<PAGE>
 
===============================================================================


                       THE INDUSTRIAL DEVELOPMENT BOARD
                      OF THE CITY OF PHENIX CITY, ALABAMA

                                      and


                            MEAD COATED BOARD, INC.



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

                                Lease Agreement

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

                           Dated as of June 1, 1993

Relating to $24,000,000 The Industrial Development Board of the City of Phenix
City, Alabama Environmental Improvement Revenue Bonds (Mead Coated Board
Project), Series 1993A

===============================================================================

<PAGE>
 
                                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

     Section 1.1    Definitions                             1
     Section 1.2    Certain Rules of Interpretation         6

ARTICLE II          REPRESENTATIONS

     Section 2.1    Representations by the Issuer           6
     Section 2.2    Representations by the Company          8

ARTICLE III         LEASING CLAUSES AND TITLE PROJECT

     Section 3.1    Lease of the Project                   10
     Section 3.2    Title to Project                       10
     Section 3.3    Quiet Enjoyment                        10

ARTICLE IV          ACQUISITION, CONSTRUCTION,
                    INSTALLATION, EQUIPPING AND
                    COMPLETION OF THE PROJECT;
                    ISSUANCE OF THE BONDS

     Section 4.1    Acquisition, Construction,
                    Installation, Equipping and
                    Completion of the Project              10
     Section 4.2    Issuance of Bonds; Disbursements
                    from the Project Fund                  12
     Section 4.3    Establishment of Completion Date;
                    Excess Proceeds                        13
     Section 4.4    Insufficiency of Project Fund          14
     Section 4.5    Issuer to Pursue Remedies Against
                    Suppliers, Contractors and
                    Subcontractors and their Sureties      14

ARTICLE V           EFFECTIVE DATE OF THIS
                    AGREEMENT; DURATION; OF LEASE
                    TERM; RENTAL PROVISIONS
<PAGE>
 
     Section 5.1    Effective Date of This
                    Agreement; Duration of
                    Lease Term                                              15
     Section 5.2    Delivery of Acceptance of Possession                    15
     Section 5.3    Rental Payments                                         15
     Section 5.4    Obligation of the Company Unconditional                 17
     Section 5.5    Assignment and Pledge of Rental
                    Payments and the Agreement                              17
     Section 5.6    Agreement to Supply Letter of Credit                    17
     Section 5.7    Purchase of Bonds                                       17
     Section 5.8    Optional Purchase of Bonds                              18
     Section 5.9    Determination of Interest Rate Periods                  18

ARTICLE VI          SPECIAL COVENANTS

     Section 6.1    Use of Project                                          18
     Section 6.2    Use of Proceeds                                         19
     Section 6.3    Indemnity Against Claims                                19
     Section 6.4    Inspection of the Project                               20
     Section 6.5    Company to Maintain Its Corporate
                    Existence; Conditions Under Which
                    Exceptions Permitted                                    20
     Section 6.6    Ownership; Further Assurances and
                    Corrective Instruments                                  20
     Section 6.7    Maintenance of Project by Company                       21
     Section 6.8    Redemption or Purchase of Bonds                         22
     Section 6.9    Investment of Bond Fund and
                    Project Fund Moneys Permitted                           22
     Section 6.10   Non-Arbitrage Covenant                                  22
     Section 6.11   Removal and Substitution of
                    Portions of Project                                     23
     Section 6.12   Taxes, Other Governmental Charges
                    and Utility Charges                                     25
     Section 6.13   Insurance Required                                      26
     Section 6.14   Application of Net Proceeds of
                    Insurance                                               26
     Section 6.15   Additional Provisions
                    Respecting Insurance                                    26
     Section 6.16   Investment Credit                                       26
     Section 6.17   Granting of Easements                                   27
     Section 6.18   Release of Certain Land                                 27

ARTICLE VII         DAMAGE, DESTRUCTION AND
                    CONDEMNATION

     Section 7.1    Damage and Destruction                                  29
     Section 7.2    Condemnation                                            30
     Section 7.3    Condemnation of
                    Company-Owned Property                                  31
<PAGE>
 
ARTICLE VIII        ASSIGNMENT; SUBLEASING,
                    PLEDGING AND SELLING;
                    REDEMPTION; RENT PREPAYMENT
                    AND ABATEMENT; OPTION AND
                    OBLIGATION TO PURCHASE PROJECT;
                    OPTION TO EXTEND TERM OF AGREEMENT

     Section 8.1    Assignment and Subleasing                             31
     Section 8.2    Pledge Under Indenture                                32
     Section 8.3    Restrictions on Sale of
                    Project by Issuer                                     32
     Section 8.4    Prepayment of Rents; Option to
                    Purchase Project; Obligation
                    to Purchase Project                                   32
     Section 8.5    Rent Abatements If Bonds Paid
                    Prior to Maturity                                     34
     Section 8.6    Reference to Bonds Ineffective
                    After Bonds Paid                                      34
     Section 8.7    Option to Extend                                      34

ARTICLE IX          EVENTS OF DEFAULT AND REMEDIES

     Section 9.1    Events of Default                                     35
     Section 9.2    Remedies on Default                                   37
     Section 9.3    Agreement to Pay Attorneys' Fees
                    and Expenses                                          37
     Section 9.4    No Additional Waiver Implied by
                    One Waiver                                            38
     Section 9.5    Notice of Default                                     38

ARTICLE X           MISCELLANEOUS

     Section 10.1   Notices                                               38
     Section 10.2   Binding Effect                                        38
     Section 10.3   Severability                                          38
     Section 10.4   Amounts Remaining
                    in the Bond Fund                                      38
     Section 10.5   Amendments                                            39
     Section 10.6   Execution in Counterparts                             39
     Section 10.7   Applicable Law                                        39
     Section 10.8   Captions                                              39
     Section 10.9   Recording of Agreement                                39
     Section 10.10  Net Lease                                             39
 
EXHIBITS
 
     Exhibit "A"    Project Land                                         A-1
     Exhibit "B"    Description of Project                               B-1
     Exhibit "C"    Form of Requisition                                  C-1
<PAGE>
 

          THIS LEASE AGREEMENT, dated as of June 1, 1993 between THE INDUSTRIAL
DEVELOPMENT BOARD OF THE CITY OF PHENIX CITY, ALABAMA, a public corporation duly
organized and existing under the laws of the State of Alabama, as lessor (the
"Issuer"), and MEAD COATED BOARD, INC., a corporation organized and existing
under the laws of the State of Delaware (the "Company"), evidencing the
agreement of the parties hereto.


                             W I T N E S S E T H:
                             -------------------

          In consideration of the respective representations and agreements
hereinafter contained, the parties hereto agree as follows (provided that in the
performance of the agreements of the Issuer herein contained, any obligation the
Issuer may thereby incur for the payment of money shall not be a general debt,
liability or obligation of the Issuer, or of the State of Alabama or any
political subdivision thereof, but shall be payable solely out of the rents,
revenues and proceeds derived from this Agreement (hereinafter defined) and the
sale of the Bonds referred to herein:


                                   ARTICLE I

                                  DEFINITIONS
                                  -----------

          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 as assigned to them in the Indenture
when used herein 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.

          "Agreement" means this Lease Agreement and any amendments and
          -----------
supplements hereto.

          "Authorized Company Representative" means any person or persons
          -----------------------------------      
designated to act on behalf of the Company by a certificate filed with the
Issuer and the Trustee containing the specimen signature of each such person and
signed by the President, Vice President or the Treasurer of the Company.

          "Authorized Issuer Representative" means any person or persons
          ----------------------------------      
designated to act on behalf of the Issuer by a certificate filed with the Issuer
and the Trustee containing the specimen signature of each such person and signed
by the Chairman or Secretary of the Issuer.

<PAGE>
 
          "Bond Counsel" means an attorney-at-law or a firm of attorneys of
          --------------
nationally recognized standing in matters pertaining to the tax-exempt nature of
interest on bonds issued by states and their political subdivisions, duly
admitted to the practice of law before the highest court of any state of the
United States of America, selected by the Company and acceptable to the Trustee.

          "Bond Fund" means the Bond principal and interest payment fund created
          -----------
by Section 5.02 of the Indenture.

          "Bonds" means The Industrial Development Board of the City of Phenix
          -------
City, Alabama Environmental Improvement Revenue Bonds (Mead Coated Board
Project), Series 1993A issued in the aggregate principal amount of $24,000,000.

          "Business Day" means any day other than (i) a Saturday or Sunday or
          --------------
legal holiday or a day on which banking institutions in the city or cities (A)
in which the principal offices of the Trustee, the Tender Agent or the
Remarketing Agent are located or (B) in which drawings under the Credit Facility
are required to be made, are authorized by law to close or (ii) a day on which
the New York Stock Exchange is closed.

          "Code" means the United States Internal Revenue Code of 1986, as
          ------
amended. References to the Code and to Sections of the Code shall include
relevant final, temporary or proposed regulations thereunder.

          "Company Guarantee" means the Guarantee Agreement, dated as of June 1,
          -------------------
1993 by and between the Company and the Trustee.

          "Completion Date" means the date of completion of the acquisition,
          -----------------
construction, installation and equipping of the Project (hereinafter defined) as
such date shall be certified as provided in Section 4.3 hereof.

          "Cost of Construction" with respect to the Project means the
          ----------------------
following:

          (a)  obligations incurred for labor and materials (including
     reimbursements payable to the Company or the Issuer and payments on
     contracts in the name of the Company or the Issuer) in connection with the
     acquisition, construction, installation and equipping of the Project;


                                      -2-
<PAGE>
 
          (b)  the cost of contract bonds and of insurance of all kinds that may
     be required or necessary during the course of construction of the Project;

          (c)  all costs of engineering services, including the costs for test
     borings, surveys, estimates, plans and specifications and preliminary
     investigation therefor, and for supervising construction, as well as for
     the performance of all other duties required by or consequent upon the
     proper construction of the Project;

          (d)  overhead of the Company, to the extent not included in
     subparagraph (c) above, allocable to the Project by the Company in
     accordance with generally accepted accounting principles;

          (e)  interest to accrue in respect of the Bonds to the Completion
     Date;

          (f)  amounts paid to the United States Treasury pursuant to 
     (S)1.103-15AT(d) and (e) of Temporary Treasury Regulations or any
     regulations promulgated pursuant to Section 148(f) of the Code;

          (g)  subject to the limitations of Section 147(g) of the Code, all
     expenses incurred in connection with the issuance of the Bonds, including
     without limitation initial compensation and expenses of the Trustee, legal
     expenses and fees, costs of printing and engraving, recording and filing
     fees, compensation of the underwriters, if any, rating agency fees and
     costs of the Letter of Credit;

          (h)  all other costs which may properly be paid or accrued for the
     acquisition, construction, installation, equipping or financing of the
     Project; and

          (i)  any sums required to reimburse the Company for advances made for
     any of the above items or for any other costs incurred or for work done
     which are properly chargeable to the Project.

          "Event of Default" means any of the occurrences enumerated in Section
          ------------------
9.1 of this Agreement.

          "Exempt Costs" means Cost of Construction of the Project to the extent
          --------------
that the payment thereof would constitute, within the meaning of Sections
142(a)(6) of the Code, the payment of costs to provide facilities that are solid
waste disposal

                                      -3-

<PAGE>
 
facilities within the meaning of said Code section or facilities functionally
related and subordinate thereto, excluding amounts paid as costs of issuance of
the Bonds but including fees paid to the issuer of the Letter of Credit during
the construction of the Project.

          "Extraordinary Services" and "Extraordinary Expenses" means all
          ------------------------     ------------------------
services rendered and all expenses incurred by the Trustee under the Indenture
other than Ordinary Services and Ordinary Expenses.

          "Government Obligations" shall have the meaning set forth in Article I
          ------------------------
of the Indenture.

          "Guarantee Agreements" means collectively the Company Guarantee and
          ----------------------
the Mead Guarantee.

          "Indenture" means the Trust Indenture, dated as of June 1, 1993,
          -----------
between the Issuer and the Trustee, pursuant to which the Bonds are authorized
to be issued, and including any Indenture supplemental thereto.

          "Issuer" means The Industrial Development Board of the City of Phenix
          --------
City, Alabama, a public corporation of the State created and existing pursuant
to the Act, a resolution of the Board of Commissioners of Phenix City adopted on
June 14, 1960 and a Certificate of Incorporation duly filed for record on July
17, 1960 in the office of the Judge of Probate of Russell County, Alabama, and
its successors and assigns.

          "Lease Term" means the duration of the leasehold interest created
          ------------
hereby as specified in Section 5.1.

          "Mead" means The Mead Corporation, an Ohio corporation, and its
          ------
successors and assigns.

          "Mead Guarantee" means the Guarantee Agreement, dated as of June 1,
          ----------------
1993 by and between Mead and the Trustee.

          "Mill" means the coated natural kraft paperboard mill operated by the
          ------
Company and located near Phenix City, Alabama.

          "Net Proceeds" means, with respect to the Bonds, the amount of the
          --------------
proceeds of the sale of the Bonds deposited into the Project Fund less the
amount paid or to be paid out from such proceeds for the payment of costs of
issuance of the Bonds plus any investment income earned on moneys in the Project
Fund.

                                      -4-

<PAGE>
 
          "Net Proceeds" means, with respect to any insurance or condemnation
          --------------
awards, the gross proceeds from the insurance or condemnation award with respect
to which that term is used remaining after the payment of all expenses
(including, without limitation, attorneys' fees and any Extraordinary Expenses
of the Trustee) incurred in the collection of such gross proceeds.

          "Ordinary Services" and "Ordinary Expenses" mean those services
          -------------------     -------------------
normally rendered and those expenses normally incurred by a trustee under
instruments comparable to the Indenture, including but not limited to fees of
its counsel.

          "Permitted Investments" shall have the meaning set forth in Article I
          -----------------------
of the Indenture.

          "Plans" means the plans and specifications prepared by or on behalf of
          -------
the Company for the Project, as the same may be revised from time to time by the
Company in accordance with the second paragraph of Section 4.1 hereof, which are
on file with the Company and accessible to the Issuer.

          "Project" means the acquisition, construction, installation and
          ---------
equipping of a project for the recycling of waste paper, including old
corrugated containers, for use in the production of coated natural kraft
paperboard, as described in the Plans and, as designated on the date hereof,
described generally in Exhibit "B" hereto.

          "Project Fund" means the fund created pursuant to Section 5.04 of the
          --------------
Indenture.

          "Project Land" means the real property described in Exhibit "A" hereto
          --------------
less such real property as may be released from this Agreement pursuant to
Section 6.18 or taken by the exercise of the power of eminent domain as provided
in Section 7.2.

          "Project Site" shall mean the site of the facility operated by the
          --------------
Company located near Phenix City, Alabama, which the Project is designed to
serve.

          "State" means the State of Alabama.
          -------

          "Trustee" means Citibank, N.A., New York, New York, and its successors
          ---------
and assigns and any other entity who may be serving as successor trustee or co-
trustee under the Indenture.

