<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
P. H. GLATFELTER COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
P.H. Glatfelter logo
P. H. GLATFELTER COMPANY
228 SOUTH MAIN STREET
SPRING GROVE, PENNSYLVANIA 17362
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 22, 1998
---------------------
TO THE SHAREHOLDERS:
The annual meeting of shareholders of P. H. Glatfelter Company will be held
at the Company's principal office, 228 South Main Street, Spring Grove,
Pennsylvania, on Wednesday, April 22, 1998 at 10:00 A.M. for the following
purposes:
1. To elect three members of the Board of Directors to serve for full
three-year terms expiring in 2001;
2. To consider two shareholder proposals; and
3. To transact such other business as may properly come before the
Meeting.
Only holders of Common Stock of record on the transfer books of the Company
at the close of business on February 25, 1998 will be entitled to notice of and
to vote at the Meeting.
It is important that your shares be represented and voted at the Annual
Meeting. Whether or not you currently intend to be present personally at the
Annual Meeting, you are urged to complete, date, sign and return the
accompanying proxy in the enclosed, self-addressed envelope requiring no postage
if mailed in the United States. You may still vote in person if you do attend
the Annual Meeting.
R. S. Wood signature
R. S. WOOD,
Secretary
March 13, 1998
<PAGE> 3
P. H. GLATFELTER COMPANY
PROXY STATEMENT
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors of P. H.
Glatfelter Company (the "Company"), 228 South Main Street, Spring Grove,
Pennsylvania 17362, in connection with the 1998 annual meeting of shareholders
of the Company (the "Annual Meeting" or "Meeting"). Copies of this proxy
statement and the accompanying proxy are being mailed to the holders of Common
Stock on or after March 13, 1998. The proxy may be revoked by a shareholder at
any time prior to its use by giving written notice of such revocation to the
Secretary of the Company, by appearing at the Meeting and voting in person or by
the timely submission of a properly executed later dated proxy. The expense of
this solicitation will be paid by the Company. Some of the officers and other
employees of the Company may solicit proxies personally and by telephone.
Holders of Common Stock of record at the close of business on February 25,
1998 will be entitled to one vote per share so held of record on all business of
the Meeting, except that the holders have cumulative voting rights in elections
of directors. Therefore, each shareholder is entitled to as many votes in the
election of directors of each class as shall equal the number of his shares of
Common Stock multiplied by the number of directors of such class to be elected.
A shareholder may cast all such votes for a single nominee or may distribute
them between two or more nominees within such class as he sees fit. The Company
had 42,164,404 shares of Common Stock outstanding on the record date. Under
Pennsylvania law and the by-laws of the Company, the presence at the Annual
Meeting, in person or by proxy, of shareholders entitled to cast at least a
majority of the votes that all shareholders are entitled to cast on a particular
matter will constitute a quorum for the purposes of consideration and action on
such matter. If the proxy is signed and returned without directions, the shares
will be voted as indicated in the Proxy Statement by the persons named in the
accompanying proxy. The votes will be counted by judges of election appointed by
the Company.
ELECTION OF DIRECTORS
Three directors are to be elected at the Annual Meeting to serve three-year
terms expiring on the date of the 2001 annual meeting of shareholders and until
their respective successors are elected and shall qualify. The persons named in
the accompanying proxy intend to vote for the election of Roger S. Hillas, Paul
R. Roedel and John M. Sanzo for terms expiring in 2001, unless authority to vote
for one or more of such nominees is specifically withheld in the proxy. Messrs.
Hillas, Roedel and Sanzo are currently directors of the Company. The persons
named in the proxy will have the right to vote cumulatively and to distribute
their votes among the nominees as they consider advisable. The three nominees
for election as directors for terms expiring in 2001 receiving the highest
number of votes cast by shareholders entitled to vote thereon, will be elected
to serve on the Board of Directors. Votes that are withheld will be counted in
determining the presence of a quorum, but will have no effect on the vote. The
Board of Directors is informed that all the nominees are willing to serve as
directors, but if any of them should decline to serve or become unavailable for
election as a director at the Meeting, an event which the Board of Directors
does not anticipate, the persons named in the proxy will vote for such nominee
or nominees as may be designated by the Board of Directors unless the Board of
Directors reduces the number of directors accordingly.
The following table sets forth information as to the nominees and the other
persons who are to continue as directors of the Company after the Annual
Meeting. The offices referred to in the table are offices of the Company unless
otherwise indicated. For information concerning the number of shares of Common
Stock of
<PAGE> 4
the Company owned by each director and all directors and officers as a group as
of February 25, 1998, see "Ownership of Common Stock."
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPAL OCCUPATION AND
ELECTED A BUSINESSES DURING LAST FIVE
NAME AGE DIRECTOR YEARS AND CURRENT DIRECTORSHIPS
---- --- ---------- -------------------------------
<S> <C> <C> <C>
Nominees to be elected for terms expiring in 2001:
Roger S. Hillas 70 1964 Retired; Chairman and Chief Executive Officer,
Meritor Savings Bank, prior to December 1992;
Director of Consolidated Rail Corporation, Toll
Bros., Inc. and The Bon-Ton Stores, Inc.
Paul R. Roedel 70 1992 Retired; Chairman and Chief Executive Officer,
Carpenter Technology Corporation, manufacturer
of specialty metals, prior to July 1992;
Director of GPU, Inc.
John M. Sanzo 48 1992 Private Financial Consultant since June 1994;
President, Edison Control Corporation,
manufacturer of circuit indicators for electric
utility industry, from November 1991 to June
1994; Managing Director, The First Boston
Corporation, an investment bank, prior to
August 1991
Directors continuing for terms expiring in 2000:
Robert E. Chappell 53 1989 Chairman and Chief Executive Officer, Penn
Mutual Life Insurance Company since January 1,
1997; President and Chief Executive Officer,
Penn Mutual Life Insurance Company from April
1, 1995 to December 31, 1996; President and
Chief Operating Officer, Penn Mutual Life
Insurance Company from January 1994 to April
1995; Executive Vice President, PNC Bank Corp.
