOUNT:________________ MINIMUM FACE AMOUNT: $100,000 MINIMUM INCREASE IN FACE AMOUNT: 25,000 DEATH BENEFIT OPTION: OPTION B ANNUAL PLANNED PERIODIC PREMIUM:____________ ELIGIBILITY PERIOD: 0 DAYS LOAN INTEREST RATE PER YEAR, PAYABLE IN ARREARS: 8% MINIMUM LOAN AMOUNT: $500 PREMIUM EXPENSE CHARGE: ACTUAL STATE PREMIUM TAX RATE, CURRENTLY MAXIMUM ADMINISTRATION EXPENSE CHARGE PER CERTIFICATE: $4.00 PER MONTH MORTALITY TABLE: 100% OF THE 1980 COMMISSIONERS STANDARD ORDINARY MORTALITY TABLE B, AGE LAST BIRTHDAY GUARANTEED INTEREST RATE: 4% PER YEAR, MONTHLY EQUIVALENT 00327 COVERAGE IS PROVIDED FROM THE EFFECTIVE DATE OF THE CERTIFICATE TO THE INSUREDS AGE 95 OR THE INSUREDS PRIOR DEATH. WHEN ANY OF THE ADDITIONAL BENEFITS ABOVE CEASE, THE MONTHLY DEDUCTION WILL BE REDUCED BY THE COST OF THAT ADDITIONAL BENEFIT COVERAGE WILL EXPIRE PRIOR TO THE INSUREDS AGE 95 IF PREMIUMS PAID AND INTEREST CREDITED ARE INSUFFICIENT TO CONTINUE COVERAGE TO SUCH TIME. CERTIFICATE SCHEDULE CONTINUED EXCESS INTEREST RATE: FOR LOANED PORTIONS OF THE FUND VALUE: THE EXCESS INTEREST RATE FOR LOANED PORTIONS OF THE FUND VALUE WILL BE DECLARED BY OUR BOARD OF DIRECTORS AND WILL BE BASED ON OUR ESTIMATES OF FUTURE INVESTMENT EARNINGS. THE RATE WILL BE DECLARED IN ADVANCE AND GUARANTEED FOR A PERIOD OF AT LEAST ONE MONTH. HOWEVER, THE RATE APPLIED WILL NOT BE LESS THAN THE GUARANTEED INTEREST RATE. FOR UNLOANED PORTIONS OF THE FUND VALUE: THE FOLLOWING RULES APPLY DURING THE FIRST TEN YEARS THAT THE CERTIFICATE IS INFORCE. NEW MONEY: THE EXCESS INTEREST RATE PLUS THE GUARANTEED RATE WILL NOT BE LESS THAN THE YIELD ON FIVE-YEAR TREASURY BONDS FOR THE FIRST FULL WEEK OF THE MONTH PRECEDING THE CALENDAR QUARTER FOR WHICH THE NEW MONEY EXCESS INTEREST RATE IS DECLARED. THE RATE SO DECLARED WILL BE APPLICABLE FOR NEW MONEY RECEIVED DURING THIS CALENDAR QUARTER UNTIL THE BEGINNING OF THE CORRESPONDING CALENDAR QUARTER IN THE NEXT CALENDAR YEAR. AT THAT TIME, NEW MONEY BECOMES OLD MONEY. FOR PURPOSES OF THIS RULE, NEW MONEY IS ANY PREMIUM RECEIVED DURING THE CALENDAR QUARTER. OLD MONEY: THE EXCESS INTEREST RATE PLUS THE GUARANTEED RATE FOR THE UNLOANED PORTIONS OF THE FUND VALUE WILL NOT BE LESS THAN THE AVERAGE OF THE YIELD ON FIVE-YEAR TREASURY BONDS FOR THE FIRST FULL WEEK OF EACH CALENDAR QUARTER FOR THE TWENTY MOST RECENT CALENDAR QUARTERS, NOT INCLUDING THE QUARTER FOR WHICH THE CURRENT EXCESS INTEREST RATE IS DECLARED, LESS TWO TENTHS OF ONE PERCENT. NOT WITHSTANDING THE ABOVE, IF THE AVERAGE YIELD AS DEFINED ABOVE IS LESS THAN 5%, THEN OUR BOARD OF DIRECTORS MAY, AT ITS DISCRETION, CREDIT INTEREST AT THE GUARANTEED RATE ONLY, WITH NO EXCESS INTEREST. THE YIELD FOR THE FIVE-YEAR TREASURY BONDS WILL BE THE YIELD AS PUBLISHED IN THE "SALOMON BROTHERS BOND MARKET ROUND-UP". IN THE EVENT THAT THE "SALOMON BROTHERS BOND MARKET ROUND-UP" DISCONTINUES PUBLICATION OF THE YIELD, THEN OUR BOARD OF DIRECTORS MAY SUBSTITUTE ANOTHER REFERENCE SOURCE FOR THE RATE, AT THEIR DISCRETION. IN THE EVENT THAT THE UNITED STATES GOVERNMENT NO LONGER ISSUES FIVE-YEAR TREASURY BONDS, THEN OUR BOARD OF DIRECTORS MAY SUBSTITUTE ANOTHER TYPE OF UNITED STATES GOVERNMENT OBLIGATION, AT THEIR SOLE DISCRETION. CERTIFICATE SCHEDULE CONTINUED AFTER THE FIRST TEN YEARS THAT THE CERTIFICATE IS INFORCE, THE EXCESS INTEREST RATE FOR UNLOANED PORTION OF THE FUND VALUE WILL BE DECLARED BY OUR BOARD OF DIRECTORS AND WILL BE BASED ON OUR ESTIMATES OF OUR FUTURE INVESTMENT EARNINGS. THE RATE WILL BE DECLARED IN ADVANCE AND GUARANTEED FOR A PERIOD OF AT LEAST ONE MONTH. HOWEVER, THE RATE APPLIED WILL NOT BE LESS THAN THE GUARANTEED INTEREST RATE. REDUCED PAID-UP COVERAGE - MORTALITY TABLE AND GUARANTEED INTEREST RATE: 100% OF THE 1980 COMMISSIONERS STANDARD ORDINARY MORTALITY TABLE B. AGE LAST BIRTHDAY GUARANTEED INTEREST RATE: 4.0% PER YEAR: MONTHLY EQUIVALENT .00327 TABLE OF SURRENDER CHARGES CERTIFICATE % INITIAL YEAR SURRENDER CHARGE 1 100% 2 80% 3 60% 4 40% 5 20% THEREAFTER 0% SURRENDER CHARGE: $ 3.08 PER $1,000 OF FACE AMOUNT MINIMUM PARTIAL SURRENDER AMOUNT: $500 TITLE PAGE INSURED:________________________ BENEFICIARY TO________________________WIFE OF THE INSURED, AS PRIMARY, TO __________________ AND ___________________, CHILDREN OF THE INSURED AS SECONDARIES IN EQUAL SHARES. OWNER ___________________________ TABLE OF CONTENTS Page Definitions................................................................... 4 General Provisions............................................................ 4 Owner Beneficiary Premium Provisions............................................................ 6 Grace Period.................................................................. 7 Reinstatement Proceeds...................................................................... 8 Death Benefit Provisions...................................................... 8 Optional Changes In An Insured's Coverage..................................... 9 Certificate Values............................................................10 Continuation Of Insurance.....................................................12 Surrender Provisions..........................................................12 Certificate Loans.............................................................14 Termination Or Discontinuance.................................................15 Income Settlement Options.....................................................15 Endorsements, If Any Riders, If Any CERTIFICATE SCHEDULE CONTINUED TABLE OF DEATH BENEFIT FACTORS PER $1,000 OF INSURED'S FACE AMOUNT ATTAINED ATTAINED AGE FACTORS AGE FACTORS 18 7.04 57 2.10 19 6.83 58 2.04 20 6.63 59 1.99 21 6.44 60 1.94 22 6.25 61 1.89 23 6.06 62 1.84 24 5.88 63 1.80 25 5.69 64 1.75 26 5.52 65 1.71 27 5.34 66 1.67 28 5.17 67 1.64 29 5.00 68 1.60 30 4.84 69 1.57 31 4.68 70 1.53 32 4.53 71 1.50 33 4.38 72 1.47 34 4.24 73 1.44 35 4.10 74 1.42 36 3.97 75 1.39 37 3.84 76 1.37 38 3.72 77 1.35 39 3.60 78 1.32 40 3.48 79 1.30 41 3.37 80 1.29 42 3.27 81 1.27 43 3.17 82 1.25 44 3.07 83 1.23 45 2.97 84 1.22 46 2.88 85 1.20 47 2.80 86 1.19 48 2.71 87 1.17 49 2.63 88 1.16 50 2.56 89 1.14 51 2.48 90 1.13 52 2.41 91 1.11 53 2.34 92 1.09 54 2.28 93 1.07 55 2.21 94 1.04 56 2.15 95 1.00 Page 1 CERTIFICATE SCHEDULE CONTINUED TABLE OF MONTHLY GUARANTEED MAXIMUM COST OF INSURANCE RATES PER $1,000 AMOUNT OF TERM INSURANCE
