Exhibit 10.3
THE MEAD CORPORATION
1996 STOCK OPTION PLAN
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COMPOSITE
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06/24/99
Section 1. Purposes.
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The purposes of The Mead Corporation 1996 Stock Option Plan
(the "Plan") are (i) to provide incentives to officers, other key
employees and non-employee directors of the Company upon whose
judgment, initiative and efforts the long-term growth and success
of the Company is largely dependent; (ii) to assist the Company in
attracting and retaining key employees and non-employee directors
of proven ability; and (iii) to increase the identity of interests
of such key employees and non-employee directors with those of the
Company's shareholders by providing such employees and directors
with options to acquire Shares of the Company.
Section 2. Definitions.
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For purposes of the Plan:
(a) "Acquisition Transaction" means a transaction of the
type described in Section 9(b) (ii).
(b) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the 1934 Act.
(c) "Board of Directors" or "Board" means the Board of
Directors of the Company.
(d) "Change in Composition of the Board," means an event
of the type described in Section 9(b) (iv).
(e) "Change in Control," means a transaction of the type
described in Section 9 (b) (iii).
(f) "Committee" means the committee referred to in Section
4.
(g) "Code" means the Internal Revenue Code of 1986, as
amended.
(h) "Company" means The Mead Corporation, an Ohio
corporation; when used in the Plan with reference to employment,
"Company" shall include any Subsidiary of the Company.
(i) "Designation of Beneficiary" means such person(s) or
entity whom the Option Holder has designated by a transfer on
death or other designation of beneficiary to receive the Holder's
Option on the Holder's death in accordance with such procedures
established from time to time by the Committee.
(j) "Fair Market Value" means the average of the highest
sale price and the lowest sale price of a Share on the date the
value of a Share is to be determined, as reported on the New York
Stock Exchange - Composite Transactions Tape or, if no sale is
reported for such date, then on the next preceding date for which
a sale is reported.
(k) "Grantee" means the employee who received the option
from the Company.
(l) "Holder" means the person(s) or entity who owns the
option, whether Grantee, Transferee, heir or other beneficiary.
(m) "Incentive Stock Option" means an option granted under
the Plan which qualifies as an Incentive Stock Option under
Section 422 of the Code.
(n) "Initial Director" means a person who is a Non-
Employee Director at the date of requisite approval of this Plan
by the shareholders of the Company.
(o) "Limited Right" means a right granted under Section 9
of the Plan.
(p) "Non-Employee Director" means a member of the Board
who is not also an employee of the Company.
(q) "Nonqualified Option" means an option granted under
the Plan which does not qualify as an Incentive Stock Option under
Section 422 of the Code.
(r) "1934 Act" means the Securities Exchange Act of 1934,
as amended.
(s) "Reload Option" means a Nonqualified Option granted
under Section 6(d) of the Plan.
(t) "Share" or "Shares" means shares of common stock,
without par value, of the Company.
(u) "Subsequent Director" means a person who becomes a
Non-Employee Director subsequent to the date of requisite approval
of this Plan by the shareholders of the Company.
(v) "Subsidiary" means any corporation, partnership or
other person or entity at least 10% of the voting or equity
interest of which is owned or controlled, directly or indirectly,
by the Company.
(w) "Tender Offer" means a tender offer or a request or
invitation for tenders or an exchange offer subject to regulation
under Section 14(d) of the 1934 Act and the rules and regulations
thereunder, as the same may be amended, modified or superseded
from time to time.
(x) "Tax Date" means the date as of which the amount of
the withholding tax payment with respect to the exercise of a
Nonqualified Option is calculated.
(y) "Transferee" means the person who received the option
from the Grantee during the Grantee's lifetime.
(z) "Person" shall have the meaning given in Section
3(a)(9) of the 1934 Act, as modified and used in Sections 13(d)
and 14(d) thereof, except that such term shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or
(iv) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions
as their ownership of stock of the Company.
Section 3. Shares Subject to the Plan.