(formerly PNC Financial Corp.), a bank holding
company, from January 1992 to December 1993;
Director of Quaker Chemical Corporation
George H. Glatfelter II(1) 46 1992 Senior Vice President since September 1995;
Vice President--General Manager, Glatfelter
Paper Division from May 1993 to September 1995;
General Manager, Glatfelter Paper Division
prior to May 1993
Thomas C. Norris 59 1976 Chairman, President and Chief Executive Officer
Richard L. Smoot 57 1994 President and Chief Executive Officer, PNC
Bank, National Association, Philadelphia/South
Jersey markets since October 1995; President
and Chief Executive Officer, PNC Bank, National
Association, Philadelphia prior to October
1995; Director of Philadelphia Suburban
Corporation
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPAL OCCUPATION AND
ELECTED A BUSINESSES DURING LAST FIVE
NAME AGE DIRECTOR YEARS AND CURRENT DIRECTORSHIPS
---- --- ---------- -------------------------------
<S> <C> <C> <C>
Directors continuing for terms expiring in 1999:
Nicholas DeBenedictis 52 1995 Chairman and Chief Executive Officer of
Philadelphia Suburban Corporation since May
1993; President and Chief Executive Officer of
Philadelphia Suburban Corporation and Chairman
of Philadelphia Suburban Water Company from
July 1992 to May 1993; Director of Philadelphia
Suburban Corporation, Met-Pro Corp. and
Provident Mutual Life Insurance Company
George H. Glatfelter(1) 71 1970 Retired; former Vice President--Manufacturing,
Spring Grove Mill
M. A. Johnson II 64 1970 Retired; former Executive Vice President,
Treasurer and Chief Financial Officer
Richard W. Kelso 60 1997 President and Chief Executive Officer, PQ
Corporation, a manufacturer of industrial
inorganic chemicals; Director of SPS
Technologies and PQ Corporation
</TABLE>
- ---------------
(1) George H. Glatfelter II is the son of George H. Glatfelter.
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND ITS COMMITTEES
BOARD OF DIRECTORS
The Board of Directors held seven meetings during 1997. Each of the
incumbent directors attended at least 75% of the aggregate of all meetings of
the Board of Directors and committees thereof on which he served in 1997. The
standing committees of the Board are the Executive Committee, the Audit
Committee, the Compensation Committee, the Finance Committee, the Nominating
Committee and the Employee Benefits Committee. The members of all of these
committees are appointed by the Board.
COMMITTEES
Executive Committee
The Executive Committee consists of five members of the Board: G. H.
Glatfelter, R. S. Hillas, M. A. Johnson II, T. C. Norris and R. L. Smoot. The
Executive Committee has the authority to exercise all of the powers of the Board
of Directors between meetings of the Board, except the power to amend the
Company's By-Laws, submit matters to shareholders for approval, create or fill
vacancies in the Board of Directors and repeal or modify any prior action of the
Board of Directors that by its terms can be repealed or amended only by the
Board. The Executive Committee held no meetings during 1997.
Audit Committee
The Audit Committee consists of five members of the Board: R. E. Chappell,
N. DeBenedictis, R. S. Hillas, P. R. Roedel and J. M. Sanzo, none of whom are
members of the Company's management. Generally, the Audit Committee (i)
recommends to the Board of Directors the independent accountants to be
3
<PAGE> 6
appointed for the Company, (ii) meets with the independent accountants, the
chief internal auditor and corporate officers to review matters relating to
corporate financial reporting and accounting procedures and policies, adequacy
of financial, accounting and operating controls and the scope of the audits of
the independent accountants and internal auditors, including in the case of the
independent accountants, the fees for such services and (iii) reviews and
reports on the results of such audits to the Board of Directors. The Audit
Committee held one meeting during 1997.
In accordance with the recommendations of the Audit Committee, the Board of
Directors has appointed Deloitte & Touche LLP, independent certified public
accountants, to audit the consolidated financial statements of the Company and
its consolidated subsidiaries for the year ending December 31, 1998. A
representative of Deloitte & Touche is expected to attend the Annual Meeting and
will be given the opportunity to make a statement if he or she desires to do so
and will be available to respond to appropriate questions.
Compensation Committee
The Compensation Committee consists of five members of the Board: N.
DeBenedictis, R. S. Hillas, R. W. Kelso, P. R. Roedel and R. L. Smoot. The
responsibilities of the Compensation Committee are described below (see "Report
of Compensation Committee on Executive Compensation"). The Compensation
Committee held three meetings during 1997.
Finance Committee
The Finance Committee consists of six members of the Board: R. E. Chappell,
G. H. Glatfelter II, M. A. Johnson II, R. W. Kelso, T. C. Norris and J. M.
Sanzo. The Finance Committee is responsible for overseeing the Company's
financial affairs and recommending such financial actions and policies,
including those with respect to dividends, as are most appropriate to
accommodate the Company's strategic and operating strategies while maintaining
its sound financial condition. The Finance Committee held five meetings during
1997.
Nominating Committee
The Nominating Committee consists of four members of the Board: R. S.
Hillas, T. C. Norris, J. M. Sanzo and R. L. Smoot. The responsibilities of the
Nominating Committee include the identification and recruitment of effective
candidates for nomination as directors and officers of the Company. The
Nominating Committee held three meetings during 1997. The Nominating Committee
will consider as nominees for election to the Board persons recommended by the
holders of Common Stock of the Company. Any shareholder desiring to recommend a
nominee for election at the 1999 annual meeting of shareholders should submit
such nomination in writing to the Secretary of the Company by November 13, 1998.
Employee Benefits Committee
The Employee Benefits Committee consists of two members of the Board, G. H.
Glatfelter II and T. C. Norris, and three officers or employees of the Company,
D. H. Landis, R. P. Newcomer and R. S. Wood. The responsibilities of the
Employee Benefits Committee include the general overview of the provisions of
various pension plans of the Company and periodic review of pension fund
performance. The Employee Benefits Committee is also responsible for
administering the Company's various profit sharing, 401(k) savings and stock
ownership plans and for conducting a periodic review of profit sharing and
savings plan fund performance. The Employee Benefits Committee held two meetings
during 1997.
4
<PAGE> 7
COMPENSATION OF DIRECTORS
Non-employee directors are paid a retainer fee of $7,500. In addition,
non-employee directors are paid $1,000 for every board meeting attended plus
$500 for every committee meeting attended. Non-employee committee chairpersons
also receive an annual committee-related retainer of $1,000.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
from the Company and its subsidiaries which was awarded to, earned by, or paid
to the Company's Chief Executive Officer and each of the Company's four other
most highly compensated executive officers in 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------- ------------------------- -------------
NAME AND RESTRICTED SECURITIES
PRINCIPAL FISCAL STOCK UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY($) BONUS($)(1) AWARDS($)(2) OPTIONS PAYOUTS($)(3) COMPENSATION($)(4)
- ------------------------- ------ --------- ----------- ------------ ---------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
T. C. Norris............. 1997 409,250 274,807 0 100,000 317,500 4,775
Chairman, President 1996 390,002 399,483 0 0 1,662,500 4,525
and Chief Executive 1995 355,052 370,964 0 0 0 10,567
Officer
R. P. Newcomer........... 1997 191,880 97,596 0 12,930 0 4,750
Senior Vice President 1996 167,880 143,069 0 13,450 0 4,500
and Chief Financial 1995 140,277 191,914 0 18,230 0 4,122
Officer
G. H. Glatfelter II...... 1997 191,580 97,468 0 12,930 0 0
Senior Vice President 1996 177,330 143,837 0 13,450 0 0
1995 157,593 152,416 0 15,580 0 0
J. F. Myers.............. 1997 192,000 77,218 0 8,760 0 4,482
Vice President-- 1996 182,952 113,348 0 9,115 831,250 4,498
Manufacturing 1995 166,320 191,953 0 18,230 0 4,990
Technology
E. J. Gillis............. 1997 168,900 63,647 0 6,510 0 2,379
Vice President-- 1996 159,336 58,281 0 11,775 532,000 4,500
Marketing, Glatfelter 1995 144,852 132,077 0 13,550 0 4,345
Paper Division
</TABLE>
- ---------------
(1) Reflects distributions under a broad-based profit sharing plan payable to
all salaried employees and bonuses under the Management Incentive Plan for
executive officers and other senior level employees.