ATTAINED ATTAINED AGE RATE AGE RATE 18 0.138 57 1.005 19 0.143 58 1.088 20 0.145 59 1.178 21 0.145 60 1.280 22 0.143 61 1.394 23 0.142 62 1.526 24 0.139 63 1.675 25 0.137 64 1.839 26 0.135 65 2.016 27 0.134 66 2.203 28 0.135 67 2.400 29 0.137 68 2.610 30 0.139 69 2.842 31 0.143 70 3.103 32 0.149 71 3.405 33 0.156 72 3.753 34 0.163 73 4.149 35 0.173 74 4.586 36 0.185 75 5.055 37 0.198 76 5.548 38 0.214 77 6.059 39 0.233 78 6.594 40 0.253 79 7.170 41 0.274 80 7.808 42 0.298 81 8.527 43 0.322 82 9.343 44 0.348 83 10.252 45 0.377 84 11.235 46 0.407 85 12.274 47 0.438 86 13.356 48 0.473 87 14.478 49 0.510 88 15.640 50 0.553 89 16.852 51 0.600 90 18.132 52 0.653 91 19.516 53 0.714 92 21.058 54 0.781 93 22.898 55 0.852 94 25.343 56 0.927
Page 2 CERTIFICATE SCHEDULE CONTINUED For amounts which were fully underwritten, the risk factors below apply to the attained age rate table.
Class of Risk Risk Factor Class of Risk Risk Factor Class of Risk Risk Factor - ------------- ----------- ------------- ----------- ------------- ---------- Standard 1.00 Class F 2.50 Class L 4.00 Class A 1.25 Class G 2.75 Class M 4.25 Class B 1.50 Class H 3.00 Class N 4.50 Class C 1.75 Class I 3.25 Class O 4.75 Class D 2.00 Class J 3.50 Class P 5.00 Class E 2.25 Class K 3.75
For guaranteed Issue, the guaranteed monthly cost of insurance rate is 100% of the above attained age rate table. For simplified acceptance, the guaranteed monthly cost of insurance rate is 100% of the above attained age rate table unless a greater class of risk factor is applicable. Page 3 DEFINITIONS WE, OUR, US, COMPANY - Connecticut Mutual Life Insurance Company. YOU OR YOUR - the Owner shown in the Certificate Schedule. HOME OFFICE - Our office at 140 Garden Street, Hartford, Connecticut 06154. AGE - age last birthday. ATTAINED AGE - the Issue Age of an Insured shown on the Certificate Schedule increased by the number Certificate Years lapsed. CERTIFICATE YEAR, CERTIFICATE ANNIVERSARY, CERTIFICATE MONTH - The Certificate Date is the date coverage begins for an Insured. Certificate months, years and anniversaries are computed from the Certificate Date. MONTHLY ANNIVERSARY DAY - the same day of each calendar month as the Certificate Date. INSURED means the insured shown in the Certificate Schedule. AGE 95 means the Certificate Anniversary on or next following the Insured's 95th birthday. DEBT means any outstanding Loan, plus any Loan Interest due or accrued. WRITTEN REQUEST - a request in writing in a form satisfactory to us and received at our Home Office, 140 Garden Street, Hartford, Connecticut 06154. GENERAL PROVISIONS Certificate This Certificate contains a summary of the terms of the Policy. Any changes or amendments to the Policy which affect the coverage under this Certificate will be described in an endorsement to this Certificate or a revised Certificate furnished to you. This Certificate supersedes and replaces any previously issued Certificate. . All statements made by the Policyholder or by an Owner or an Insured will be deemed representations and not warranties. No statement made by any Insured will be used in any contest of coverage under the Policy unless a copy of the instrument containing such statement has been furnished to the Insured, if living, otherwise to the Beneficiary of the coverage being contested. . No change in any Certificate will be valid unless it is submitted in writing and until it is approved by one of our officers. . No agent may change or waive any provision of the Policy or this Certificate issued under the Policy. . We may modify the terms and conditions of the Policy or this Certificate to conform to any new law or regulation affecting the Policy. Page 4 Owner The Owner has the exclusive right to exercise all rights and privileges and to receive all benefits under the Certificate during the lifetime of the Insured. If no Owner designated under this Certificate is living and the Policy does not provide otherwise, the Owner will be the successor in interest to said Owner. . If the Owner is an entity (other than a natural person) which ceases to exist, the Owner will be the successor in interest to said Owner. Beneficiary The Beneficiary is the Beneficiary shown in the Certificate Schedule unless later changed. . If no beneficiary survives an Insured, the Beneficiary will be the estate of the Insured, unless the Certificate states otherwise. . The interest of any Beneficiary will be subject to: (1) any assignment of this Certificate which is binding on us; and (2) any optional settlement agreement in effect at an Insured's death. Change of Owner or Beneficiary . While the Insured is alive you can change the Owner or the Beneficiary. Any request for a change must be in writing to us. . The change will take effect on the date the request is signed whether or not the Insured is living when we receive the request at our Home Office. However, the change will be subject to any payment made or actions taken by us before receiving the request. Misstatement of Age If the age of the Insured has been misstated, we will adjust the amount of any Death Benefit payable. The Death Benefit will be the benefit that would be purchased by the most recent mortality charge at the Insured's correct age. Incontestability We cannot contest an Insured's coverage after it has been in force during the lifetime of the Insured for a period of two years from the Certificate Date. We cannot contest any optional increase in an Insured's coverage after the increase has been in force during the Insured's lifetime for two years after the Effective Date of the increase. After this Certificate has been in force for two years, any contest of an increase will be based solely on the application for such increase. Suicide If an Insured dies by suicide, whether sane or insane, within one year from the Certificate Date, the proceeds we will pay will be limited to the premiums paid less any Debt and less any Partial Surrenders. If an Insured dies by suicide, whether sane or insane, within one year from the Effective Date of any optional increase in Face Amount, the amount we will pay with respect to such increase will be limited to its cost. Page 5 Assignment You may assign this Certificate. Written notice of the terms of transfer or a copy of any assignment must be filed at our Home Office. Until we receive such notice we will not be required to take notice of or be responsible for any transfer of interest in this Certificate by an assignment, agreement or otherwise. . We will not be responsible for the validity of any assignment. . Any assignment made after the Insured's death will be valid only with our consent. Periodic Report At least once a year we will furnish you a report which includes: (1) the current status of this Certificate; (2) all transactions in connection with this Certificate since the last report; and (3) any other