Exhibit 10.31

 

     www.mead.com   

The Mead Corporation

World Headquarters

Courthouse Plaza Northeast

Dayton, OH 45463

TEL: 937 495 6323

     [MEAD logo]     

 

December 1, 2000

 

Mr. Mark T. Watkins

Vice President, Technology

The Mead Corporation

Courthouse Plaza N.E.

Dayton, Ohio 45463

 

Dear Mark:

 

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, 2001; provided, however, that commencing
on January 1, 2002 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.

 

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Mr. Mark T. Watkins

December 1, 2000

Page 2

 

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

 

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Mr. Mark T. Watkins

December 1, 2000

Page 3

 

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

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Mr. Mark T. Watkins

December 1, 2000

Page 4

 

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

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Mr. Mark T. Watkins

December 1, 2000

Page 5

 

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 Vice President,
Technology 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

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Mr. Mark T. Watkins

December 1, 2000

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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.

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Mr. Mark T. Watkins

December 1, 2000

Page 7

 

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 and one-half (2.5) times the sum of your (A) highest rate of annualized
Base Salary in effect at any time up to and including the Date of Termination,
and (B) the greater of (x) the highest amount of the actual annual incentive and
long-term incentive you received under the Mead Annual Incentive Plan and the
Mead Long-Term Incentive Plan for the three plan years immediately preceding the
year in which your Date of Termination occurred, and (y) the highest amount of
your target annual incentive and your target long-term incentive established

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Mr. Mark T. Watkins

December 1, 2000

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for the Mead Annual Incentive Plan and the Mead Long-Term Incentive Plan for the
three plan years immediately preceding the year in which your Date of
Termination occurred (or, if higher, your target annual incentive and your
target long-term incentive established for the Mead Annual Incentive Plan and
the Mead Long-Term Incentive Plan for the plan year in which your Date of
Termination occurred);

 

(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) In addition to the retirement benefits to which you are entitled under each
Pension Plan or any successor plan thereto, the Corporation shall pay you a lump
sum amount in cash, calculated under the assumption that at such Date of
Termination you had an additional three (3) years of age and service credits,
provided that your age and service will not be treated as extending beyond your
65th birthday, with Compensation (as defined in such

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Mr. Mark T. Watkins

December 1, 2000

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Pension Plan) for each of such three (3) additional years to be treated at (A)
your highest rate of annualized Base Salary in effect at any time up to and
including the Date of Termination, and (B) the greater of (x) the highest amount
of the actual annual incentive you received under the Mead Annual Incentive Plan
for the three plan years immediately preceding the year in which your Date of
Termination occurred, and (y) the highest amount of your target annual incentive
established for the Mead Annual Incentive Plan for the three plan years
immediately preceding the year in which your Date of Termination occurred (or,
if higher, the target annual incentive established for the Mead Annual Incentive
Plan for the plan year in which your Date of Termination occurred). For purposes
of this Section 4(d)(v), “Pension Plan” shall mean any tax-qualified pension or
non-qualified supplemental pension or excess benefit pension plan maintained by
the Corporation and any other plan or agreement entered into between you and the
Corporation which is designed to provide you with retirement benefits. The three
(3) additional years of age and service shall be used for purposes of all
calculations under this section, including but not limited to the early
retirement reduction calculation so as to offset such reduction. All
calculations under this Agreement with respect to your benefits shall be made
without regard to any amendments to any Pension Plan made subsequent to a Change
in Control which adversely affect in any manner the computation of retirement
benefits hereunder.

 

(vi) 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) Whether or not you become entitled to the Severance Payments, if any of the
payments or benefits received or to be received by you in connection with a
Change in Control or termination of your employment (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 or any
Person affiliated with the Corporation or such Person) (all such payments and
benefits, excluding the Gross-Up Payment (as hereinafter defined), being
hereinafter referred to as the “Total Payments”) will be subject to the excise
tax (the “Excise Tax”) referred to in Section 4999 of the Internal Revenue Code
(the “Code”), or any similar tax that may hereafter be imposed, the Corporation
shall pay you in cash an additional amount (the “Gross-Up Payment”) such that
the net amount retained by you, after deduction of any Excise Tax upon the Total
Payments and any federal, state and local income