(2) At December 31, 1997, Mr. Norris held restricted stock awards for 40,000
shares of common stock, 20,000 shares of which will vest on each of May 1,
1998 and May 1, 1999 pursuant to the 1988 Restricted Common Stock Award Plan
(the "1988 Plan"). At December 31, 1997, the fair market value of the shares
subject to awards held by Mr. Norris was $745,000. No dividends are paid on
shares subject to restricted stock awards which have not vested. The table
does not include performance shares described under "Long-Term Incentive
Plan Awards."
(3) For 1997, reflects payouts of awards made in 1991, which vested on May 1,
1997 pursuant to the 1988 Plan. For 1996, reflects payouts of awards made in
1988, which vested on May 1, 1996 pursuant to the 1988 Plan.
(4) Other compensation reported for 1997 represents (a) matching contributions
under the Company's 401(k) Savings Plan and (b) in the case of Mr. Norris,
the $25 payable to him as an employee at the Company's Spring Grove Mill
with service in excess of 25 years.
5
<PAGE> 8
OPTION GRANTS
The following table sets forth information concerning the number of options
granted during 1997 and the value of unexercised options to purchase Common
Stock held by the named executive officers at December 31, 1997. Under the terms
of the stock options granted during 1997, none of the options were exercisable
until 1998.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
NUMBER OF % OF
SECURITIES TOTAL GRANT
UNDERLYING OPTIONS DATE
OPTIONS GRANTED TO EXERCISE PRESENT
GRANTED EMPLOYEES PRICE EXPIRATION VALUE
NAME (#)(1) DURING 1997 ($/SH)(1) DATE ($#)(2)
---- ---------- ----------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
T. C. Norris....................... 100,000 28.3 17.88 12/31/06 482,000
R. P. Newcomer..................... 12,930 3.7 17.88 12/31/06 62,323
G. H. Glatfelter II................ 12,930 3.7 17.88 12/31/06 62,323
J. F. Myers........................ 8,760 2.5 17.88 12/31/06 42,223
E. J. Gillis....................... 6,510 1.8 17.88 12/31/06 31,378
</TABLE>
- ---------------
(1) Options granted to Mr. Norris became exercisable in full on January 1, 1998.
Upon retirement Mr. Norris may exercise options until the first to occur of
five years from the date of such retirement or December 31, 2006. Options
granted to the other named executive officers are exercisable with respect
to 25% of the total number of shares subject to option on each of January 1,
1998 and January 1 of the following three years, provided the grantee of the
option has been continuously employed by the Company since the date of
grant.
(2) The estimated present value at grant date of options granted during 1997 has
been calculated using the Black-Scholes option pricing model, based upon the
following assumptions: estimated time until exercise: ten years; a risk-free
interest rate of 6.58%, representing the interest rate on a U.S. Government
zero-coupon bond on the date of grant with a maturity corresponding to the
estimated time until exercise; a volatility rate of 24.6%; and a dividend
yield of 3.92%, representing the current $0.70 per share annualized
dividends divided by the fair market value of the Common Stock on the date
of grant. The approach used in developing the assumptions upon which the
Black-Scholes valuation was done is consistent with the requirements of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation."
6
<PAGE> 9
YEAR-END OPTION VALUES
The following table sets forth information concerning options exercised in
1997 and the value of unexercised options to purchase Common Stock held by the
named executive officers at December 31, 1997.
AGGREGATED OPTION EXERCISES IN 1997
AND OPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SECURITIES UNDERLYING OPTIONS AT
SHARES OPTIONS AT 12/31/97 12/31/97($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
T. C. Norris........... 0 n/a 45,000 100,000 29,531 75,000
R. P. Newcomer......... 0 n/a 37,478 32,132 28,751 31,921
G. H. Glatfelter II.... 0 n/a 36,153 30,807 27,674 30,844
J. F. Myers............ 0 n/a 36,394 24,711 27,159 24,016
E. J. Gillis........... 0 n/a 29,719 22,116 23,618 25,351
</TABLE>
- ---------------
(1) Value is measured by the difference between the closing price for the
Company's Common Stock on the American Stock Exchange on December 31, 1997
and the exercise price of the option.
LONG-TERM INCENTIVE PLAN AWARDS
The following table sets forth information concerning the number of
performance shares granted in 1997 under the Company's 1992 Key Employee
Long-Term Incentive Plan.
LONG-TERM INCENTIVE PLAN AWARDS IN 1997
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERFORMANCE OR NON-STOCK PRICE BASED PLAN
SHARES, UNITS OTHER PERIOD ---------------------------------
OR OTHER UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS(1) OR PAYOUT(2) SHARES(#) SHARES(#) SHARES(#)
---- ------------- ---------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
T. C. Norris...................... 0 -- -- -- --
R. P. Newcomer.................... 3,720 4 years 930 3,720 7,440
G. H. Glatfelter II............... 3,720 4 years 930 3,720 7,440
J. F. Myers....................... 2,520 4 years 630 2,520 5,040
E. J. Gillis...................... 1,930 4 years 483 1,930 3,860
</TABLE>
- ---------------
(1) Performance shares awarded in 1997 under the 1992 Key Employee Long-Term
Incentive Plan will be paid at the end of the performance period in amounts
based upon the Company's success in achieving certain performance goals,
which are a combination of (i) return on average shareholders' equity and
(ii) pre-tax earnings growth for the period. Payouts of earned performance
shares will be made in common stock of the Company. The performance shares
will be forfeited upon termination of a participant's employment with the
Company during the performance period for any reason other than death or
disability.
(2) The performance period is from January 1, 1997 to December 31, 2000.
7
<PAGE> 10
EMPLOYEE BENEFIT PLANS
Salary Continuation Plan
The Company has a Salary Continuation Plan which provides for the payment
for ten years following the retirement or death of the participant of an amount
which on an actuarial basis as computed in 1987, was expected to equal the
difference between 55% of the participant's then projected compensation at age
60 and the sum of then projected Social Security and Company pension plan
retirement benefits to which the participant is entitled. If the participant
dies prior to retirement, the benefits are payable to the participant's
beneficiary. Compensation for purposes of the Salary Continuation Plan generally
includes salary plus cash received and deferred compensation accrued under the
Company's Management Incentive Plan and the former Salaried Employees' Profit
Sharing Plan and Company contributions under the Employee Stock Purchase Plan.
The Company has purchased insurance on the lives of the participants to provide
funds to help offset the costs of benefits payable under the Plan. T.C. Norris
is the only active employee who participates in the Plan.