information required by the state in which this Certificate was delivered. Illustration of Benefits and Values Upon written request we will send you an illustration of future benefits and values illustrated on both a guaranteed and current basis. The illustration may also be based upon such assumptions as you may specify. We may limit the number of such illustrations in any Certificate Year. We reserve the right to charge a fee not to exceed $10.00 for each illustration. Claims of Creditors To the extent allowed by law, the amount held and the payments made by us shall not be subject to the claims of any Insured's, Owner's or Beneficiary's creditors. PREMIUM PROVISIONS Payment of Premiums The initial premium for the Insured's coverage under the Group Policy must be paid before the Certificate Date. Such premium is payable in advance at our Home Office. The Policyholder may request a receipt signed by our President or Secretary and countersigned by our authorized agent. Certificate Planned Periodic Premiums The Insured's planned periodic premium amount and frequency are shown on the Certificate Schedule. Changes in frequency and increases or decreases in amount of Planned Periodic Premium payments may be made by you. We reserve the right to limit any increase in Planned Periodic Premiums as described in the Certificate Premium Limits provision. Certificate Unscheduled Premiums Any premium we receive under this Certificate in an amount different from the Planned Periodic Premium will be considered an unscheduled premium. Unscheduled premium payments can be made at any time while this Certificate is in Force. They will be credited to the Certificate Fund Value on the date we receive them, subject to the limits described below. Certificate Premium Limits We may refuse to accept any Certificate Premium payment in any Certificate Year which: (1) would result in an increase in an Insured's Death Benefit by more than it would increase the Fund Value as a result of the application of the Death Benefit Factors, unless we receive evidence satisfactory to us of the Insured's insurability; or Page 6 (2) would prevent the coverage under the Certificate from continuing to qualify as life insurance under the Internal Revenue Code of 1954, as amended. If any premiums in excess of the limits described above are accepted, we may return them to you as soon as we determine that they are in violation of any of these limits. GRACE PERIOD Grace Period for Payment of Certificate Premiums If on any Certificate Monthly Anniversary Day, the Fund Value less any Debt, is not enough to cover the Monthly Deduction for the following month, a grace period of 61 days will be allowed for payment of any balance needed for the Monthly Deduction. If the balance needed is not paid within the grace period, the coverage under this Certificate will end without value at the end of the grace period. Notice of the required premium will be mailed to you and to any Assignee of record at your last known address(es) at least 30 days before the end of the grace period. If the Insured should die during the Grace Period, the death proceeds will be reduced by the required premium. Reinstatement If this Certificate terminates other than by maturity, or death of the Insured, you may reinstate it within 5 years after the date of termination. We require the following: (1) a written application for reinstatement; (2) evidence of the Insured's insurability satisfactory to us; (3) payment of the amount that remained unpaid at the end of the grace period; (4) a premium large enough to pay Monthly Deductions for at least three months from the date of reinstatement. The Certificate date of reinstatement will be the Certificate Monthly Anniversary on or next following our approval. If the Insured's coverage before the end of the grace period includes benefits provided by rider, such benefits will be reinstated subject to the terms of the rider. The Fund Value on the date of reinstatement will be the amount provided by the Net Certificate Premium paid on reinstatement less the monthly deduction for the first certificate month following reinstatement. The Surrender Charge for the reinstated Policy will be based on the number of years the Insured's coverage was in force before the reinstatement. The time the coverage was not in force will not be counted. DIVIDENDS Each year, we will ascertain the surplus, if any, to be allotted on the Policy as a dividend. It will be allotted as of the end of each Policy Year. If this Policy ends, any surplus to be allotted as a final dividend may be reduced to provide for a terminal claim reserve. The dividend and terminal claim reserve will be in accordance with our rules then in effect. The Certificate Owner may elect to have any surplus allotted on the Policy: (1) to be paid in cash to the Certificate Owner; or (2) to be used to pay any premium for coverage under the Policy; or (3) to be converted into a participating paid-up addition to the face amount of the Certificate. The Certificate Owner may, at any time, surrender to us for cash any such dividends outstanding. The cash amount will be equal to the reserve of the paid-up additions. Any dividends paid under the Policy will be used for the sole benefit of the Insureds. Page 7 We do not expect to pay dividends on the Policy. PROCEEDS General Proceeds means the amount payable on the Maturity Date, upon Surrender or at the death of the Insured prior to the Maturity Date. . If the Insured is alive on the Certificate Maturity Date, the proceeds will be the Fund Value on that date, less any Debt. . If the Certificate is surrendered before the Certificate Maturity Date, the proceeds will be the Surrender Value. . The proceeds on the death of an Insured will be the Death Benefit, plus any insurance provided by an additional benefit rider on the life of the Insured, less any Debt. The Death Benefit is described in the Death Benefit provision. . Proceeds may be subject to adjustment as provided in the Misstatement of Age, Suicide and Grace Period provisions. Settlement . All amounts payable by us are payable only at our Home Office. . Unless an optional settlement agreement is elected, proceeds will be paid in a single sum. . We may require the return of the Certificate before paying proceeds. Interest on Death Proceeds We will pay interest on death proceeds paid in a single sum from the Insured's date of death to the date of payment. The rate of interest will not be less than the current rate credited on death proceeds left on deposit with us under the regular interest option or the rate required by