                                      -5-
<PAGE>
 

          "Trust Estate" shall mean the property described in the granting
          --------------
clauses of the Indenture.

          Section 1.2  Certain Rules of Interpretation.  The definitions set
                       --------------------------------
forth in Section 1.1 shall be equally applicable to both the singular and plural
forms of the words and terms therein defined and shall cover all genders.

          "Herein", "hereby", "hereunder", "hereof", "hereinbefore",
"hereinafter" and other equivalent words refer to this Agreement and not solely
to the particular Article, Section or subdivision in which such word is used.

          Reference herein to an Article number (e.g., Article IV) or a Section
                                                 ----
number (e.g., Section 3.2) shall be construed to be a reference to the
        ----
designated Article number or Section number hereof unless the context or use
clearly indicates another or different meaning or intent.

          Any terms defined in Article I of the Indenture and not defined herein
are incorporated by reference.


                                  ARTICLE II

                                REPRESENTATIONS
                                ---------------

          Section 2.1  Representations by the Issuer.  The Issuer makes the
                       ------------------------------
following representations as the basis for the undertakings on its part herein
contained:

          (a)  Organization and Authority.  The Issuer 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 Phenix
     City of June 14, 1960 and a Certificate of Incorporation duly filed for
     record on June 17, 1960, in the office of the Judge of Probate of Russell
     County, Alabama, which Certificate of Incorporation has not been amended or
     revoked and is of full force and effect. The Issuer has all requisite power
     and authority under the Act to (i) issue the Bonds, (ii) use the proceeds
     thereof to acquire, construct, install and equip the Project, (iii) own,
     lease and dispose of the Project, and (iv) enter into, and perform its
     obligations under this Agreement and the Indenture. This Agreement and the
     Indenture have been duly authorized, executed and delivered by the Issuer
     and are legal, valid and binding agreements enforceable against the Issuer
     in accordance with their respective terms.

                                      -6-

<PAGE>
 

          (b)  Pendinq Litigation.  There are no actions, suits, proceedings,
               -------------------
     inquiries or investigations pending, or, to the knowledge of the Issuer,
     threatened against or affecting the Issuer in any court or before any
     governmental authority or arbitration board or tribunal, which involve the
     possibility of materially and adversely affecting the transactions
     contemplated by this Agreement or the Indenture or which, in any way, would
     adversely affect the validity or enforceability of the Bonds, the
     Indenture, this Agreement or any agreement or instrument to which the
     Issuer 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
               ------------------------------------------------------------
     issuance and sale of the Bonds and the execution and delivery by the Issuer
     of this Agreement and the Indenture, and the compliance by the Issuer with
     all of the provisions of each thereof and of the Bonds (i) are within the
     purposes, powers and authority of the Issuer, (ii) to the best of the
     knowledge of the Issuer, 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 Issuer a violation of or a breach of or default under,
     or result in the creation of any lien, charge or encumbrance upon any
     property of the Issuer (other than as contemplated by this Agreement or the
     Indenture) under the provisions of, any charter instrument, by-law,
     indenture, mortgage, deed of trust, note agreement or other agreement or
     instrument to which the Issuer is a party or by which the Issuer 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
     Issuer or any of its activities or properties, and (iii) have been duly
     authorized by all necessary corporate action on the part of the Issuer;

          (d)  Governmental Consents.  Neither the nature of the Issuer nor any
               ----------------------
     of its activities or properties, nor any relationship between the Issuer
     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 Issuer in
     connection with the execution, delivery and performance of this Agreement
     and the Indenture or the offer, issue, sale or delivery of the Bonds, other
     than those already obtained. The Issuer has filed with the Alabama
     Securities Commission notification of the Issuer's intention to issue the
     Bonds as required by Code of


                                      -7-
<PAGE>
 
     Alabama, Section 8-6-110 et seq., as amended, and the Director of the
                              --------  
     Alabama Securities Commission has issued a Certificate of Notification with
     respect to the Bonds pursuant to the aforesaid act and said Certificate of
     Notification has not been revoked or rescinded and is in full force and
     effect;

          (e)  No Defaults.  To the best of the Issuer's knowledge, no event has
               ----------- 
     occurred and no condition exists with respect to the Issuer which would
     constitute an "Event of Default" as defined in this Agreement or the
     Indenture or which, with the lapse of time or with the giving of notice or
     both, would become such an "Event of Default". The Issuer is not in default
     under the Act or under any charter instrument, by-law or other agreement or
     instrument to which it is a party or by which is it bound;

          (f)  No Prior Pledge.  Neither the Project, this Agreement nor any of
               ---------------         
     the payments to be received pursuant to this Agreement have been pledged or
     hypothecated in any manner or for any purpose other than as provided in the
     Indenture as security for the payment of the Bonds; and

          (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 is in furtherance of the public purpose of
     the Act. The Project will be located within 25 miles of the corporate
     limits of Phenix 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.

          Section 2.2 Representations by the Company. The Company makes the
                      ------------------------------  
  following representations as the basis for the undertakings on its part herein
  contained:

          (a)  Corporate Organization and Power.  The Company (i) is a
               -------------------------------- 
     corporation duly organized, validly existing and in good standing under the
     laws of the State of Delaware, (ii) is duly qualified to transact business
     as a foreign corporation in the State of Alabama, and (iii) has all
     requisite corporate power and authority and all necessary licenses and
     permits to own and operate its properties and to carry on its business as
     now being conducted and as presently proposed to be conducted;


                                      -8-
<PAGE>
 
          (b)  Pending Litigation. There is no proceeding pending, or to the
               ------------------ 
     knowledge of the Company threatened, against or affecting the Company in
     any court or before any governmental authority, arbitration board or
     tribunal which is likely to materially and adversely affect the ability of
     the Company to perform its obligations under this Agreement;

          (c)  Agreements Are Legal and Authorized. The execution and delivery
               ----------------------------------- 
     by the Company of this Agreement and the compliance by the Company with all
     of the provisions hereof and thereof (i) are within the corporate power of
     the Company, (ii) will not conflict with or result in any breach of any of
     the provisions of, or constitute a default under or result in the creation
     of any lien, charge or encumbrance upon any property of the Company (other
     than as contemplated by this Agreement and the Indenture) under the
     provisions of the Company's Certificate of Incorporation or Bylaws or any
     agreement or other instrument to which the Company is a party or by which
     it may be bound, or any license, judgment, decree, law, statute, order,
     rule or regulation of any court or governmental agency or body having
     jurisdiction over the Company or any of its activities or properties, and
     (iii) have been duly authorized by all necessary action on the part of the
     Company;

          (d)  Governmental Consent. To the knowledge of the Company, neither
               -------------------- 
     the Company nor any of its business or properties, nor any relationship
     between the Company and any other person, nor any circumstances in
     connection with the execution, delivery and performance by the Company of
     this Agreement 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 Company other than those already obtained;

          (e)  No Defaults. To the knowledge of the Company, no event has
               ----------- 
     occurred and no condition exists with respect to the Company that would
     constitute an Event of Default under this Agreement or which, with the
     lapse of time or with the giving of notice or both, would become such an
     Event of Default;

          (f)  Compliance with Law. To the knowledge of the Company, 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


                                      -9-
<PAGE>
 
     business, which violation or failure to obtain is likely to materially and
     adversely affect the ability of the Company to perform its obligations
     hereunder;

          (g)  Commencement of Construction. The acquisition, construction,
               ---------------------------- 
     installation and equipping of the Project commenced after October 19, 1991,
     and no obligation relating to the acquisition, construction, installation
     or equipping of the Project was paid or incurred prior to such date.

                                  ARTICLE III

                     LEASING CLAUSES AND TITLE TO PROJECT
                     ------------------------------------

          Section 3.1  Lease of the Project. The Issuer hereby leases to the
                       -------------------- 
Company, and the Company hereby leases from the Issuer, the Project at the rent
set forth in Section 5.3 and in accordance with the provisions hereof.

          Section 3.2  Title to Project. Upon the execution and delivery hereof,
                       ---------------- 
the Issuer agrees that it will furnish to the Company and the Trustee an opinion
of the Issuer's Counsel or other Counsel satisfactory to the Company and the
Trustee stating that the Issuer has good fee simple title and/or a leasehold
interest in and to the Project.

          Section 3.3  Quiet Enjoyment. The Issuer warrants and agrees that it
                       --------------- 
will defend the Company in the quiet enjoyment and peaceable possession of the
Project, free from all claims of all persons claiming by, through or under the
Issuer, throughout the Lease Term, so long as the Company shall perform the
agreements to be performed by it hereunder, or so long as the period for
remedying any failure in such performance shall not have expired.

                                  ARTICLE IV

                   ACQUISITION, CONSTRUCTION, INSTALLATION,
                   EQUIPPING AND COMPLETION OF THE PROJECT;
                             ISSUANCE OF THE BONDS
                   ----------------------------------------

          Section 4.1  Acquisition, Construction, Installation, Equipping and
                       ------------------------------------------------------ 
Completion of the Project. Not later than the delivery hereof the Issuer will
-------------------------
have acquired fee simple title and/or a leasehold interest in and to the
Project, and subject to the provisions of Section 4.4, the Issuer agrees that:

          (a)  It will acquire, construct, equip and install facilities
     necessary for the Project. The aforesaid

                                      -10-
<PAGE>
 

     acquisition, construction, equipping and installation shall be
     substantially in accordance with the Plans. The Project shall be the
     property of the Issuer and subject to the terms hereof.

          (b)  Subject to the provisions of the following paragraphs, it will
     cause to be acquired, constructed, equipped and installed such additional
     machinery, equipment and related property described in the list attached
     hereto as Exhibit "B" and such other items of machinery, equipment and
     related property as in the Company's judgment may be necessary for the
     operation of the Project. Such additional machinery, equipment and related
     property shall become a part of the Project and shall be the property of
     the Issuer and subject to the terms hereof.

          The Issuer and the Company agree that the Company from time to time
may supplement or amend the Plans (including additions thereto or omissions
therefrom), provided that no such amendment shall provide for a material
addition to, deletion from or modification of the Plans unless there shall have
been filed with the Issuer and the Trustee (i) a revised Exhibit "B" containing
a description of the Project as revised by such amendment or modification, the
accuracy of which shall have been certified by an Authorized Company
Representative, and (ii) the written opinion of a firm of nationally recognized
Bond Counsel experienced in the financing of solid waste disposal facilities
stating that (a) the Project as provided for in such modified or amended Plans
will constitute a "project" within the meaning of the Act, and (b) the
expenditure of moneys from the Project Fund to pay the Cost of Construction in
accordance with such amended or modified Plans will not impair the exemption of
interest on Bonds from federal income taxation.

          The Issuer hereby makes, constitutes and appoints the Company as its
true, lawful and exclusive agent for the acquisition, construction, equipping
and installation of the Project, and the Company hereby accepts such agency to
act and do all things on behalf of the Issuer, to perform all acts and
agreements of the Issuer hereinabove provided in this Section, and to bring any
actions or proceedings against any person which the Issuer might bring with
respect thereto as the Company shall deem proper. The Issuer hereby ratifies and
confirms all actions of, and assumes and adopts all contracts entered into by,
the Company with respect to the Project prior to the date hereof. This
appointment of the Company to act as agent and all authority hereby conferred or
granted is conferred and granted irrevocably until all activities in connection
with the acquisition,

                                     -11-

<PAGE>
 
construction, equipping and installation of the Project shall have been
completed, and shall not be terminated prior thereto by act of the Issuer or of
the Company. So long as the Company is not in default hereunder, upon the
Completion Date (or at any time prior thereto upon the request of the Company)
the Issuer 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 and any rights or causes of action arising from or
against any of the foregoing.

          The Issuer agrees to complete the acquisition, construction, equipping
and installation of the Project as promptly as practicable after receipt of the
proceeds from the sale of the Bonds, to continue said acquisition, construction,
equipping and installation with all reasonable dispatch and to use its best
efforts to cause said acquisition, construction, equipping and installation to
be completed as soon as practicable, delays incident to strikes, riots, acts of
God or the public enemy beyond the reasonable control of the Issuer only
excepted, but if said acquisition, construction and installation is not
completed within the time herein contemplated there shall be no resulting
liability on the part of the Issuer and no diminution in or postponement or
abatement of the rents and other payments required by Section 5.3 to be paid by
the Company.

          Section 4.2  Issuance of Bonds; Disbursements from the Project Fund.
                       ------------------------------------------------------ 
In order to provide funds to finance the Cost of Construction, the Issuer agrees
that it will initially issue and deliver the Bonds to the purchasers thereof and
apply and deposit the proceeds thereof in accordance with the terms of the
Indenture. The Company has approved the Indenture in form and substance,
approves the issuance of the Bonds in accordance with the Indenture and approves
the manner and purposes for which proceeds of the Bonds may be used and invested
pursuant to the Indenture.

          The Issuer has authorized and directed the Trustee to disburse moneys
from the Project Fund for payment or reimbursement of the Cost of Construction.
Each disbursement from the Project Fund shall be made only upon receipt by the
Trustee of a written requisition signed by the Authorized Company Representative
in substantially the form of Exhibit "C" attached hereto, stating with respect
to each payment to be made: (a) the requisition number, (b) the name and address
(or wire transfer instructions) of the person, firm or corporation to whom
payment is due, (c) the amount to be paid, (d) certifying that

                                     -12-
<PAGE>
 
each obligation mentioned therein has been properly incurred and is a proper
charge against the Project Fund, specifying in reasonable detail the purpose and
circumstances of such obligation and certifying that such obligation has not
been the basis of any previous withdrawal from the Project Fund, and (e)
certifying that payment of such requisition will not result in less than 95% of
the total proceeds of the sale of the Bonds expended at that time having been
used to pay Exempt Costs.

          In approving or certifying any requisition under this Section the
Issuer and the Trustee may rely as to the completeness and accuracy of all
statements in such requisition upon the approval of or certification to such
requisition by the Authorized Company Representative, and the Company hereby
agrees to indemnify and save harmless the Issuer and the Trustee, and each of
their directors, officers, members, agents and employees from any liability
incurred in connection with any requisition so approved or certified.

          Section 4.3  Establishment of Completion Date; Excess Proceeds. The
                       ------------------------------------------------- 
Completion Date shall be evidenced to the Trustee by a certificate of the
Authorized Company Representative: (i) stating that the Project has been
completed substantially in accordance with the Plans, (ii) stating that, except
for amounts retained by the Trustee at the Company's direction for any Cost of
Construction of the Project not then due and payable or which is in dispute, the
entire Cost of Construction of the Project has been paid, and (iii) stating that
not less than 95% of the total proceeds of the sale of the Bonds have been used
to pay Exempt Costs. Notwithstanding the foregoing, such certificate may state
that it is given without prejudice to any rights against third parties which
exist at the date of such certificates or which may subsequently come into
being.