Pension Plan
Officers and directors who are full time employees of the Company
participate in the P.H. Glatfelter Company Retirement Plan for Salaried
Employees (the "Pension Plan"). Benefits payable under the Pension Plan are
based upon years of service and average annual compensation for the five
consecutive calendar years during the ten years preceding the year of retirement
that yield the highest average. Retirement benefits under the Pension Plan are
not subject to any deduction for Social Security benefits. Retirement benefits
accrued under the Pension Plan for Employees of the Ecusta Division are reduced
by any pension benefits payable under a pension plan maintained by a predecessor
employer. Annual compensation for purposes of the Pension Plan generally
includes salary as listed in the Summary Compensation Table on page 5
("Compensation Table") plus bonus listed in the Compensation Table for the prior
year. To the extent deferral of an award under the Company's Management
Incentive Plan causes a reduction in a participant's pension under the Pension
Plan, the Management Incentive Plan provides a pension supplement.
Employees in the Spring Grove Division who earned a vested benefit under
the Pension Plan before May 1, 1970 may receive a benefit, if greater than the
usual benefit, which does not give effect to years of service, and is based on
plan earnings, which consist of the sum of average compensation in excess of
annual base salary for the five year period prior to the year of actual
retirement, or, if earlier, the year in which the employee attains age 60, and
the annual base salary as of the April 30th closest to the retirement date or,
if earlier, the April 30th closest to the 60th birthday. Annual compensation for
such participants generally means the salary and bonus amounts listed in the
Compensation Table.
The Company has a Supplemental Executive Retirement Plan ("SERP") which
provides participants with pension benefits that would have been payable under
the Pension Plan but for certain legal limits. The benefits payable under the
SERP to each participant are equal to the difference between the benefits that
would have been payable under the Pension Plan in the absence of any legal
limits and the benefits actually payable under the Pension Plan. Participants
may elect to receive the benefits in any form permitted under the Pension Plan,
or in the form of a single sum.
The following table shows the estimated annual retirement benefits payable
in the form of a single life annuity at normal retirement age under the Pension
Plan, the SERP and the pension supplement provided under the Management
Incentive Plan.
8
<PAGE> 11
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE
ANNUAL ESTIMATED ANNUAL RETIREMENT BENEFIT BASED ON YEARS OF SERVICE
FIVE YEAR PLAN -------------------------------------------------------------
COMPENSATION($) 15 20 25 30 35
--------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
125,000............... 25,782 34,376 42,970 46,095 49,220
150,000............... 31,032 41,376 51,720 55,470 59,220
175,000............... 36,282 48,376 60,470 64,845 69,220
200,000............... 41,532 55,376 69,220 74,220 79,220
250,000............... 52,032 69,376 86,720 92,970 99,220
300,000............... 62,532 83,376 104,220 111,720 119,220
400,000............... 83,532 111,376 139,220 149,220 159,220
500,000............... 104,532 139,376 174,220 186,720 199,220
600,000............... 125,532 167,376 209,220 224,220 239,220
700,000............... 146,532 195,376 244,220 261,720 279,220
800,000............... 167,532 223,376 279,220 299,220 319,220
</TABLE>
The following executive officers who participate in the Pension Plan had the
indicated credited years of service at December 31, 1997: T. C. Norris: 38
years, R. P. Newcomer: 25 years, G. H. Glatfelter II: 21 years, J. F. Myers: 30
years, and E. J. Gillis: 24 years.
Of the named executive officers at December 31, 1997, Mr. Norris and Mr.
Myers earned a vested benefit under the Pension Plan before May 1, 1970 and
their accrued benefits at age 65 in the form of a single life annuity under such
plan, calculated without respect to service, were $243,449 and $100,909 per
year, respectively, which exceeds the benefit that each of them would be
entitled to receive under the above table.
The Company has a Supplemental Management Pension Plan which provides for
the payment of an early retirement supplement to any participant who retires
before reaching age 65 and elects to defer receipt of benefits under the Pension
Plan until he reaches age 65 or, if earlier, until the first day of the 36th
month following his retirement. The monthly payment equals the monthly amount
calculated for the participant under the Pension Plan and the SERP, but with the
addition of three years to the participant's age. Payments end when the
participant or the participant's beneficiary begins to receive payments under
the Pension Plan or, if there is no beneficiary, at death.
COMPENSATION COMMITTEE INTERLOCK
AND INSIDER PARTICIPATION
The Compensation Committee consists of five members of the Board of
Directors: P. R. Roedel (Chairman), N. DeBenedictis, R. S. Hillas, R. W. Kelso
and R. L. Smoot.
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and approves the elements of the
Company's executive compensation program and assesses the effectiveness of the
program as a whole. The Compensation Committee's responsibilities include: (i)
reviewing annually (A) with the Company's Chief Executive Officer, T. C. Norris,
the job performance of corporate officers and key senior management employees of
the Company and (B) the job performance of the Company's Chief Executive Officer
as measured against financial and other objectives and the Company's
achievements as compared to certain other companies in the paper and forest
products industry, (ii) reviewing and establishing the level of salaries and
benefits for the Chief Executive Officer, other corporate officers and other key
senior management employees of the Company, including but not limited to
benefits under the Company's long-term incentive plan, profit sharing plan,
defined benefit and contribution
9
<PAGE> 12
plans and other welfare benefit plans, and (iii) reviewing and approving the
participants in, and the operating rules for awards under, the Company's
Management Incentive Plan.
The Compensation Committee from time to time reviews the Company's entire
executive compensation structure through an examination of compensation
information for comparable companies and certain broader-based data, including
data relating to the geographic areas in which the Company has facilities,
compiled by the Company and by compensation and other consulting firms. As used
herein, comparable companies refer to other companies in the paper and forest
products industry (both publicly and privately owned) selected by management as
being the companies in the industry which on an overall basis are most similar
to the Company in relation to size, products and financial and other
characteristics and in certain cases to general industry and nondurable
manufacturing companies of roughly the same revenue size as the Company. Certain
of the comparable companies are included in the Dow Jones Paper Products
Industry Group and/or the S&P 500, and therefore are represented in the Stock
Performance Chart below. In examining the compensation paid by the comparable
companies, the Compensation Committee does not analyze the stock performance of
such companies, but does examine their general financial performance.
Executive Compensation Policies. The Compensation Committee has generally
structured the Company's executive compensation program (i) to be competitive
with compensation programs of comparable companies to enable the Company to
attract, retain and motivate a highly qualified executive management team, (ii)
to provide a significant portion of variable-based compensation that is
contingent upon objectively-measured performance to align executive officers'
interests with those of the Company's shareholders, and (iii) to include
appropriate and flexible design features in such programs which will be
responsive to the peculiarities of the paper industry and to the changing needs
of the Company. The elements of the Company's executive compensation program are
salary, annual incentive compensation, long-term incentive compensation and
other benefits. From time to time the Compensation Committee solicits the advice
of compensation and other consulting firms to evaluate the Company's executive
compensation program in order to ensure that such program is competitive with
compensation programs of comparable companies.