law, but in no case less than 3% a year. DEATH BENEFIT PROVISIONS Death Benefit The Death Benefit will depend on the Death Benefit option in effect on the date of the Insured's death. Option A. The Death Benefit is the Face Amount on the date of death, or, if greater, the Fund Value on the date of death multiplied by the Death Benefit Factor for the Insured's Attained Age at death. Option B. The Death Benefit is the Face Amount plus the Fund Value on the date of death, or, if greater, the Fund Value on the date of death multiplied by Death Benefit factor for the Insured's Attained Age at death. . The Death Benefit Factors are listed in the Certificate Schedule. . The Death Benefit Option in effect is shown in Insured's Certificate Schedule. Face Amount The Initial Face Amount and the Minimum Face Amount are shown in the Certificate Schedule. You may request a change in the Face Amount as described in the Optional Changes in Face Amount provision. Page 8 OPTIONAL CHANGES IN COVERAGE Optional Changes in Face Amount The existing Face Amount may be increased or decreased by written request from you. Any change will be effective on the Certificate Monthly Anniversary Day on or next following the date we approve the request, unless you request a later date. No change in the Face Amount is allowed in the first Certificate Year. We will issue an endorsement to this Certificate to reflect any change. . Decreases Any decrease in Face Amount is subject to the following conditions. (1) no decrease is permitted until the first Certificate Anniversary; (2) the Face Amount in effect after a decrease may never be less than the Minimum Face Amount. (3) any decrease will reduce the Face Amount in the following order: (a) against any increases beginning with the most recent; and then (b) against the Initial Face Amount. . Increases Any increase in Face Amount is subject to the following conditions: (1) submission of an application for an increase and satisfactory evidence of insurability of the Insured. (2) if the Fund Value, less any Debt, is not sufficient to continue the coverage in force for three months at guaranteed rates of mortality and interest, a premium sufficient to increase the Fund Value to such amount is required. (3) the minimum amount of any increase in Face Amount is shown in the Certificate Schedule. . Increases are not available if the Certificate Monthly Deduction is being waived under the terms of a waive rider. Changing to Reduced Paid-Up Coverage Prior to the Certificate Maturity Date, you may elect that the Insured's coverage under the Group Policy be changed to a reduced paid-up status. The following conditions will apply: . The election must be made by a written request. . If Death Benefit Option B is in effect on the date of request, it will be changed to Death Benefit Option A immediately prior to the Effective Date of the paid-up coverage and the Face Amount after such change shall be equal to the Face Amount prior to such change plus the Fund Value on the date of change. . The Cash Value will be applied as a net single premium at the Insured's Attained Age to determine a paid-up Face Amount. . The maximum amount of Cash Value that may be applied without evidence of insurability is the amount needed to provide a paid-up Face Amount not greater than the Death Benefit immediately prior to the Effective Date of the paid-up coverage. If the entire Cash Value is not applied to purchase the paid-up Face Amount, any excess Surrender Value will be refunded to the Insured. . The Cash Value must be an amount that will provide a paid-up Face Amount of not less than the Minimum Face Amount shown on the Certificate Schedule. Page 9 The election will go into effect on the Certificate Monthly Anniversary Date on or next following the date we receive your election request. . Once the election for reduced paid-up coverage goes into effect: (1) we will not accept any further Certificate Premiums for the Insured's coverage; (2) no further optional changes in the Insured's coverage may be made; (3) any Debt which existed on the date the coverage was changed to a reduced paid-up status will be continued under the paid-up coverage and any loan interest will be due and payable as described in the Certificate Loans provision; and (4) any additional benefits provided by rider will terminate. (5) This Certificate may be reinstated as described in the Reinstatement provision. . We will issue an endorsement to the Certificate to reflect the election of the paid-up option. . The endorsement will show the new paid-up Face Amount and the guaranteed cash value at age 95. . If the entire Surrender Value is not applied to purchase the paid-up insurance, the excess Surrender Value will be refunded to you. . The guaranteed net single premium rates will be based on the attained age and rating class of the Insured and the mortality table and guaranteed interest rate for the Reduced Paid-Up Coverage as shown in the Certificate Schedule. We may use a lower net single premium rate at our discretion. . The paid-up coverage may be surrendered for its cash value less any debt at any time. The cash value of the paid-up coverage will equal the present value of future guaranteed benefits based on the mortality table and interest rate that are shown in the certificate schedule determined on the date of the change. If the paid-up coverage is surrendered within 30 days after a Certificate Anniversary, the cash value will not be less than the value on such anniversary. . The paid-up coverage will be eligible for dividends. CERTIFICATE VALUES Fund Value The Fund Value on the Certificate Date is the Initial Certificate Net Premium paid less the Monthly Deduction for the first Certificate Month. On any Certificate Monthly Anniversary Day, the Fund Value of an Insured's coverage will be equal to: (1) the Fund Value on the prior Monthly Anniversary Day; plus (2) one month's interest on item (1); plus (3) the sum of net certificate premiums received at our Home Office since the prior Monthly Anniversary Day; plus (4) interest on item (3) from the date of receipt to the Certificate Monthly Anniversary Day; less (5) any Partial Surrenders plus Surrender Charge made on the Monthly Anniversary Day; less (6) the Monthly Deduction due on the Certificate Monthly Anniversary Day. On any other day the Fund Value will be calculated in a consistent manner. Page 10 Net Certificate Premium The net certificate premium is the premium paid less the Premium Expense Charge shown in the Certificate Schedule. Monthly Deduction The Monthly Deduction due on any Monthly