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Mr. Mark T. Watkins

December 1, 2000

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taxes, employment taxes, and Excise Tax upon the Gross-Up Payment provided for
by this Section 4(e) (including FICA), shall be equal to the Total Payments;

 

(ii) For purposes of determining the potential impact of the Excise Tax and the
amount of such Excise Tax, (A) all of the Total Payments shall be treated as
“parachute payments” (within the meaning of Section 280G(b)(2) of the Code)
unless, in the opinion of tax counsel (“Tax Counsel”) reasonably acceptable to
you and selected by the accounting firm which was, immediately prior to the
Change in Control, the Corporation’s independent auditor (the “Auditor”), such
payments or benefits (in whole or in part, and whether received or to be
received in the future) do not constitute parachute payments, including by
reason of Section 280G(b)(4)(A) of the Code, (B) all “excess parachute payments”
within the meaning of Section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in
excess of the Base Amount (within the meaning of Section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise not subject to the
Excise Tax, and (C) the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Auditor in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount
of the Gross-Up Payment, you shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state or locality of your residence on
the Date of Termination (or if there is no Date of Termination, then the date on
which the Gross-Up Payment is calculated for purposes of this Section (e)), net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes;

 

(iii) In the event that the Excise Tax is subsequently determined to exceed the
amount taken into account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Corporation shall make an
additional Gross-Up Payment in respect to such excess (plus any interest,
penalties or additions payable by you with respect to such excess) within five
(5) business days following your payment of such excess. If, after receipt of
the Gross-Up Payment, you become entitled to receive any refund with respect to
a determination that there was an overpayment of any Excise Tax or income tax
with respect to the Gross-Up Payment, including interest and penalties with
respect thereto, you shall, within five (5) business days following receipt of
such refund, promptly pay to the

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Mr. Mark T. Watkins

December 1, 2000

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Corporation the amount of such refund (together with any interest paid or
credited thereon (after taxes applicable thereto)).

 

(iv) You shall notify the Corporation in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the
Corporation of an additional Gross-Up Payment. Such notification shall be given
no later than ten (10) business days after the Internal Revenue Service issues
to you either a written notice proposing imposition of the Excise Tax or a
statutory notice of deficiency with respect thereto, and you shall apprise the
Corporation of the nature of such claim and the date on which such claim is
requested to be paid. You shall not pay such claim prior to the expiration of
the thirty (30) day period following the date on which you give such notice to
the Corporation (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Corporation notifies you in
writing prior to the expiration of such period that it desires to contest such
claim, you shall: (w) give the Corporation any information reasonably requested
by the Corporation relating to such claim; (x) take such action in connection
with contesting such claim as the Corporation shall reasonably request in
writing from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably selected by
the Corporation; (y) cooperate with the Corporation in good faith in order to
effectively contest such claim; and (z) permit the Corporation to participate in
any proceedings relating to such claim. Provided, however, that the Corporation
shall directly bear and pay all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall
indemnify and hold you harmless, on an after-tax basis, for any Excise Tax,
income and employment tax, including interest and penalties with respect
thereto, imposed as a result of such representation and payment of costs and
expenses. Without limitation of the foregoing, the Corporation shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings, and
conferences with the taxing authority in respect of such claim.

 

(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

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Mr. Mark T. Watkins

December 1, 2000

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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.

 

(i) Except as provided in Section 4(e), the Corporation’s obligation to make the
payments and the arrangements provided for herein shall be absolute and
unconditional, and shall not be affected by any circumstances, including,
without limitation, any offset, counterclaim, recoupment, defense, or other
right which the Corporation may have against you or anyone else. All amounts
payable by the Corporation hereunder shall be paid without notice or demand.

 

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

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Mr. Mark T. Watkins

December 1, 2000

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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
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.

--------------------------------------------------------------------------------

Mr. Mark T. Watkins

December 1, 2000

Page 14

 

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  

/s/ Jerome F. Tatar

   

--------------------------------------------------------------------------------

   

Jerome F. Tatar

Chairman of the Board,

Chief Executive Officer and President

 

Agreed to this 10th day

of November, 2000.

By  

/s/ Mark T. Watkins

   

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Mark T. Watkins

Vice President, Technology