          In the event that moneys shall remain in the Project Fund after
payment of all Cost of Construction of the Project, such moneys shall, at the
direction of the Company, be used (i) for the redemption of Bonds in the largest
amount possible at the earliest date permitted by the Indenture at which the
redemption price for such Bonds to be redeemed is 100% of the principal amount
thereof plus accrued interest to the redemption date or for the purchase of
Bonds pursuant to Article V of the Indenture or otherwise for the purpose of
cancellation at any time prior to the earliest date permitted by the Indenture
for the redemption of Bonds, (ii) paid into the Bond Fund to pay interest on the
Bonds, or (iii) a combination of (i) and (ii) above; provided, however, that
such moneys shall not be used as described in (i), (ii) or (iii) above unless
the Company supplies the Trustee with


                                     -13-

<PAGE>
 

an opinion of Bond Counsel to the effect that such use will not adversely affect
the exclusion from gross income of the interest on the Bonds for federal income
tax purposes. The Company agrees that any investments which it may direct of
such amounts shall result in a yield on such investments, computed in accordance
with the applicable provisions of (S)(S) 1.103-13 and 1.103-14 of the Treasury
Regulations, not in excess of the yield (computed in the same manner) on the
Bonds.

          Section 4.4  Insufficiency of Project Fund.  The Issuer does not make
                       ----------------------------- 
any warranty, either express or implied, that the amounts in the Project Fund
and available for payment of the Cost of Construction of the Project will be
sufficient to pay all of the Cost of Construction. The Company agrees that in
the event that moneys in the Project Fund are insufficient to pay all of the
Cost of Construction, the Company shall complete the acquisition, construction,
installation and equipping of the Project, and shall pay or make funds available
to the Issuer to pay that portion of the Cost of Construction in excess of the
moneys available therefor in the Project Fund. The Company agrees that, if after
exhaustion of the amounts of the Project Fund, it should pay any portion of the
Cost of Construction, it shall not be entitled to any diminution of the amounts
payable under as provided in Section 5.2 hereof.

          Section 4.5  Issuer to Pursue Remedies Against Suppliers, Contractors
                       -------------------------------------------------------- 
and Subcontractors and Their Sureties.  At the direction and sole cost of the
-------------------------------------
Company (to the extent that such cost is not payable and actually paid from the
Project Fund), the Issuer will promptly proceed, either separately or in
conjunction with others, to exhaust the remedies of the Issuer against any
defaulting supplier, contractor or subcontractor and against any surety
therefor, for the performance of any contract made in connection with the
Project. If the Company shall so notify the Issuer, the Company may, in its own
name or in the name of the Issuer, 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
Issuer 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 Issuer in any such action or proceeding. Any moneys
recovered by way of damages, refunds, adjustments or otherwise in connection
with the foregoing prior to the Completion Date shall be paid into the Project
Fund and after the Completion Date shall be used as authorized by Section 4.3.

                                     -14-


<PAGE>
 
                                   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 with respect to the Project shall then begin,
and, subject to the other provisions hereof, shall expire at midnight, June 1,
2028, or sooner upon payment or redemption of the Bonds as hereinafter provided
subject to extension as provided in Section 8.7.

          Section 5.2  Delivery and Acceptance of Possession.  The Issuer agrees
                       ------------------------------------- 
to deliver to the Company sole and exclusive possession of the Project (subject
to the right of the Issuer and the Trustee to inspect the same pursuant to
Section 6.4) 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 much possession of the Project prior to the Completion Date as shall
not interfere with the acquisition, construction, installation and equipping of
the Project.

          Section 5.3 Rental Payments.
                      ---------------
          (a)  As rent for the Project, the Company agrees to pay to the
Trustee, as assignee and pledgee of and for the account of the Issuer, for
deposit in the Bond Fund, amounts sufficient, together with other moneys held by
the Trustee under the Indenture and available therefor, to pay the principal of,
and the redemption premium (if any) and the interest on, the Bonds as the same
become due pursuant to the terms of the Indenture, as follows:

               (i)    On or prior to each date upon which interest on the Bonds
     is payable under the Indenture, a sum which will be equal to the interest
     on the Bonds coming due on such dates;

               (ii)   On or prior to any redemption date for the Bonds, a sum
     equal to the principal of, and the redemption premium (if any) and the
     interest on, the Bonds which are to be redeemed on such date; and

               (iii)  On or prior to June 1, 2028, a sum which will be equal to
     the principal amount of the Bonds coming due on such date.

                                     -15-


<PAGE>
 

If the Company defaults in any payment required by this paragraph (a), the
Company will pay interest (to the extent allowed by law) on such amount until
paid at the rate provided for in the Bonds.

          (b)  In furtherance of the foregoing, so long as any Bonds are
outstanding the Company will pay all amounts required to prevent any deficiency
by an act or failure to act by the Trustee, the Company, the Issuer, the Tender
Agent or any other person.

          (c)  The Company will also pay: (i) the fees of the Trustee for
rendering Ordinary Services and the Ordinary Expenses of the Trustee and any
Paying Agents under the Indenture, such fees and expenses to be paid directly to
the Trustee or Paying Agents for their respective accounts as and when such
fees and expenses become due and payable, (ii) any fees for Extraordinary
Services and the Extraordinary Expenses of the Trustee and (iii) any expenses in
connection with any redemption of the Bonds. The Company may, without
constituting grounds for an Event of Default hereunder, withhold payment of any
fees for Ordinary Services and Extraordinary Services and Ordinary Expenses and
Extraordinary Expenses to contest in good faith the necessity of the same or to
contest in good faith the necessity for any services performed and expenses paid
or incurred by any Paying Agent.

          (d)  In addition to the payments required to be made by the Company
pursuant to paragraph (a) above, the Company shall pay to the Trustee amounts
sufficient to pay the purchase price of any Bonds which the Company purchases
pursuant to Section 3.03 of the Indenture. All such payments shall be made to
the Trustee at its principal corporate trust office or to the Tender Agent at
its principal office, as the case may be, in lawful money of the United States
of America.

          (e)  The Company will also pay, on or prior to each day on which a
payment of purchase price of a Bond which has been tendered shall become due, an
amount which will enable the Trustee or the Tender Agent, as the case may be, to
make such payment in full in a timely manner.

          (f)  The Company need not pay any amount paid to Bondholders from the
proceeds of a draw on the Letter of Credit or any Alternate Credit Facility.

          (g)  The Company need not pay any amount required to be paid by
paragraphs (d) and (e) above to the extent of any amount paid to Bondholders
from the proceeds of a remarketing of Bonds in accordance with Section 3.04 of
the Indenture.

                                     -16-


<PAGE>
 

          Section 5.4  Obligation of the Company Unconditional.  The obligation
                       ----------------------------------------
of the Company to make the rental payments as provided in Section 5.3 and to
perform and observe the other agreements on its part contained herein shall be
absolute and unconditional notwithstanding any change in the tax or other laws
of the United States of America or of the State of Alabama or any political
subdivision of either thereof or any failure of the Issuer to perform and
observe any agreement, whether express or implied, or any duty, liability or
obligation arising out of or connected with this Agreement. Nothing contained in
this Section 5.4 shall be construed to release the Issuer from the performance
of any of the agreements on its part herein contained; and, in the event the
Issuer should fail to perform any such agreement on its part, the Company may
institute such action against the Issuer as the Company may deem necessary to
compel performance or recover its damages for nonperformance so long as such
action shall not violate the agreements on the part of the Company contained in
the preceding sentence, but in no event shall the Company be entitled to any
diminution of the amounts payable as provided in Section 5.3 hereof.

          Section 5.5  Assignment and Pledge of Rental Payments and the
                       ------------------------------------------------
Agreement.  The Issuer shall assign to the Trustee as security for the Bonds
----------
under the Indenture all rights, title and interest of the Issuer in and to (i)
the "Revenues" (defined in the Indenture), (ii) this Agreement insofar as they
relate to all Bonds Issued and outstanding under the Indenture (except for the
Issuer's rights providing that notices, approvals, consent, requests and other
communications be given to the Issuer and the Issuer's rights under Sections
6.3, 6.4 and 9.3 hereof) and (iii) all amounts on deposit from time to time in
the Project Fund and the Bond Fund. The Company assents to such assignment and
hereby agrees that, as to the Trustee, its obligations to make such payments
shall be absolute and shall not be subject to any defense or any right of set-
off, counterclaim or recoupment arising out of any breach by the Issuer or the
Trustee of any obligation to the Company, whether hereunder or otherwise, or out
of any indebtedness or liability at any time owing to the Company by the Issuer
or the Trustee.

          Section 5.6  Agreement to Supply Letter of Credit.  The Company shall
                       -------------------------------------
provide for the delivery of a Letter of Credit meeting the requirements of
Section 6.01 of the Indenture to the Trustee simultaneously with the original
issuance and delivery of the Bonds.

          Section 5.7  Purchase of Bonds.  The Issuer, with the consent of the
                       ------------------
Company, has set forth in Section 3.01 of the

                                     -17-


<PAGE>
 
Indenture the terms and conditions relating to such purchases and has set forth
in Article XII of the Indenture the duties and responsibilities of the Tender
Agent with respect to the purchase of Bonds and of the Remarketing Agent with
respect to the remarketing of Bonds. The Company approves the appointment by the
Issuer of Merrill Lynch, Pierce, Fenner & Smith Incorporated as the initial
Remarketing Agent and Citibank, N.A. as the initial Tender Agent and hereby
authorizes and directs the Tender Agent and the Remarketing Agent to purchase,
offer, sell and deliver Bonds in accordance with the provisions of Section 3.01
and Article XII of the Indenture. The Issuer acknowledges that the Remarketing
Agent, in undertaking its duties set forth in the Indenture with respect to the
determination of the interest rates borne by the Bonds, will be acting as agent
for and on behalf of the Issuer. The Issuer shall have no obligation or
responsibility, financial or otherwise, with respect to the purchase or
remarketing of Bonds or the making or continuation of arrangements therefor,
except that the Issuer shall generally cooperate with the Company, the Trustee,
the Tender Agent and the Remarketing Agent as contemplated in Article XII of the
Indenture.

          Section 5.8  Mandatory Purchase of Bonds.  The Company, at any time
                       ----------------------------
and from time to time, shall furnish moneys to the Tender Agent accompanied by a
notice directing that such moneys be applied to the purchase of Bonds to be
purchased pursuant to Section 3.03 of the Indenture. Bonds so purchased shall be
delivered in accordance with Section 3.06 of the Indenture.

          Section 5.9  Determination of Interest Rate Periods.  The Company may
                       ---------------------------------------
determine the duration and type of the Interest Rate Periods (as defined in the
Indenture) as, and to the extent, set forth in Section 2.02 of the Indenture.


                                  ARTICLE VI

                               SPECIAL COVENANTS
                               -----------------

          Section 6.1  Use of Project.  The Issuer hereby acknowledges that the
                       ---------------
Company shall have singular and exclusive right to the use of the Project. The
Company hereby agrees that so long as the Project is operated, it shall be
operated as solid waste disposal facilities within the meaning of Section
142(a)(6) of the Code. The Issuer makes no warranty, either express or implied,
as to the Project or that the Project will be suitable for the Company's
purposes.

                                     -18-


<PAGE>
 
          Section 6.2  Use of Proceeds. The Company hereby covenants that at
                       ----------------
least 95% of the total proceeds of the sale of the Bonds will be used to pay
Costs of Construction of the Project which constitute Exempt Costs and that all
of the Net Proceeds of the Bonds deposited within the Project Fund pursuant to
the Indenture will be used to pay the Cost of Construction of the Project.

          In addition, the Company covenants with the Issuer, for the benefit of
the Bondholders, that the proceeds of the Bonds will not be used in any manner
which would result in the loss of the exclusion from gross income of the
interest on the Bonds for federal income tax purposes.

          Section 6.3  Idemnity Against Claims.  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 the 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

                                     -19-


<PAGE>
 
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 6.4 Inspection of the Project. The Company agrees that the
                      --------------------------
Issuer and its duly authorized agents at reasonable times, and with the written
consent of the Company which shall not be unreasonably withheld, may enter upon
the Project Site and examine and inspect the Project and the books and records
of the Company with respect to the Project.

          Section 6.5 Company to Maintain Its Corporate Existence; Conditions
                      -------------------------------------------------------
Under Which Exceptions Permitted. The Company will maintain its corporate
---------------------------------
existence, will continue to be a corporation in good standing under the laws of
the State, will not dissolve or otherwise dispose of all or substantially all of
its assets and will consolidate with or merge into another legal entity or
permit one or more other legal entities (other than one or more subsidiaries of
the Company) to consolidate with or merge into it, or sell or otherwise transfer
to another legal entity all or substantially all its assets as an entirety and
dissolve, only if (a) the surviving, resulting or transferee legal entity is
organized and existing under the laws of the United States, a state thereof or
the District of Columbia, is solvent, is qualified to do business in the State
as a foreign corporation and (if not the Company) assumes in writing all the
obligations of the Company under this Agreement and (b) the Company or the
surviving entity is not immediately after such merger, consolidation or transfer
in default in any material respect under this Agreement.

          Section 6.6 Ownership; Further Assurances and Corrective Instruments.
                      ---------------------------------------------------------
The Issuer covenants that it lawfully owns and is lawfully possessed of the
Project Land, that it has good and marketable fee simple title therein and
thereto and that it has or will acquire good and marketable fee simple title
and/or a leasehold interest to the Project and that it will defend said title
and/or leasehold interest therein and thereto and every part thereof against the
claims of all persons whomsoever. The Issuer 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 and for carrying out the intention or
facilitating the performance of this Agreement.

                                  -20-      
<PAGE>
 
          Section 6.7 Maintenance of Project by Company.
                      ----------------------------------
          (a) The Company agrees that during the Lease Term, it will pay all
costs of operating, maintaining and repairing the Project; provided, that
nothing in this Section shall require the Company to maintain, operate or repair
the Project if, in the sole judgment of the Company, the Company shall determine
that operation of the Project or the manufacturing facilities the Project is
designed to serve is impossible, impracticable or uneconomic.

          (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, including installation of additional machinery equipment, and related
property, which it may deem desirable for its business purposes; provided that
all such additions, modifications and improvements do not adversely affect the
use of the Project as solid waste disposal facilities. All machinery, equipment
and related personal property so installed by the Company shall not be subject
to this Agreement or the lien of the Indenture 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 property so installed by the Company may
be modified or removed at any time while there exists no Event of Default
hereunder; provided, that any damage to the Project 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 lien 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 lien 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 Issuer or the Trustee shall notify
the Company that by nonpayment of any such items, the lien or security interests
afforded by this Agreement or as to any part of the Project or the payments to
be made pursuant to the Agreement or the Revenues will be materially endangered
or the Project or any part thereof or the payments to be made pursuant to the
Agreement or the Revenues will be subject to loss or forfeiture, in which event
the Company shall promptly pay and

                                     -21-
<PAGE>
 
cause to be satisfied and discharged all such unpaid items. The Issuer will
cooperate fully with the Company in any such contest.