Anniversary Day is: (1) the Cost of Insurance for the following month; plus (2) the cost of any additional benefits provided by the rider for the following month; plus (3) the Administration Expense Charge shown in the Certificate Schedule. Fund Value Interest Rate Calculations . On each Certificate Monthly Anniversary Day we will credit interest separately to the portion of the Fund Value equal to any existing Debt and to the balance of the Fund Value. . The Guaranteed Interest Rate is shown on the Certificate Schedule. Excess Interest Rate . An interest rate in excess of the Guaranteed Interest Rate may be applied in the calculation of the Fund Value. Descriptions of how the excess interest rate for the Loaned and Unloaned portions of the Fund Value are shown on the Certificate Schedule. . In no event will the interest rate credited to the Fund Value be less than the Guaranteed Interest Rate shown on the Certificate Schedule. . All interest rates stated are effective annual rates. They will be applied to properly reflect the date of receipt of any Certificate Planned Periodic Premiums and any changes in Debt during a Certificate Month. Cost of Insurance The Cost of Insurance for an Insured is determined on a monthly basis on each Certificate Monthly Anniversary Day. The Cost of Insurance is determined separately for each of the following, in the order shown: (1) the Initial Face Amount as follows: (a) that part which is on a guaranteed issue basis; next (b) that part which is on a simplified issue basis; next (c) that part which is fully underwritten; (2) each increase in Face Amount, successively, in the order in which it took effect; and (3) any portion of the Insured's Death Benefit which is a result of the Death Benefit being equal to the Fund Value multiplied by the Death Benefit Factor. The Cost of Insurance for each of (1), (2) and (3) above is calculated by multiplying its Cost of Insurance Rate by its Amount at Risk. The "Amount at Risk" at the beginning of the Certificate Month is the difference between: (a) the Insured's Death Benefit that would have been payable in the event of the Insured's death on that day divided by one plus the Guaranteed Monthly Equivalent Interest Rate; and Page 11 (b) the Fund Value at the beginning of the Certificate Month, decreased by the monthly deduction for any additional benefit riders. The Fund Value for the Insured's coverage as described in (b) is applied in the order shown above in (1), (2) and (3) to determine the Amount at Risk for each. If the Fund Value when so applied equals or exceeds the Initial Face Amount there is no Amount at Risk for that Initial Face Amount and no Cost of Insurance for it. If the Fund Value when so applied equals or exceeds the Initial Face Amount plus an increase in Face Amount, there is no Amount at Risk for that increase and no cost of Insurance for it. Cost of Insurance Rate The monthly Cost of Insurance Rate is based on the Insured's attained age and rating class. The rating class for the Insured's Initial Face Amount is the Insured's rating class on the Certificate Date as shown in the Certificate Schedule. The Insured's rating class for optional increases in Face Amount is the Insured's rating class on the Effective Date of the Increase in Face Amount. The rating class with the most recent Effective Date will apply to any portion of the Death Benefit which is a result of the Death Benefit being equal to the Fund Value on the date of death multiplied by the Death Benefit Factor. Monthly Cost of Insurance Rates will be determined by us based on our expectations as to future mortality, interest, expenses, and persistency. We can change the rates from time to time, but they will never be more than the Monthly Guaranteed Cost of Insurance Rates shown on the Certificate Schedule. Any change in rates, and the way in which they are determined, will be made on a uniform basis for Insureds of the same age and rating class. We will file any such changes with the insurance supervisory official of the state in which the Certificate is delivered. Cash Value The Cash Value is the Fund Value less any Surrender Charge. CONTINUATION OF INSURANCE If Certificate premium payments are not continued, the coverage under this Certificate will be continued as long as the Fund Value less any Debt is sufficient to cover any Monthly Deductions. The coverage will not be continued beyond the Certificate Maturity Date. If the Insured is living on the Certificate Maturity Date, the Fund Value, if any, less any Debt will be paid to you. The planned periodic premium may not provide coverage to the Certificate Maturity Date even if the planned periodic premium is paid as scheduled. The period for which coverage under the Certificate will continue will be effected by the following: (a) the amount, timing and frequency of premium payments; (b) change in the Face Amount and Death Benefit Options; (c) change in interest credits and Monthly Deduction charges; (d) deductions for additional riders; and (e) any Partial Surrenders or loans. SURRENDER PROVISIONS Surrender Value The Insured's coverage may be surrendered by you for its Surrender Value at any time while the Insured is living and before the Maturity Date. The Surrender Value is the Cash Value less any Debt. Page 12 We may postpone payment for up to 6 months after we receive your request unless the surrender is to pay premiums to us. We will not defer a payment for more than 6 months after we receive your written request. If we defer a payment for 10 working days or more, we will pay interest at a rate not less than 3% a year for the period the payment is deferred. Surrender Charge The Surrender Charge is a charge made against the Fund Value in the event of Total or Partial Surrender. The amounts and durations of the Surrender Charges are shown in the Table of Surrender Charges shown in the Certificate Schedule. The Surrender Charges applicable to the Initial Face Amount are the charges shown in the Table of Surrender Charges. For any requested increase in the Face Amount that is approved, Surrender Charges will apply to the amount of the increase. Such charges will be the charges shown in the Table of Surrender Charges effective on the date the requested increase is approved and for the duration shown in the Table of Surrender Charges. For a Partial Surrender a Surrender Charge will be made against the amount of the Fund Value that is surrendered. This Surrender Charge will be applied if the amount of the Partial Surrender is greater than 25% of the Fund Value in any certificate year. This charge will be in