The Compensation Committee intends that awards made under the Long-Term
Incentive Plan and the Management Incentive Plan will qualify as
performance-based compensation that will be deductible for federal income tax
purposes under Section 162(m) of the Code.
Salary. The Company's policy is to pay fair salaries at levels which are
sufficient to attract and retain high caliber individuals based on the relative
value of each position, as measured against comparable companies. The
Compensation Committee assigns each executive position a salary range based on
the salary level for similar positions at comparable companies. Ranges are
adjusted by the Compensation Committee periodically.
Generally, executive officer salaries are reviewed and approved annually.
The salary for each executive is set by the Compensation Committee after an
assessment of his or her performance and the relation of his or her salary to
the midpoint for the relevant salary range, as well as the Company's financial
results and general economic conditions. The factors that were considered in
granting salary increases to executive officers for 1997 were as follows: (i)
the Company's financial performance in 1996, (ii) the salary levels for a number
of the executive officers were significantly below the midpoint salary levels of
the salary grades for their respective positions and the midpoint salary levels
for positions of similar scope and responsibility at comparable companies and,
(iii) the Compensation Committee's assessment of the officer's performance as
evaluated and reported to the Compensation Committee by the Chief Executive
Officer.
Annual Incentive Compensation. The Compensation Committee establishes
incentive bonus opportunities designed to encourage greater efforts on the part
of key salaried employees to increase the profits of the Company. The incentive
bonus opportunities potentially represent a significant portion of total
compensation and are intended to correlate with the financial performance of the
Company or one or more divisions thereof. The underlying objectives of the
Company's Management Incentive Plan are to assure that incentive bonus
10
<PAGE> 13
awards are at risk annually, to reward key mill management personnel on the
basis of both mill and corporate financial results and to provide an incentive
bonus award structure for key salaried employees of the Company that is similar
to that of comparable companies.
To establish financial targets for payment of incentive awards, the Company
and each of its mills are treated as separate profit centers. In addition, the
Glatfelter Paper Group profit center represents a combination of the Spring
Grove and Neenah mill profit centers. The incentive bonus award for all profit
centers, exclusive of the Corporate profit center, is based on a combination of
the return on capital employed (as defined for each of the individual mill
profit centers) and the return on shareholders' equity (as defined) of the
Company. The incentive bonus award for the Corporate profit center is based
solely on return on shareholders' equity (as defined) of the Company.
The Compensation Committee establishes maximum, target and minimum
financial objectives to be achieved for each profit center each year. Under the
Plan, when establishing such financial objectives, the Compensation Committee
considers the current economic climate, the forecast for the Company's business
and the historical financial results of the Company. This methodology is
intended to induce management to enhance the profitability of the Company
throughout the full business cycle, and therefore to provide value to the
shareholders of the Company. The Compensation Committee believes that executive
officers should not receive any incentive bonus if the Company does not achieve
annually established minimum financial objectives. If the minimum financial
objectives are achieved, the incentive award for an executive officer would be
determined by multiplying a percentage derived from the financial performance of
such officer's respective profit center by the midpoint of the salary range for
such officer.
The financial performance of the Company's Corporate profit center for
1997, which is the relevant profit center for all but one of the named executive
officers, was halfway between the minimum and the target financial objectives
established by the Compensation Committee. The financial performance for the
Glatfelter Paper Group profit center for 1997, which is the relevant profit
center for Mr. Gillis, was slightly lower than the target financial objectives
established by the Compensation Committee. The incentive bonus payments for
certain named executive officers were higher on a relative basis for 1996 as
compared to 1995 due to such officers' promotions in October 1995 (i.e. their
midpoint base salary, which is used in determining their incentive awards, was
higher in 1996 than in 1995).
Long-Term Incentive Compensation. The Company's Long-Term Incentive Plan
enables the Company to offer key employees equity interests in the Company and
other incentive awards, including performance-based stock incentives. Certain
features of the Plan (i.e. stock options, performance shares, performance units
and restricted stock) are similar to long-term incentives offered by many of the
comparable companies. The primary purposes of the Plan are to (i) attract,
retain, motivate and reward key employees, (ii) provide target long-term
incentive award opportunities which are competitive with comparable companies,
(iii) assure that the awards issued pursuant to the Plan reflect the cyclical
and long-term nature of the paper industry, (iv) enable senior executives to
acquire appropriate levels of equity interest in the Company in order to
increase the alignment of their interests with those of shareholders and (v)
otherwise strengthen the mutuality of interests between key employees and the
Company's shareholders.
In 1995, the Company adopted a long-term incentive program, developed at
the direction of the Compensation Committee by an executive compensation
consulting firm, under which stock options and/or performance shares are granted
annually to key employees. The value of such awards is based upon the value of
awards granted to positions of similar scope and responsibility within
comparable companies. Stock options have an exercise price equal to the fair
market value of the Company's Common Stock at the time of the grant and
generally become exercisable in 25% increments on January 1 of the next four
years. Contingent awards of performance shares are generally made on the first
day of the four-year performance period. At the end of the four-year performance
period, the number of shares earned is based upon the level of achievement of
two factors: return on average shareholders' equity and pre-tax earnings growth
for the four-year performance
11
<PAGE> 14
period. If the threshold return on average shareholders' equity is not attained,
no shares are earned. Above the threshold goals, the contingent award is reduced
if the target goals are not met and such contingent award is supplemented if the
target goals are exceeded. Payouts of earned performance shares are made in
Common Stock of the Company at the end of the four-year performance period. The
primary factor considered by the Compensation Committee in setting the amounts
of options and performance shares granted in 1997 were the amounts granted to
officers in positions of similar responsibility by comparable companies.
CEO Compensation. Mr. Norris' salary was increased by 5% effective January
1, 1997. In granting this increase, the Committee considered Mr. Norris'
leadership of the Company during 1996, which was a difficult year for the
industry, when the Company's financial results exceeded its peer group on a
relative basis. The Committee also considered that Mr. Norris' base salary is
below the midpoint for his salary grade.
Mr. Norris' annual incentive bonus award for 1997 reflected the fact that
the financial performance of the Company's Corporate profit center for 1997 was
halfway between the minimum and the target financial objectives established by
the Compensation Committee for 1997.
The Committee also granted Mr. Norris nonqualified stock options effective
January 1, 1997. The value of such options is comparable with the value of
options granted to chief executive officers of comparable companies. The
Committee believes that this form of stock compensation more closely aligns Mr.
Norris' interests with those of the shareholders of the Company.
P. R. Roedel
N. DeBenedictis
R. S. Hillas
R. W. Kelso
R. L. Smoot
12
<PAGE> 15
STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the cumulative
total return on the Company's Common Stock during the five years ended December
31, 1997 with the cumulative total return on the S&P 500 Composite Index and the
Dow Jones Paper Products Industry Group. The comparison assumes $100 was
invested on December 31, 1992 in the Company's Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MEASUREMENT PERIOD P.H. GLATFELTER DOW JONES PAPER
(FISCAL YEAR COVERED) COMPANY S&P 500 PRODUCTS
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 108.40 110.08 107.86
1994 94.19 111.53 120.13
1995 108.07 153.45 137.26
1996 118.14 188.68 144.98
1997 127.20 250.99 157.31
</TABLE>
CERTAIN TRANSACTIONS
R. L. Smoot, a director of the Company, is President and Chief Executive
Officer of PNC Bank, National Association, Philadelphia/South Jersey markets.