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(a) Number of Shares. Subject to adjustment as provided
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in Section 11, the maximum number of Shares that may be issued
and/or delivered under the Plan upon the exercise of options is
8,000,000. Subject to adjustment as provided in Section 11, the
maximum number of Shares that may be issued and/or delivered under
the Plan to any individual over the term of the Plan upon the
exercise of options shall not exceed 800,000. Such Shares may be
either authorized and unissued or treasury Shares. Any shares (i)
subject to an option which for any reason has terminated or
expired or has been cancelled prior to being fully exercised or
(ii) which have been received by the Company as full or partial
payment for Shares purchased pursuant to Section 8(b), may again
be granted pursuant to options under the Plan.
(b) Subject to adjustment as provided in Section 11, the
maximum number of Limited Rights which may be granted under the
Plan is 8,000,000. Subject to adjustment as provided in Section
11, the maximum number of Limited Rights that may be granted under
the Plan to any individual over the term of the Plan shall not
exceed 800,000. Any Limited Rights granted under the Plan which
for any reason terminate or expire or have been cancelled prior to
being fully exercised may again be granted under the Plan.
Section 4. Administration.
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The Plan shall be administered by a committee (the
"Committee") of the Board of Directors, consisting of three or
more directors, who shall from time to time be appointed by and
serve at the pleasure of, the Board of Directors. No director
shall serve as a member of the Committee if (i) he or she does not
qualify as a disinterested person with respect to the Plan under
Rule 16b-3 (or any successor provision) under the 1934 Act or (ii)
he or she does not qualify as an outside director within the
meaning of Section 162(m) of the Code.
The Committee shall have and exercise all the power and
authority granted to it under the Plan. Subject to the provisions
of the Plan, the Committee shall in its sole discretion determine
the persons to whom, and the times at which, Incentive Stock
Options, Nonqualified Options, Reload Options and Limited Rights
shall be granted; the number of Shares to be subject to each
option; the option price per Share; and the term of each option.
In making such determinations, the Committee may take into
consideration each participant's present and/or potential
contribution to the success of the Company and any other factors
which the Committee may deem relevant and proper. Subject to the
provisions of the Plan, the Committee shall also interpret the
Plan; prescribe, amend and rescind rules and regulations relating
to the Plan; correct defects, supply omissions and reconcile any
inconsistencies in the Plan; and make all other determinations
necessary or advisable for the administration of the Plan. The
Committee may in its discretion change the terms of any Limited
Right granted hereunder in connection with an Incentive Stock
Option to permit the Limited Right to be exercisable even though
the Fair Market Value of a Share on the date of exercise does not
exceed the exercise price of the related option. Such
determinations of the Committee shall be conclusive. A majority
of the Committee shall constitute a quorum for meetings of the
Committee, and the act of a majority of the Committee at a
meeting, or an act reduced to or approved in writing by all
members of the Committee, shall be the act of the Committee.
Section 5. Eligibility.
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From time to time during the term of the Plan, the Committee
may grant one or more Incentive Stock Options, Nonqualified
Options and Reload Options to any person who is then an officer or
other key employee of the Company. Each Non-Employee Director
shall be eligible to receive Nonqualified Options granted under
the formula provision set forth in Section 7 of the Plan.
Section 6. Terms and Conditions of Options.
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(a) Option Grant Document. The terms of each option
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granted under the Plan (at any time after the establishment of the
Plan) shall be set forth in a written agreement or other grant
document, the form of which shall be approved by the Committee.
(b) Terms and Conditions of General Application. The
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following terms and provisions shall apply to all options granted
under the Plan, except to the extent otherwise provided in
Sections 6 (c), 6 (d), 6 (e), 6 (f) and 7 hereof, if applicable:
(1) No option may be granted under the Plan at an
option price per Share which is less than the Fair Market Value of
a share on the date of grant.
(2) No option may be exercised more than ten years
after the date of grant.
(3) No option shall be exercisable within one year
after the date of grant. At the time an option is granted, the
Committee may provide that after such one year period, the option
may be exercised with respect to all Shares subject thereto, or
may be exercised with respect to only a specified number of Shares
over a specified period or periods.
(4) Except as provided in Sections 6 (b) (5) and 6
(b) (6), an option may be exercised only if the Grantee of such
option has been continuously employed by the Company since the
date of grant. Whether authorized leave of absence or absence for
military or governmental service shall constitute a termination of
employment shall be determined by the Committee in its sole
discretion.