proportion to the charge for the total Surrender Value. The proportion will be computed as the amount of Surrender Value that is surrendered divided by the total Surrender Value. When a partial Surrender is made, future Surrender Charges will be reduced in the same proportion. Any requested decrease in the Face Amount will not reduce the applicable Surrender Charges. Surrender . You may surrender this Certificate by: (1) filing a written request in a form acceptable to us; and (2) returning the Certificate to our Home Office. . The date of surrender will be the Certificate Monthly Anniversary on or next following our receipt of the request. . The surrender proceeds equal the Surrender Value on the date of surrender. However, the surrender proceeds within 30 days after a Certificate Anniversary will not be less than: (1) the surrender proceeds on that Certificate Anniversary; plus (2) any unscheduled premiums received since that Anniversary but not yet credited; less (3) any increase in Debt or any partial surrender since that Anniversary. . This Certificate of Insurance will terminate as of the date of surrender. Partial Surrender You may make a Partial Surrender of the Surrender Value by written request. The date of the Partial Surrender will be the Monthly Anniversary Day on or next following our receipt of the request. . Partial Surrenders are subject to the following conditions: (1) Partial Surrenders are not allowed before the first Certificate Anniversary. (2) The amount of any Partial Surrender must be at least the Minimum Partial Surrender amount shown in the Certificate Schedule. Page 13 (3) A Partial Surrender may not result in a remaining Cash Value equal to less than twelve Monthly Deductions. . The amount of a Partial Surrender, plus the Surrender Charge, will be deducted from the Fund Value. This will result in a reduction of the Cash Value and Death Benefit. If Death Benefit Option A is in effect on the Monthly Anniversary Day on which a Partial Surrender is made, the Face Amount will be reduced by the amount of the Partial Surrender. The reduction will apply first against any increases beginning with the most recent and then against the Initial Face Amount. Partial withdrawals are not allowed if the resulting decrease in the specified amount goes below the minimum shown in the following schedule. Basis of Values Minimum Cash Values are based on the mortality table and Guaranteed Interest Rate shown in the Certificate Schedule. The Cash Values are not less than the minimum values required by the law in the state in which this Certificate is delivered. Where required, the method of determining Cash Values has been filed with the insurance supervisory official of the state in which this Certificate is delivered. CERTIFICATE LOANS General On or after the first Certificate Anniversary, while the Certificate is in force, you may, by written request, borrow against it. We will lend any sum up to the Certificate's Maximum Loan Value, less existing Debt. This Certificate will be the sole security for the loan. Maximum Loan Value The Maximum Loan Value on any date is the Cash Value on such date less three Monthly Deductions. Interest Rate A loan bears interest at the Loan Interest Rate shown on the Certificate Schedule. Interest accrues daily from the date of the loan and is due at the end of each Certificate Year. If the interest is not paid when it is due, it will be added to the loan and will bear interest at the same loan rate. Minimum Loan Amount The Minimum Loan Amount as shown on the Certificate Schedule. Repayment You may repay all or part of a Certificate Loan at any time while the Insured is alive and the insurance is in force. Every payment to us will be considered a premium payment unless clearly marked for Debt repayment. Termination This Certificate will terminate if Debt equals or exceeds the Cash Value unless an additional premium or loan repayment is made. The due date for such payment will be the 61st day after the date when Debt first equals or exceeds the Cash Value. We will mail 30 days notice of pending termination to your last known address Page 14 and the last known address(es) of any assignee of record. The notice will indicate the loan repayment or premium required to keep this Certificate in force. Unless we receive such amount by the 62nd day, the Certificate will terminate without value on that date. We may postpone payment for up to 6 months after we receive your request unless the loan is to pay premiums to us. We will not defer a payment for more than 6 months after we receive your written request. TERMINATION OR DISCONTINUANCE Termination of the Policy The Policy will terminate without the right of reinstatement on the date the coverage ends for the last remaining Insured under the Policy. Continuation of Insured's Coverage After Discontinuance If the Group Policy is discontinued, any insurance then in effect will remain in force under the Policy, provided it is not cancelled or surrendered by the Owner. The continuance of the coverage is subject to the Continuation of Insurance provision of this Certificate. All insurance that is continued will be automatically changed from deduction from wages to a direct billing status. Certificate Premiums will then be payable directly to us. Individual Termination The Insured's coverage under the Policy will terminate when one of the following occur: (1) the Insured dies; (2) the Insured's coverage matures; (3) the date the Insured's coverage ends without value; (4) the date the Insured's coverage is surrendered for its Surrender Value; or (5) the date the Group Policy terminates or is discontinued, except as provided in the Continuance of Insured's Coverage After Discontinuance provision. If, for any reason, contributions for coverage are no longer being deducted from wages, the status of the insurance under this Certificate will change from deduction of contributions to direct billing. INCOME SETTLEMENT OPTIONS If elected, we will pay proceeds under the terms of an optional settlement agreement, rather than in a single sum. You may elect such an agreement before proceeds become payable. If proceeds are at least $10,000, the payee may elect such an agreement if none is in effect. The following options are available. Option 1. Installments for a Special Period. Equal payments for a stated number of years, not more than 30. The amount is shown in the Option 1 Table. Option 2. Life Income. Equal monthly payments while the payee is alive, as shown in the Option 2 Table. Payments with or without installments certain may be elected. Option 