PNC Bank, National Association ("PNC Bank"), an indirect subsidiary of PNC Bank
Corp., has a banking relationship with the Company and provides general banking
services and credit facilities. On February 18, 1997, the Company obtained a
$75,000,000 line of credit with PNC Bank. This line of credit, combined with an
already existing $45,000,000 line of credit, allowed the Company to borrow
$116,000,000, $115,000,000 of which was repaid on the same day. The Company paid
a $10,945 fee for this intraday loan. The Company paid $159 in interest in 1997
on the remaining $1,000,000 loan. As of December 31, 1997, the Company had a
$25,000,000 line of credit with PNC Bank. In addition, PNC Bank is one of seven
lending institutions under a $200,000,000 Credit Agreement dated December 22,
1997, which was used to finance the Company's acquisition of the Schoeller &
Hoesch specialty paper business. PNC Bank's committed share of this credit
facility is $31,250,000. As of December 31, 1997, the Company's borrowing under
the Credit Agreement was approximately $48,665,000; PNC Bank's portion of this
loan was approximately $7,604,000. All transactions between the Company and PNC
Bank have been made in the ordinary course of business and on substantially the
same terms as those prevailing at the time for comparable transactions with
other persons.
13
<PAGE> 16
OWNERSHIP OF COMMON STOCK
The following table sets forth as of February 25, 1998 (except as otherwise
noted) the holdings of (i) each person who is known by the Company to own
beneficially more than 5% of the Common Stock of the Company, (ii) each director
and certain executive officers and (iii) all directors and executive officers of
the Company as a group. All stock with respect to which a person has the right
to acquire beneficial ownership within 60 days is considered beneficially owned
by that person.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
(NUMBER OF SHARES) PERCENTAGE
-------------------------------- OF CLASS
VOTING AND/OR (IF GREATER
NAME DIRECT(1) INVESTMENT POWER(2) THAN 1%)
---- --------- ------------------- -----------
<S> <C> <C> <C>
Principal Holders
PNC Bank Corp...................................... 0 16,564,947(3) 39.3%
Fifth Ave. & Wood St.
Pittsburgh, Pa.
P. H. Glatfelter Family Shareholders' Voting 0 13,595,881(4) 32.2%
Trust...........................................
c/o PNC Bank
1600 Market Street
Philadelphia, Pa.
G. H. Glatfelter................................... 0 3,784,319(5) 9.0%
Spring Grove, Pa.
Directors and certain officers (other than those
listed above)
R. E. Chappell..................................... 0 2,000 --
N. DeBenedictis.................................... 2,000 1,000 --
G. H. Glatfelter II................................ 0 59,252(6) --
R. S. Hillas....................................... 0 16,000 --
M. A. Johnson II................................... 10,544 1,536 --
R. W. Kelso........................................ 0 0 --
E. J. Gillis....................................... 12,193 40,804(7) --
J. F. Myers........................................ 39,886 79,588(8) --
R. P. Newcomer..................................... 3,174 53,232(9) --
T. C. Norris....................................... 95,923 151,312(10) --
P. R. Roedel....................................... 200 0 --
J. M. Sanzo........................................ 500 0 --
R. L. Smoot........................................ 500 0 --
All directors and executive officers as a group.... 172,432 4,324,604(11) 10.6%
</TABLE>
- ---------------
(1) Reported in this column are shares held of record.
(2) Does not include shares reported in Direct ownership column. For purposes
of the table, shares of Common Stock are considered beneficially owned by a
person if such person has or shares voting or investment power with respect
to such stock. As a result, the same security may be beneficially owned by
more than one person and, accordingly, in some cases, the same shares are
listed opposite more than one name in the table. Also includes, in some
cases, shares beneficially held by wives or minor children, as to which
beneficial ownership is disclaimed.
(3) Consists of 10,372,570 shares as to which PNC Bank Corp. has sole voting
power; 6,092,511 shares as to which PNC Bank Corp. has shared voting power;
9,719,815 shares as to which PNC Bank Corp. has sole investment power; and
6,304,255 shares as to which PNC Bank Corp. has shared investment power.
The amounts specified for shared voting power and shared investment power
both include 89,348 shares held by PNC Bank as co-trustee with G. H.
Glatfelter. In addition, 13,595,881 shares of the total
14
<PAGE> 17
amount of shares beneficially held by PNC Bank Corp. are deposited in the
Voting Trust (see footnotes (4) and (7)). All shares beneficially held by
PNC Bank Corp., are also considered to be beneficially held by its
subsidiary, PNC Bancorp, Inc., and by PNC Bank, a subsidiary of PNC
Bancorp, Inc. All of the above share amounts are as of December 31, 1997.
(4) Consists of shares beneficially owned as of December 31, 1997 by certain
descendants of Philip H. Glatfelter or the spouses of such descendants,
including shares beneficially owned by G. H. Glatfelter and G. H.
Glatfelter II, which were deposited in the P. H. Glatfelter Family
Shareholders' Voting Trust dated July 1, 1993 (the "Voting Trust"). Shares
deposited in the Voting Trust may be withdrawn subject to certain
conditions. Co-trustees for the Voting Trust are William M. Eyster II,
Katherine G. Costello, Patricia G. Foulkrod, Phillip H. Glatfelter IV, H.
Clinton Vaughan and PNC Bank. Co-trustees (other than PNC Bank) each
represent a family group. The shares deposited in the Voting Trust may be
voted only in accordance with a majority of votes cast by the co-trustees
pursuant to a weighted formula in which (i) each co-trustee (other than PNC
Bank) is entitled to cast such number of votes as is equal to the number of
shares deposited in the Voting Trust in which members of his or her family
group have an interest and (ii) PNC Bank is entitled to cast such number of
votes as is equal to the number of shares deposited in the Voting Trust in
which any fiduciary trust of which PNC Bank is a trustee and which is for
the benefit of one or more Glatfelter family members has an interest. The
co-trustees have no dispositive power with regard to the shares deposited
in the Voting Trust. The Voting Trust will continue until it is terminated
by the co-trustees or all of the shares deposited in the Voting Trust are
withdrawn. The address for each of the co-trustees is c/o PNC Bank, 1600
Market Street, Philadelphia, Pa.
(5) Includes 89,348 shares held as co-trustee with PNC Bank, 905,577 shares (of
which 4,416 shares are also included in the number of shares which he holds
as co-trustee) which G. H. Glatfelter has the right to withdraw from
certain trusts of which PNC Bank is trustee and 2,793,810 shares which G.
H. Glatfelter has the right, on certain conditions, to purchase from
certain trusts of which PNC Bank is trustee. All shares beneficially owned
by G. H. Glatfelter are deposited in the Voting Trust (see footnote (4)).