          Section 6.8 Redemption or Purchase of Bonds. The Issuer shall not
                      --------------------------------
cause the redemption or purchase of the Bonds except upon the direction of the
Company. The Issuer shall take all steps then necessary under the applicable
provisions of the Indenture for the redemption or purchase of Bonds upon receipt
by the Issuer and the Trustee from the Company of a written notice specifying:

          (a) the principal amount of Bonds to be redeemed or purchased;

          (b) the date of such redemption or purchase; and

          (c) in the case of a redemption of Bonds, directions to mail a notice
     of redemption in accordance with Section 8.04 of the Indenture or in the
     case of a purchase of Bonds, directions to mail a notice of mandatory
     tender for purchase in accordance with Section 3.03(g) of the Indenture.

          Section 6.9 Investment of Bond Fund and Project Fund Moneys Permitted.
                      ----------------------------------------------------------
Any moneys held in the Bond Fund or the Project Fund shall be invested or
reinvested by the Trustee upon the request and direction of the Company in
Government Obligations and Permitted Investments, respectively. All such
directions by the Company shall be in compliance with applicable laws of the
State. Such investments shall be made upon telephonic direction of an Authorized
Company Representative which shall be promptly confirmed in writing and shall
mature in such amounts and at such times as may be necessary to provide funds
when needed to make payments from the Bond Fund or the Project Fund. The Trustee
may make any and all such investments through its own bond department. Any
interest or gain received from such investments shall be credited to and held in
the Bond Fund or the Project Fund, respectively, and any loss from such
investments shall be charged against the Bond Fund or the Project Fund,
respectively.

          Section 6.10 Non-Arbitrage Covenant.
                       -----------------------

          (a) The Company and the Issuer each covenants to the owners of the
Bonds that, notwithstanding any other provision of this Agreement or any other
instruments, it shall take no action, nor shall the Company direct the Trustee
to take or approve the Trustee's taking any action or direct the Trustee to make
or approve the Trustee's making any investment or use of proceeds of

                                     -22-
<PAGE>
 
the Bonds or any other moneys which may arise out of or in connection with, this
Agreement, the Indenture or the Project, which would cause the Bonds to be
treated as "arbitrage bonds" within the meaning of Section 148 of the Code. In
addition, the Company covenants and agrees to comply with the requirements of
Section 148(f) of the Code as it may be applicable to the Bonds or the proceeds
derived from the sale of the Bonds or any other moneys which may arise out of or
in connection with, this Agreement, the Indenture or the Project throughout the
term of the Bonds.

          (b) The Company will determine the amount of the required arbitrage
rebate, if any, payable to the United States Government under Section 148 of the
Code should gross proceeds (within the meaning of Section 148(f) of the Code)
arise and will make any required payment, in the amounts and at the times
required by Section 148(f) of the Code and applicable Treasury Regulations,
regardless of whether there are any remaining proceeds or other funds
attributable to the Bonds that are available for the purpose of the Bonds. The
Company will not permit the amount of gross proceeds invested in any Bond year
at a yield materially higher than the Bond yield to exceed the limits set forth
in Section 148 of the Code.

          (c) No provision of this Agreement shall be construed to impose upon
the Trustee any obligation or responsibility for compliance with arbitrage
regulations.

          Section 6.11 Removal and Substitution of Portions of Project. The
                       ----------------------------------------------- 
Issuer shall not be under any obligation to renew, repair or replace any
inadequate, obsolete, worn out, unsuitable, undesirable, inappropriate or
unnecessary items comprising the Project. 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, without any responsibility or accountability to
the Issuer or the Trustee therefor, remove such items from the Project Site and
(on behalf of the Issuer) sell, trade in, or otherwise dispose of them (as a
whole or in part) provided that the Company shall either:

          (a) substitute (either by direct payment of the costs thereof or by
     advancing to the Issuer the moneys necessary therefor) and install other
     machinery, equipment or related property having equal or greater utility
     (but not necessarily having the same function or value) in the operation of
     the Project as a solid waste disposal facility (provided such removal and
     substitution shall not impair operating unity),

                                     -23-
<PAGE>
 
     all of which substituted machinery, equipment or related property shall
     become a part of the Project; or

          (b) not make any such substitution and installation, provided (i) that
     in the case of the sale of any such machinery, equipment or related
     property to anyone other than itself or in the case of the scrapping
     thereof, the Company shall pay into the Bond Fund the greater of the
     proceeds from such sale, the scrap value thereof or the original cost
     thereof less depreciation in accordance with generally accepted accounting
     principles, as the case may be, (ii) that in the case of the trade-in of
     such machinery, equipment or related property for other machinery,
     equipment or related property not to be installed as a part of the Project,
     the Company shall pay into the Bond Fund the amount of the greater of the
     credit received by it in such trade-in or the original cost thereof less
     depreciation in accordance with generally accepted accounting principles,
     and (iii) that in the case of the sale of any such machinery, equipment or
     related property to the Company or in the case of any other disposition
     thereof, the Company shall pay into the Bond Fund an amount equal to the
     original cost thereof less depreciation at rates calculated in accordance
     with generally accepted accounting principles.

The removal of any portion of the Project 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 which, together with other
prior unreported dispositions, in the aggregate results in proceeds under this
Section of $100,000 or more and shall pay to the Trustee such amounts as are
required by the provisions of the preceding subsection (b) of this Section to be
paid into the Bond Fund promptly after the sale, trade-in or other disposition
requiring such payment. The Company shall not remove or permit the removal of
any item constituting the Project except in accordance with the provisions of
this Section.

          The Company shall deliver to the Issuer appropriate documents
conveying to the Issuer title to any machinery, equipment or related property
installed or placed at the Project Site pursuant to this Section, and upon the
request of the Company, the Issuer shall deliver, and cause or direct the
Trustee to deliver, to the Company appropriate documents


                                     -24-
<PAGE>
 
conveying to the Company title to any property removed from the Project Site
pursuant to this Section.

          Section 6.12  Taxes, Other Governmental Charges and Utility Charges.
                        -----------------------------------------------------
The Company agrees to pay and discharge all lawful real estate taxes, personal
property taxes, water charges, sewer charges, assessments (including, but not
limited to, 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) 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
Issuer 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 Issuer or the Company
     therein or under this Agreement;

          (b) upon or with respect to the income or profits of the Issuer 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 Issuer 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 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 (subject to the right of the Company
to contest any such 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

                                     -25-
<PAGE>
 
the Project and the Issuer 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 Issuer, 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. The Issuer 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, the
Issuer or the Trustee may (but shall be under no obligation to) pay the same,
and any amounts so advanced therefor by the Issuer 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 6.13  Insurance Required. Throughout the Lease Term the
                        ------------------
Company shall keep the Project continuously insured against such risks as are
customarily insured against by businesses of like size and type (other than
business interruption insurance), paying as the same become due all premiums in
respect thereto. Notwithstanding the foregoing, the Company may elect to self-
insure.

          Section 6.14  Application of Net Proceeds of Insurance. The Net
                        ----------------------------------------
Proceeds of the insurance carried pursuant to the provisions of Section 6.13
shall be applied as follows: (i) Net Proceeds of property and casualty
insurance shall be applied as provided in Section 7.1, and (ii) Net Proceeds of
liability insurance shall be applied toward extinguishment or satisfaction of
the liability with respect to which such insurance proceeds may be paid.

          Section 6.15  Additional Provisions Respecting Insurance. All
                        ------------------------------------------
insurance, if any, required in Section 6.13 shall 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, if any, may be contained in blanket
policies now or hereafter maintained by the Company.

          Section 6.16  Investment Credit. The Issuer agrees that any investment
                        -----------------
tax credit with respect to the Project or any part thereof shall be made
available to the Company, and the Issuer

                                     -26-
<PAGE>
 
will fully cooperate with the Company in any effort by the Company to avail
itself of any such investment tax credit, but neither the Issuer nor the Trustee
shall have any responsibility or liability for the Company's failure to receive
any such investment tax credit. The Issuer agrees to cause the Trustee to
cooperate in making any investment tax credit available to the Company.

          Section 6.17  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 and such grant will be free from any lien or
security interest created by this Agreement, 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 with or without consideration and the Issuer 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:

          (a) a copy of the instrument of grant or release, and

          (b) a written application signed by the president or any vice
     president of the Company requesting the execution and delivery of such
     instrument and stating

               (i) that such grant or release is not detrimental to the proper
          conduct of the business of the Company, and

               (ii) that such grant or release will not impair the effective use
          or interfere with the operation of the Project.

          Section 6.18  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:

          (a) any unimproved part of the Project Land (on which none of the
     components comprising the Project is located but

                                     -27-
<PAGE>
 
     on which parking, transportation or utility facilities may be located) on
     which the Issuer proposes to construct improvements for lease or sale under
     another and different agreement, or

          (b) any part of the Project Land with respect to which the Issuer
     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:

               (i) a copy of such amendment as executed;

               (ii) a resolution of the Issuer (A) stating that the Issuer 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 Issuer in default
          under any of the provisions hereof, (B) giving an adequate legal
          description of that portion of the Project Land to be released, (C)
          stating the purpose for which the Issuer desires the release, (D)
          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 Issuer and (E) requesting such release;

               (iii) a certificate of an officer of the Company approving such
          amendment together with an officer's certificate stating that the
          Company is not in default under any of the provisions hereof;

               (iv) a copy of the agreement between the Issuer and such person
          wherein the Issuer 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 person, and wherein such person agrees to lease
          or purchase the same from the Issuer, 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

                                     -28-
<PAGE>
 
               (v) a certificate of an Authorized Company Representative dated
          more than sixty (60) days prior to the date of such amendment and
          stating that, in the opinion of the person signing such certificate,
          (A) 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 for the purposes hereinabove stated, and (B) the release
          so proposed to be made will not impair the usefulness of the Project
          as a facility of a type which the Issuer is authorized to acquire
          under the laws pursuant to which the Issuer then exists, 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 VII

                     DAMAGE, DESTRUCTION AND CONDEMNATION
                     ------------------------------------
   
          Section 7.1 Damage and Destruction. Unless the Company shall have
                      ----------------------  
elected to exercise its option to prepay all rentals or purchase the Project
pursuant to the provisions of Section 8.4, if prior to payment in full of the
Bonds the Project is destroyed (in whole or in part) or is damaged by fire or
other casualty, the Company, or the Issuer at the Company's direction, (i) shall
promptly replace, repair, rebuild or restore the property damaged or destroyed
in a manner which provides facilities generally comparable to the facilities 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 as solid waste disposal 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

                                     -29-

<PAGE>
 
reimbursement from the Issuer or any abatement, diminution or postponement of
the amounts payable under Section 5.3.

          Section 7.2 Condemnation. Unless the Company shall exercise its option
                      ------------   
to prepay all rentals or purchase the Project pursuant to the provisions of
Section 8.4, 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 Issuer and the Company 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:

          (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 solid
     waste disposal facilities suitable for the Company's operations at the
     Project Site (which solid waste disposal facilities will be deemed a part
     of the Project and available for use 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 solid waste disposal facilities will
     be acquired subject to no liens, security interests or encumbrances prior
     to the lien or security interest afforded by this Agreement and the
     Indenture, other than Permitted Encumbrances;

          (c) redemption of the Bonds in accordance with the provisions of
     Article VIII of the Indenture; provided, that no part of any such
     condemnation award may be applied for such redemption unless (1) all of the
     Bonds are to be redeemed in accordance with the Indenture upon exercise of
     the option to purchase the Project pursuant to the provisions of Section
     8.01(a) of the Indenture, or (2) if less than all of the Bonds are to be
     redeemed, the Company shall furnish to the Issuer and the Trustee a
     certificate of the Authorized Company Representative stating (i) that the
     property forming a part of the Project that was taken in such eminent
     domain proceeding is not essential to the Company's use or occupancy of the
     Project, (ii) that the Project has been restored to a condition
     substantially equivalent to its condition prior to the taking in such
     eminent domain proceeding, or (iii) that

                                     -30-
<PAGE>
 
     solid waste disposal facilities have been acquired which are suitable for
     the Company's operations at the Project as contemplated by the foregoing
     subsection (b) of this Section; or

          (d) payment into the Bond Fund of an amount sufficient to provide for
     payment in full of the Bonds.

          The Issuer 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 Issuer. In no event will the Issuer 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.

                                 ARTICLE VIII

                 ASSIGNMENT, SUBLEASING, PLEDGING AND SELLING;
                  REDEMPTION; RENT PREPAYMENT AND ABATEMENT;
                   OPTION AND OBLIGATION TO PURCHASE PROJECT;
                       OPTION TO EXTEND TERM OF AGREEMENT
                 ---------------------------------------------       

          Section 8.1 Assignment and Subleasing. This Agreement may be assigned
                      -------------------------  
by the Company and the Project may be subleased by the Company without the
necessity of obtaining the consent of the Issuer or the Trustee, subject,
however, to the following conditions:

          (a) no assignment (other than pursuant to Section 6.5) 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 the 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 Issuer

                                     -31-
<PAGE>
 
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 8.2 Pledge Under Indenture. Under the terms of the Indenture,
                      ----------------------   
the Issuer 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, all 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 8.3 Restrictions on Sale of Project by Issuer. The Issuer
                      -----------------------------------------  
agrees that, except as set forth in Section 8.2, it shall not (a) sell, assign,
transfer or convey the Project during the Lease Term, (b) create or suffer to be
created any assignment, pledge, charge, lien or encumbrance on the Trust Estate,
or (c) 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 Issuer with, or the merger of the Issuer 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 (i) that no
such action shall be taken without the prior written consent of the Company,
unless such action shall be required by law, and (ii) 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 Issuer,
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 8.4 Prepayment of Rents; Option to Purchase Project;
                      ------------------------------------------------  
Obligation to Purchase Project.
------------------------------
          (a) The Company shall have the option to prepay any part of the rents
payable under Section 5.3, and the Issuer agrees that the Trustee may accept
such prepayment when the same is tendered by the Company, upon giving written
notice to the Trustee at least four Business Days prior to the thirtieth day
before the date set for redemption, to the

                                        -32-
<PAGE>
 
     extent that the Bonds are subject to optional redemption in part pursuant
     to Section 8.01(a) of the Indenture.

          (b) The Company shall have the option to purchase the Project by
     prepaying all of the rents payable under Section 5.3, and the Issuer agrees
     that the Trustee may accept such prepayment when the same is tendered by
     the Company, upon giving written notice to the Trustee at least four
     Business Days prior to the thirtieth day before the date set for
     redemption, to the extent that the Bonds are subject to optional redemption
     in whole pursuant to Section 8.01(a) of the Indenture.

          (c) The Company shall be obligated to prepay a portion of the rentals
     payable under Section 5.3, and the Issuer agrees that the Trustee may
     accept such prepayment when the same is tendered by the Company, to the
     extent that the bonds are subject to mandatory redemption in part pursuant
     to Section 8.01(b) of the Indenture.

          (d) The Company shall be obligated to purchase the Project by
     prepaying all of the rents payable under Section 5.3, or to prepay all of
     the rents payable under Section 5.3 without purchasing the Project, and the
     Issuer agrees that the Trustee may accept such prepayment when the same is
     tendered by the Company, to the extent that Bonds are subject to mandatory
     redemption in whole pursuant to Section 8.01(b) of the Indenture.