(5) At the time an option is granted, or at such
other time as the Committee may determine, the Committee may
provide that, if the Grantee of the Option ceases to be employed
by the Company for any reason (including retirement or disability)
other than death, the option will continue to be exercisable by
the Holder (including a Transferee under Section 10 hereof) for
such additional period (not to exceed the remaining term of such
option) after such termination of employment as the Committee may
provide.
(6) At the time an option is granted, the Committee
may provide that, if the Grantee of such option dies while
employed by the Company or while entitled to the benefits of any
additional exercise period established by the Committee with
respect to such option in accordance with Section 6(b) (5), then
the option will continue to be exercisable by the person or
persons to whom the Grantee's rights with respect to such option
shall have passed by will or by the laws of descent and
distribution (or in accordance with the procedures set forth in
Section 10 hereof) for such additional period after death (not to
exceed the remaining term of such option) as the Committee may
provide.
(7) At the time an option is granted, the Committee
may provide for any restriction or limitation on the exercise of
such option and/or for any restriction or limitation on the
transferability of the Shares issuable upon the exercise of such
option as it may deem appropriate.
(c) Additional Provisions Applicable to Incentive Stock
Options. ------------------------------------------------------
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The following additional terms and provisions shall apply to
Incentive Stock Options granted under the Plan, notwithstanding
any provision of Section 6 (b) to the contrary:
(1) No Incentive Stock Option shall be granted to an
officer or other employee who possesses directly or indirectly
(within the meaning of Section 424(d) of the Code) at the time of
grant more than 10% of the voting power of all classes of Shares
of the Company or of any parent corporation or any corporation,
50% or more of the voting stock of which is owned or controlled,
directly or indirectly, by the Company, unless the option price is
at least 110% of the Fair Market Value of the Shares subject to
the option on the date the option is granted and the option is not
exercisable after the expiration of five years from the date of
grant.
(2) The aggregate Fair Market Value (determined on
the date an Incentive Stock Option is granted) of Shares with
respect to which Incentive Stock Options are exercisable for the
first time by any individual in any calendar year (under the Plan
and all of the plans of the Company and any Subsidiary and any
parent corporation) shall not exceed $100,000, or such other
maximum amount permitted by the Code.
(3) Any Stock Option granted under the Plan may
contain a feature providing for, upon the exercise thereof, the
grant of a Reload Option subject to and in accordance with the
terms and conditions set forth in Section 6 (d) below.
(d) Additional Provisions Applicable to Reload Options.
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Whenever the Grantee of any option containing a reload feature
(the "Original Option") outstanding under this Plan exercises such
Original Option, the Grantee of such Original Option (except as
provided in Section 6 (d) (5) below) shall be granted on the date
of such exercise (the "Reload Date") a new option (the "Reload
Option") for a number of Shares (the "Original Shares") equal to
the number of Shares subject to the Original Option being
exercised less the number of Shares subject to the Original Option
which are (A) withheld by the Company as full or partial payment
of the option price for such Original Option, (B) otherwise
disposed of for purposes of having the proceeds applied for such
purpose or (C) withheld by the Company for purposes of tax
withholding in accordance with Section 8 (d) hereof. The
following additional terms and provisions shall apply to Reload
Options granted under the Plan, notwithstanding any provision of
Section 6 (b) to the contrary:
(1) Option Price. The option price per Share
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covered by a Reload Option shall be an amount equal to the Fair
Market Value per Share as of the Reload Date.
(2) Expiration Date. Subject to Section 6 (d) (4)
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below, the option exercise period shall expire on, and the Reload
Option shall no longer be exercisable following, the tenth
anniversary of the Reload Date.
(3) Vesting Period. Reload Options granted under
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this Section 6 (d) shall vest and become exercisable with respect
to all
Shares covered thereby on the third anniversary of the Reload
Date, subject to Section 6 (f) hereof.
(4) Automatic Cancellation. Except as otherwise
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provided in the agreement evidencing a Reload Option, a Reload
Option shall be immediately cancelled (without any action taken by
the Company) with respect to that number of Shares subject to such
Reload Option (such number of Shares being determined in
accordance with the succeeding sentence), effective immediately
upon any sale, disposition or purported assignment or transfer of
any or all of the Original Shares subject to the Original Option
prior to the third anniversary of the Reload Date. The number of
Shares subject to the Reload Option so cancelled shall equal the
number of Original Shares subject to the Original Option so sold,
disposed of, assigned or transferred prior to the third
anniversary of the Reload Date; provided, however, that such
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Shares subject to the Reload Option shall not be cancelled if such
Original Shares are used in connection with the exercise of
another option with respect to which Section 6 (d) hereof applies.