(6) Includes 46,642 shares subject to the currently exercisable portions of
options. Of the shares beneficially owned by G. H. Glatfelter II, 11,580
are subject to the Voting Trust (see footnote (4)).
(7) Includes 38,177 shares subject to the currently exercisable portions of
options.
(8) Includes 45,421 shares subject to the currently exercisable portions of
options.
(9) Includes 48,630 shares subject to the currently exercisable portions of
options.
(10) Includes 145,000 shares subject to the currently exercisable portions of
options.
(11) Includes 449,212 shares subject to the currently exercisable portions of
options.
G. H. Glatfelter, the Voting Trust, PNC Bank Corp., PNC Bancorp, Inc., and
PNC Bank may be deemed to be "control persons" of the Company for purposes of
the proxy rules and regulations of the Securities and Exchange Commission.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
On December 3, 1996, Mr. Smoot purchased 300 shares of Common Stock but did
not report the purchase until March 13, 1997.
15
<PAGE> 18
SHAREHOLDER PROPOSALS
The Company has been notified that shareholders intend to present the two
proposals set forth below for consideration at the Annual Meeting. The
Securities and Exchange Commission has adopted regulations that govern the
inclusion of such proposals in the Board of Directors' annual meeting proxy
materials.
If any shareholder wishes to present a proposal to the 1999 annual meeting
of shareholders, such proposal must be submitted to the Secretary of the Company
no later than November 13, 1998 if the proposal is to be considered by the Board
of Directors for inclusion in its proxy materials for that meeting.
Abstentions will be counted as present for purposes of determining the
presence of a quorum for purposes of the following shareholder proposals, but
will not be counted as votes cast. Broker non-votes (i.e., shares held by a
broker or nominee as to which the broker or nominee does not have the authority
to vote on a particular matter) will not be counted as present for purposes of
determining the presence of a quorum for purposes of the shareholder proposals
and will not be voted. Accordingly, neither abstentions nor broker non-votes
will have any effect on the outcome of the vote on the shareholder proposals.
THE FOLLOWING PROPOSALS HAVE BEEN CAREFULLY CONSIDERED BY THE BOARD OF
DIRECTORS, WHICH CONCLUDED THAT THEIR ADOPTION WOULD NOT BE IN THE BEST
INTERESTS OF THE COMPANY OR ITS SHAREHOLDERS. FOR THE REASONS STATED AFTER EACH
PROPOSAL AND ITS SUPPORTING STATEMENT, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST EACH PROPOSAL.
SHAREHOLDER PROPOSAL NUMBER 1 -- ELIMINATE CLASSIFIED BOARD OF DIRECTORS
Mr. Charles Miller, having an office address at 23 Park Circle, Great Neck,
New York 11024, beneficial owner of 250 shares of Common Stock, has proposed the
adoption of the following resolution and has furnished the following statement
in support of his proposal:
"RESOLVED, that the shareholders of the Company request that the Board of
Directors take the necessary steps, in accordance with state law, to declassify
the Board of Directors so that all directors are elected annually, such
declassification to be effected in a manner that does not affect the unexpired
terms of directors previously elected.
"SUPPORTING STATEMENT
"The election of directors is the primary avenue for shareholders to
influence corporate governance policies and to hold management accountable for
its implementation of those policies. I believe that the classification of the
Board of Directors, which results in only a portion of the Board being elected
annually, is not in the best interests of the Company and its shareholders.
"I believe that the Company's classified Board of Directors maintains the
incumbency of the current Board and therefore of current management, which in
turn limits management's accountability to shareholders.
"The elimination of the Company's classified Board would require each new
director to stand for election annually and allow shareholders an opportunity to
register their views on the performance of the Board collectively and each
director individually. I believe this is one of the best methods available to
insure that the Company will be managed in a manner that is in the best
interests of the shareholders.
"I believe that concerns expressed by companies with classified boards that
the annual election of all directors could leave companies without experienced
directors in the event that all incumbents are voted out by shareholders, are
unfounded. In my view, in the unlikely event that shareholders vote to replace
all directors, this decision would express shareholder dissatisfaction with the
incumbent directors and reflect the need for change.
"I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION"
16
<PAGE> 19
RESPONSE OF BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR
THE FOLLOWING REASONS.
The Company's Board of Directors is divided into three classes, serving
staggered three-year terms. The Board is confident that the election of
Directors by classes is in the best interests of the Company and its
shareholders and should not be changed.
The Board believes that the election of Directors by classes assures
continuity and stability of the Company's management and policies, since a
majority of the Directors at any given time have prior experience as Directors
of the Company. A classified Board also allows the Company to implement a
long-term strategy and to focus on long-term performance, while permitting a
more orderly process for a change in the composition of the Board and for the
consideration by the Directors of policies and strategies for the enhancement of
shareholder value.
When Directors are elected by classes, a change in the composition of a
majority of the Board normally requires at least two shareholder meetings,
instead of one. Therefore, the Board believes that the election of Directors by
classes reduces the vulnerability of the Company to certain potentially abusive
takeover tactics and encourages potential acquirors to initiate such an action
through arm's length negotiations with both management and experienced
Directors. Thus, a classified Board does not preclude unsolicited acquisition
proposals but, by eliminating the threat of imminent removal, positions the
incumbent Board to act to maximize the value of an acquisition to all
shareholders.
Finally, the Board believes that Directors elected for staggered terms are
not any less accountable to shareholders than they would be if elected annually.
Shareholders have the ability to propose and elect alternate nominees for the
class of directors to be elected each year, and thus to influence the Board's
composition.
Even if this proposal is approved by the shareholders, it will merely
represent an expression of the wishes of the shareholders and will not be
binding on the Board of Directors. The Board of Directors would still be
required to determine whether a change in the present system of electing
directors is in the best interests of the Company and could decide, in the
exercise of its business judgment, to retain the existing classified Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
SHAREHOLDER PROPOSAL AND YOUR PROXY WILL BE SO VOTED IF THE PROPOSAL IS
PRESENTED UNLESS YOU SPECIFY OTHERWISE.
SHAREHOLDER PROPOSAL NUMBER 2 -- MAXIMIZE VALUE
Mr. William Steiner, having an office address at William Steiner
Investments, 4 Radcliff Drive, Great Neck, New York 11024, beneficial owner of
1,250 shares of Common Stock, has proposed the adoption of the following
resolution and has furnished the following statement in support of his proposal:
"Resolved that the shareholders of P. H. Glatfelter Company Corporation
urge the P. H. Glatfelter Company Board of Directors to arrange for the prompt
sale of P. H. Glatfelter Company to the highest bidder.
"The purpose of the Maximize Value Resolution is to give all P. H.
Glatfelter Company shareholders the opportunity to send a message to the P. H.