          (e) The Company shall have the option to purchase the Project by
     providing for payment of the Bonds pursuant to Article XV of the Indenture.

          (f) The Company shall be obligated to purchase, and the Issuer agrees
     to sell, the Project for ten dollars ($10.00) at the expiration of the
     Lease Term, following payment in full of the Bonds.

All prepaid rents shall be used for the redemption or purchase of Bonds in the
manner and to the extent provided in the Indenture. The options granted to the
Company pursuant to this Section 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. Upon the
expiration of the Lease Term, or the sooner termination of the Lease Term, the
Issuer will, upon receipt of evidence provided by the Trustee

                                      -33-
<PAGE>
 
satisfactory to it that none of the Bonds remain outstanding under the
Indenture, deliver to the Company documents conveying to the Company good and
marketable fee simple title in and to the Project, as the Project then exists,
subject to the following: (a) those liens, security interests and encumbrances
(if any) to which said title in and to the Project was subject when conveyed to
the Issuer, (b) those liens, security interests and encumbrances created by the
Company or to the creation or suffering to which the Company consented, (c)
those liens, security interests and encumbrances resulting from the failure of
the Company to perform or observe any of its agreements contained herein, and
(d) any right and title of any condemning authority.

          Section 8.5 Rent Abatements If Bonds Paid Prior to Maturity. If at any
                      -----------------------------------------------          
time the moneys in the Bond Fund are sufficient to retire, in accordance with
the terms of the Indenture, all of the outstanding Bonds and to pay all fees and
charges of the Trustee due or to become due through the date on which the last
of the Bonds is to be retired, under circumstances not resulting in termination
of the Lease Term, and if the Company is not at the time otherwise in default
hereunder, the Company shall be entitled to use and occupy the Project from the
date on which such moneys are in the Bond Fund to and including midnight on June
1, 2028, without the payment of rent during that interval (but otherwise on the
terms and conditions hereof).

          Section 8.6 References 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 15.01 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.

          Section 8.7 Option to Extend. The Company shall have, and is hereby
                      ----------------  
granted, the option to extend the term of this Agreement for an additional term
ending on June 1, 2033; provided, however, that such option shall not be
exercisable at any time an Event of Default shall have occurred and be
continuing. If at the end of the Lease Term provided for in Section 5.1 hereof,
no Event of Default shall have occurred and be continuing, the Company shall be
deemed to have exercised such option to extend the term of this Agreement unless
it notifies the Board and the Trustee in writing to the contrary at least 30
days prior to the end of such Lease Term. For and during such

                                     -34-
<PAGE>
 
additional term, the Company will pay to the Board an annual rent of $100,
payable in advance on June 1, 2028 and on each June 1 thereafter (except June 1,
2033 on which date such additional term shall end as aforesaid), but otherwise
all the terms and conditions of this Agreement shall apply during such
additional term; except that the provisions of Sections 7.1 and 7.2 shall not
apply and except further that the Company shall not be required to carry any
insurance for the benefit of the Trustee, but shall be required to carry
insurance under Section 6.13 for the benefit of the Board as its interest may
appear. In the event the Company exercises the option to extend the Lease Term
granted in this Section 8.7, it shall, at any time after commencement of such
additional term, have the right to terminate this Agreement upon giving to the
Board notice in writing not less than 10 days prior to the date of termination.
At any time during, or at the end of, the extended Lease Term provided for in
this Section 8.7, the Company may purchase the Project for $100.


                                   ARTICLE IX

                        EVENTS OF DEFAULT AND REMEDIES
                        ------------------------------

          Section 9.1  Events of Default. Each of the following shall be an
                       ----------------- 
"Event of Default" under this Agreement:

          (a)  An "Event of Default" occurs and is continuing under the
     Indenture or under either of the Guarantee Agreements.

          (b)  Failure by the Company to observe and perform any covenant,
     condition or agreement on its part to be observed or performed hereunder,
     for a period of ninety (90) days after written notice, specifying such
     failure and requesting that it be remedied, is given to the Company by the
     Issuer or the Trustee; provided, however, if the failure stated in the
     notice cannot be remedied within such period, it shall not constitute an
     "Event of Default" if corrective action is instituted by the Company within
     the applicable period and diligently pursued until the default is
     corrected.

          (c)  Either Mead or the Company shall (i) apply for or consent to the
     appointment of, or the taking of possession by, a receiver, custodian,
     trustee or liquidator of it or of all or a substantial part of its
     property; (ii) admit in writing its inability, or be generally unable, to
     pay its debts as such debts become due, (iii) make a general assignment for
     the benefit of its creditors, (iv) commence a voluntary case under the
     Federal Bankruptcy Code (as now or

                                      -35-
<PAGE>
 
     hereafter in effect), (v) file a petition seeking to take advantage of any
     other law relating to bankruptcy, insolvency, reorganization, winding-up,
     or composition or adjustment of debts, (vi) fail to controvert in a timely
     or appropriate manner, or acquiesce in writing to, any petition filed
     against it in an involuntary case under said Federal Bankruptcy Code, or
     (vii) take any action for the purpose of effecting any of the foregoing.

          (d) A proceeding or case shall be commenced, without the application
     or consent of either Mead or the Company, in any court of competent
     jurisdiction, seeking (i) the liquidation, reorganization, dissolution,
     winding-up, or composition or adjustment of debts, of either Mead or the
     Company, (ii) the appointment of a trustee, receiver, custodian, liquidator
     or the like of either Mead or the Company or of all or any substantial part
     of any of their assets, or (iii) similar relief in respect of the Company
     under any law relating to bankruptcy, insolvency, reorganization, winding-
     up, or composition or adjustment of debts, and such proceeding or case
     shall continue undismissed, or any order, judgment or decree approving or
     ordering any of the foregoing shall be entered and continue unstayed and in
     effect, for a period of sixty (60) days from commencement of such
     proceeding or case or the date of such order, judgment or decree, or an
     order the Company shall be entered in an involuntary case under said
     Federal Bankruptcy Code.

           (e) The dissolution or liquidation of the Company except as may be
     permitted by the terms of Section 6.5.

The foregoing provisions of Section 9.1(b) are subject to the limitation that,
if by reason of force majeure the Company is unable in whole or in part to carry
                ----- -------
out its agreements herein contained other than those set forth in Section 5.3
hereof, an Event of Default shall not be deemed to have occurred during the
continuance of such inability. The term "force majeure" as used herein shall
mean the following: acts of God; strikes; lockouts or other industrial
disturbances; acts of public enemies; orders of any kind of the government of
the United States or of the State of Alabama or any of their departments,
agencies or officials or of any civil or military authority; insurrections;
riots; epidemics; landslides; lightning; earthquakes; fire; hurricanes;
tornadoes; storms; floods; washouts; droughts; arrests; restraints of government
and people; civil disturbances; explosions; breakage or accident to machinery,
transmission lines, pipes or canals; partial or entire failure of utilities;

                                      -36-
<PAGE>
 
or any other cause or event not reasonably within the control of the Company.
The Company agrees, however, to remedy to the extent practicable with all
reasonable dispatch the effects of any force majeure preventing the Company from
carrying out its agreements; provided that the settlement of strikes, lockouts
and other industrial disturbances shall be entirely within the discretion of the
Company, and the Company shall not be required to make settlement of strikes,
lockouts and other industrial disturbances by acceding to the demands of the
opposing party or parties when such course is in the judgment of the Company
unfavorable to the Company.

          Section 9.2  Remedies on Default. Whenever any Event of Default shall
                       ------------------- 
have occurred and be continuing, the Issuer may, in addition to any other
remedy now or hereafter existing at law, in equity or by statute, take either or
both of the following remedial steps:

          (a) By written notice to the Company, the Issuer may declare all
     amounts payable hereunder to be immediately due and payable, whereupon the
     same shall become immediately due and payable;

          (b) The Issuer may take whatever action at law or in equity may appear
     necessary or desirable to collect the amounts referred to in (a) above then
     due and thereafter to become due, or to enforce performance and observance
     of any obligation, agreement or covenant of the Company under this
     Agreement.

Any amounts collected pursuant to action taken under this Section 9.2 shall be
paid into the Bond Fund and applied in accordance with the provisions of the
Indenture or, if the Bonds have been fully paid (or provision for payment
thereof has been made in accordance with the provisions of the Indenture) and
the fees and expenses of the Trustee and the Paying Agents and all other
amounts required to be paid under the Indenture shall have been paid, to the
Company.

          Section 9.3  Agreement to Pay Attorneys' Fees and Expenses. In the 
                       ---------------------------------------------         
event the Company should breach any of the provisions of this Agreement and the
Issuer or the Trustee should employ attorneys or incur other expenses for the
collection of amounts payable hereunder or the enforcement of performance or
observance of any obligation or agreement on the part of the Company herein
contained, the Company agrees that on demand therefor it will pay to the Issuer
or the Trustee (as the case

                                      -37-
<PAGE>
 
may be) the reasonable fees of such attorneys and such other reasonable expenses
so incurred by the Issuer.

          Section 9.4 No Additional Waiver Implied by One Waiver. In the event
                      -------------------------------------------
any agreement contained in this Agreement 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 9.5 Notice of Default. The Company shall notify the Trustee
                      ------------------
and the Issuer of any Event of Default hereunder or under the Indenture or
either of the Guarantee Agreements promptly upon its acquiring knowledge
thereof.


                                   ARTICLE X

                                 MISCELLANEOUS
                                 -------------

          Section 10.1 Notices. All notices, certificates or communications
                       --------
hereunder shall be sufficiently given and shall be deemed given when delivered
or mailed by registered or certified mail, postage prepaid, addressed as
follows: if to the Issuer, c/o Floyd & Floyd, 1000 14th Street, P.O. Box 759,
Phenix City, Alabama 36868, Attention: Chairman; if to the Company, c/o The Mead
Corporation, Mead World Headquarters, Courthouse Plaza Northeast, Dayton, Ohio
45463, Attention: Treasurer; and if to the Trustee, at 120 Wall Street, 13th
Floor, New York, New York, 10043, Attention: Corporate Trust Department. A
duplicate copy of each notice, certificate or other communication given
hereunder by either the Issuer or the Company to the other shall also be given
to the Trustee. The Issuer, 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 10.2 Bindinq Effect. This Agreement shall inure to the benefit
                       ---------------
of and shall be binding upon the Issuer, the Company and their respective
successors and assigns, subject, however, to the limitations contained in
Section 6.5 hereof.

          Section 10.3 Severability. In the event any provision of this
                       -------------
Agreement 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 10.4 Amounts Remaining in the Bond Fund. Any amounts remaining
                       -----------------------------------
in the Bond Fund upon termination of this




                                      -38-
<PAGE>
 
Agreement shall, to the extent provided in the Indenture, belong to and be paid
to the Company by the Trustee.

          Section 10.5 Amendments. This Agreement may not be terminated except
                       -----------
in accordance with the provisions hereof and may not be amended or supplemented
except by a written agreement in accordance with Article XIV of the Indenture
and signed by the parties hereto. In any event, prior notice of any proposed
amendment or supplement must be given to the Trustee.

          Section 10.6 Execution in Counterparts. This Agreement may be executed
                       --------------------------
in several counterparts, each of which shall be an original and all of which
shall constitute but one and same instrument.

          Section 10.7 Applicable Law. This Agreement shall be governed by and
                       ---------------
construed in accordance with laws of the State, except that the standard of care
to which the Trustee shall be held in the performance of its duties and
obligations shall be governed by and construed in accordance with the laws of
the State of New York.

          Section 10.8 Captions. The captions or headings in this Agreement are
                       ---------
for convenience only and in no way define, limit or describe the scope or intent
of any provisions or sections of this Agreement.

          Section 10.9 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 10.10 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.

                                     -39-

<PAGE>
 
          IN WITNESS WHEREOF, the Issuer and the Company have caused this
Agreement to be executed in their respective corporate names and their
respective corporate seals to be hereunto affixed and attested by their duly
authorized officers, all as of the date first above written.

                                       THE INDUSTRIAL DEVELOPMENT
                                       BOARD OF THE CITY OF PHENIX
                                       CITY, ALABAMA
(Seal)

                                       By: /S/ Kenneth A. Roberts
                                          -------------------------------------
                                          Chairman

Attest:

/S/ Sonny Dyson
---------------------------------- 
Secretary
 
                                       MEAD COATED BOARD, INC.
 
(Seal)

                                       By: /S/ William R. Graber
                                          -------------------------------------
                                          Title:           Treasurer
 
Attest:

/S/ Jeffrey L. Hayman
----------------------------------
Title:         Secretary

                                     -40-
<PAGE>
 
  STATE OF GEORGIA:
                  : SS.
COUNTY OF MUSCOGEE:

          On this 2nd day of June, 1993, before me appeared Kenneth A. Roberts,
to me personally known, who being by me duly sworn, did say that he is Chairman
of The Industrial Development Board of the City of Phenix City, Alabama and that
the seal affixed to the foregoing Lease Agreement is the sale of The Industrial
Development Board of the City of Phenix City, Alabama and that the foregoing
Lease Agreement was signed and sealed on behalf of The Industrial Development
Board of the City of Phenix City, Alabama, and the said Chairman acknowledges
the execution of the foregoing Lease Agreement as the free act and deed of The
Industrial Development Board of the City of Phenix City, Alabama.

         IN WITNESS WHEREOF, I hereunto set my hand and official seal.

                             /s/  Linda Boyd
                                -----------------------------------
                                Notary Public
 
[NOTARIAL SEAL]              My Commission Expires:
                             My Commission Expires Dec. 17, 1996

                                     -41-
<PAGE>
 
STATE OF OHIO       :
                    : SS 
COUNTY OF MONTGOMERY:

          On this 8th day of June, 1993, before me appeared William R. Graber,
to me personally known, who, being by me duly sworn, did say that he is
Treasurer of Mead Coated Board, Inc., a Delaware corporation, qualified to do
business in the State of Alabama, and that the seal affixed to the foregoing
Lease Agreement is the seal of Mead Coated Board, Inc., and that the foregoing
Lease Agreement was signed and sealed on behalf of Mead Coated Board, Inc. by
authority of its board of directors, and the said Treasurer acknowledges the
execution of the foregoing Lease Agreement as the free act and deed of Mead
Coated Board, Inc.
 
          IN WITNESS WHEREOF, I hereunto set my hand and official seal.

                                    /s/ Jeffrey L. Hayman
                                    -----------------------------------
                                    Notary Public
                                    My Commission Expires:
                                     
[NOTARIAL SEAL]                     JEFFREY L. HAYMAN
                                    ATTORNEY-AT-LAW
                                    NOTARY PUBLIC - STATE OF OHIO
                                    LIFETIME COMMISSION
                                    SECTION 147.03 R. C.