(5) Active Employee. No Reload Option shall be
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granted to any person who is not employed by the Company at the
time of exercise of an Original Option.
(e) Waiver of Terms. Subject to the ten-year limitation
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in Section 6 (b) (3), the Committee may waive or modify at any
time, either before or after the granting of an option (including
a Reload Option but excluding any option granted under Section 7
hereof) any condition or restriction with respect to the exercise
of such option imposed by or pursuant to this Section 6 in such
circumstances as the committee may deem appropriate (including,
without limitation, in the event the Grantee retires with the
approval of the Company, or in the event of a proposed Acquisition
Transaction, a Change in Control, Tender Offer for Shares, or
other similar transaction involving the Company).
(f) Acceleration Upon Certain Events. Subject to the
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first sentence of Section 6(b)(3) hereof, but notwithstanding any
other provision of the Plan, immediately prior to the occurrence
of an "Acceleration" (as defined in this Section 6(e)), all
outstanding options granted hereunder (including Reload Options
and options granted pursuant to Section 7 hereof) shall become
fully vested and exercisable. As used in the immediately
preceding sentence, "immediately prior" to the Acceleration shall
mean sufficiently in advance of the Acceleration to permit the
grantee to take all steps reasonably necessary to exercise the
option fully and to deal with the Shares purchased under the
option so that those Shares may be treated in the same manner in
connection with the Acceleration as the Shares of other
shareholders. For purposes of this Section 6 (e), an
"Acceleration" shall mean any of the following: (i) the date of
the first purchase of Shares pursuant to a Tender Offer (other
than an offer by the Company), (ii) the date of shareholder
approval of an Acquisition Transaction, (iii) the date of filing
of the Schedule 13D or shareholder authorization of the control
share acquisition giving rise in either case to a Change in
Control, or (iv) the date of a Change in Composition of the Board.
Section 7. Non-Employee Directors Formula Options.
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The following additional terms and provisions of this
Section 7 shall apply to grants of options to Non-Employee
Directors under the Plan, notwithstanding any provision of Section
6(b) to the contrary. The provisions of this Section 7 shall not
be amended more than once every six months, other than to comport
with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or
the rules promulgated thereunder.
(a) General. Non-Employee Directors shall receive
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Nonqualified Options under the Plan. The option price per Share
shall equal the Fair Market Value of a Share on the date of grant.
(b) Initial Grants to Initial Directors. Upon the
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requisite approval of the Plan by the shareholders of the Company,
each Initial Director shall be granted automatically an option to
purchase 600 Shares.
(c) Initial Grants To Subsequent Directors. Each
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Subsequent Director shall, at the time such director becomes a
Non-Employee Director, be granted automatically an option to
purchase 600 Shares.
(d) Subsequent Grants To Directors. On January 3rd of
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each year beginning on January 3, 1997, each continuing Initial
Director shall be granted automatically an option to purchase a
number of Shares determined below. On January 3rd of each year
subsequent to a Subsequent Director's becoming a Non-Employee
Director, each Subsequent Director shall be granted automatically
an option to purchase a number of Shares determined below. The
number of Shares subject to each grant made pursuant to this
Paragraph (d) shall equal the product obtained by multiplying (w)
600, by (x) an adjustment factor (the "Factor"). The Factor shall
equal the quotient obtained by dividing (y) the "base line number"
for average "total compensation" paid to directors by companies
with annual sales in excess of $4 billion, as published in the Hay
Consulting Group's "Directors Compensation Report" (or comparable
successor report) in the calendar year immediately preceding the
year in which such grant is made, which report covers compensation
paid in the year ending immediately prior to the year of
publication, by (z) $36,246. In the event that such Directors
Compensation Report (or comparable successor report) is not
published with respect to any year, the Factor shall equal one
(1).
(e) Exercisability. Subject to Section 6 (f) hereof, each
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option granted under this Section 7 shall be exercisable as to 100
percent of the Shares covered by the option on the first
anniversary of the date the option is granted.