3. Interest. Interest payments while the payee is alive or for a shorter period. Interest will be paid at an effective rate of 3% per year. Payments are increased by any additional interest earnings we may apportion. For each $1,000 of proceeds, interest payments equal $30 annually, $14.89 semi-annually, $7.42 quarterly and $2.47 monthly. Page 15 Option 4. Installments of Specified Amount. Equal annual, semi-annual, quarterly or monthly payments for a stated amount. Payments will be made until the proceeds and interest are all paid out. The total yearly amount paid must be at least 6% of the original proceeds. Any unpaid balance left with us will be increased by interest at 3% a year. We will also add any additional interest earnings we may apportion. Option 5. Life Income With Installment Refund. Equal monthly payments as shown in the Option 5 Table. Payments will be made until the total amount paid equals the proceeds and as long thereafter as the payee lives. Option 6. Joint Life Income for the Payee and One Other Person With Two-Thirds to Survivor. (One Hundred and Twenty Months Certain). Based on the Option 6 Table, we will pay a joint income to the payee and one other person designated at exercise of this option. We will pay the income for 120 months certain, and as long afterwards as both payees are living. After the death of either payee, and following payment of any remaining income certain, monthly payments equal to two-thirds of monthly income will be continued to the surviving payee for life. The Alternate Life Income and Payment Provisions paragraphs apply to this option. Alternate Life Income If Option 2, 5 or 6 is elected, the payee may elect to receive an alternate life income. This is instead of receiving income based upon the rates shown in the following tables. The election must be made at the time the income is to begin. . The alternate life income will be more than the monthly income provided by a new single premium immediate annuity (first payment immediate), based upon our published rate then in use. Payment Provisions . If an optional settlement agreement becomes effective, we will issue a supplementary contract in exchange for this Certificate and agreement. The contract will show the rights and benefits provided by the agreement. . We may change the payment basis to quarterly, semi-annual, or annual if any payment is less than $50. . Payments under Option 2, 5 and 6 will be subject to proof of the payees' age. . The first installment under Options 1, 2, 4, 5 and 6 is due as of the date the proceeds become payable. . Installments certain under Options 1, 2, 5 and 6 are computed at 3% interest compounded annually. This does not apply when alternate life income is selected. Installments certain, after the first, will be increased by additional interest earnings we may apportion. If the alternate life income is elected, we will not increase payments certain by additional interest earnings. Page 16 ----------------------------------------- INSTALLMENTS CERTAIN FOR EACH $1000 OF PROCEEDS ----------------------------------------- OPTION 1 ----------------------------------------- Number Annual Monthly of Years Installment Installment ----------------------------------------- 1 $1000.00 $84.47 2 507.39 42.86 3 343.23 28.99 4 261.19 22.06 5 212.00 17.91 6 179.22 15.14 7 155.83 13.16 8 138.31 11.68 9 124.69 10.53 10 113.82 9.61 11 104.93 8.86 12 97.54 8.24 13 91.29 7.71 14 85.95 7.26 15 81.33 6.87 16 77.29 6.53 17 73.74 6.23 18 70.59 5.96 19 67.78 5.73 20 65.25 5.51 21 62.98 5.32 22 60.92 5.15 23 59.04 4.99 24 57.33 4.84 25 55.76 4.71 26 54.31 4.59 27 52.97 4.47 28 51.74 4.37 29 50.60 4.27 30 49.53 4.18 ----------------------------------------- Semiannual installments are 50.37% of the annual installments. Quarterly installments are 25.28% of the annual installments. ----------------------------------------- Page 17
- ------------------------------------------------------------------------------------------------------------------------ MONTHLY LIFE INCOME PER $1,000 OF PROCEEDS - ------------------------------------------------------------------------------------------------------------------------ OPTION 2 OPTION 5 OPTION 2 OPTION 5 --------------------------------------------- -------------------------------------------- PAYEE Without Number of With PAYEE Without Number of With Age Installments Monthly Installment Age Installments Monthly Installment Nearest Certain Installments Refund Nearest Certain Installments Refund Birthday Certain Birthday Certain 120 120 - ------------------------------------------------------------------------------------------------------------------------ 20 $3.00 $2.99 $2.98 55 $ 4.49 $4.44 $4.27 21 3.01 3.01 2.99 56 4.58 4.52 4.34 22 3.03 3.03 3.01 57 4.68 4.61 4.42 23 3.05 3.05 3.03 58 4.79 4.71 4.50 24 3.07 3.07 3.05 59 4.90 4.81 4.58 25 3.09 3.09 3.07 60 5.01 4.91 4.67 26 3.12 3.11 3.09 61 5.14 5.02 4.76 27 3.14 3.14 3.11 62 5.27 5.14 4.86 28 3.16 3.16 3.14 63 5.42 5.26 4.96 29 3.19 3.18 3.16 64 5.57 5.39 5.07 30 3.21 3.21 3.18 65 5.74 5.53 5.19 31 3.24 3.24 3.21 66 5.91 5.67 5.31 32 3.27 3.27 3.23 67 6.10 5.81 5.43 33 3.30 3.30 3.26 68 6.30 5.96 5.56 34 3.33 3.33 3.29 69 6.51 6.12 5.70 35 3.37 3.36 3.32 70 6.74 6.28 5.85 36 3.40 3.39 3.35 71 6.98 6.44 6.00 37 3.44 3.43 3.38 72 7.24 6.61 6.16 38 3.47 3.47 3.42 73 7.51 6.79 6.33 39 3.51 3.51 3.45 74 7.81 6.96 6.51 40 3.56 3.55 3.49 75 8.12 7.14 6.70 41 3.60 3.59 3.53 76 8.46 7.31 6.90 42 3.65 3.63 3.56 77 8.82 7.49 7.10 43 3.69 3.68 3.61 78 9.21 7.67 7.32 44 3.74 3.73 3.65 79 9.62 7.84 7.58 45 3.80 3.78 3.69 80 10.07 8.01 7.80 46 3.85 3.83 3.74 81 10.54 8.17 8.05 47 3.91 3.89 3.79 82 11.05 8.33 8.32 48 3.97 3.94 3.84 83 11.59 8.48 8.60 49 4.03 4.01 3.89 84 12.16 8.62 8.90 50 4.10 4.07 3.95 85 12.78 8.75 9.22 51 4.17 4.14 4.01 and over 52 4.25 4.21 4.07 53 4.32 4.28 4.13 54 4.41 4.36 4.20 - ------------------------------------------------------------------------------------------------------------------------
Page 18