                                     -42-
<PAGE>
 
                                   EXHIBIT A

                                 PROJECT LAND

The Project Land includes the following property:

          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(degrees) 11' 16" E 381.63' to the point of beginning (N 793,790.00 E
233,241.60); thence N 90(degrees) 00' 00" E 760.00'; thence S 0(degrees) 00' 00"
E 102.00'; thence N 90(degrees) 00' 00" E 128.04'; thence S 0(degrees) 00' 00" E
960.48' (at existing utility bridge); the N 90(degrees) 00' 00" W 13.00'; thence
N 0(degrees) 00' 00" W 672.48'; thence N 90(degrees) 00' 00 W 875.04'; thence N
0(degrees) 00' 00" E 390.00' to the point of beginning; said land being
7.85(plus or minus) acres; less than and except any structures not included in
the Mead Corporation Contract No. 21-4162;

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 Board Premises (such part of the land leased to Georgia Kraft Company
     by the Issuer pursuant to a Lease Agreement dated as of July 1, 1977 (the
     "1977 Lease"), which is more specifically described in Exhibit A to the
     1977 Lease, less and except the Project Land, is hereinafter referred to as
     the "Board Premises") in order to provide all necessary or convenient
     ingress or egress between the Project Land and railroads, public roads and
     highways and the Chattahoochee River and to permit passage between the
     Project Land and the Board Premises;

          (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 Board Premises
     necessary or convenient in order to assure the passage of equipment, raw
     materials, items in the process of manufacture, and finished products from
     the Project Land to the Board Premises,

                                      A-1

<PAGE>
 
     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 Board Premises 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 Board Premises,
     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 Project 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 Board Premises; and

          (d) An easement and right to create and maintain upon the Board
     Premises encroachments of equipment, structures or other improvements which
     will be included on the Project 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 Board Premises;

but subject to the following easements over the Project Land in favor of the 
Board Premises:

          (a) An easement and right for pedestrian and vehicular traffic to use
     all present and future walks, railroads, roads, driveways and docks upon
     the Project Land in order to provide all necessary or convenient ingress
     and egress among and between all portions of the Board Premises and between
     the Board Premises and the Project 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 Board
     Premises;

                                      A-2
<PAGE>
 
          (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 Project Land necessary or
     convenient in order to assure the passage of equipment, and finished
     products from one portion of the Board Premises to another or between the
     Board Premises and the Project 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 Board Premises in order to permit and facilitate the
     operation of any facilities located on the Board Premises;
 
          (c) An easement and right to erect, install, construct, maintain,
     renew, replace and use on, over and under any part of the Project 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 Board
     Premises, including without limitation, the right to make connections with
     machinery, equipment, pipes, conduits and wires, structures and other
     improvements and appurtenances thereto, on the Project Land; and

          (d) An easement and right to maintain any present equipment,
     structures or other improvements included within the facilities presently
     located on the Board Premises as encroachments upon the Project Land as
     long as any such equipment, structures or other improvements remain
     standing, and to construct and maintain similar encroachments on the
     Project Land in respect of any additional improvements constructed adjacent
     to the Project 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 Project Land.

                                      A-3
<PAGE>
 
                                  EXHIBIT "B"

                                      to

                            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

                               PROJECT SUMMARY 

Mead Coated Board, Inc. presently operates a coated natural kraft paperboard
mill (the "Mill") in Russell County, Alabama, near the City of Phenix City,
Alabama.

     The Project consists of the acquisition, construction and installation of 
the No. 2 Recycle Plant (the "Recycle Plant") at the Mill and certain related 
facilities. The Recycle Plant is a 350 ton per day ("TPD") recycled fiber 
facility. The material to be recycled is waste paper and consists of old 
corrugated containers (made from kraft liner and corrugated medium) and other 
similar waste paper.

     The major components of the Project are as follows:

     covered bale storage building with rail and truck
       unloading docks;
     open bale storage slab;
     clamp trucks and forklifts;
     process building with maintenance crane;
     pulper feed conveyor and pulper;
     junk tower with clam shell hoist;
     ragger with tail cutter;
     detrashing unit;
     screen;
     high density cleaners;
     primary coarse screen;
     light rejects separator;
     tailings screen;
     medium density cleaners;
     primary fine screens;
     secondary fine screen;
     tertiary fine screen;
     primary cleaners;

                                      B-1

<PAGE>
 
     secondary cleaners;
     thickener;
     high density storage tank;
     clarifying system;
     sludge pre-thickener;
     separator;
     reject press;
     sludge press;
     self-cleaning bar screen;
     rejects conveyor;
     dump trucks;
     process pumps, tanks, and tile chests;
     recycled stock chest (allocated portion);
     piping;
     water supply systems;
     waste water treatment systems;
     distributed control system; and
     electrical control system.

                                      B-2

<PAGE>
 
                                  EXHIBIT "C"

                         REQUISITION AND CERTIFICATION

                    Request No. ______  Date: ____________ 

TO:       Citibank, N.A., as Trustee
          120 Wall Street, 13th Floor
          New York, New York  10043

          Attention:  Corporate Trust Department

          The undersigned Authorized Company Representative designated pursuant 
to the terms of a Lease Agreement, dated as of June 1, 1993 (the "Agreement"), 
between and among The Industrial Development Board of the City of Phenix City, 
Alabama, a public corporation created and existing under the laws of the State 
of Alabama (the "Issuer"), and Mead Coated Board, Inc., a Delaware corporation 
(the "Company"), hereby requests that there be paid from the "Project Fund" 
(herein below described) the sum of $___________ and in that connection, DOES 
HEREBY CERTIFY, as follows:

          1.  The requested payment has been properly incurred and is a proper
     charge against The Industrial Development Board of the City of Phenix City,
     Alabama Project Fund -- Mead Coated Board Project, Series 1993A and has not
     been the basis of any previous withdrawal from said Project Fund.

          2.  Payment should be made to:

              Name:

              Address or Wire Instructions:

          3.  The purpose and circumstances of such obligation are as follows:

          4.  Payment of such obligation will not result in less than 95% of the
     total proceeds of the sale of the "Bonds" (defined in the Agreement)
     deposited with the Project Fund

                                      C-1

<PAGE>

     expended as of the date hereof having been used to pay "Exempt Costs" (as
     defined in the Agreement).

          This ____ day of ________, 19__.


                                       MEAD COATED BOARD, INC.


                                       By: _________________________________
                                           Authorized Company Representative


                                      C-2
<PAGE>
 
                                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

The 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 N.A., 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 $48,000,000 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 1993A and 
Additional Bonds as permitted and provided for under said Trust Indenture.



                                       This instrument prepared by:

                                       Thompson, Hine and Flory
                                       312 Walnut Street
                                       14th Floor
                                       Cincinnati, Ohio 45202


<PAGE>
 
                                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.)

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
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.....................................    7

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..............    9
              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
</TABLE>

                                       i
<PAGE>
 
<TABLE> 

<S>                                                                        <C> 
              Section 6.3   - Taxes, Other Governmental Charges and
                              Utility Charges.............................   17
              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...................   22
              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......................   25
              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....................................   26
              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.................   29
</TABLE> 

                                      ii
<PAGE>
 
<TABLE> 

<S>                                                                         <C> 
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......................   30
              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

EXHIBIT "B" - PROJECT SUMMARY.............................................  B-1
</TABLE> 

                                      iii
<PAGE>
 
                                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

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 N.A., 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 $48,000,000 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 1993A and
Additional Bonds as permitted and provided for under said Trust Indenture.

                                       This instrument prepared by:

                                       Thompson, Hine and Flory
                                       312 Walnut Street
                                       14th Floor
                                       Cincinnati, Ohio 45202
<PAGE>
 
                                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.)

<TABLE> 
<CAPTION> 
                                                                           Page
                                                                           ----
<S>                                                                        <C>
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.....................................    7

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..............    9
              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
</TABLE>

                                       i
<PAGE>
 
<TABLE> 

<S>                                                                        <C> 
              Section 6.3   - Taxes, Other Governmental Charges and
                              Utility Charges.............................   17
              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...................   22
              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......................   25
              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....................................   26
              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.................   29
</TABLE> 

                                      ii

<PAGE>
 
<TABLE> 

<S>                                                                         <C> 
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......................   30
              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

EXHIBIT "B" - PROJECT SUMMARY.............................................  B-1
</TABLE> 

                                      iii

<PAGE>
 

                                LEASE AGREEMENT

          THIS LEASE AGREEMENT, made and entered into as of June 1, 1993, 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; 


<PAGE>
 

          "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 $48,000,000 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 1993A, 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; 

                                       2

<PAGE>
 

          "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 July 1, 1980
          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 November 1, 1983
          between Georgia Kraft Company and the Board, as amended in an
          Assignment, Assumption and Amendatory Lease Agreement


                                       3
<PAGE>
 
          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, 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 and the Company;

               (j)  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;

               (k)  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 and other bonds of the Board, as amended and supplemented
          from time to time;

               (l)  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; and

               (m)  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;

          "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. The Project Facilities are more fully described in the
     Project Summary; 

          "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;

          "Project Summary" means the Project Summary prepared by the Company,
     entitled "PROJECT SUMMARY - INDUSTRIAL FACILITIES-MEAD COATED BOARD, INC.
     COATED LINERBOARD MILL", a copy of which is

                                       4
<PAGE>
 
attached hereto as Exhibit "B" and by this reference made a part hereof,
including any amendments thereto made pursuant to the terms thereof;

          "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 N.A., 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,

                                      5  
<PAGE>
 
          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

                                       6
<PAGE>
 
          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 seen 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

                                       7
<PAGE>
 
          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

                                       8
<PAGE>
 
          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 acquisition, construction and installation
     of the Project Facilities will be in accordance with the Project Summary, a
     copy of which is on file with the Board and the Trustee.

          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.

                                       9
<PAGE>
 
          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

                                       10
<PAGE>
 
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

                                       11
<PAGE>
 
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, June 1, 2033, 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 December 1, 1993,
and June 1 and December 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

                                       12
<PAGE>
 
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

                                      13
<PAGE>
 
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 at 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"), consisting of payments in fixed, specified amounts ("Fixed
Payments") and payments in amounts determined by formula as set forth below
("Variable 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 July 1 and August 15, 1993 and on August 15
of each subsequent year, commencing August 15, 1994.

          The Fixed Payments shall be payable to Russell County and shall be in
the following amounts: $55,000 on July 1, 1993; $145,000 on August 15, 1993;
$200,000 on August 15, 1994; $50,000 on each of August 15, 1995, August 15,
1996, August 15, 1997 and August 15, 1998; and $100,000 on August 15 of each
subsequent year, commencing August 15, 1999.

          The aggregate Variable 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

                                       14
<PAGE>
 
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 Variable Payment due on August 15, 1994 (with respect to
the December 31, 1992 Assessment Date) and August 15, 1995 shall be distributed
as follows: 60% to the Phenix City Board of Education and 40% to the Russell
County Board of Education. The Variable Payments due on December 15, 1996 and
thereafter 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 make 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

                                       15
<PAGE>
 
          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

                                      16
<PAGE>
 
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.

                                       17
<PAGE>
 
          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.

                                       18
<PAGE>
 
          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 or 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 the 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.

                                       19
<PAGE>
 
          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 on 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

                                       20
<PAGE>
 
          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 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

                                      21
<PAGE>
 

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 at 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

                                      22
<PAGE>
 
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

                                      23
<PAGE>
 
          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 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 finder 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.

                                      24
<PAGE>
 
          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 on 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 discharged in accordance with

                                      25
<PAGE>
 
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, June 1, 2033 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.

                                   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

                                      26
<PAGE>
 
               (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 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,

                                      27
<PAGE>
 
          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 untended 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

                                      28
<PAGE>
 
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 under Section 5.3, in whole or in part. To exercise the option
granted in this paragraph, the Company shall, on or before the 2Oth 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

                                      29 
<PAGE>
 
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:

          (a)  If to the Board -   The Industrial Development
                                   Board of the City of
                                   Phenix City, Alabama
                                   c/o Mr. Kenneth A. Roberts
                                   Community Bank
                                   2301 Airport Thruway
                                   Columbus, Georgia 31904

                                   with a copy to
  
                                   R. Michael Raiford, Esq.
                                   501 14th Street
                                   Phenix City, Alabama 36267

          (b)  If to the Company - Mead Coated Board, Inc.
                                   Mead World Headquarters
                                   Dayton, Ohio 45463
                                   Attention: Treasurer

                                   with a copy to:

                                   Thompson, Hine and Flory
                                   312 Walnut Street
                                   14th Floor
                                   Cincinnati, Ohio 45202
                                   Attention: Robert A. Selak  
              
                                      30
<PAGE>
 
          (c)  If to the Trustee - AmSouth Bank N.A.
                                   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.

          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.

                                      31
<PAGE>
 
          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

[CORPORATE SEAL]

                                       By: /s/ Kenneth A. Roberts
                                           ---------------------------------
                                           Chairman


                                       MEAD COATED BOARD, INC. 



                                       By: /s/ William R. Graber
                                           ---------------------------------
                                           
                                      32
<PAGE>
 
                            ACKNOWLEDGMENT 0F B0ARD
                
STATE OF GEORGIA    )
                    )
COUNTY OF MUSCOGEE  )

          I, 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 or said public corporation.


          GIVEN under my hand and seal of office, this 27th day of April, 1994.

                                               /s/ Linda Boyd
                                               ------------------------
                                                     Notary Public
 
(SEAL)
              My commission expires: 12-17-96
 

                                      33
<PAGE>
 
                           ACKNOWLEDGMENT OF COMPANY

STATE OF OHIO        )
                     )
COUNTY OF MONTGOMERY )


          I, a Notary Public in and for said County in said State, hereby
Certify that William R. Graber, 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 as 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 27th day of April, 1994.