(f) Termination. Upon the termination of a Non-Employee
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Director from such position, for any reason, after such director
has attained either age 70 or ten (10) years of service as a
director of the Company (whether or not as a Non-Employee
Director), each option granted to such Non-Employee Director
pursuant to this Section 7 which is exercisable at the time of
such termination shall remain exercisable for the remainder of its
term. Upon the termination of a Non-Employee Director from such
position, for any reason, prior to the attainment of age 70 or ten
(10) years of service as a director of the Company (whether or not
as a Non-Employee Director), all options granted to such Non-
Employee Director pursuant to this Section 7 which are exercisable
at the time of such termination shall remain exercisable for a
period of one year following the date of such termination, but in
no event may the term of an option be extended beyond its
expiration date. Each option granted pursuant to this Section 7
which is not exercisable at the time of such termination shall be
immediately cancelled.
Section 8. Exercise of Options.
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(a) Notice of Exercise. The Holder of an option granted
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under the Plan may exercise all or part of such option by giving
written
notice of exercise to the Committee or its designee; provided,
however, that an option may not be exercised for a fraction of a
Share. No Holder of an option nor such Holder's legal
representatives, legatees, Transferees, distributees or
Designation of Beneficiary will be, or will be deemed to be, a
Holder of any Shares covered by such option unless and until the
option shall have been exercised in accordance with the Plan.
(b) Payment of Option Price. The option price for Shares
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with respect to which an option is exercised shall be paid in full
at the time such notice is given. An option shall be deemed
exercised on the date the Committee or its designee receives
written notice of exercise, together with full payment for the
Shares purchased. The option price shall be paid to the Company
either in cash or Shares (including Shares withheld from the
Shares otherwise receivable by the Option Holder upon the exercise
of the option) having a Fair Market Value equal to the option
price (or a combination of cash and Shares such that the sum of
the Fair Market Value of the Shares plus the cash equals the
option price). The Committee shall have the authority, subject to
such conditions and procedures that it deems necessary and
advisable, to authorize the use of a cashless exercise procedure
with a registered broker/dealer.
(c) Payment in Cancellation of Option. The Committee
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shall have the authority in its sole discretion to authorize the
payment to an Option Holder (with the consent of such Holder) in
exchange for the cancellation of all or a part of such Holder's
Option (other than an option granted under Section 7 hereof), of
cash in an amount per Share not to exceed the difference between
the aggregate Fair Market Value on the date of such cancellation
of the Shares and the aggregate option price of such Shares;
provided, however, that if an Acceleration has occurred, for
purposes of this subparagraph, "Fair Market Value" on the date of
such cancellation shall be calculated in the same manner as the
"exercise value" of a Limited Right would be calculated under
Section 9(c) with respect to such date (whether or not any Limited
Rights are actually outstanding).
(d) Tax Withholding. With the approval of the Committee,
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the Grantee of a Nonqualified Option may elect to have the Company
retain from the Shares to be issued upon the exercise by the
Grantee of such option Shares having a Fair Market Value on the
Tax Date equal to all or any part of the required minimum federal,
state and local withholding tax payments to be made by the Grantee
with respect to the exercise of the option in lieu of making such
payments in cash. The Committee may establish from time to time
rules or limitations with respect to the right of a Grantee to
elect to have the Company retain Shares in satisfaction of
withholding payments; provided, however, that, in any event, any
such election made by a person subject to Section 16(b) of the
1934 Act must be made in accordance with any applicable rules
established under such Section.
If a Grantee transfers a Nonqualified Option pursuant to
Section 10, the Grantee is required to satisfy the applicable
withholding taxes by paying cash or other property to the Company
with respect to any income recognized by the Grantee on the
exercise of such option by the Transferee. The Grantee's
withholding obligations must be satisfied on the date that the
Transferee exercises the option. If the Grantee does not satisfy
the applicable withholding tax obligation, the Company shall
retain from the Shares to be issued Shares having a Fair Market
Value on the Tax Date equal to the mandatory withholding tax
payable by the Grantee.
In connection with the exercise of an option or Limited
Right, the Company has the right to require the Grantee to remit
or otherwise make available to the Company an amount sufficient to
satisfy any federal, state and/or local withholding tax
requirements prior to the delivery or transfer of any certificate
or certificates for Shares (and prior to a cash payment in the
case of a Limited Right) or to take whatever action it deems
necessary to protect its interests with respect to tax liabilities
in connection with the issuance of Shares or cash payment.