Glatfelter Company Board that they support the prompt sale of P. H. Glatfelter
Company to the highest bidder. A strong and or majority vote by the shareholders
would indicate to the board the displeasure felt by the shareholders of the
financial performance of the Company over many years and the drastic action that
should be taken. Even if it is approved by the majority of the P. H. Glatfelter
Company shares represented and entitled to vote at the annual meeting, the
Maximize Value Resolution will not be binding on the P. H. Glatfelter Company
Board. The proponent, however, believes that if this resolution receives
substantial support from the shareholders, the board may choose to carry out the
request set forth in the resolution.
17
<PAGE> 20
"The prompt auction of P. H. Glatfelter Company should be accomplished by
any appropriate process the board chooses to adopt including a sale to the
highest bidder whether in cash, stock, or a combination of both. It is expected
that the board will uphold its fiduciary duties to the utmost during the
process.
"The proponent further believes that if the resolution is adopted, the
management and the board will interpret such adoption as a message from the
Company's shareholders that it is no longer acceptable for the board to continue
with its current management plan and strategies.
"I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION"
RESPONSE OF THE BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR
THE FOLLOWING REASONS.
The Board of Directors and management believe that an appropriate indicator
of the Company's achievement in providing value to its shareholders is return on
shareholders' equity over the long term. Over the ten years ended December 31,
1997 the average annual return on shareholders' equity for the Company was 16.8%
(before unusual and extraordinary charges to earnings). This compares to the
average annual return on shareholders' equity for such period for the United
States based companies in the Dow Jones Paper Products Industry Group of 7.7%.
From time to time it has been difficult to maintain this level of return on
shareholders' equity in the short-term due to the cyclical nature of the
Company's business and the associated pressure on industry pricing. As a result,
the Company's long-term strategy has been to increase its emphasis on the less
cyclical and higher margin specialty papers, as opposed to commodity papers. The
Board of Directors believes this strategy is to the benefit of its shareholders.
In the more than ten years that have elapsed since the Company's
acquisition of the Ecusta Division, the Company has been aggressively searching
for additional acquisitions in the technically engineered specialty paper
markets. Finding appropriate acquisition candidates has not been an easy task,
notwithstanding the help of many qualified professionals. In the meantime, the
Company has grown internally in the production and sale of specialty papers and
has continued to focus on its other core markets, book publishing and envelope
papers. It has also maintained its stock repurchase program, which has provided
increased value to its shareholders.
In November 1997, the Company announced that it had executed a definitive
agreement to acquire the specialty paper business of the Schoeller & Hoesch
group ("S&H"), a German company. The acquisition was completed on January 2,
1998. The Board of Directors is enthusiastic about the prospects for S&H. It is
a quality business, run by an experienced management team, that produces a
variety of specialty papers with a significant share of the worldwide tea bag
paper market and the European tobacco paper market.
In view of the future prospects for the Company, the Board of Directors
believes that this is not the appropriate time to undertake the sale of the
Company. A sale at this time would foreclose the full opportunity currently
available to the Company for enhancement of shareholder value through its
present operations, including the S&H business. The Board continues to take
seriously its fiduciary obligation to act in the best interests of the Company
and its various constituencies, including its shareholders. As the Board
regularly evaluates the strategic direction of the Company, it will continue to
consider all practicable options for enhancing return on shareholders' equity
over the long-term.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
SHAREHOLDER PROPOSAL AND YOUR PROXY WILL BE SO VOTED IF THE PROPOSAL IS
PRESENTED UNLESS YOU SPECIFY OTHERWISE.
OTHER BUSINESS
As of the date of this proxy statement, the Board of Directors knows of no
business that will be presented for consideration at the Annual Meeting other
than the items referred to above. If any other matter is
18
<PAGE> 21
presented to the Meeting which under applicable proxy regulations need not be
included in this proxy statement or which the Board of Directors did not know
would be presented a reasonable time before this solicitation, the persons named
in the accompanying proxy will have discretionary authority to vote proxies with
respect to such matter in accordance with their best judgment.
R. S. Wood signature
R. S. WOOD,
Secretary
March 13, 1998
19
<PAGE> 22
(LOGO)
Printed on Ecusta Nyalite
Manufactured by the Ecusta Division of the
P. H. Glatfelter Company
<PAGE> 23
PROXY
P.H. GLATFELTER COMPANY
SPRING GROVE, PENNSYLVANIA
---------------------------
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD APRIL 22, 1998
The undersigned shareholder of P.H. Glatfelter Company hereby appoints
Nicholas DeBenedictis, Robert E. Chappell and M.A. Johnson II and each of them,
attorneys and proxies, with power of substitution in each of them, to vote and
act for and on behalf of the undersigned at the annual meeting of shareholders
of the Company to be held at the Company's principal office, Spring Grove,
Pennsylvania, on Wednesday, April 22, 1998, and at all adjournments thereof,
according to the number of shares which the undersigned would be entitled to
vote if then personally present, as indicated hereon and in their discretion
upon such other business as may come before the meeting, all as set forth in
the notice of the meeting and in the proxy statement furnished herewith, copies
of which have been received by the undersigned; and hereby ratifies and
confirms all that said attorneys and proxies may do or cause to be done by
virtue hereof.
IT IS AGREED THAT UNLESS OTHERWISE MARKED ON THE OTHER SIDE SAID ATTORNEYS
AND PROXIES ARE APPOINTED WITH AUTHORITY TO VOTE FOR THE ELECTION OF DIRECTORS
AND THAT AS TO THE OTHER PROPOSALS WHICH ARE DESCRIBED IN THE PROXY STATEMENT,
SAID ATTORNEYS AND PROXIES SHALL VOTE AS DIRECTED, OR IN THE ABSENCE OF SUCH
DIRECTIONS, AGAINST SUCH PROPOSALS.
(PLEASE FILL IN, SIGN AND DATE ON THE OTHER SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE)
(Continued and to be signed on reverse side)
<PAGE> 24
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
P.H. GLATFELTER COMPANY
APRIL 22, 1998
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
VOTE FOR ALL
NOMINEES LISTED VOTE
AT RIGHT, EXCEPT AS WITHHELD
INDICATED BELOW (FOR ALL NOMINEES)
1. ELECTION OF
DIRECTORS: [ ] [ ]
NOMINEES: TERM EXPIRING IN 2001:
ROGER S. HILLAS
PAUL R. ROEDEL
JOHN M. SANZO
The Board of Directors Recommends voting "FOR" the nominees.
To withhold authority to vote for any individual nominee, write that
nominee's name in the space below:
- ----------------------------------
The Board of Directors Recommends voting "AGAINST" the following proposals.
2. Approval of shareholder's proposal requesting that the Board of Directors
be declassified (all Directors elected annually).
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of shareholder's proposal urging the Board of Directors to
arrange for the sale of the Company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature: ______________________________ Date:_____________________
Signature: ______________________________ Date: ____________________
[IF HELD JOINTLY]
NOTE: SIGNATURE SHOULD BE THE SAME AS THE NAME PRINTED ABOVE. EXECUTORS,
ADMINISTRATORS, TRUSTEES, GUARDIANS, ATTORNEYS, AND OFFICERS OF CORPORATIONS
SHOULD ADD THEIR TITLE WHEN SIGNING.