                        

                                           /s/ Robert A. Selak 
                                           -----------------------------
                                                   Notary Public
(SEAL)                                    ROBERT A. SELAK, Attorney at Law
                                          Notary Public, State of Ohio
                                          My Commission has no expiration date.
                                          Section 147.03 O. R. C.
              My commission expires:            
                                     -----------

                                      34


<PAGE>
 
                                  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 June 1, 1993


                          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


                                      A-1
<PAGE>
 
     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 "1993 Leased Land");

less and except the following property:

PARCEL l

     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 degrees-50'E 976.85 feet to the property line of the
     United States Government; thence along said property line N2 degrees-50'W
     1296.69 feet to a branch which runs into Bluff Creek; thence along said
     branch the following courses; N41 degrees-41'W 340.67 feet;


                                      A-2
<PAGE>
 
     S85 degrees-42'W 324.22 feet; S81 degrees-08'W 330.0 feet; N25 degrees-48'W
     145.58 feet; S76 degrees-52'W 198.66 feet; N44 degrees-03'W 152.62 feet;
     S46 degrees-35'Q 84.21 feet; S21 degrees-OO'E 83.39 feet; N82 degrees-27'W
     94.15 feet; S7 degrees-51'E 148.82 feet; S66 degrees-39'W 386.20 feet; S62
     degrees-55'W 237.23 feet; S65 degrees-05'W 232.38 feet; S74 degrees-24'W
     408.97 feet; S51 degrees-52'W 371.60 feet; S19 degrees-42'W 231.02 feet;
     S62 degrees-26'W 198.83 feet; N85 degrees-48'W 229.54 feet; S89 degrees-
     23'W 159.01 feet; N83 degrees-01'W 327.29 feet; S80 degrees-02'W 437.03
     feet; thence S59 degrees-27'W 318.79 feet; thence S3 degrees-28'E 199.83
     feet; thence S1 degrees-16'E 607.22 feet; thence N87 degrees-24'E 343.43
     feet; thence N82 degrees-04'E 516.01 feet; thence N70 degrees-45'E 540.58
     feet; thence N89 degrees-18'E 472.15 feet; thence N0 degrees-01'E 400.58
     feet; thence S89 degrees-59'E 446.0 feet; thence S0 degrees-01'W 395.0
     feet; thence N89 degrees-18'E 171.06 feet; thence N46 degrees-28'E 463.45
     feet to the South line of Section 21; thence along said Section line S90
     degrees-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 and 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


                                      A-3

<PAGE>
 
     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 as 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 degree 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 degrees 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
     degrees 37' W) a distance of fifty-three and fifty-six hundredths (53.56)
     feet to an iron pan; 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 degree 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 degrees 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:


                                      A-4

<PAGE>
 
     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


                                      A-5

<PAGE>
 
     corner us 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 degrees 59' 52' E, 291.25' to the point of beginning; thence S 0 degrees
     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 (plus or minus) 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 degrees 59' 52" E, 291.25' to the point of beginning; thence S 8 degrees
     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
     degrees 39' 40" E, 843.58' to a parallel rectangular area (Bark Hog
     Structure) 26.00' north to south


                                      A-6

<PAGE>
 
     (10.00 lying south of last said course) by 37.50'; thence Continue along
     last said course 27.00'; thence N 45 degrees 07' 38" E, 350.71' to the
     point of ending; said land being 0.63 + acres;

     NO. 2 TURBINE AREA

          A11 that portion of land, and structures lying thereon, On 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
     degrees 19' 16" E, 663.98' to the point of beginning (N 792,550.0 E
     233,534.0); thence S 0 degrees 00' W, 50.00'; thence N 90 degrees 00' E,
     121.00'; thence N 0 degrees 00' W, 50.00'; thence N 90 degrees 00' W,
     121.00' to the point of beginning; said land being 0.14 (plus or minus)
     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
     degrees 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 degrees 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 (plus or minus) 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
     degrees 39' 25" E, 461.76' to the point of beginning (N 792,748.92, E
     233,478.50); thence N 90 degrees 00' E, 73.57'; thence S 0 degrees 00' W,
     34.50'; thence N 90 degrees 00' W, 11.82'; thence S 0 degrees 00' W,
     143.17'; thence N 90 degrees 00' W, 90.62'; thence N 0 degrees 00" W,
     83.08'; thence N 90 degrees 00" E, 28.87'; thence N 0 degrees 00' W. 94.59'
     to the point of beginning; said land being 0.32 (plus or minus) acres;


                                      A-7

<PAGE>
 
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 degrees 51' 31" E, 790.90' to the point of beginning; thence N 90
     degrees 00' W, 82.00; thence S 0' 00" W, 8.75'; thence N 90 degrees 00' W,
     232.22'; thence S 15 degrees 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 degrees 24' 34" E, 692.79' to the point of beginning; thence S 36
     degrees 51' 02" E, 454.94' to the point of ending; said land being 0.29
     (plus or minus) 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 degrees 34' 06" E, 600.24' to the point of beginning; thence S 71
     degrees 04' 32" E, 640.91'; thence N 50 degrees 08' 32" E, 61.59' to the
     point of ending; said land being 0.45 (plus or minus) acres;

                                      A-8
<PAGE>
 
     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 degrees 21' 59" W, 84.29' to the point of beginning; thence S 56 degrees
     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 degrees 00' bounded by a
     rectangular structure 32' -6" (plus or minus) East-West and 32' -6" (plus
     or minus) North-South; thence N 82 degrees 51' 32" E, 355.48' to the point
     of ending; said land being 0.45 (plus or minus) 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
     degrees 06' 06" W, 35.94' to the point of beginning (N 792,374.0, E
     234,473.25); thence S 0 degrees 00' W, 133.50'; thence N 90 degrees 00' W,
     103.39'; thence S 0 degrees 00' W, 103.50'; thence 90 degrees 00' W,
     48.00'; thence N 0 degrees 00' W, 55.75'; thence N 90 degrees 00' W, 80.00;
     thence S 0 degrees 00' W, 42.75'; thence N 90 degrees 00' W, 63.00; thence
     N 0 degrees 00' W, 110.00'; thence N45 degrees 00' E, 55.00'; thence N0
     degrees 00' W, 23.11'; thence 90 degrees 00' E, 23.00'; thence N 0 degrees
     00' W, 23.25'; thence N90 degrees 00' E, 170.00'; thence N 0 degrees 00' W,
     28.75'; thence N 90 degrees 00' E, 62.50' to the point of beginning; said
     area being 1.01 (plus or minus) 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
     degrees 46' 07" W, 591.71' to the point of beginning (N 791, 960.0 E
     234,055.0); thence S 0 degrees 00' W, 170.00'; thence N 90 degrees 00' W,
     111.00; thence 0 degrees 00' W, 170.00'; thence N 90 degrees 00' E, 111.00'
     to the point of beginning; said land being 0.43 (plus or minus) acres;


                                      A-9

<PAGE>
 
     TURPENTINE RECOVERY FACILITY AREA

          All that port on 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
     degrees 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 degrees 00" E, 20.00';
     thence S 0 degrees 00' W, 30.00; thence N 90 degrees 00' W, 20.00' to the
     point of beginning; said land being 0.01 (plus or minus) 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
     degrees 22' 54" E, 879.79' to the point of beginning; thence N 0 degrees
     00' W, 326.00'; thence N 90 degrees 00' E, 711.08'; thence S 0 degrees 00'
     W, 326.00'; thence N 90 degrees 00' W, 328.00'; thence S 0 degrees 00' W,
     188.00'; thence N 90 degrees 00' W, 50.00'; thence N 0 degrees 00' W,
     188.00'; thence N 90 degrees 00' W, 333.08' to the point of beginning; said
     land being 5.54 (plus or minus) 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
     degrees 04' 57" W, 197.69' to the point of beginning (N 792,156.0, E
     234,462.0); thence S 0 degrees 00" W, 82.00'; thence N 90 degrees 00" w,
     52.00'; thence N 0 degrees 00' W, 82.00'; thence N 90 degrees 00' E, 52.00
     to the point of beginning' said land being 0.10 (plus or minus) acres;

     NEW LIME KILN/RECAUSTICIZING

          All that portion of land, and structures lying thereon, in Section 28,
     T 14 N, R 30 E, County or Russell, State of Alabama, more particularly
     described as follows:


                                     A-10

<PAGE>
 
     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
     degrees 51' 29" E, 267.79' to the point of beginning (N 793,238.0 E
     233,503.0); thence N 90 degrees 00' E, 399.23'; thence S 0 degrees 00' W,
     50.00'; thence N 90 degrees 00' W, 10.00'; thence S 0 degrees 00' W,
     40.00'; thence N 90 degrees 00' W, 136.23'; thence N 0 degrees 00' W,
     80.00'; thence N 90 degrees 00' W, 50.00'; thence S 0 degrees 00' W,
     10.00'; thence N 90 degrees 00' W, 54.00'; thence S 0 degrees 00' W,
     40.00'; thence N 90 degrees 00' E, 65.00'; thence S 0 degrees 00' W,
     30.00'; thence N 90 degrees 00' W, 150.00'; thence N 0 degrees 00' W,
     17.00'; thence N; 90 degrees 00' W, 64.00'; thence N 0 degrees 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
     degrees 16' 34" E, 439.77' to the point of beginning (N 792,814.67, E
     233,534.32'); thence N 90 degrees 00' E, 36.30'; thence N 0 degrees 00' W,
     20.50'; thence N 90 degrees 00' E, 72.26'; thence N 0 degrees 00' W,
     14.83'; thence N 90 degrees 00' E, 110.50'; thence S 0 degrees 00' W,
     42.58'; thence N 90 degrees 00' E, 26.00'; thence S 0 degrees 00' W, 81.00'
     thence N 90 degrees 00' W, 51.00' thence N 0 degrees 00" W, 25.12'; thence
     N 90 degrees 00' W, 72.26'; thence N 90 degrees 00' W, 20.50'; thence N
     degrees 00' W, 36.30'; thence N 0 degrees 00' W, 34.00' to the point of
     beginning; said land being 0.47 (plus or minus) 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
     degrees 01' 33" E, 637.83' to the point of beginning (N 792,851.0, E
     233,813.33); thence N 90 degrees 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
     degrees 00'; thence S 0 degrees 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
     degrees 00'; thence N 90 degrees 00' W, 34.00'; thence N 0 degrees 00' W,
     99.79'; thence N 90 degrees 00' W, 69.00'; thence N 59 degrees 47' 19" W,
     91.42'; thence N 90 degrees 00' W, 64.67'; thence N 0 degrees 00' W, 57.54'
     to the point of beginning; said land being 0.72 (plus or minus) acres;

                                     A-11
<PAGE>
 
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
     degrees 38' 59" E, 253.41' to the point of beginning (N 793,165.00 E
     233,503.00); thence N 90 degrees 00' E, 64.00'; thence S 0 degrees 00' E,
     17.00'; thence N 90 degrees 00' E, 150.00; thence N 0 degrees 00' E,
     30.00'; thence N 90 degrees 00' W, 65.00'; thence N 0 degrees 00' E,
     40.00': thence N 90 degrees 00' E, 54.00'; thence N 0 degrees 00' E,
     10.00'; thence N 90 degrees 00' E, 50.00'; thence S 0 degrees 00' E,
     80.00'; thence N 90 degrees 00' E, 136.23'; thence N 0 degrees 00' E,
     40.00'; thence N 90 degrees 00' E, 75.00'; thence S 0 degrees 00' E,
     78.00;' thence N 90 degrees 00' W. 464.23'; thence 0 degrees 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

                                     A-12
<PAGE>
 
     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 an 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:

                                     A-13
<PAGE>
 
     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(degrees) 11' 16" E 381.63' to the point of beginning (N 793,790.00 E
     233,241.60); thence N 90 degrees 00' 00" E 760.00'; thence S 0 degrees 00'
     00" E 102.00'; thence N 90 degrees 00' 00" E 128.04'; thence S 0 degrees
     00' 00" E 960.48' (at existing utility bridge)' the N 90 degrees 00' 00" W
     13.00'; thence N 0 degrees 00' 00" W 672.48', thence N 90 degrees 00' 00 W
     875.04'; thence N 0 degrees 00' 00" E 390.00' to the point of beginning;
     said land being 7.85(plus or minus) 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 1993 Leased Land and railroads, public roads
     and highways and the Chattahoochee River and to permit passage between the
     1993 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 1993 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 1993 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

                                      A-14
<PAGE>
 

          (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 1993 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 1993 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 1993 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 1993 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 1993 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 1993 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 1993 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


                                      A-15
<PAGE>
 
     improvements and appurtenances thereto, on the 1993 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 1993 Leased Land
     as long as any such equipment, structures or other improvements remain
     standing, and to construct and maintain similar encroachments on the 1993
     Leased Land in respect of any additional improvements constructed adjacent
     to the 1933 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 1993 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 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

                                      A-16
<PAGE>
 
     Board's First Mortgage Revenue Bonds (Industrial Warehouse Services, Inc.),
     Series 1990;

(7)  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;

(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; and

(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.


                                      A-17
<PAGE>
 
                                 EXHIBIT "B"

                                      to

                            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



                    PROJECT SUMMARY - INDUSTRIAL FACILITIES

                           RUSSELL COUNTY, ALABAMA 



The Project in an expansion of and improvements to an existing coated linerboard
mill (the "Mill") in Russell County, Alabama owned in part by the Board and
leased to the Company and owned in part by the Company.


                                      B-1

<PAGE>
 
                                FIRST AMENDMENT
                                ---------------

                                      TO
                                      --

                                LEASE AGREEMENT
                                ---------------

     THIS FIRST AMENDMENT TO LEASE AGREEMENT (the "Amendment") is made and 
entered into as of February 1, 1995 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 $48,000,000 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 1993A
(the "Series 1993A Bonds") pursuant to a Trust Indenture dated as of June 1,
1993 (the "Original Indenture") from the Board to AmSouth Bank of Alabama
(formerly AmSouth Bank, N.A.), as Trustee (the "Trustee").

     The Board has used the proceeds of the sale of the Series 1993A 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 June 1, 1993 (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 1993A 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 $88,000,000 in aggregate principal amount of 
Industrial Development Revenue Bonds (Mead Coated Board Project), Series 1995A 
(the "Series 1995A Bonds"), pursuant to the Indenture as supplemented by a First
Supplemental Trust Indenture dated as of February 1, 1995 (the "First 
Supplemental Indenture") from the Board to the Trustee. The Indenture as 
supplemented by the First 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:

<PAGE>
 
                                   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 1995A Bonds.

     Section 1.2  Terms of Agreement Applicable to Series 1995A Bonds. All
     -----------  ---------------------------------------------------
terms, conditions, representations and covenants set forth in the Agreement
applicable to the Series 1993A 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 1995A Bonds. Without limiting the foregoing,
all references in the Agreement to the "Bonds" shall be deemed to mean the
Series 1993A Bonds and the Series 1995A 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 1995A 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
     First 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 1995A 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 1995A Bonds and the execution and delivery by
     the Board of the First
 
                                      -2-
<PAGE>
 
     Supplemental Indenture and this Amendment and the compliance by the Board
     with all of the provisions of each thereof and of the Series 1995A 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 1995A 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 First
     Supplemental Indenture and this Amendment, or the offer, issue, sale or
     delivery of the Series 1995A Bonds, other than (i) the filing with the
     Alabama Securities Commission of the notification of the Board's intention
     to issue the Series 1995A 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 First Supplemental 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
     Series 1995A 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:


                                      -3-
<PAGE>
 
          (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 1995A 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 
this Amendment, the 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.


                                      -4-
<PAGE>
 
                                  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:
                                           ------------------------------------
                                           Chairman

 
                                       MEAD COATED BOARD, INC.

                                       By: /s/ SIGNATURE ILLEGIBLE
                                           ------------------------------------
                                           Treasurer
 
                                      -5-
<PAGE>
 
                                  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/ SIGNATURE ILLEGIBLE
                                           ------------------------------------
                                           Chairman

 
                                       MEAD COATED BOARD, INC.

                                       By: 
                                           ------------------------------------
 

                                      -5-
<PAGE>
 
                            ACKNOWLEDGMENT OF BOARD

STATE OF ALABAMA

COUNTY OF RUSSELL

     I, Robert P. Lane, 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 4th day of April, 1995.