Section 9. Limited Rights
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(a) Grant of Limited Rights. The Committee may grant
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Limited Rights with respect to any option granted under the Plan
(other than an option granted under Section 7) either at the time
the option is granted or at any time thereafter prior to the
exercise, cancellation, termination or expiration of such option.
The number of Limited Rights covered by any such grant shall not
exceed, but may be less than, the number of Shares covered by the
related option. The term of any Limited Right shall be the same
as the term of the option to which it relates. The right of a
Holder to exercise a Limited Right shall be cancelled if and to
the extent a related option is exercised, and the right of a
Holder to exercise an option shall be cancelled if and to the
extent a related Limited Right is exercised.
(b) Events permitting Exercise of Limited Rights. A
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Limited Right shall be exercisable only if and to the extent that
the related option is exercisable; provided, however, that
notwithstanding the foregoing, (x) a Limited Right shall not be
exercisable during the first six months of its term, and (y) in
the case of a Limited Right issued in connection with an Incentive
Stock Option, such Limited Right shall not be exercisable unless
the Fair Market Value of a Share on the date of exercise exceeds
the exercise price of a Share subject to the related option. A
Limited Right which is otherwise exercisable may be exercised only
during the following periods:
(i) during a period of 30 days following the date of
expiration of a Tender Offer (other than an offer by the Company),
if the offeror acquires Shares pursuant to such Tender Offer;
(ii) during a period of 30 days following the date of
approval by the shareholders of the Company of a definitive
agreement: (x) for the merger or consolidation of the Company
into or with another corporation, if the Company will not be the
surviving corporation or will become a subsidiary of another
corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving or parent entity) at least 80% of the combined
voting power of the voting securities of the Company or such
surviving or parent entity outstanding immediately after such
merger or consolidation, (y) for the merger or consolidation of
the Company with another corporation, if the Company will be the
surviving corporation and will not become a subsidiary of another
corporation, or for the merger or consolidation of any direct or
indirect subsidiary of the Company into or with another
corporation, other than (in either case) a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent ((i)
in the case of a merger or consolidation of the Company, either by
remaining outstanding or by being converted into voting securities
of the surviving entity or any parent thereof, or (ii) in the
case of a merger or consolidation of any direct or indirect
subsidiary of the Company, either by remaining outstanding if the
Company continues as a parent of the merged or consolidated
subsidiary or by being converted into voting securities of the
surviving entity or any parent thereof) at least 51% of the
combined voting power of the voting securities of the Company or
surviving or parent entity outstanding immediately after such
merger or consolidation, or (z) for the sale or disposition of all
or substantially all of the assets of the Company (each of the
foregoing transactions is hereinafter referred to as an
"Acquisition Transaction");
(iii) during a period of 30 days following: (x) the
date upon which the Company is provided a copy of a Schedule 13D
(filed pursuant to Section 13(d) of the 1934 Act and the rules and
regulations promulgated thereunder) indicating that any person or
group (as such terms are defined in Section 13(d)(3) of the 1934
Act) has become the beneficial owner (as defined in Rule 13d-3 of
the Exchange Act) of 20% or more of the outstanding voting Shares
of the Company or (y) the date of authorization, by both a
majority of the voting power of the Company and a majority of the
portion of such voting power excluding the voting power of
interested Shares, of a control share acquisition (as such term is
defined in Chapter 1701 of the Ohio Revised Code) (each of the
foregoing transactions is hereinafter referred to as a "Change in
Control"); and
(iv) during a period of 30 days following a change in
the composition of the Board of Directors such that individuals
who were members of the Board of Directors on the date two years
prior to such change (and any new directors (other than a director
whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company) who were elected, or were nominated for election, by the
Company's shareholders with the affirmative vote of at least two-
thirds of the directors then still in office who either were
directors at the beginning of such two year period or whose
election or nomination for election was previously so approved) no
longer constitute a majority of the Board of Directors (such a
change in composition is hereinafter referred to as a "Change in
Composition of the Board").