- -------------------------------------------------------------------------------------- MONTHLY INCOME FOR EACH $1,000 OF PROCEEDS - OPTION 6 - -------------------------------------------------------------------------------------- FIRST PAYEE SECOND PAYEE - Age Nearest Birthday ------------------------------------------------------------------------------ Age Nearest Birthday 50 51 52 53 54 55 56 57 58 59 60 - -------------------------------------------------------------------------------------- 45 $3.63 $3.66 $3.68 $3.70 $3.72 $3.74 $3.77 $3.79 $3.82 $3.84 $3.86 46 3.66 3.68 3.70 3.73 3.75 3.77 3.80 3.82 3.85 3.87 3.90 47 3.69 3.71 3.73 3.75 3.78 3.80 3.83 3.85 3.88 3.90 3.93 48 3.71 3.73 3.76 3.78 3.81 3.83 3.86 3.88 3.91 3.94 3.96 49 3.74 3.76 3.79 3.81 3.84 3.86 3.89 3.92 3.94 3.97 4.00 50 3.77 3.79 3.82 3.84 3.87 3.89 3.92 3.95 3.98 4.00 4.03 51 3.79 3.82 3.85 3.87 3.90 3.93 3.96 3.98 4.01 4.04 4.07 52 3.82 3.85 3.88 3.90 3.93 3.96 3.99 4.02 4.05 4.08 4.11 53 3.85 3.88 3.91 3.94 3.97 3.99 4.02 4.05 4.08 4.12 4.15 54 3.88 3.91 3.94 3.97 4.00 4.03 4.06 4.09 4.12 4.16 4.19 55 3.91 3.94 3.97 4.00 4.03 4.07 4.10 4.13 4.16 4.20 4.23 56 3.94 3.97 4.01 4.04 4.07 4.10 4.13 4.17 4.20 4.24 4.27 57 3.97 4.01 4.04 4.07 4.11 4.14 4.17 4.21 4.24 4.28 4.32 58 4.01 4.04 4.07 4.11 4.14 4.18 4.21 4.25 4.29 4.32 4.36 59 4.04 4.07 4.11 4.14 4.18 4.22 4.25 4.29 4.33 4.37 4.41 60 4.07 4.11 4.14 4.18 4.22 4.26 4.29 4.33 4.37 4.41 4.45 61 4.11 4.14 4.18 4.22 4.26 4.30 4.34 4.38 4.42 4.46 4.50 62 4.14 4.18 4.22 4.26 4.30 4.34 4.38 4.42 4.46 4.51 4.55 63 4.18 4.21 4.25 4.29 4.34 4.38 4.42 4.47 4.51 4.56 4.60 64 4.21 4.25 4.29 4.33 4.38 4.42 4.47 4.51 4.56 4.60 4.65 65 4.25 4.29 4.33 4.37 4.42 4.46 4.51 4.56 4.61 4.65 4.70 66 4.28 4.33 4.37 4.41 4.46 4.51 4.55 4.60 4.65 4.71 4.76 67 4.32 4.36 4.41 4.45 4.50 4.55 4.60 4.65 4.70 4.76 4.81 68 4.36 4.40 4.45 4.50 4.54 4.59 4.65 4.70 4.75 4.81 4.87 69 4.39 4.44 4.49 4.54 4.59 4.64 4.69 4.75 4.80 4.86 4.92 70 4.43 4.48 4.53 4.58 4.63 4.68 4.74 4.80 4.85 4.91 4.97 - --------------------------------------------------------------------------------------
*Second Payee - Ages 61 to 70 appears on the next page. The rate for any combination of ages not stated in the table will be furnished on request. Page 19 - ------------------------------------------------------------------------ MONTHLY INCOME FOR EACH $1,000 OF PROCEEDS - OPTION 6. - ------------------------------------------------------------------------ FIRST PAYEE SECOND PAYEE - Age Nearest Birthday ------------------------------------------------------------- Age Nearest Birthday 61 62 63 64 65 66 67 68 69 70 - ------------------------------------------------------------------------ 45 $3.89 $3.91 $3.94 $3.97 $3.99 $4.02 $4.04 $4.07 $4.09 $4.12 46 3.92 3.95 3.97 4.00 4.03 4.05 4.08 4.10 4.13 4.16 47 3.95 3.98 4.01 4.03 4.06 4.09 4.12 4.14 4.17 4.19 48 3.99 4.02 4.04 4.07 4.10 4.13 4.15 4.18 4.21 4.24 49 4.02 4.05 4.08 4.11 4.14 4.17 4.19 4.22 4.25 4.28 50 4.06 4.09 4.12 4.15 4.18 4.21 4.24 4.27 4.29 4.32 51 4.10 4.13 4.16 4.19 4.22 4.25 4.28 4.31 4.34 4.37 52 4.14 4.17 4.20 4.23 4.26 4.29 4.32 4.36 4.39 4.42 53 4.18 4.21 4.24 4.27 4.31 4.34 4.37 4.40 4.43 4.47 54 4.22 4.25 4.29 4.32 4.35 4.39 4.42 4.45 4.48 4.52 55 4.26 4.30 4.33 4.37 4.40 4.44 4.47 4.50 4.54 5.57 56 4.31 4.34 4.38 4.41 4.45 4.49 4.52 4.56 4.59 4.63 57 4.35 4.39 4.43 4.46 4.50 4.54 4.57 4.61 4.65 4.68 58 4.40 4.44 4.48 4.51 4.55 4.59 4.63 4.67 4.71 4.74 59 4.45 4.49 4.53 4.57 4.61 4.65 4.69 4.73 4.77 4.80 60 4.49 4.54 4.58 4.62 4.66 4.70 4.75 4.79 4.83 4.87 61 4.54 4.59 4.63 4.68 4.72 4.76 4.81 4.85 4.89 4.94 62 4.60 4.64 4.69 4.73 4.78 4.82 4.87 4.91 4.96 5.00 63 4.65 4.70 4.74 4.79 4.84 4.89 4.93 4.98 5.03 5.07 64 4.70 4.75 4.80 4.85 4.90 4.95 5.00 5.05 5.10 5.15 65 4.76 4.81 4.86 4.91 4.96 5.02 5.07 5.12 5.17 5.22 66 4.81 4.86 4.92 4.97 5.03 5.08 5.14 5.19 5.25 5.30 67 4.87 4.92 4.98 5.04 5.09 5.15 5.21 5.27 5.32 5.38 68 4.92 4.98 5.04 5.10 5.16 5.22 5.28 5.34 5.40 5.46 69 4.98 5.04 5.10 5.16 5.23 5.29 5.35 5.42 5.48 5.54 70 5.04 5.10 5.17 5.23 5.30 5.36 5.43 5.50 5.56 5.63 - ------------------------------------------------------------------------ The rate for any combination of ages not stated in the table will be furnished on request. Page 20 EX-21 7 SUBSIDIARIES OF THE REGISTRANT Exhibit (21) SUBSIDIARIES OF THE MEAD CORPORATION* State or Jurisdiction Name of Incorporation - ---- --------------------- AT-A-GLANCE, INC. New York Escanaba Paper Company Michigan Forest Kraft Company Delaware MB Pulp Company Delaware MCB Woodlands and Services, Inc. Alabama Mead Coated Board, Inc. Delaware Mead Emballage, S.A. Paris, France Mead Foreign Holdings, Inc. Ohio Mead International Ireland Dublin, Ireland Mead Oxford Corporation Delaware Mead Packaging International, Inc. Ohio Mead Panelboard, Inc. Ohio - -------------- * The names of additional subsidiaries have been omitted because the unnamed subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. Subsidiaries which are consolidated into the above-listed subsidiaries are also omitted. EX-23 8 CONSENT OF INDEPENDENT AUDITORS EXHIBIT (23) CONSENT OF DELOITTE & TOUCHE LLP We consent to the incorporation by reference in (i) the Form S-8 Registration Statement (No. 33-59007) pertaining to The Mead Corporation Employees Stock Purchase Plan, (ii) the Post-Effective Amendment No. 2 to Form S-8 Registration Statement (No. 2-90746) pertaining to the 1984 Stock Option Plan, (iii) the Form S-8 Registration Statements (Nos. 33-37961 and 33-47580) pertaining to the Mead Salaried Savings Plan, (iv) the Form S-3 Registration Statements (Nos. 33-14759 and 33-34009) pertaining to Common Shares of Selling Shareholders, (v) the Form S-3 Registration Statements (Nos. 33-43994, 33-51337 and 333-16135) pertaining to $850,000,000 aggregate principal amount of Debt Securities, (vi) the Form S-8 Registration Statement (No. 33-40118) pertaining to the 1991 Stock Option Plan, (vii) the Form S-8 Registration Statement (No. 33-03047) pertaining to the 1996 Stock Option Plan, (viii) the Form S-3 Registration Statement (No. 333-16221) pertaining to transferred stock options, (ix) the Form S-8 Registration Statement (No. 333-61285) pertaining to The Mead Corporation Executive Capital Accumulation Plan, and (x) the Form S-8 Registration Statement (No. 33-53421) pertaining to the Mead Savings Plan for Bargaining Unit Employees, and Prospectus pertaining to Common Shares of Selling Shareholders, included in such Registration Statement, of our report dated January 27, 2000, appearing in the Annual Report on Form 10-K of The Mead Corporation for the year ended December 31, 1999. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Dayton, Ohio March 3, 2000 EX-27 9 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL REPORT ON FORM 10-K OF THE MEAD CORPORATION FOR THE YEAR ENDED DECEMBER 31, 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 IF BE DEEMED A PART OF ANY REGISTRATION STATEMENT TO WHICH IT RELATES. 1,000,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 56 0 548 16 490 1,230 5,904 2,547 5,662 1,001 1,334 0 0 153 2,278 5,662 0 3,800 0 3,087 0 0 105 272 99 208 0 0 0 208 2.04 1.99
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