              
                                       /S/
                                       ----------------------------------------
                                                   Notary Public

(SEAL)

                                       My commission expires: February 28, 1996
                                                             ------------------

                                      -6-

<PAGE>
 
                           ACKNOWLEDGMENT OF COMPANY

STATE OF OHIO

COUNTY OF MONTGOMERY

     I, Robert A. Selak, Notary Public in and for said County in said State,
hereby certify that Gregory T. Geswein, 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 6th day of April, 1995.

              
                                       /S/
                                       ----------------------------------------
                                                   Notary Public

(SEAL)

                                       My commission expires:
                                                             ------------------

                                          ROBERT A. SELAK, Attorney at Law
                                          Notary Public, State of Ohio
                                          My Commission has no expiration date.
                                          Section 147.03 O. R. C.

                                      -7-

<PAGE>
 
                             CONSENT OF BONDHOLDER
                             ---------------------

     Mead Coated Board, Inc., as holder of all of the outstanding Industrial
Development Revenue Bonds (Mead Coated Board Project), Series 1993A and Series
1995A 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 Supplemental Trust Indenture, dated as of February 1, 1995, between the
Board and AmSouth Bank of Alabama, supplementing a Trust Indenture, dated as of
June 1, 1993 between the Board and AmSouth Bank of Alabama.

     IN WITNESS WHEREOF, Mead Coated Board, Inc. has caused this Consent of
Bondholder to be executed in its name and behalf as of February 1, 1995

                                       MEAD COATED BOARD, INC.


                                       By: /S/ G. T. Geswein
                                          -------------------------------------
                                                        Treasurer

                                      -8-
<PAGE>
 
                              CONSENT OF TRUSTEE
                              ------------------

     AMSOUTH BANK OF ALABAMA (formerly AmSouth Bank, N.A.), as Trustee under the
Trust Indenture dated as of June 1, 1993 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 February 1, 1995, between the Board and Mead Coated Board, Inc.,
amending the Lease Agreement, dated as of June 1, 1993 between the Board and
Mead Coated Board, Inc.
 
     IN WITNESS WHEREOF, AmSouth Bank of Alabama has caused this Consent of
Trustee to be executed in its name and behalf as of February 1, 1995.

                                       AMSOUTH BANK OF ALABAMA, as Trustee


                                       By: /s/ Renee Ragland
                                          -------------------------------------
                                          Title:  CORPORATE TRUST OFFICER

                                      -9-

<PAGE>
 
                                  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 February 1, 1995

                          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
<PAGE>
 
     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 "1993 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(degrees)-50'E 976.85 feet to the property line of the
     United States Government; thence along said property line N2(degrees)-50'W
     1296.69 feet to a branch which runs into Bluff Creek; thence along said
     branch the following courses; N41(degrees)-41'W 340.67 feet; S85(degrees)-
     42'W 324.22 feet; S81(degrees)-08'W 330.0 feet; N25(degrees)-48'W 145.58
     feet; S76(degrees)-52'W 198.66 feet; N44(degrees)-03'W 152.62 feet;
     S46(degrees)-35'Q 84.21 feet; S21(degrees)-00'E 83.39 feet; N82(degrees)-
     27'W 94.15 feet; S7(degrees)-51'E 148.82 feet; S66(degrees)-39'W 386.20
     feet; S62(degrees)-55'W 237.23 feet; S65(degrees)-05'W 232.38 feet;
     S74(degrees)-24'W 408.97 feet; S51(degrees)-52'W 371.60 feet; S19(degrees)-
     42'W 231.02 feet; S62(degrees)-26'W 198.83 feet; N85(degrees)-48'W 229.54
     feet; S89(degrees)-23'W 159.01 feet; N83(degrees)-01'W 327.29 feet;
     S80(degrees)-02'W 437.03 feet; thence S59(degrees)-27'W 318.79 feet; thence
     S3(degrees)-28'E 199.83 feet; thence S1(degrees)-16'E 607.22 feet; thence
     N87(degrees)-24'E 343.43 feet; thence N82(degrees)-

                                      A-2
<PAGE>
 
     04'E 516.01 feet; thence N70(degrees)-45'E 540.58 feet; thence 
     N89(degrees)-18'E 472.15 feet; thence N0(degrees)-01'E 400.58 feet; thence
     S89(degrees)-59'E 446.0 feet; thence S0(degrees)-O1'W 395.0 feet; thence
     N89(degrees)-18'E 171.06 feet; thence N46(degrees)-28'E 463.45 feet to the
     South line of Section 21; thence along said Section line S90(degrees)-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(degrees) 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

                                      A-3
<PAGE>
 
     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(degrees) 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(degrees) 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(degrees) 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(degrees) 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

                                      A-4
<PAGE>
 
     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

                                      A-5
<PAGE>
 
     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(degrees) 59' 52 E, 291.25' to the point of beginning; thence S
     0(degrees) 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 (plus or minus) 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 281 T 14 N, R 30 E, County of Russell, State of Alabama; thence N
     31(degrees) 59' 52" E, 291.25' to the point of beginning; thence S
     8(degrees) 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(degrees) 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(degrees) 07' 38" E, 350.71' to the point of ending; said land being 0.63
     (plus) 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(degrees) 19' 16" E, 663.98' to the point of beginning (N 792,550.0 E
     233,534.0); thence S 0(degrees) 00' W, 50.00'; thence N 90(degrees) 00' E,
     121.00'; thence N 0(degrees) 00' W, 50.00'; thence N 90(degrees) 00' W,
     121.00' to the point of beginning; said land being 0.14 (plus or minus)
     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: 

                                      A-6
<PAGE>
 
     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(degrees) 35' 13" W, 1186.73' to the point of beginning (N 791,565.0. E
     233,610.0); thence S O' 00" W, 12.00'; thence N 90(degrees) 00' W, 64.00';
     thence N, O' 00" W 12.00', thence N 90' 00" E, 64.00' to the point of
     beginning; said land being 0.02 (plus or minus) 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(degrees) 39' 25" E, 461.76' to the point of beginning (N 792,748.92, E
     233,478.50); thence N 90(degrees) 00' E, 73.57'; thence S 0(degrees)
     00' W, 34.50'; thence N 90(degrees) 00' W, 11.82'; thence S 0(degrees) 00'
     W, 143.17'; thence N 90(degrees) 00' W, 90.62'; thence N 0(degrees) 00" W,
     83.08'; thence N 90(degrees) 00" E, 28.87'; thence N 0(degrees) 00' W,
     94.59' to the point of beginning; said land being 0.32 (plus or minus)
     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(degrees) 51' 31" E, 790.90' to the point of beginning; thence N
     90(degrees) 00' W, 82.00; thence S 0' 00" W, 8.75'; thence N 90(degrees)
     00' W, 232.22'; thence S 15(degrees) 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 (plus or minus) 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(degrees) 24' 34" E,

                                      A-7

<PAGE>
 
     692.79' to the point of beginning; thence S 36(degrees) 51' 02" E, 454.94'
     to the point of ending; said land being 0.29 (plus or minus) 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(degrees) 34' 06" E, 600.24' to the point of beginning; thence S
     71(degrees) 04' 32" E, 640.91 '; thence N 50(degrees) 08' 32" E, 61.59' 
     to the point of ending; said land being 0.45 (plus or minus) 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(degrees) 21' 59" W, 84.29' to the point of beginning; thence S
     56(degrees) 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(degrees) 00'
     bounded by a rectangular structure 32' -6" (plus or minus) East-West and
     32' -6" (plus or minus) North-South; thence N 82(degrees) 51' 32" E,
     355.48' to the point of ending; said land being 0.45 (plus or minus) 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(degrees) 06' 06" W, 35.94' to the point of beginning (N 792,374.0, E
     234,473.25); thence S 0(degrees) 00' W, 133.50'; thence N 90(degrees) 00'
     W, 103.39'; thence S 0(degrees) 00' W, 103.50'; thence 90(degrees) 00' W,
     48.00'; thence N 0(degrees) 00' W, 55.75'; thence N 90(degrees) 00' W,
     80.00; thence S 0(degrees) 00' W, 42.75'; thence N 90(degrees) 00' W,
     63.00; thence N 0(degrees) 00' W, 110.00'; thence N45(degrees) 00' E,
     55.00'; thence N0(degrees) 00' W, 23.11'; thence 90(degrees) 00' E, 
     23.00'; thence N 0(degrees) 00' W, 23.25'; thence N90(degrees) 00' E, 
     170.00'; thence N 0(degrees) 00' W, 28.75';


                                      A-8

<PAGE>
 
     thence N 90(degrees) 00' E, 62.50' to the point of beginning; said area
     being 1.01 (plus or minus) 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(degrees) 46' 07" W, 591.71' to the point of beginning (N 791, 960.0 E
     234,055.0); thence S 0(degrees) 00' W 170.00'; thence N 90(degrees) 00' W,
     111.00; thence 0(degrees) 00' W, 170.00'; thence N 90(degrees) 00' E,
     111.00' to the point of beginning; said land being 0.43 (plus or minus)
     acres;

     TURPENTINE RECOVERY FACILITY AREA

          A11 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(degrees) 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(degrees) 00" E, 20.00';
     thence S 0(degrees) 00' W, 30.00'; thence N 90(degrees) 00' W, 20.00' to
     the point of beginning; said land being 0.01 (plus or minus) 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(degrees) 22' 54" E, 879.79' to the point of beginning; thence N
     0(degrees) 00' W, 326.00'; thence N 90(degrees) 00' E, 711.08'; thence S
     0(degrees) 00' W, 326.00'; thence N 90(degrees) 00' W, 328.00'; thence S
     0(degrees) 00' W, 188.00'; thence N 90(degrees) 00' W, 50.00'; thence N
     0(degrees) 00' W, 188.00'; thence N 90(degrees) 00' W, 333.08' to the point
     of beginning; said land being 5.54 (plus or minus) 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:

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<PAGE>
 
     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(degrees) 04' 57" W, 197.69' to the point of beginning (N 792,156.0, E
     234,462.0); thence S 0(degrees) 00" W, 82.00'; thence N 90(degrees) 00"
     w, 52.00'; thence N 0(degrees) 00' W, 82.00'; thence N 90(degrees) 00' E,
     52.00 to the point of beginning' said land being 0.10 (plus or minus)
     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(degrees) 51' 29" E, 267.79' to the point of beginning (N 793,238.0 E
     233,503.0); thence N 90(degrees) 00' E, 399.23'; thence S 0(degrees) 00' W,
     50.00'; thence N 90(degrees) 00' W, 10.00'; thence S 0(degrees) 00' W,
     40.00'; thence N 90(degrees) 00' W, 136.23'; thence N 0(degrees) 00' W,
     80.00'; thence N 90(degrees) 00' W, 50.00'; thence S 0(degrees) 00' W,
     10.00'; thence N 90(degrees) 00' W, 54.00'; thence S 0(degrees) 00' W,
     40.00'; thence N 90(degrees) 00' E, 65.00'; thence S 0(degrees) 00' W,
     30.00'; thence N 90(degrees) 00' W, 150.00'; thence N 0(degrees) 00' W,
     17.00'; thence N 90(degrees) 00' W, 64.00'; thence N 0(degrees) 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(degrees) 16' 34" E, 439.77' to the point of beginning (N 792,814.67, E
     233,534.32'); thence N 90(degrees) 00' E, 36.30'; thence N 0(degrees) 00'
     W, 20.50'; thence N 90(degrees) 00' E, 72.26'; thence N 0(degrees) 00' W,
     14.83'; thence N 90(degrees) 00' E, 110.50'; thence S 0(degrees) 00' W,
     42.58'; thence N 90(degrees) 00' E, 26.00'; thence S 0(degrees) 00' W,
     81.00' thence N 90(degrees) 00' W, 51.00' thence N 0(degrees) 00" W,
     25.12'; thence N 90(degrees) 00' W, 72.26'; thence N 90(degrees) 00' W,
     20.50'; thence N 0(degrees) 00' W, 36.30'; thence N 0(degrees) 00' W,
     34.00' to the point of beginning' said land being 0.47 (plus or minus)
     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

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<PAGE>
 
     Coordinate System; thence S 62(degrees) 01' 33" E, 637.83' to the point of
     beginning (N 792,851.0, E 233,813.33); thence N 90(degrees) 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(degrees) 00; thence S 0(degrees) 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(degrees) 00'; thence N 90(degrees) 00' W. 34.00'; thence N
     0(degrees) 00' W, 99.79'; thence N 90(degrees) 00' W. 69.00'; thence N
     59(degrees) 47' 19" W, 91.42'; thence N 90(degrees) 00' W, 64.67'; thence N
     0(degrees) 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, is, 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(degrees) 38' 59" E, 253.41' to the point of beginning (N 793,165.00 E
     233,503.00); thence N 90(degrees) 00' E, 64.00'; thence S 0(degrees) 00' E,
     17.00'; thence N 90(degrees) 00' E, 150.00; thence N 0(degrees) 00' 5E,
     30.00'; thence N 90(degrees) 00' W, 65.00'; thence N 0(degrees) 00' E,
     40.00'; thence N 90(degrees) 00' E, 54.00'; thence N 0(degrees) 00' E,
     10.00'; thence N 90(degrees) 00' E, 50.00'; thence S 0(degrees) 00' E,
     80.00'; thence N 90(degrees) 00' 1E, 136.23'; thence N 0(degrees) 00' E,
     40.00'; thence N 90(degrees) 00' E, 75.00'; thence S 0(degrees) 00' E,
     78.00;' thence N 90(degrees) 00' W, 464.23'; thence 0(degrees) 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

                                     A-11
<PAGE>
 
     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

                                      A-12
<PAGE>
 
     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(degrees) 11' 16" E 381.63' to the point of beginning (N 793,790.00 E
     233,241.60); thence N 90(degrees) 00' 00" E 760.00'; thence S 0(degrees)
     00' 00" E 102.00'; thence N 90(degrees) 00' 100" E 128.04'; thence S
     0(degrees) 00' 00" E 960.48'(at existing utility bridge)' the N 90(degrees)
     00' 00" W 13.00'; thence N 0(degrees) 00 00" W 672.48', thence N
     90(degrees) 00' 00 W 875.04'; thence N 0(degrees) 00' 00" E 390.00' to the
     point of beginning; said land being 7.85(plus or minus) 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 1993 Leased Land and railroads, public roads
     and highways and the Chattahoochee River and to permit passage between the
     1993 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 1993 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,

                                      A-13
<PAGE>
 
     and other similar facilities to the 1993 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 1993 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 1993 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 1993 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 1993 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 1993 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 1993 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 1993 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

                                      A-14
<PAGE>
 
     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 1993 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 1993 Leased Land
     as long as any such equipment, structures or other improvements remain
     standing, and to construct and maintain similar encroachments on the 1993
     Leased Land in respect of any additional improvements constructed adjacent
     to the 1993 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 1993 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 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; 
 

                                      A-15
<PAGE>
 
(7)  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;

(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; and

(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 and Series 1995A.










                                     A-16