(c) Exercise of Limited Rights. Upon exercise of a
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Limited Right, the Holder thereof shall receive from the Company a
cash payment equal to the excess of: (x) the aggregate "exercise
value" on the date of exercise (determined as provided below) of
that number of Shares as is equal to the number of Limited Rights
being exercised over (y) the aggregate exercise price under the
related option of that number of Shares as is equal to the number
of Limited Rights being exercised. A Holder shall exercise a
Limited Right by giving written notice of such exercise to the
Committee. A Limited Right shall be deemed exercised on the date
the Committee receives such written notice.
The "exercise value" of a Limited Right on the date of
exercise shall be:
(i) in the case of an exercise during a period
described in Section 9 (b) (i), the highest price per Share paid
pursuant to any Tender Offer which is in effect at any time during
the 60-day period prior to the date on which the Limited Right is
exercised;
(ii) in the case of an exercise during a period
described in Section 9(b) (ii), the greater of: (x) the highest
sale price of a Share during the 30-day period prior to the date
of shareholder approval of the Acquisition Transaction, as
reported on the New York Stock
Exchange -Composite Transactions Tape, or (y) the highest fixed or
formula per Share price payable pursuant to the Acquisition
Transaction (if determinable on the date of exercise);
(iii) in the case of an exercise during a period
described in Section 9(b) (iii), the greater of: (x) the highest
sale price of a Share during the 30-day period prior to the date
the Company is provided with a copy of the Schedule 13D, or the
date of authorization of the control Share acquisition, as
reported on the New York Stock Exchange -Composite Transactions
Tape, or (y) the highest acquisition price of a Share shown on
such schedule 13D or to be paid in such control Share acquisition;
and
(iv) in the case of an exercise during a period
described in Section 9 (b) (iv), the highest sale price of a Share
during the 30-day period prior to the date of the change in
Composition of the Board, as reported on the New York Stock
Exchange - Composite Transactions Tape. Notwithstanding the
foregoing, in no event shall the exercise value of a Limited Right
issued in connection with an Incentive Stock Option exceed the
maximum permissible exercise value for such a right for purposes
of Section 422 of the Code and the regulations and interpretations
issued pursuant thereto. Any securities or property which form
part or all of the consideration paid for Shares pursuant to a
Tender Offer or Acquisition Transaction shall be valued at the
higher of (1) the valuation placed on such securities or property
by the person making such Tender Offer or the other party to such
Acquisition Transaction, or (2) the value placed on such
securities or property by the Committee.
(d) Compliance with Law. The exercise of Limited
-------------------
Rights by directors and officers of the Company shall be subject
to, and comply with, the applicable requirements of Rule l6b-3 (e)
under the 1934 Act (or any successor provision), as the same may
be amended, modified or superseded from time to time.
Section 10. Transfers Upon Death; Nonassignability.
----------- --------------------------------------
Except as provided in this Section 10, options granted under
the Plan may not be sold, pledged, assigned, hypothecated or
transferred other than by Designation of Beneficiary, or, if none,
then by will or the laws of descent and distribution and may be
exercised during the lifetime of the Grantee only by such Grantee
or by his guardian or legal representative.
Upon the death of an Option Holder, outstanding Options held
by such Holder may be exercised only by Designation of
Beneficiary, or, if none, then by the executor or administrator of
the Holder's estate or by a person who shall have acquired the
right to such exercise by will or by the laws of descent and
distribution.
Subject to such conditions as the Committee may prescribe,
during an option Grantee's lifetime, the Committee may permit the
transfer or assignment of an outstanding option by such Grantee;
provided, that such transfer or assignment shall not apply to (y)
an option which is an Incentive Stock Option (but only if
nontransferability is necessary in order for the option to qualify
as an Incentive Stock Option) and (z) an option granted to a
person subject to Section 16 of the 1934 Act (but only if
nontransferability is necessary in order for the option to qualify
for the exemption under Rule 16b-3 of the 1934 Act)
Section 11. Adjustments Upon Changes in Capitalization.
----------- ------------------------------------------
In the event of a change in outstanding Shares by reason of
a Share dividend, recapitalization, merger, consolidation, split-
up, combination or exchange of Shares, or the like, or in the
event of any similar corporate transaction which the Committee
determines requires the adjustments described herein, the maximum
number of Shares subject to option during the existence of the
Plan, the number of Limited Rights which may be granted under the
Plan, the number of Shares subject to, and the option price of,
each outstanding option, the maximum number of Shares or Limited
Rights which may be granted to any individual over the term of the
Plan, the number of Limited Rights outstanding, the Fair Market
Value of a Share on the date a Limited Right is granted, and the
like shall be appropriately adjusted by the Committee
(disregarding any fractional Shares resulting therefrom), whose
determination in each case shall be conclusive.
Section 12. Conditions Upon Granting and Exercise of Options and
----------- ----------------------------------------------------
Limited Rights and Issuance of Shares.
-------------------------------------
No option or Limited Right shall be granted, no option or
Limited Right shall be exercised and Shares shall not be issued or
delivered upon the exercise of an option unless the grant and
exercise thereof, and the issuance and/or delivery of Shares
pursuant thereto, or the payment therefor, shall comply with all
relevant provisions of state and federal law, including, without
limitation, the Securities Act of 1933, as amended, the 1934 Act,
the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares then may
be listed.
Section 13. Amendment and Termination of Plan.
----------- ---------------------------------
(a) Amendment. The Board of Directors may from time to
---------
time amend the Plan, or any provision thereof, in such respects as
the Board of Directors may deem advisable; provided, however, that
any such amendment shall be approved by the holders of Shares by
such vote and otherwise in compliance with applicable federal or
state law (including Rule 16b-3 (or any successor provision) under
the 1934 Act) or the requirements of any stock exchange upon which
the Shares may then be listed.
(b) Termination. The Board may at any time terminate the
------------
Plan.
(c) Effect of Amendment or Termination. No amendment to
----------------------------------
or termination of the Plan shall adversely affect any option or
Limited Right previously granted under the Plan without the
consent of the Holder thereof.
Section 14. Notices.
----------- -------
Each notice relating to this Plan shall be in writing and
delivered in person or by mail to the proper address. Except as
otherwise provided by the Committee, each notice shall be deemed
to have been given on the date it is delivered or mailed,
provided, however, that for a notice of exercise given in
accordance with Section 8 (b), which shall be deemed to have been
given on the date it is received by the Committee with payment of
the option price. Each notice to the Committee shall be addressed
as follows: The Mead Corporation, Mead World Headquarters,
Courthouse Plaza Northeast, Dayton, Ohio 45463, Attention:
Compensation Committee. Each notice to the Holder of an option or
other person or persons then entitled to exercise an option shall
be addressed to such person or persons at The Holder's address as
set forth in the records of the Company. Anyone to whom a notice
may be given under this Plan may designate a new address by
written notice to the party to that effect.
Section 15. Benefits of Plan.
----------- ----------------
This Plan shall inure to the benefit of and be binding upon
each successor and assign of the Company. All rights and
obligations imposed upon the Holder of an option and all rights
granted to the Company under this Plan shall be binding upon such
Holder's heirs, legal representatives and successors.
Section 16. Pronouns and Plurals.
----------- ---------------------
All pronouns shall be deemed to refer to the masculine,
feminine, singular or plural, as the identity of the person or
persons may require.
Section 17. Shareholder Approval and Term of Plan.
----------- -------------------------------------
The Plan shall become effective upon its approval by the
affirmative vote of the holders of a majority of the Shares
entitled to vote thereon held by shareholders present in person or
by proxy at any shareholders' meeting at which a quorum is
present. The Plan shall expire on September 30, 2005, unless
sooner terminated in accordance with Section 13.
Section 18. Interpretation.
----------- --------------
The Plan is designed and intended to comply with Rule 16b-3
promulgated under the 1934 Act and Section 162(m) of the Code and
all provisions hereof shall be construed in a manner to so comply.
___________________________________________
NOTES:
- -----
(1) Adopted by the Board of Directors of the Company on October 28,
1995, and approved by the Company's shareholders on April 25,
1996.
(2) Amendments to Sections 2, 6 (b) and (e), 8 (a) and (d), 10 and 14
to allow for the designation of a beneficiary of the stock option
grant.
(3) Amendments to Section 2(b), with an addition of subsection (z);
Section 6(a), (f); Section 9(b) with addition of subsections (i),
(ii), (iii), (iv) as adopted by the Board of Directors on June 24,
1998.
(4) Administrative Amendment to Section 8(d) as adopted by the
Compensation Committee of the Board of Directors on June 24, 1999.